Shared services appears to be on everyone’s lips at the moment. But will it really help save costs, boost efficiency and encourage HR to grow? Or will it just end up creating more problems than solutions?
Shared services may not be a new concept but it certainly appears to be flavour of the month.
A Treasury-commissioned report by former Logica boss Martin Read revealed last month that government departments and quangos could achieve cost savings of between 25-30% if they re-engineered back-office functions and introduced central wide shared services.
Chancellor Alistair Darling said in last month’s Budget that he fully supported the report’s proposals, agreeing to speed up the introduction of shared services across departments.
While one would not contest the aim of saving money and improving efficiency, Personnel Today revealed the move is likely to see the loss of nearly 6,000 government HR jobs. It also runs the risk of being time consuming – Defra’s HR chief recently warned it took her department two years to fully implement shared back-office functions across HR, payroll, procurement and finance departments.
So will the introduction of shared services really help save costs, boost efficiency and encourage HR to grow? Or will it just end up creating IT headaches, cutting key staff and losing vital talent?
“If the business case is sound and implemented correctly then there is no reason for [IT or staffing] issues to come about,” Philippa Bradley, strategic HR sales lead at Logica UK explained. “Sometimes the business case is built on ‘sand’ and in these cases, the realisation of the business case is hampered by poorly motivated staff having to do more with less people.”
Richard Crouch, head of HR and organisational development at Somerset County Council, which entered into a shared services joint venture with Taunton Deane Borough Council, Avon and Somerset Police and technology giant IBM in 2007, warned the model can go wrong if mismanaged, and said success boiled down to restructuring the whole service, as well as the way organisations worked (see case study below). He has observed shared services functioning at council level and said they often did not deliver the savings expected or required and lacked clear design.
“Too often it involves the sharing of managers but not of the staff on the ground,” he told Personnel Today.
“Sometimes one council [who has lost a head of HR] talks to a neighbouring council and says ‘can your head of HR look after our services as well?’. The manager who inherits the service has inherited that team and ends up with double the workload.
“It can be confusing for staff and for customers as to who does what and who’s employed by whom. The head of HR of a shared service is often torn both physically and emotionally between the organisations being serviced.”
However, Crouch was quick to point out the benefits of shared services, citing economies of scale, shared learning and expertise and a reduction in duplication (such as policy writing) as examples. He also believed HR careers can flourish under the system. “Shared services gives HR professionals a real opportunity to come out of the shadows, become more front-office and have a much wider cross-organisational perspective.”
Alan Bailey, director of integrated HR services at Capita, agreed. “It does leave HR people in that space where they can do value-added stuff rather than admin. The HR director can focus on performance development and talent development. If you centralise and make sure you have one common process, you get a compliant, better result.”
The National Trust knows about this. The charity introduced shared services six years ago. The process took a year to complete, all transactional HR activity was centralised and a new computerised HR information system rolled out.
“Previously we had 17 separate personnel departments across England, Wales and Northern Ireland,” said Paul Boniface, director of HR and governance at the Trust. “Now it’s just one. There were a lot of options on policy and process, consequent duplication of effort and it also consequently carried a higher risk because of different approaches. Now we have a single set of policies and processes, no duplication, one process and considerable cost advantages.” The trust made annual staffing and efficiency savings of £300,000 when they introduced shared services.
According to Boniface, one of the biggest challenges was cultural. “We did have examples of line managers not complying with new processes. Over time that eroded as they saw the benefits of doing things the new way,” he added.
Vanessa Robinson, head of HR practice development at the Chartered Institute of Personnel and Development, advised organisations thinking of embracing shared services to view it as a long-term change within the organisation.
“It’s making sure people know what the change is about, good communications, and making sure you set up project teams, which comprise more than the people changing jobs, but a number of key stakeholders too.”
Case study: Somerset County Council
Somerset County Council entered into a 10-year shared services deal with Taunton Deane Borough Council, Avon and Somerset Police Authority and IBM in October 2007, costing £400m.
The public/private partnership began delivering services, including HR, communications, finance, and facilities management, with targeted savings of £200m a year. It involved more than 1,000 public sector employees transferring to the new venture. One-hundred and fifty HR professionals went into the company from Somerset County Council alone.
Richard Crouch, head of HR and organisational development at the council, said the project would help HR staff eventually spend less time on pure back-office functions and more on front-office HR, as it allowed the organisation to introduce a new IT software product that will ‘talk’ to different systems.
“[Shared services] means you can transfer staff to more of a front-line service or reduce staff. We are going to have fewer in-putters and retrain them and re-skill to the advisory and recruitment side,” he added.