Nearly 6,000 government HR jobs are likely to face the chop after the chancellor agreed plans to speed up the introduction of shared services across departments in his Budget last week.
A report by former Logica boss Martin Read, which was fully endorsed by the Treasury, said cost savings of between 25-30% could be achieved if government departments and quangos adopted a radical re-engineering of back-office functions and introduced central-wide shared services.
It listed examples across the public and private sectors where HR headcount had been reduced on average by about 30%, with one worst-case scenario outlining when as many as 70% of HR jobs had been slashed.
With 8,400 HR professionals in the Civil Service, more than 2,500 HR jobs are now at risk, based on 30% savings in staff costs. And with an estimated 11,400 HR practitioners across the UK’s 1,162 quangos, some 3,400 HR jobs are also in the firing line.
HR and industry experts have backed the proposals and even claimed the Budget’s aim to claw back £15bn in support function costs by 2013-14 could go further.
Chris Bones, dean of Henley Business School, told Personnel Today that as much as £60bn could be saved if the state followed private sector examples to squeeze more staff efficiencies. “There are big chunks of administration, communication and managerial jobs that could be cut,” he said. “But cuts shouldn’t affect frontline services, they should be focused on the back office.”
Bones cautioned against the use of shared services, as such projects tended to generate more costs. “Shared services involves a big computer project, which would cost them more money than they would save,” he said.
However, Tony Dolphin, senior economist at the Institute for Public Policy Re-search, said while shared services could “cause a headache” for HR, it was a successful method for re-organising back-office functions.
HR directors that have recently moved towards shared services also backed the move to speed up its introduction across Whitehall and quangos.
Linda Scott, HR director at the British Transport Police, has begun implementing a shared services model to save 20% in costs and axed nearly 30 of the force’s 140 HR roles.
She said: “There will be fewer roles for HR professionals but it will improve their careers. Shared services will take the bottom-end of the function and automate it, freeing up HR to do more strategic work, which can add value to the business.”
A Cabinet Office spokeswoman said it was up to individual departments to implement efficiency savings as they saw fit. “There’s no reason why any department that fits the model for shared services could not start using such a system.”
However, she added shared services was not just about cutting jobs. “By simplifying and streamlining back-office processes, frontline staff are able to spend more time delivering services and less time filling out forms.”
Shared services case studies
- HM Prison Service: saved 32% in staff costs after setting up shared services for HR, finance, and procurement.
- NHS: shared services has delivered up to 30% savings.
- Luxury goods manufacturer: HR headcount reduced by 70% by consolidating head offices.
- Telecommunications firm: Operational costs reduced by up to 66% by sharing support functions.
Source: Operational Efficiency Programme Report
The case for shared services
The introduction of a shared service centre is often just one element of a wider change to the way that the HR department operates and is structured.
Since the Budget 2009 committed to delivering £15bn back-office efficiency savings by 2013-14, identified in Martin Read’s report, government HR is set to undergo a huge reform.
This will not just be in shared services, but in tightening up the way the function’s processes and systems are run.
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Helena Parry, service development manager at outsourcing firm Ochre House, said a typical role reduction when implementing shared functions was at least between 15-20%, but it depended on the size and nature of the department.
Additional reporting: Louisa Peacock
