In our last research paper on ‘Shared Services in Government – Turning private-sector lessons into public-sector best practices(1)’, we concluded that reducing government costs was a necessity, not an option. Shared services were perceived as a viable, proven approach to achieving the necessary rationalization of typical ‘back-office’ functions such as Human Resources, Finance, IT and Procurement. We stated that business cases had the potential to typically target at least 5-15 per cent in cost reduction, together with significant improvements in service levels for citizens.
With government finances under pressure and treasury departments increasing their drive for major reform of service delivery in welfare, health, taxation, education and justice sectors, at every level from national to local, it was recognized that the time was ripe to identify and grasp the benefits. The key was not whether to do it, but to ensure that it was done well. To facilitate this, we offered a six step approach, based on relevant private and public sectors experience which incorporated: (1). Definition of scope and realistic target setting; (2). Selection of an appropriate operating model; (3). Creation and application of an effective governance regime; (4). Inclusiveness of transformation and recognition of the need to balance the demands of the ‘day job’ (5). Pragmatic management of technology and infrastructure costs; and (6). Simplification of performance management.
We also noted that shared services are a building block in an evolutionary cycle toward more dynamic and flexible public sector services, consistent with the vision of an agile, responsive and joined-up government fit for this millennium. We identified early applications of the concept of shared services for citizen-facing processes and predicted this potential future trend. Our other predictions for the potential next generation included increased interest in engagement of the private sector, outsourcing, off-shoring, the increase of standardization and the role of technology.
Our last research examined the economic and organizational case for shared services and concluded that the opportunity to implement was ripe, we thought that it would be compelling to now examine how the concepts are being turned into reality. To do this, we developed hypotheses on drivers, enablers, benefit identification and realization, transformation barriers and future trends. These hypotheses were developed from our own experience in working with private sector clients and with many government organizations on projects, together with a comprehensive review of contemporary published research papers.
The hypotheses were discussed in 25 in-depth interviews with CEO/CIO executives and Program Directors from government organizations in nine countries – Australia, Austria, Canada, Germany, South Africa, The Netherlands, New Zealand, United Kingdom and United States.
Although the resulting analysis is not statistically representative, it provides interesting insights into how governments are implementing shared services and their aspirations for the future. This paper highlights the good – and the not so good – practice, and offers advice and frameworks to improve the implementation and maximize the opportunity that shared services present.
External pressures on governments continue to grow: responding to the competitive challenge of globalization, maintaining security, understanding climate change and its environmental and economic impact, and supporting aging populations. In addition, citizens are more demanding of the public sector as they experience the service improvements that new technologies can bring. Further, there is an ever-present need to reduce the cost to serve and the demand on the taxpayer.
Governments are not passive participants. They have the ability and the opportunity to deal with these pressures and provide their citizens with an improved service – and they are able to do so without necessarily breaking the treasury. Shared services, where economies of scale initiate a reorganization to create a new service to provide either back-office (for example HR, procurement, IT and ‘lower-value’ transactional processing) or front-office (for example customer service) processes have become a significant element for the strategy to address these challenges. Many countries are already well advanced in their development. For example:
- In Canada, dramatic and sustained positive turn-around at most levels has delivered budget surpluses (except at the municipal level). There is continued effort at reducing cost and simultaneously enhancing the quality of service. The focus is on delivery, looking at innovative approaches to changing service infrastructures, by involving the private sector and increasingly from within the broader public sector itself.
