In this month's issue of the Nomad Wireless Briefing -
Oct Nov 2006:

• The Value of Shared Services


• Re-engineering for Shared Services


• Technology Re-engineering for Shared Services
  
  
  
  

Shared Services were popularised in the early 1990’s as a means of reducing the administrative cost of service delivery.  More recently shared services are run as Centres of Excellence, aligned with wider public policy goals and demonstrating optimal business processes. 

The shared services agenda represents a shift towards public bodies consolidating their back-offices and an aggregation of services across sectors such as health, education and police. 

Within the public sector much of the initial focus has been on finance and human resource functions but there are many other opportunities to consolidate functions and improve efficiency and effectiveness within local authorities. 

Through the use of new technologies Shared Service operators have generated significant economic benefits whilst also delivering process improvements and identifying new opportunities to generate value.

Shared Services have established their viability because they have created real and measurable value for organisations.  Increased productivity and lower administration costs are typical benefits and these have driven increased investment.  The following table outlines the four key value drivers of Shared Services.

Value Driver:  Economic Benefits
Description:  This refers to initiatives that are focussed on cost reduction due to better-managed processes or on increased revenues due to better collection mechanisms.

Value Driver:  Process Integrity
Description:  As a consequence of implementing Shared Services, organisations have developed ‘best-practices’ towards their business processes, with standard approaches across different departments.  This makes it easier to manage and ensure compliance of operations.

Value Driver:  Business Value
Description:  Business value arises from improved use of technology, particularly data repositories that can share information across departments.  A solid infrastructure also allows opportunities to extend the service offering.

Value Driver:  Customer Satisfaction
Description:  The success of Shared Services is only really realised when citizens recognise the value of the Shared Service and participate at increasing levels with the service, further driving down costs, while delivering on the council service mandate.

As the Shared Service evolves, local authorities have to consider how they structure themselves to pursue all these types of value.  Some may choose to retain an infrastructure, independent of the Shared Service to focus on all types of value, while others may choose to focus solely on the Economic Benefits from cost reductions. 

Shared Services have created measurable and significant value for companies in terms of productivity but often at the cost of less tangible measures such as a local, personalised service.

 
Figure 1 - Shared Services Pro's and Con's

Services have largely delivered on the specific targets that were set out for them (See: Michael G. Markos, Experient Consulting).  These targets have been rooted in process, service and control and have resulted in well run organisations that can measure and track their improvements.

Customers, both employees and citizens, however, measure value in more intangible terms.  Both indicate that the service is not as good as it was.  Where service was once delivered within the community, now it is common to see cases such as Westminster outsourcing their revenue function to Blackburn.  Loss of decision-making authority and a disconnection from the operation of the shared service can undermine Local Authority employees and are threats to the long-term viability of the Shared Service centre.

A factor in the success of local authorities Shared Service initiatives will be ensuring that these difficult to measure ‘intangibles’ are not diminished in the drive for greater efficiencies.

Although the value of Shared Services is obvious on paper, it is not so trivial in practice to realise that value.   Local authorities have to factor in new partnerships, relationships and ways of collaborating in the context of different organisational motivations and impacts.

Process re-engineering and enhanced technology have been primary catalysts of huge productivity gains, enabling organisations to consolidate transaction processing and customer service operations.

Shared Services offer a solution to local authorities wishing to improve productivity transparency and accountability through re-organisation of resources, roles and responsibilities.  Transitioning to shared services is most effective when it happens incrementally and each of the ‘pillars’ the following diagram are addressed.

Figure 2 - Pillars of Shared Services

Effective Governance and strong leadership are characteristics of effective shared services providing the motivation and the mechanisms for keeping the partnership on track and ensuring there are sufficient resources to deliver on the objectives of the venture.

Shared Services introduce great change into an organisation.  These changes are often perceived as loss of control, confusion about transparency and a lack of clarity on new roles and responsibilities.  Managing this change requires that stakeholders (both internal and external) be effectively engaged and support is provided to help staff adapt to new working conditions.

The strength of relationships that managers foster between their customers, suppliers and staff will help to determine the long-term viability of the shared service and more importantly how effective it is in meeting new opportunities. 

Rebuilding processes to be more effective, rather than simply aggregating functionality supports a Shared Service agenda.  Effective reengineering will reduce bureaucratic overheads, allowing people to concentrate on their core expertise and servicing their customers. 

An integral element of the Organisational Re-engineering model as pioneered by West Lancashire District Council’s Shared Contact Centre is to engage employees in the process and to transfer knowledge in-house via an action learning approach.

 Figure 3 - Re-Enginnering for Shared Services

The diagram above identifies some of the re-engineering techniques that might be employed in consolidating processes from two organisations together to deliver a shared service.

Data Collection is the first step in re-engineering processes and relates to processes and may also come from consultation as to what is required of the new processes.  Process mapping refers to documenting the way services are currently delivered.  At this stage the critical success factors are gathered to help determine what a successfully re-engineered process looks like.

Having gathered the required data, a critical analysis of the processes can be undertaken.  This is probably the most important step in that it forms the basis for development of improved processes based upon an examination of the current processes and how they can be optimised through a shared service model.  Employee Consultation can be used to incorporate the ideas of employees (or indeed customers) affected by these changes into the new processes.  This is a useful technique for building consensus and helping to ensure that all will support the new processes.

The final stage in the process is to benchmark the results of the analysis and to determine whether the reengineered processes match the best in class and whether they lend themselves to sustained improvements.  Benchmarking is a continuous process of measuring and assessing the services of public service leaders and incorporating the best practices into future enhancements of the process.

Local authorities, organised vertically into separate departments, working with in-house business processes do not yield optimal organisational performance. The Shared Service agenda aims to address these challenges by building cross organisation service delivery based on integrated data, processes and cooperation.

Technological advances in computing and communications place IT, mobility and connectivity to back-office systems as important elements in realising this vision. However it is not a trivial challenge.  Integration between different systems necessitates a common understanding of standards, protocols and of course the objective to be achieved.

Interoperability

The goal of interoperability is to enable independently developed systems to co-operate over a communications infrastructure. It allows different kinds of applications do what they do best, while supporting cross-organisational business processes. The complexity of the systems and applications to integrate will often dictate an adherence to standards and agreement on use of those standards so that the systems can operate in consort.

Integration requirements such as authentication and session management are typically centralised to service all of the integrated systems. Web services or off-the-shelf brokering technologies may be employed to handle cross-language integration problems. Data integration will be required where data is collated from multiple different systems.

Departments and external customers (vendors, businesses and citizens) have many different requirements and a wide variety of standards and systems. Typically, this includes proprietary, custom and in-house developed systems. Occasionally these systems require integration with legacy systems that prevent the use of more modern and simpler approaches to integration.

Consider the following interoperability best practices when integrating systems:

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