Shared services: the way forward
'Shared services' appears to be on everyone's lips at the moment. But will it really help to save costs, boost efficiency and encourage HR to grow, or will it just end up creating more problems than solutions?
On this page:
Business case
Benefits of shared services
Communication is key
Case study: Somerset County Council.
Shared services may not be a new concept, but it appears to be flavour of the month.
A Treasury-commissioned report by former Logica CEO Martin Read revealed last month that government departments and quangos could achieve cost savings of 25%-30% if they reengineered back-office functions and introduced central shared services.
Chancellor Alistair Darling said in last month's Budget that he fully supported the report's proposals, agreeing to speed up the introduction of shared services across departments.
But Personnel Today revealed that the move is also likely to cost nearly 6,000 government HR jobs, and runs the risk of being time consuming - Defra's HR chief recently warned that it took her department two years to fully implement shared back office functions across HR, payroll, procurement and finance departments.
So will the introduction of shared services really help, or will it just end up creating IT headaches, sacrificing key staff and losing vital talent?
Business case
Philippa Bradley, strategic HR sales lead at Logica UK, said: "If the business case is sound and implemented correctly then there is no reason for [IT or staffing] issues to come about. Sometimes the business case is built on sand and the realisation of the business case is hampered by poorly motivated employees having to do more with less people."
Richard Crouch, head of HR and organisational development at Somerset County Council, which joined a shared services venture in 2007 (see case study), warned that the model can go wrong if mismanaged, and said success depended on how organisations implemented the changes.
Crouch, who has experienced shared services at councils, said they did not often deliver the savings expected, or lacked clear design. "Too often it involves sharing managers but not the staff on the ground," he told Personnel Today. "Sometimes one council [which has lost a head of HR] says to a neighbouring council: 'Can your head of HR look after our services as well?' The manager who inherits the service inherits that team and ends up with a double workload.
"It can be confusing for staff and for customers as to who does what and who's employed by whom. The head of HR of a shared service is often torn, both physically and emotionally, between the organisations being serviced."
Benefits of shared services
However, Crouch cited the benefits of shared services, including economies of scale, shared learning and expertise and a reduction in duplication as examples. And HR careers can flourish under the system. "Shared services gives HR professionals a real opportunity to come out of the shadows, become more front-office and have a much wider cross-organisational perspective."
Alan Bailey, director of integrated HR services at outsourcing provider Capita, agreed. "It does leave HR people in that space where they can do value-added stuff rather than admin. The HR director can focus on performance and talent development. If you centralise and make sure you have one common process, you get a compliant, better result."
The National Trust knows about this. The charity introduced shared services six years ago. The process took a year to complete, all transactional HR activity was centralised and a new computerised HR information system rolled out.
"Previously, we had 17 separate personnel departments across England, Wales and Northern Ireland," said Paul Boniface, director of HR and governance at the Trust. Now it's just one.
"There were a lot of options on policy and process, consequent duplication of effort and it also carried a higher risk because of different approaches. Now we have a single set of policies and one process, and annual savings of £300,000," he said.
Communication is key
Vanessa Robinson, head of HR practice development at the Chartered Institute of Personnel and Development, advised organisations thinking of embracing shared services to view it as a long-term change. Success is based on making sure people know what the change is about. Good communication, and making sure you set up project teams that include a number of key stakeholders, not just the people changing jobs, are vital too, she said.
Case study: Somerset County Council
Somerset County Council entered into a 10-year shared services deal with Taunton Deane Borough Council, Avon and Somerset Police Authority and technology giant IBM in October 2007, costing £400m.
The public/private partnership began delivering services, including HR, communications, finance, and facilities management, with targeted savings of £200m for Somerset alone. It involved more than 1,000 public sector employees transferring to the new venture, with 150 HR professionals coming from Somerset.
Richard Crouch, head of HR and organisational development at the council, said the project would help HR staff eventually spend less time on pure back-office functions and more on front-office HR, as it allowed the organisation to introduce a new IT software product that will 'talk' to different systems.
"[Shared services] means you can transfer staff to more of a front-line service or reduce staff. We are going to have fewer 'in-putters' and retrain and re-skill them to the advisory and recruitment side," he added.
