Shared services: A problem shared

The business

Cambridgeshire County Council provides social services, education and environmental services to a population of 590,000. It has an annual budget of £570m, including its direct schools grant, and employs 18,000 staff.

The challenge

The council had implemented an e-business web tool from Oracle to handle most of its IT, HR and payroll transactions. However, the continuing need for upgrades was becoming increasingly costly, and the council wanted to make savings. It hit upon the idea of developing a shared-service model, which would not only save money through efficiencies, but could also generate revenue by being sold on to other public service bodies.

The solution

In 2006, the council started exploring the potential to create a shared-services arrangement. It found a willing partner in neighbouring Northamptonshire County Council, which saw an opportunity to gain access to an e-business suite without having to go through a costly procurement and implementation process.

The councils are investing up to £2.7m in the project, including significant system upgrades to enhance the service for future customers. The implementation took place over a period of 18 months and the sharing arrangement went live in June 2008.

The project was handled by Cambridgeshire’s director of people and policy, Stephen Moir, who believes it goes much further than other shared-service arrangements between local councils.

“A lot of shared-service models tend to be just partnership arrangements or outsourcing under a different name,” he says. “But we have genuinely been able to create common processes and support teams running the systems on behalf of both organisations. That has significantly reduced costs of the transactions and helped us make better use of our technology.”

Being a ‘virtual’ arrangement meant there was less upheaval than there might have been. “It’s built around technology, so it doesn’t involve picking up a whole load of employees and transplanting them into a single shared-service centre in another part of the country,” Moir says.

A challenge was getting buy-in from staff members, which was made more difficult by the fact that Northamptonshire was going through management restructuring at the time, and that the chief executives of both councils changed during the implementation process.

However, Moir believes that there is now absolute buy-in from local politicians and the chief executives. It helps that the model can be sold on to other public bodies, and especially local authorities, providing additional revenue. “We want to do something for and on behalf of local government,” Moir explains.

A significant amount of work went into deciding who did what, and agreeing common processes. Negotiations were needed to create suitable commercial and legal agreements between the two organisations.

Organisational culture was also an issue, but Moir says the two sides worked together to overcome any differences.

“We needed everyone to share a common vision of what the programme was trying to achieve,” he says. “That required a significant investment in internal communications – to engage with people in both organisations – and it’s something we will continue to do.”

The outcome

Cambridgeshire is on target to achieve £1m in savings by the end of 2009, as a result of reducing the cost of corporate services functions and renegotiating the contract with the technology supplier Fujitsu. It has seen significant efficiencies in the way it runs processes such as payroll.

The council also anticipates that it will accrue an income of more than £16m from the use of its model by other public bodies. Moir insists that this is a very robust business case, having been assessed by external advisers, and is absolutely achievable. Northamptonshire will gain similar benefits.

Cambridgeshire is now seeing its vision coming close to fruition. It will soon be advertising for a private sector partner to work with both councils in creating a joint venture company in 2010.

if I could do it

again…

The biggest learning point was realising the importance of clarifying both councils’ objectives early on, says Cambridgeshire’s director of people and policy, Stephen Moir.

“Another time I would do more work on the organisational culture at the outset, to get broader engagement within both councils in terms of what we were trying to achieve,” he says. “It eventually cascaded, and we now have the level of engagement we need, but it took a lot of work to achieve that.”

Moir also thinks it might have been wiser to take a more phased approach rather than trying to do everything at once. “There was a lot of pressure on individual staff members, and in terms of resources we were probably spreading ourselves too thin,” he admits. “We reached every big milestone we were aiming for, but it did mean a huge amount of work from some key individuals.

“Also it would have been nice not to have to go through the cycle of re-educating new senior people within both organisations. That took up time that could have been focused on the delivery. The moral is, don’t do something like this while in the throes of major restructuring.

