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If your CEO asks the question posed in the title, it probably isn’t acceptable to respond with the plain truth answer “It depends on how you want HR to contribute to the business!”

While this wouldn’t be an answer many would welcome, it is important to consider what role and purpose the HR department plays in your organisation – how it delivers value for the business. Form and size should follow function and purpose – do you need a large administrative function or a smaller team of highly skilled professionals?

If leaders want a “back to basics” personnel support function, the HR team might include a small number of “professional staff” with more administrative support people – helping managers to comply with the obligations of employment law and effective employment practice.

A more strategic perspective, incorporating organisation development and combined with a devolved approach to people management can see the HR function with slightly larger number of more specialist team-members – highly adapted to providing advise on complex issues while expecting managers to do more for themselves – offering less administrative support – particularly where it has deployed smart self-service solutions.

So what is the answer to the level of resources needed?

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While inheriting and accepting many features of the outgoing government’s strategy on productivity and efficiency, the Coalition Government has, at times, seemed less than enthusiastic about the delivery of corporate functions through shared service centres.

In the context of many reports of failing shared services projects in the public sector, it would have been astonishing if the government had not wanted to assure itself about these projects before setting out a strategy for the future.

In July 2011 the government published short paper setting out it’s views. Government Shared Services : A Strategic Vision summarises its findings and conclusions.

The government has set out an approach to consolidate back office “transactional services” in HR, Finance, Payroll and Procurement between and across Central Government organisations and Arms Length Bodies (ALBs).

It suggests the existing shared services operations, while not delivering optimum results, have already delivered savings (£13m per annum at the Home Office, £20m at Ministry of Justice and £35m per annum at Department for Work and Pensions) through moving back office transactions to shared service centres. It is relatively common for shared services projects to encounter difficulty in establishing a baseline position on service quality and costs and there are no details provided on how these figures have been derived.

The government’s new vision consists of -

• A Central Government oversight function to lead a new governance structure to accredit independent Shared Services Centres (ISSCs),
• A small equitable market (maybe 2 providers) of accredited ISSCs will be available for Government Departments and their ALBs to choose between,
• ISSCs will operate independently from customer organisations, delivering “outcome based services” using standardised simplified processes against established performance benchmarks.
• ISSCs can adopt different business models (i.e. public, mutual, private), leverage capability and financial investment needed to deliver services and can operate virtually or from integrated delivery centres.
• Departments can make a case to continue to use their own “standalone” corporate services if they can match ISSC performance using the agreed benchmarks.
• If a department can show better performance than ISSCs, they may be able to begin offering services to others but a Department may be compelled to become a customer of an ISSC, or at least meet the same standards, if they are falling shot of performance standards.

The Cabinet Office Efficiency and Reform Group Shared Services team will be working on a migration plan and a strategic outline business case for November 2011. Overall, the paper does seem to set out a pragmatic approach to the challenge, recognising that one-size might not fit all and providing some flexibility for the larger organisations to continue providing in-house services.

In relation to the shared services delivery model, the government has suggested it will learn five important lessons from the experience of early shared services adoption in government -

• Independence is important to incentivise a better quality of services at a lower cost.
• Delivery of shared services is not a core Government skill and bringing in operational and commercial expertise is vital to improving current capability.
• On-boarding to a bespoke service can be expensive and issues on charging between public organisations can act as a barrier, e.g. smaller organisations need an affordable solution.
• Shared Services comprises a range of key components that influence cost and require standardisation – infrastructure, IT platform, ERP solution, business change, business processes.
• Strong governance is essential and efficiency gains are proportional to the level of mandation in the use of shared services.

While these lessons look fine (if not very new), does this strategy make sense in its broader context?

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The Coalition Government has been trailing a major overhaul to public service delivery for many months as part of its Big Society and “localism” agenda. It’s aim is to reduce the role of Whitehall in the commissioning, planning and delivery of public services across the country. In the Modernising Commissioning Green Paper, the Government stated ” …. these reforms are fundamental to achieving the Power Shift, to which this government is committed, transferring power away from central government to local communities.”

Before the Prime Minister’s speech, the Independent predicted scaled back rather than the bold initiatives that had been expected before the NHS pause. It expected there to be no new enabling legislation with, instead, each arm of Government establishing it’s own framework and initiative – much like the free schools and academies programme for education.

In earlier announcements, Francis Maude said no additional legislation was required to allow mutual organisations to bubble-up spontaneously. Change would come from energy and drive of local stakeholders rather than a programme of central change and control. However the barriers for employees and employers to an effective bottom-up change solution seem no closer to resolution.

