Partnerships in recruitment: using a shared-services model

The London Borough of Sutton has been working in partnership with several other London boroughs to develop an innovative shared-services model for recruitment.

Learning points

  • Prompted by an efficiency drive, several London-based employers have become partners in a venture to outsource recruitment administration to one or more suppliers, with the potential to save up to £1 million a year.
  • The initiative is being led by the London Borough of Sutton and involves a core service for all partners of response handling, applicant management and recruitment data management, together with six optional modules, such as recruitment advertising and executive search.
  • The selection process to choose suppliers is under way, and IRS will report on the initiative's progress in a future issue.

Outsourcing and developing a shared-services model to deliver parts of the HR function are not new concepts in the public sector. But a recent initiative that seeks to establish a common framework for recruitment administration across several London boroughs is entering uncharted territory.

For the past 18 months, the London Borough of Sutton - in partnership with the London boroughs of Croydon, Greenwich, Haringey, Merton, Richmond upon Thames and the Royal Borough of Kingston upon Thames - has been developing this project. The partnership is now at the point of selecting a shared-services partner, or partners, to deliver the transactional elements of staff recruitment.

The framework consists of an agreed set of core activities that will be provided "at consistent quality and cost" to all seven participating boroughs. However, the proposed contract specification also provides for additional, optional modules of service that its partner boroughs may elect to adopt.

One of these discretionary modules involves recruitment advertising, and builds on an already established framework agreement that exists under the auspices of the London Contracts Supplies Group. As such, this part of the new shared-services framework will be offered to a wider group of London boroughs. It is also anticipated that additional partners from this group - more than 60 organisations in total - may decide to opt in to any module, or combination of modules, over the course of time.

Making efficiencies

The main impetus for developing a shared-services model was the Gershon review of public sector efficiency published in July 2004. At that time, the London Borough of Sutton was on the verge of centralising its recruitment function, but suspended these plans in the light of the report's recommendations.

As Dave Goldsmith, HR adviser at the London Borough of Sutton and project manager for the shared-services initiative, explains: "Gershon specifically mentions HR as a 'back-office function' and the potential efficiencies that can be made. Of all the services provided by HR teams across London, recruitment administration is perhaps the most easily categorised and defined. We decided to investigate whether there could be any mileage in sharing delivery of this service in partnership with other London boroughs."

While many of the resourcing challenges facing local authorities in the capital are common to all, the aim of this initiative is not to create a shared recruitment policy or collectively alleviate specific recruitment difficulties. As Goldsmith emphasises, the key goal is to modernise recruitment services and improve efficiency. In so doing, the partner organisations also expect to achieve best-practice customer service for job applicants and promote London local government as an "employer of choice".

Working in partnership

It was clear from the outset that the development of a shared recruitment administration service would be a complex undertaking, requiring considerable planning. "Bringing this project to fruition has involved close collaboration between several London boroughs," Goldsmith says.

"For example, the London Borough of Hounslow has no interest in joining the core of the shared service but still contributed the expertise of their shared-services manager as project facilitator, in the true spirit of partnership. This has helped ensure the smooth running of the project."

At the outset, a project board was established, comprising the seven core partners with the London Borough of Sutton as the project sponsor. One of its first tasks was to conduct a feasibility study. "At that point, we had nothing concrete to base any decision on," Goldsmith recalls. "It was essential that we gathered hard statistical data. At this stage, we were not attempting to establish a business case for the initiative, but gathering the necessary research in order to agree a way forward."

The final feasibility report is an in-depth document that sets out, probably for the first time, a framework for recruitment benchmarks across London. The aim of the study was to establish the key elements of the recruitment process, identifying areas of commonality and difference among the partner organisations.It also investigates volumes of recruitment activity and associated expenditure, and identifies the services deemed suitable for sharing.

To capture this detailed data from partner boroughs, every recruitment function in each authority was charged with keeping a "recruitment diary" for a two-month period in spring 2005. Diarists were required to complete a spreadsheet on a daily basis that recorded the time spent - to the nearest quarter of an hour - on a wide range of specific recruitment activities, such as "writing recruitment advertisements", "application pack dispatch" and "general recruitment enquiries". The diary entries were then collated by Goldsmith and analysed to calculate the cost of each recruitment element in terms of staff time.

Data analysis

The data were further manipulated to incorporate the "physical" cost of recruitment - for example, the money spent on producing and sending out paper-based application packs. The project manager was then able to rank each recruitment activity in terms of workload and resources, and produce graphs charting cross-borough comparisons.

"The findings indicated that a lot of time was spent on process and not as much on supply and delivery," Goldsmith says. "We concluded that there were definitely potential savings to be made by changing the existing delivery format."

The study also found that there is currently no overriding standard of recruitment service delivery across London boroughs. Models of service vary considerably, and the staff and ancillary costs of recruitment administration show a similar variation in expenditure. For example, the cost of producing an application pack ranged from 98p in one borough to £6 in another. The transactional element of "cost per hire", meanwhile, varied from £18.75 in one partner organisation to £1,228.18 in another.

By amalgamating the data, it was possible to undertake a cost-benefit analysis and forecast the annual collective cost of delivering recruitment services across the participating boroughs. The partners were then able to compare this cost with the estimated projected savings they could make by implementing various delivery options, including no shared service, developing in-house service provision, or moving to a shared recruitment service provided by a third-party supplier. The final model presented by far the most cost-effective option, with potential annual savings of around £1 million to be made across the partnership.

Moving forward

The feasibility study helped those London boroughs then involved in the project to decide whether or not outsourcing the transactional elements of recruitment was an appropriate way forward for their own organisation. Inevitably, says Goldsmith, some of the original partners withdrew at this stage and, in January 2006, the seven remaining councils forged ahead with the plan to develop a shared-services model.

