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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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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 a time when public services are under pressure to save money, its not surprising more local authorities are considering the potential benefits of creating shared service solutions.

Members of Scotland’s Clyde Valley Community Planning Partnership (CVCPP) – West Dunbartonshire, East Dunbartonshire, Inverclyde, East Renfrewshire, Renfrewshire, Glasgow, North Lanarkshire and South Lanarkshire – are working together on a programme.

Similarly, the London boroughs of Westminster, Hammersmith and Fulham, and Kensington and Chelsea propose merging many of their front-line services. The three councils’ will receive a feasibility report on the possible merger in February 2011.

Statements reported in the press about the CVCPP scheme suggest the programme is looking at savings of arond 20% and the London boroughs have talked about savings of £100m though these both seem likely to be the kind of generalised modelling and targets discussed in the early stages of most shared services projects rather than a carefully worked-up figure using real data on proposed solutions.

In principle, the potential savings from shared front-line services ought to be significantly larger than shared back-office – simply because of the proportion of organisational expenditure in those areas (back-office functions typically costing a small percentage of  total revenue) but the delivery of savings is no more certain.

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Photo: amontei, Flickr

In July 2010, Anthony Dance asks on the HRZone website why poor manager performance was not seen as a key issue for HR practitioners. It’s absolutely the case that many organisations see gaps in management capability as a  serious problem.

A quick trawl through Personnel Today sees poor managers blamed for provoking conflict, increasing the levels of sickness absence, causing under-performance and creating a culture which allows poor customer service.

These concerns certainly aren’t surprising. In its 2005 Workplace Productivity Survey, the US-based Society for Human Resource Management (SHRM) examined workplace factors which impacted on worker productivity. The survey gained responses from 478 HR professionals and 613 employees and 58% of respondents reported the most important factor holding employee productivity back was poor management. Read the rest of this entry →

Photo: Darren Hester, Flickr

NHS managers looking at our benchmarking solution have described how they will use it to plan and monitor local actions in response to the challenge of the NHS Quality, Innovation, Productivity and Prevention initiative (QIPP).

A Payroll Manager explained it would enable him to demonstrate how service plans would adjust the profile of the organisation changing high level and detailed performance data.

As well as providing an evidence-base for improvement planning, the tool would enable them to meet the recommendations of the Operational Efficiency Programme, collating relevant information and providing comparison data to inform their decisions.

The solution has been created specifically for NHS organisations (versions for other part of the public sector or on the drawing board). Back-office benchmarking is new for the NHS and, obviously, depends on having significant volumes of data from relevant organisations to provide comparative information.

While still at an early stage in its service lifecycle – only just moving from planning to delivery – the early signs are promising. Already, 60% of the NHS organisations which evaluated the service have subscribed while others are still considering their position. No organisation having reached this point has, yet, decided not to subscribe.

Attractor is now marketing the service widely for the firs time and expects sufficient sign-up from NHS organisations to provide subscribers with authoritative, persuasive and compelling evidence to support local decision-making. Read the rest of this entry →

With the UK’s election result imminent, public sector bodies must soon return to the efficiency agenda.

Shared services or outsourcing solutions seem likely to be deployed for back-office services across much of the public sector.

Organisations with ready plans will probably face pressure to quickly turn blueprints into reality.

Those without plans will have to develop ideas quickly, recognising the pressure to maintain spending on front line services will dominate any discussion on these initiatives.

How can those who have to make decisions “see the wood for the trees”? What evidence is available to support decisions and help them reach judgements and make informed decisions?

HM Treasury’s 2009 report on operational efficiency examined evidence from the private sector before arriving at its targets for efficiency savings. It concluded that back-office savings in the range of 20-30% could be achieved from business process reengineering / shared services. Other revews have reached slightly different conclusions. Read the rest of this entry →

The government’s plan for back office efficiency, “Putting the Frontline First”, was published this week.

The material includes benchmark data for finance, HR, IT and Estates functions in central government plus broad improvement plans for government and the wider public sector.

Amongst other measures, the report uses the ratio of employees to HR practitioners to compare efficiency. The report reveals the top 10% of government departments reach levels of HR efficiency comparable to the median private sector attainment and just 3% match the top quartile private sector performance.

The report also highlights a weak correlation between HR resources and sickness absence levels, suggesting resource levels are not a reliable indicator of effectiveness. Read the rest of this entry →

At the Operational Efficiency Conference in November, speakers explored how to drive change and efficiency across central government and the wider public sector.

While central government was moving quickly to measure and report levels of efficiency, there was less obvious engagement in the wider public sector.

Plenary speakers highlighted the challenge of direct action in these environments where there are devolved political and governance frameworks combined with diffuse financial control mechanisms. Read the rest of this entry →

Photo:Covilha, Flickr

As purse strings tighten, high-quality front-line public services should be protected as much as possible. Nonetheless, core services shouldn’t be treated with kid gloves or complacency. Both front-line and back-office teams need to be proactive in identifying how to save money.

Back-office teams will face pressure to adopt outsourcing and shared services to save costs. Evidence shows these solutions can reduce costs and improve quality, though examples of failure aren’t hard to find.

New services don’t always deliver the lower “headline” costs expected and poor quality can create major hidden expenditure linked to correction and re-working activity. A short-sighted focus on cost-cutting can weaken effectiveness across the whole organisation.

Management should consider how effective back-office teams contribute to cost-control across the business. It would be unwise to reduce costs in one area but find the organisation spends far more elsewhere. Read the rest of this entry →