Shared services - fine in principle but will it happen in reality?

The case for shared services has long been argued and documented in numerous government reports. However, on the ground little progress has been achieved. With the 2007 comprehensive spending review likely to task public bodies with saving at least 3% a year and many chief executives claiming that this will affect front line services, why have back office inefficiencies largely been ignored?

The Local Government white paper promoted shared services as a core element in achieving potential savings of £40 billion over 10 years from sharing HR & IT alone – just think how many teachers and social workers this would pay for!

This is before addressing council tax, business rates and housing benefit where over 400 local authorities (LAs) still have their own ICT infrastructure, staff and call centres to administer what is a transactional service. The reason for this is that shared services is not simply about aggregation but requires standardisation, process re-engineering and consolidation to deliver modern, efficient services for the customer. It needs political leaders and chief executives to confront uncomfortable head count reductions and to give up the right to run services locally – not every LA can be a business centre! These are the true reasons for the lack of appetite to explore change. It is difficult to imagine councils getting together naturally to centralise the running of these services into four or five national centres, even if it was in a venture in which that they had a stake.

If this is to happen a framework of incentives is required from government encouraging authorities to share, with clarity given over retained savings and pump priming to fund set up costs. This also requires a central organisation to encourage match making and smooth over local democratic sensitivities – a chance perhaps for the Regional Centres of Excellence to play a real role. Until such a lead is taken, none of the major private sector providers would be interested in consortia procurements. The record of these coming to fruition is poor, even with two or three authorities, and the cost of bidding is very high.

Meanwhile, these companies continue to go about their business by consolidating contracts they win into business centres in which they have already invested, and in doing so improving the performance of staff, enhancing service delivery and reducing costs by up to 40%. At least private sector providers are cutting through the myth that it is difficult to make shared services happen! But to achieve this they have to win individual procurements, probably involving three or four of them bidding over a 12 month period. This is a huge waste of public money where only the management consultants running the processes are the winners. But at least it cuts through the tradition, timidity and territorialism that currently exists.