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Had some really interesting discussions with senior HR practitioners this week – all touching on the shape, design and delivery of corporate services in the NHS.  Talking about the challenges facing NHS corporate functions, in particular we talked about HR Services and how senior teams should be considering areas for review and redesign using stronger evidence of efficiency and effectiveness.

We agreed NHS organisations needed help to understand their contribution, effectiveness, costs and efficiency. With better information available about those services, CEO’s could talk to their Directors about areas and ways to find better, more effective and affordable solutions to universal and ongoing organisational challenges.

Photo: kevindooley, Flickr

Over a period of years supporting public sector organisations’ support improvement action in corporate teams, especially with HR, Finance and Payroll, one of the most common topics of discussion with Directors and senior managers has been the proper place for payroll functions.

Some years ago, during a conversation with one (American) Chief Executive working in an NHS Trust that was experiencing problems with payroll services, this experienced leader expressed amazement that NHS organisations used outsourced payroll suppliers when ensuring staff were accurately and properly paid was “the most important responsibility of every employer.

Clearly he did not share the view of payroll as a low-value service, an assumption which might underpin the fact that, in UK public services, outsourcing payroll to a specialist provider is relatively commonplace.

Outsourced Solutions

Historically, payroll services have been the most likely corporate service for public bodies to buy-in from another organisation. Seen as non-core function, any in-house service would be viewed as wasting valuable time and money.

In the past, the challenge of legislative compliance combined with high volumes of relatively simple data driving most payroll processes (e.g. absence records, overtime worked, shift payments due) has made outsourcing the payroll function an attractive option.

This approach sees payroll as a”commoditized service” – a simple function which can and should be organised and delivered in the cheapest manner possible with the essential outcomes being payment accuracy and legal compliance.

During a time of austerity and cuts in public services, it seems more fashionable than ever before to outsource such services, having them delivered by a specialist payroll or multi-faceted corporate shared services provider. From 2007 onwards, public services have been seeking cost reductions in support functions by moving these services out to shared services organisations. The expectation for these projects is a combination of simplification, standardisation, automation and economies of scale will reduce costs while maintaining or improving standards. There should be no surprise there are both strong proponents and opponents of these projects, but everyone agrees delivering the benefits is pretty challenging.

For a shared services project to succeed in delivering savings while protecting quality, some fundamental changes are required, with significant review and redesign of functional roles and the business processes they are responsible for. With the trend for considering outsourcing a wider range of  administrative functions, the potential to buy in a combination of “HR and Payroll” or “Accounts and Payroll” is becoming increasingly common. In such cases the perspective of the client organisation about these support functions can be an important driver for the suitability of a particular solution. Read the rest of this entry →

Drawn into a conversation on LinkedIN last week about the “proper place” for the payroll team. Many people were sure that dealing with the pay, tax and accounting means there is no better place than in Finance – one even suggesting only Finance could be trusted to make accurate calculations.

Others were certain that the people-facing nature of payroll, the need for customer service plus the links to employment contracts pushed the function closer to Human Resources.

A few people identified the “HR input -Finance output” business that payroll delivered and talked about effective separation of duties to meet audit control requirements. This is definitely on the radar as a subject of a future article.

What do you think?

Working with public sector organisations, you will often hear (from corporate functions) that front-line managers cant operate self-sufficiently and need a lot of hands-on support from the corporate teams in finance, HR, procurement etc.

Does this reflect a clear and robust understanding of managers’ capacity and an organisational need for particular ways of working and higher levels of resource …. or simply excuses for maintaining out-moded models of operating?

Wouldn’t it be better for these teams to relinquish day-to-day control of the operational management of staffing an other issues, “letting go” while encouraging and supporting their managers to operate independently?

Public services may have a higher level of investment in professional education and training than private companies might expect and this might be a justification for higher resource levels in HR. Of course, many public services organisations have a high proportion of “professional practitioners”, creating a management layer naturally more interested in their professional responsibilities (i.e. patient care, social work, children’s education, catching criminals) than in managing staff and especially dealing with HR procedures.

It is that same professional context that can also create additional challenges when managing staffing problems that are more tricky to handle (see article Too Hard to Sack). In that context, we all recognise the temptation to procrastinate when there is something unpleasant to do and public sector managers can always justify focussing on public service outcomes first rather than having uncomfortable conversations. It’s possible this forms part of the context of a high-touch approach from HR teams.

Recently, we looked at the issue of HR ratios and explored whether it was possible to arrive at a magic “right number” using some kind of formula. Having decided this was almost certainly over-simplistic, we considered the kind of support and service models that HR might need to provide for managers. The Cranfield Study we referred to there showed organisational sector had a high correlation with the size of the HR function. Presumably this reflects the fact there will be many common features shared by organisations working in the same industry -

• similar workforce profiles with common working patterns etc.
• managers and staff with shared experiences and comparable skill sets,
• the same kinds of performance, conduct and other issues which require HR support.

It seems likely however these factors don’t reflect the whole picture. Read the rest of this entry →

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?

Read the rest of this entry →

In the current climate, perhaps it is unsurprising NHS organisations are looking for clear financial justifications for making any investments in projects which will take some time to complete and deliver benefits. When resources are tight and a number of core corporate functions are being subject to scrutiny and pressure, people are not sure there is a financial justification for starting any new work.

Having had the Electronic Staff Record (ESR) in place since 2008 (at the latest), many NHS organisations have deployed self service tools in some shape though few appear to be making full use of all it’s key features.

Too many NHS Trusts have been “piloting” ESR Self Service for a long time, with only a small number of people across the organisation using some of the tools available. This pattern suggests NHS organisations have commenced deployment without a clear strategy or vision about how they want to change the way they work.

Like many large projects, it can be all too easy to fall into the trap of focusing on the technology rather than the desired business change.

Undoubtedly, self service tools face special barriers in a healthcare environment. Not everyone has routine access to a computer and the NHS workforce has been relatively late in adapting to new computing technologies generally. With effective planning however, these challenges can be appropriately addressed and overcome.

In part though, the lack of progress on ESR Self Service reflects an innately conservative approach of corporate teams to the introduction of new technology – possibly not an issue special to the NHS. To the extent that self service encourages devolution of control and decision-making away from corporate centres, it is quite natural for those teams to express concern about risks and potential loss of control.

The combination of hesitant corporate teams, competing priorities, financial pressures and institutional constraints has the potential to make many NHS organisations seem increasingly archaic to “modern” managers from forward-looking healthcare and private industry and a new generation of employees now joining clinical teams from universities – who are familiar with the features of modern self-service technologies including sites like Amazon, Lastminute.com, iTunes and Facebook.

Like many organisations then, the NHS has been relatively slow to implement self service tools in the workplace. It is all to common to hear the business benefits of ESR Self Service have yet to be fully understood or, more importantly, realised in practice. How can this be successfully approached? 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 →

The last government trailed the concept of outsourcing public sector back office functions to the private sector. The expectation is that this would raise money, reduce costs and contribute to defecit reduction. Do you think this is a good idea? Read the rest of this entry →

 The UK government seems certain that outsourcing back office functions would improve services as well as reduce costs. This view is supported by the major consultancy firms and the CBI. A programme of outsourcing seems likely.

What do you think?

Read the rest of this entry →

The public sector appears to be set for increasingly widespread use of shared services for back-office functions. Most business leaders agree the strategy is effective but not everyone agrees.

The NHS has some previous experience of shared services and uses some shared service solutions currently. Thinking of the needs of your organisation, are these the right solutions for HR, Finance, Estates and IT services? Read the rest of this entry →