Over the past few years, governments around the globe have been fighting a common battle on three fronts.
On the first, a global downturn in the economy has led to increased fiscal pressures and difficulties in balancing budgets.
On the second front, growing expectations that public-sector organizations should be more accountable to stakehol-ders and deliver better public services have left governments struggling to provide more citizen-focused services with less funding.
On the third front, impending labour shortages as an aging workforce retires mean that many governments will find it difficult to retain the knowledge workers they need to run their operations. In fact, some governments are already starting to experience skills shortages in certain areas, such as information technology.
And what does it all point to? Shared services – a different way of organizing government operations.
Governments need shared services now. Around the world and in Canada, they are required to accomplish seemingly endless objectives with decidedly limited resources. The traditional options for governments faced with such a dilemma have been to either cut services or increase revenue through higher taxes.
One of the bigger obstacles faced in the move to shared services is dealing with multiple enterprise resource planning (ERP) systems and old legacy systems. Government will get approval for a shared services model – but without support for new or integrating ERP systems.
Fundamentally, ERP implementations are meant to align business process to applications and improve productivity through systems automation. Accenture researchers have found that combining consistent processes and ERP systems is vital to the success of a shared services project. Additionally, implementing shared services after ERP has been implemented will help deliver on the business case for the ERP.
Still, some government leaders have overcome these obstacles and achieved remarkable results through a different approach – shared services – thereby dramatically increasing the value of the services they provide and transforming their organizations into high performers.
Exploring shared service around the world
Accenture recently conducted a global research project to explore the world of shared services for governments. Some of what we found surprised us:
Shared services is now a broadly accepted model is the public sector: Fully 66 per cent of the governments we surveyed have already implemented shared services or are in the process of implementing it. Another 28 per cent, say they anticipate implementing shared services in the next one to three years. Only six per cent have no plans to implement shared services.
In fact, 85 per cent of the governments we surveyed believe shared services are or will be important to supporting their organization’s strategic goals. We believe these governments understand that delivering administrative services of higher quality at lower cost will improve direct service delivery to citizens and increase public-sector value.
We also found that the toughest challenges many governments face during actual implementation are not the ones most expect before starting.
On the downside, we found that many governments are still falling short of achieving the full potential benefit of shared services. In most cases, the focus on cost savings has obscured the service improvement opportunities so far. Many governments also struggle with insufficient baseline data to assess their progress and the impact of the changes they made. They need to embrace benchmarking more fully to determine whether improvements have been made once their shared services transformation has begun.
Additionally, the unique nature of government sets up specific challenges to shared services, in terms of managing political, workforce, territorial and governance issues. These can prevent governments from adopting the optimal organizational structures and flexible procurement approaches that commercial entities can adopt more freely.
Our interviews with leaders uncovered a wealth of valuable advice from some hard-learned lessons. While all experienced a myriad of shared services challenges, they emerged with demonstrably successful shared services organizations and solid strategies for continuous improvement. Although their individual circumstances differed greatly, many of these executives echoed strikingly similar sentiments, especially about the value of building a strong business case, gaining early buy-in from all stakeholders and insisting on meticulous up-front planning.
The benefits of shared services
The potential benefits from shared services are striking. In the private sector, it is not uncommon for organizations to identify savings in excess of 20 per cent, which alone is strong rationale for the move to shared services. Then there are other benefits that contribute to delivering greater public-sector value: greater efficiency, improved focus on strategic outcomes and improved service delivery. For governments to achieve these benefits, they need a starting point: baselines to compare practices, to understand what those who have been successful have done to ensure their success, and to help those just starting out on their shared services journey to know which practices to avoid and which to pursue rigorously.
What can we learn from successes?
Our interviews with these innovators revealed consistent leading practices at various stages of the shared services journey. These include:
• Gain leadership support/buy-in from politicians and senior management.
• Develop a strong shared services business case, strategy and plan.
• Create the shared services organization as a stand-alone entity.
• Create a strong governance structure that includes user departments and service-level agreements.
• Manage workforce issues.
• Ensure that the right enabling capabilities are in place.
• Transform the internal culture.
• Measure performance.