David Cameron’s statement that diversity in supply will be “the default” and the public sector will have to justify providing services in-house is a bold one, though the method and approach to deliver this in practice seems somewhat obscure. There is scant detail on HOW the Coalition Government plans to deliver and support the change it wants to see take place.It will be important to see how the government takes the agenda forward with the measures that were described by Maude in the following Commons statement -

• strengthening accountability by a radical programme of transparency for government and the public sector
• unlocking innovation by removing barriers to entry, stimulating entry by new types of provider, and unlocking new sources of capital
• ensuring public sector providers can hold their own by liberating public sector bodies from red tape
• encouraging employee ownership by promoting mutualisation and employee cooperatives
• ensuring service continues if particular service-providers fail with effective continuity regimes established service by service.

The White Paper does provide a comprehensive, consistent and coherent approach to delivering public services in a different way. Many people would agree with the suggestions that Choice, Fair Access and Accountability are important though fewer are likely to welcome increasing Diversity (because of the fears of damaging privatisation) and many will be worried about Decentralisation at a time when local services are being hit hard by spending cuts.

So does the White Paper provide shafts of light for the future or is it just too difficult to see the wood for the trees?
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Attractor recently publsihed an article about Lambeth Council – which had already adopted many approaches which seemed to fit with the new Coalition Government’s rhetoric. The council’s “Co-Operative Council” strategy seemed in tune with current thinking and the organisation apparently aimed to develop a truly “downward and outward” facing culture.

Local Government is experiencing severe financial pressure, with the finance settlement announced on 13th December 2010 – following the Comprehensive Spending Review in October. With the financial squeeze being front-loaded, many are expressing concern the “cuts agenda” for 2011-14 will overtake the potential benefits of concepts underpinning the “Big Society”.

Has the Co-Operative Council made significant progress in changing how it works and adapting to a new environment? How is the council tackling the challenge of austerity?

in July 2010, Lambeth commenced a consultative exercise, like many councils, in relation to its objectives and priorities. This exercise involved a survey of residents, the use of focus groups with older people and parents and a workshop involving a representative sample of the borough’s population.

The exercises were used as opportunities to explore what local residents and community groups thought about the council’s options for reducing expenditure. In addition to these participative exercises, the council created an online budget simulator toll that allowed people to identify areas where there could and should be reductions in expenditure to help balance the budget.

How has this shaped action? Read the rest of this entry →

In an effort to save costs, Kensington and Chelsea, Hammersmith and Fulham and Westminster Councils made proposals in the latter part of 2010 to share services in a “Tri-Borough” solution.

They plan to deliver savings in management and “overheads” for the direct services provided to the public. The proposals, referred to by some as a ”Super Council”  have been described as radical and are considered by some to poase too many challenges for local political accountability.

The proposals anticipate £34.6m each year  (27% from Children’s Services and 29% from Adult Social Care) assuming it will be possible to deliver a 50% reduction in management numbers and overhead costs by 2015 though the complex challenges are recognised to require a higher skill base and more senior staff to deliver the strategy.

The proposals are being cosidered by the Councils during February 2011 and the blogsite ConservativeHome comments on both the plan and criticisms from Labour opponents despite similar plans being developed by Lambeth, Southwark and Lewisham Councils.

The Tri-Borough Councils expect to deliver shared management teams for Children’s Services and Adult Social Care, as well as to share a number of senior posts including Chief Executives and Director-level posts. Integrated services for delivering support to schools and managing specialist services are planned. They also expect to have shared corporate back offices (HR, Finance, Property, IT, Legal and Administration run either through external contracts or by single provider councils.

The proposals aim to retain local decision-making and accountability with each council raising its own funds and setting spending priorities and able to set its own policy for how services are delivered. It is anticipated the Councils will share innovation in service delivery and adopt common specifications where compatible with policy objectives and give best value to taxpayers.

So how radical are these plans and are they likely to be effective? Read the rest of this entry →

Photo: Marfis75, Flickr

In May 2010 Lambeth Council published its Co-operative Council White Paper, setting out a vision of how it would need to reconfigure its structures and services. In a timely strategy, it looked forward to a time when the public sector would withdraw from particular services to protect funding for others.

It foresaw the need for citizens, the voluntary sector and community groups to take over the delivery of these services if they chose to do so. Rather than abandoning these services, the role of of local government was to empower the community to take on more responsibilities.

This strategy and vision is clearly in tune with the idea of the Big Society and the austerity measures being taken by central government.