The partners attended a workshop to map out the "ideal" recruitment process in order to draw up a service specification document that would form the basis of the tendering process. The result was a detailed series of "module maps" that depict, in considerable detail, each distinct element of the recruitment cycle and how they interconnect.

Although most of the transactional elements associated with recruitment - and some selection activities - will fall within the remit of the shared-services model, there are some exceptions. "There are several recruitment touch-points between applicants and the prospective employer where it is essential to retain responsibility internally," Goldsmith says. "For example, none of the partner boroughs would contemplate outsourcing redeployment checks. There are other activities where specialist local government knowledge, or direct interaction between the candidate and the recruiting borough, is essential; for example, final selection interviews and the preparation of offer letters."

What's on the menu?

These exclusions aside, and 10 service specification drafts later, a final document outlining the activities that would form the shared recruitment services model was produced. This service specification report recognises that each partner borough has individual needs and requirements from the shared service. Nonetheless, there are common elements that form the partnership. It is envisaged that this "core activity" module will be supplied to the seven main partners, covering:

  • response handling;
  • applicant management; and
  • management information.

Each of these three broad headings covers a wide range of different activities. The associated tasks are spelt out in the service specification. For example, response handling includes:

  • vacancy notification;
  • application enquiry support; and
  • application pack dispatch.

Under each of these sub-activities, the specification document describes in great detail the expected range of responsibilities that must be undertaken by the supplier under the service-level agreement.

In addition to the core services, boroughs can elect to adopt one or more additional modules:

  • recruitment advertising;
  • online shortlisting;
  • interview administration;
  • assessment and testing;
  • clearance administration; and
  • executive search and selection.

Contracting out

Goldsmith explains that suppliers were invited to submit bids for either the entire contract or any selection of lots appropriate to their business. The project board has adopted this flexible approach so that it can select the best available expertise for each recruitment segment. However, the service specification document emphasises that "it is expected that in the case of lots being divided, suppliers work collaboratively to provide a seamless, consistent, reliable and cost-effective service for the London boroughs."

The board anticipated that some organisations would make a bid to provide the complete package of services. A prospective supplier was required to submit a separate proposal for each module it wishes to supply. In the event of the division of lots, the project board plans to appoint a managing agent to "oversee, ensure integration with, and support other suppliers".

It is expected that the managing agent will be a supplier of one of the modules, and any third party wishing to bid for this work needs to submit a discrete proposal. Suppliers bidding for the managing agent aspect were expected to:

  • outline a methodology for managing
  • diverse organisations;
  • draw on examples where this has been undertaken in other sectors, highlighting other major clients and the volume of transactions managed; and
  • cost this element separately in any submission.

Timetable for tender

Following an invitation to tender, more than 150 expressions of interest had been received at the time of IRS's visit. The closing date for receipt of bids was 8 September 2006 and the shortlisting process was scheduled to commence soon afterwards.

With such high numbers of potential bids to supply a range of discrete services, the tendering and selection process promises to be a resource-intensive and intricately choreographed undertaking. Fortunately, this work can be shared among the participating boroughs.

Assessment teams - comprising representatives from those partner boroughs that have signed up for a particular service - have been established to conduct the shortlisting for each module. A two-day "mop-up" session has been scheduled at the conclusion of the shortlisting process, when all partner boroughs will have the opportunity to finalise the shortlist.

It is envisaged that three suppliers will be shortlisted for each module, and will be invited to make presentations to support their bid in early October 2006. It is expected that bidders will provide details of existing clients that are prepared to supply a reference, to enable the project board to examine the services they already provide to other organisations. The assessment teams will carry out these "site reference visits", the results of which will form an important part of the selection process.

According to Goldsmith, the criteria against which potential outsourcing providers will be measured are based "70% on quality measures against the specification of services and 30% on cost".

A quality service

The London Borough of Sutton, in close partnership with the London Borough of Croydon, has already prepared the draft service-level agreements for each module. "The reason we have been able to prepare the contracts at this stage is because of the rigorous approach the project board has taken to developing the in-depth specification document," Goldsmith explains. "The hard work had already been done."

Each participating borough will have an individual tailored solution, dependent on the number and complexity of modules adopted. As the specification explains, there will be a separate contract for each borough, "allied to an overall collective contract and supported by individual and collective service-level agreements".

Responsibility for overall monitoring of the contract - or contracts - will fall to the project board, which will then become a management or contract board. According to Goldsmith, each service-level agreement will contain "hundreds of key performance indicators" to support the monitoring process. As he explains: "Close monitoring of the contracts is the key to ensuring clarity and quality of service."

It is envisaged that local contract monitoring will feed into the overall contract monitoring. Suppliers will be expected to provide:

  • quarterly reports and presentations to the contract board on adherence to performance indicators;
  • a named overall project manager to report to the board on issues of non-adherence to standards, both by the supplier and by boroughs; and
  • programmed and ad hoc contract review meetings.

Bringing this shared recruitment services framework to the point of tender has been a complex and lengthy task. Any outsourcing project, if developed properly, represents a serious undertaking, but this project has involved an additional layer of complexity because seven different recruitment processes have had to be synthesised. This has required a genuine partnership approach and close collaboration on the part of the partner boroughs.

The scheduled "go live" date is 1 April 2007 and Goldsmith is confident that the project will meet this deadline. But he is also aware that, in some respects, the serious work has just begun. The initiative will only fail if the project board cannot find a suitable supplier for the core module, as all other modules are optional. IRS plans to revisit the London Borough of Sutton once the shared-services model is fully implemented to hear about the next stages of the project, and the results will be published in a future issue.