Some of these key components of shared service success are particularly relevant in Canada:
1Develop a strong shared services business case, strategy and plan
Define a clear vision, business strategy and operating model. This advice is so fundamental as to seem a given, yet, we were struck by how many of our respondents told of problems during implementation that could be traced back to planning that was either incomplete or not detailed enough. Nearly all spoke of spending the necessary “up-front” time as an important lesson learned, and we think it bears repeating. A successful shared services implementation requires a vision that is clear from the outset, extends far beyond initial deployment of the solution and is shared by stakeholders.
2Create the shared services organization as a stand-alone entity
Most of the innovators created new, stand-alone shared services entities as part of their organizational transformation. Though sometimes “hosted” by another organization, the shared services organizations typically were set up as separate operations with their own management teams and, in some cases, with their own accounts and balance sheet. This approach:
• Separates the shared services centre from any negative connotations associated with existing business units or an organization’s headquarters,
• Avoids conflicts of interest by providing clear purchaser-provider clarity,
• Combats lack of trust and concerns about service levels that are often expressed when a peer organization takes over services,
• Disengages the shared services organization from entrenched work paradigms and instills new values and a culture of operational excellence, and,
• Allows the shared services organization greater latitude during the design and implementation stage for establishing entirely new operational procedures that will in turn create higher value results. By contrast, if the shared service were purely managed within a business unit, it would raise the risk that management focus would be lost amid competing priorities.
3Create a strong governance structure that includes user departments and service-level agreements
Sound governance is key to a successful shared services implementation, as it not only helps to manage the strategy for implementation and ongoing issues, but also defuses territorial issues and establishes accountability. Several of the organizations in our research found that a governance structure that included their client agencies was optimal, as it built and sustained buy-in.
4Manage workforce issues
Workforce issues must be communicated and managed throughout the journey. When shared services centres are established, these typically draw staff from several constituent agencies, which creates a number of issues. The reorientation of roles and responsibilities, and the change in internal culture, will require substantial staff training. Governments must address fears about job losses or relocations, loss of morale among employees who feel they are moving to a less important organization, and issues related to pay parity, as well as changes in working conditions and job descriptions. The leaders stress the need for open and regular communication with staff during and after the transition.
Staff need to understand the vision and strategy, and appreciate the new customer-focused mindset, of the shared services entity. They need to understand the conditions of their new employment. And most of all, they require reassurance about their new roles and value.
Listening to employees’ concerns is the first step. Doing more with less, while desirable at the organizational level, may be resented at the individual employee level. It is critical to instill pride in the employees as they take on their new roles, and to help them adjust to a continuing process of change.
What about technology and ERP?
The executives we interviewed saw technology as a key enabler for moving to shared services. In many cases, the right technology had enabled simplification, standardization and automation of previously complex, diverse, tedious and duplicated manual tasks.
For example, the U.S. Defence Finance and Accounting Service turned 300 sites into 27. Not surprisingly, executives there believe the successful move to shared services could not have happened without a solid technology platform.
In other governments, reengineering of systems in the long term was regarded as vital to realizing the full savings and efficiency potential of shared services. In this regard, a shared vision between the leadership in the shared services organization and the chief technology officer is key.
Particularly important is a single ERP system. Indeed, much of the initial cost saving included in business cases for shared services comes from the consolidation of ERP systems, which can result in lower licensing and maintenance costs. Following the initial savings from consolidating ERP systems is a larger wave of process efficiency benefits.
ERP is a fundamental element of shared services success. Without a solid ERP strategy, many organizations may be challenged in their shared services initiative; those that do not have a strategy, or are working in multiple ERPs, are starting with their hands tied.
Despite the value of leading-edge technology, several interviewees grappled initially with legacy systems, either because of the lack of funding for information technology upgrades or the lack of authority or control over IT policy.
The current economic and social environment is leading governments to make transformational change. Governments are at a crossroads. The move to shared services is a journey that takes time, effort, focus and discipline. Many governments have a long way to go on that journey to realize the full potential of shared services.
Those governments that recognize the dramatic change inherent in shared services – change far beyond techno- logy deployment – have often found it vital to bring in outside help, either to assist through the transition or to partner with the government to deliver the shared services through a business-process outsourcing arrangement. Their successes to date seem to make one point clear: If you are not already thinking about moving to shared services for your organization, you probably should. 057233 Jim McDade is the lead partner for the government operating group at Accenture in Canada.