By withdrawing from some services, it would possible (and necessary) to prioritise resources and investment investment particular areas – services which would continue to be provided by the public sector -

• personalised services – those which “maximise life chances” and required professionals to work closely with and provide support for citizens
• community services – those best tackled by large parts of the the community coming together to take decisions on services

What are the implications of this vision and strategy? Read the rest of this entry →

Photo: Siddhu 2020, Flickr

The well-respected Flip Chart Fairy Tales website has recently covered some important themes relating to the challenge of improving efficiency and productivity in the public sector. Rick points out the differences between manufacturing and service sectors and the lessons of systems thinking. The track record of UK industry in productivity improvement has, indeed, been gradual rather than dramatic and public services have to move far faster.

It seems, though, examples of public sector inefficiency are not hard to identify. In September 2010, an anonymously penned article in the the Guardian echoed the feedback from public servants working across the UK, describing a number of examples of waste in public services -

• poor recruitment and appointment decisions,
• poor management handling of lazy and inept staff,
• poor specification, deployment and use of contractors,
• waste, bad design and poor delivery of major IT projects,
• poor economy in travel and expense practice.

While, perhaps, indicative of a culture that values neither productivity nor efficiency, addressing all these issues would be insufficient to tackle the level of savings envisaged by the Coalition Government’s austerity measures.

In other respects however, the observer focuses on a far more important issue -

“… teams tend to blindly follow out-of-date procedures while others create new measures and protocols for the sake of it – and no one stops to question the need for so many reinventions of the wheel. Much of my present role has come about because of the need to redo work that was never completed to a remotely adequate standard.

The same thing happens whenever “efficiency savings” are called for: another big review gets under way, the same problems are discussed, committees are created … and then everyone carries on as before. Instead of waiting like martyrs for the axe to fall, the civil service could act. It could forget about further costly top-down examinations of recurring problems and instead ask everyone to take it upon themselves to do something about wastage.”

While this diagnosis may seem over-simple, it reveals an important truth. It is often within the outdated and ineffective working practices – which have accumulated over many years – that most of the inefficiencies remain deeply locked. To make effective change here, far more radical solutions are required and, in some places, shared services are seen as the answer. However, this response to inefficiency can be worse than the original problem. Read the rest of this entry →

Since the publication of the Smarter Government report in November 2009, which released the results of benchmarking work for the back office functions within central government, interested observers having been waiting for the NHS to complete it’s own review. This work has been completed and with the publication of the QIPP Back Office Efficiency and Management Optimisation Report has been published along with the conclusions on how the NHS should take matters forward.

As well as following on from the Smarter Government review, this work follows themes already established by HM Treasury’s Operational Efficiency Review, published in July 2009 which outlined the potential benefits of efforts to improve back-office efficiency. HM Treasury concluded it would be sensible to deliver improvements through shared back-office functions and larger scale procurement.

The QIPP report reveals the NHS spends £2.8bn on back office functions and suggests it would be possible to make savings of around £616m (around 22% of current spend) by standardising and streamlining services through scaled solutions.

This seems a more credible target than the common over-optimistic claims (30-50%) which fail to take into account the proportions of current work that cannot or will not be effectively shared.

A potential saving of this magnitude is certainly worth exploring in more detail but taking into account £2.8bn represents only 2.6% of NHS operating expenditure, it’s vital to keep a sense of perspective about the scale of benefits. Delivering all the potential savings identified would deliver 0.6% savings overall and only 3.1% of the £20bn savings target established for the NHS by 2013. The financial pressures facing the NHS will not be addressed by streamlining the back office! thie require more substantial work on core clinical services.

Furthermore, establishing shared services will take time, investment and significant effort. Shared services projects starting now would be unlikely to yield savings within the timescale of the current national savings programme. This does not mean they are not worth pursuing …. just that they need approaching with realistic expectations and appropriate objectives. Organisations that enter into such project with unrealistic expectations are most likely to fail.

There are important messages and key issues identified in the report that are worthy of more exploration. What can we learn from it? Read the rest of this entry →

At the Efficiency and Reform conference held on 25th November 2010 at the Barbican in London, Attractor led a Masterclass for public sector managers. The discussion considered how to respond to the twin challenges of financial constraints arising from the recent Comprehensive Spending Review plus increasing localism within the Coalition Government’s Big Society agenda.

It was recognised there were inherent challenges of localism, including stresses arising from local political action and the potential for increasing variation and a “postcode lottery” in service provision. There were also complications, legal, financial and contractual in withdrawing from existing public services and “spinning out” services into new mutual or social enterprise organisations.

It is vital to recognise successful change programmes addressed change “in-depth”, tackling technology, processes and people, paying attention to all the technical issues, while also addressing issues in business process design (task value and sequencing) while working to engage people to build understanding and attitudes of people.

But how can this be done? Read the rest of this entry →