It's Hard to Ignore the Shared Option

Written by John Tizard. First published in Public Servant Magazine

Public sector organisations across the country are renewing interest in shared services, but, as John Tizard points out, a well-defined, inclusive strategy is essential

As the recession and public expenditure forecasts predict doom and despondency, engulfing politicians and public sector managers alike, there is renewed talk about the need to establish shared services.

This is particularly the case in local government. Reports that a future Conservative government would encourage – or perhaps enforce – greater sharing of resources, services, people and capital equipment between local authorities add to this search for the silver bullet.

Councils have made progress in developing shared services in response to local circumstances – be it sharing support services across departments within one authority or with others, jointly appointing chief executives and other senior or specialist staff, or sharing specialist equipment.

The NHS shared financial services programme – based on a joint venture between the NHS and Steria – has delivered significant savings. This initiative is also an example of the potential benefits from a shared and collaborative approach to designing, procuring and establishing a joint venture structure to implement a national programme with local benefits.

However there are many more agencies, including councils, that have not adopted strategies to share services outside their own authority. In some parts of the public sector – central government is a fine example – there has been more talk than action, and some unsuccessful attempts to create shared services.

Often there seems to be an assumption that shared services will require some form of outsourcing. Partnership working with a specialist business provider can facilitate shared services by acting as a catalyst for change through access to expertise, investment in IT and people development, and sharing of risk. While in some circumstances this may provide the answer, it will not always be the case.

There is no reason why partnerships between public sector agencies cannot provide effective and efficient services. The key question is not whether to outsource, but whether to adopt shared services. The means to achieving the objective should be a secondary, but nonetheless very important consideration.

Some services are more easily provided on a commodity basis than others. It is likely that entrepreneurial public agencies and businesses will market services such as payroll on this basis and do so increasingly aggressively.

If shared service can offer quality provision for considerably lower costs it is hard to ignore the option – every pound saved is a pound available for priority services. In some cases only a shared approach makes economic and practical sense to ensure access to specialist professionals and/or services.

Some factors in adopting a shared service strategy are peculiar to the public sector, especially to local government. It has to protect its democratic accountability – there must be a direct route for holding politicians to account for performance and the use of resources. Political accountability should focus on outcomes and use of public resources, not on who provides services or how they are delivered. Shared provision – whoever provides it – should not diminish accountability. The user agency should specify its requirements and hold the provider to account for these. This "client" function forms part of political accountability – it would be wrong to have a confused and vague set of performance targets and accountabilities because the "client" was part of the "provider" in an ill-defined relationship. Those who argue that they cannot contemplate shared services because they would lose accountability and control, either misunderstand the nature of political accountability, lack confidence in their ability to control that which they procure or partner to secure, or deliberately seek to avoid evaluating the potential opportunities that shared services offer.

There must be accountability for externalities as well as for direct outcomes. If a programme results in redundancies and an impact on the local economy, politicians have to account for this – which of course, is not the same preventing such results.

The politician, supported by senior managers, will have to decide if the benefits of reduced costs and/or improved performance outweigh short-term impacts such as job losses or the loss of in-house capacity. There has to be transparency of performance and accountability.

The opportunity to align budgets and services between agencies based on local strategic partnering is one means of securing shared services that can underpin delivery of shared community outcomes.

Fundamental to considering any form of shared service is the question: "How will this strengthen or hinder the achievement of overarching policy objectives?" Often, the answer will simply be through the freeing-up of finance to fund other activities or to cushion spending cuts and/or to ensure higher quality, resilient services. In other cases it may be that shared IT enables more effective joined-up frontline working between agencies.

When moving towards shared services consider these questions:

What do we wish to achieve – cost reduction; improved services; joined-up service commissioning or delivery; more resilient provision; shared risk management; or a combination of these?
Which services to include – and what elements of particular services; what has to be done locally or be bespoke to the local community; what can be standardised across a range of agencies; where do we want to exercise local control on standards and specifications; what should be democratically controlled – and can we have this control through a contract with a shared service centre?
What will be the externalities and unintended consequences, and how can these be managed
What models of shared service delivery are available – public sector consortium; public sector trading; partnerships with the business sector?
How could services be re-engineered and improved rather than simply aggregating current arrangements
What will the transitional costs be?
What will be the implications for employees, and what arrangements are required to handle relocation, redundancy, retraining etc?
What are the short- and medium-term business cases?
How will the shared service contribute to wider policy goals; what will we do with any financial benefits?
How will we ensure accountability and transparency?
What is the political case and how will we account for the decisions?
Are the necessary planning, design, project management, procurement and contract skills available together with the political will?
How will the arrangements be piloted, tested and revised, and how will users and employees be engaged in this?

Organisations would benefit from objective advice and information, brokerage services to help develop consortia arrangements with potential partners, and support on market management and procurement. In local government this might come from the REIPs and/or one of the national advisory agencies.

Development of a shared service strategy should be just that – a strategic process. An inclusive approach should involve staff, service users, the wider community, local and partner agencies and potential supplier partners. There seems to be an inevitability about the development of shared services, but it is vital that individual agencies consider what is right for them. Shared services are one answer, but only to the one question – they will never be a panacea for all the challenges facing public services.

John Tizard is director of the Centre for Public Service Partnerships at the University of Birmingham