“But it’s something I would definitely do again,” Moir insists. “If I was in another organisation, I would be actively looking at shared services, because I now know that if I didn’t act quickly, I could guarantee my funding position would become increasingly tight.”

Employee perspective

As Cambridgeshire’s HR lead for shared services, HR business services manager Bridget Herdman helped decide how the Oracle system would be shared and implemented. This gave her a rare opportunity for true partnership working with another council.

“A key principle was to have a common set-up wherever possible. At Cambridgeshire we have used an Oracle system for more than 10 years, and we needed to review the data we were holding and make the necessary changes,” Herdman says.

“We’ve learned from recent system improvements that Northamptonshire has taken advantage of, and plan to implement these ourselves. We have also benefited by sharing experience, policies and procedures to learn from each other’s best practice.”

But she admits that there have been some downsides.

“Sometimes we have struggled to agree details, and we do have very different ways of working. But overall we have been able to reach agreement and it has been a positive experience.”

Guide to cross-organisational shared services in 10 steps

1 Be absolutely clear on what shared services will deliver to your organisations and set specific goals.

2 Define who its customers are and implement robust review measures to ensure their needs are being met.

3 Be pragmatic about which activities should be kept in-house or outsourced, and be clear in communicating your new HR processes to stakeholders.

4 Explore all your technology options with a view to taking the mundane tasks out of processing while keeping important face-to-face and phone services in place.

5 Agree on governance structures that will determine the type and standard of services offered, and design procedures that allow adjustment with business change.

6 Develop an agreed internal pricing regime, which can include a variety of charging mechanisms, but needs to be modelled so that partners are aware of cost exposure.

7 Have service level agreements (SLAs) in place between the service providers and the participating organisations, to avoid disagreements on such things as the speed of delivery.

8 Clarify whether the services will be hosted via a new, separate company, owned by the partners, or by one organisation on behalf of the others.

9 Determine whether employees will retain their contracts of employment, or be TUPE-transferred to either the new company or the hosting organisation.

10 Maintain a long-term vision – it will be needed to overcome any day-to-day problems.

Peter Reilly, director HR research and consultancy, the Institute for Employment Studies

If I could do it again…

The biggest learning point was realising the importance of clarifying both councils’ objectives early on, says Cambridgeshire’s director of people and policy, Stephen Moir.

“Another time I would do more work on the organisational culture at the outset, to get broader engagement within both councils in terms of what we were trying to achieve,” he says. “It eventually cascaded, and we now have the level of engagement we need, but it took a lot of work to achieve that.”

Moir also thinks it might have been wiser to take a more phased approach rather than trying to do everything at once. “There was a lot of pressure on individual staff members, and in terms of resources we were probably spreading ourselves too thin,” he admits. “We reached every big milestone we were aiming for, but it did mean a huge amount of work from some key individuals.

“Also it would have been nice not to have to go through the cycle of re-educating new senior people within both organisations. That took up time that could have been focused on the delivery. The moral is, don’t do something like this while in the throes of major restructuring.

“But it’s something I would definitely do again,” Moir insists. “If I was in another organisation, I would be actively looking at shared services, because I now know that if I didn’t act quickly, I could guarantee my funding position would become increasingly tight.”

Employee perspective

As Cambridgeshire’s HR lead for shared services, HR business services manager Bridget Herdman helped decide how the Oracle system would be shared and implemented. This gave her a rare opportunity for true partnership working with another council.

“A key principle was to have a common set-up wherever possible. At Cambridgeshire we have used an Oracle system for more than 10 years, and we needed to review the data we were holding and make the necessary changes,” Herdman says.

“We’ve learned from recent system improvements that Northamptonshire has taken advantage of, and plan to implement these ourselves. We have also benefited by sharing experience, policies and procedures to learn from each other’s best practice.”

But she admits that there have been some downsides.

“Sometimes we have struggled to agree details, and we do have very different ways of working. But overall we have been able to reach agreement and it has been a positive experience.”

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