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Earlier this year (July 2011) NHS Shared Business Service (SBS), a joint venture between the Department of Health and Steria UK, announced its clients would get a share of a £1.2m ‘bonus’. SBS reports savings of 20-40% of operational costs for services it has taken over in back-office support in areas such as finance and accounting, payroll and family health services and says it has saved £50m already.

SBS continues to proactively grow it’s business by acquiring work from additional NHS Trusts with the aim of saving the NHS £250m by 2014. Attractor would highlight the point that evaluating the impact of shared services can be complex as the boundaries between client and provider can generate costs if they are not well designed managed effectively. It’s not clear from published material exactly what functions have transferred and where clients retain responsibilities and functions.

With the right service-design, an external supplier can certainly provide capacity some organisations would struggle to obtain and retain, delivering better outcomes and cost effectiveness than an in-house service. Like many outsourced transactional functions however, feedback Attractor has from SBS customers does vary, with some being very pleased with both financial results and operational delivery while others reporting less satisfaction with operational service delivery.

This market is not very mature and only time will tell the extent to which SBS and other shared service providers are successful in providing robust and cost effective transactional services across the NHS.

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 →

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.

Read the rest of this entry →

With the Comprehensive Spending Review (CSR) nearing completion, most public sector organisations are expecting major reduction in the operating costs and many are waiting to see if they have a future. For those organisations with a certain future, the need to identify efficiencies, remodel services and deliver savings will be a driving force over the next few years.

Until recently, the government had been a supporter of shared service solutions which allowed public sector organisations to save costs in corporate and back office functions. Many of the UK’s  local authorities and NHS organisations have been continuing with shared services projects while commentators have been expressing doubts about their value.

The reputation of shared services is at best, mixed. Many private sector organisations are extolling their virtues and making strong claims for improvements in service quality and cost.

Often however, informed professionals in IT, Finance, HR and facilities regularly express doubts about their track record, not all of which can be attributed to a lack of imagination or a reactionary desire to defend the status quo.

But where does the government stand on the matter? Is the tide coming in or going out? Read the rest of this entry →

The NHS White Paper, “Equity and Excellence: Liberating the NHS”  represents the completion of a devolution journey the NHS has been undertaking for over a decade. Moving all service providers either to Foundation Trust status or to one of a number of social enterprise models, it effectively de-nationalises NHS organisations.

In future, NHS services would be delivered through a wide range of diverse organisations – based on different legal frameworks and working in different ways.

When it comes to workforce issues, most people are currently focusing on the impact on those involved in commissioning, planning, inspecting, monitoring and managing the NHS. Staff losing jobs, reassigning function to new GP consortia, possible TUPE transfers and skills retention challenges.

But what does all this mean for the workforce delivering care? When the dust settles, these are the people we rely on to maintain high quality patient experiences.

While it might feel a little early, it’s worth considering what the provider organisations emerging from the shake up might look like. Read the rest of this entry →

Image : jinho.jung, Flickr

When organisations refer to their “shared services” projects, they are not all talking about identical solutions. Different experiences and variations in savings will reflect the nature of changes being made and the approach to implementation.

For some organisations, implementing shared services brings together a number of activities which were managed within local business units – creating a single, centralised solution.

Instead of each business unit controlling its own local service, they all share a single internal service delivered from a central location.

For other organisations shared services involves seeking to buy-in services from another corporate body – perhaps a parent organisation, a similar neighbour or a commercial partner. In this case, challenges of reorganising services and delivering service levels are multiplied by issues of finding the right partners, procurement and contracts.

In some very ambitous cases, organisations might be seeking to both centralise and buy-in services in one swift act which makes projects especially challenging. In all cases the service outcomes will be judged on the basis of how they work for customers and how much they cost. These judgements will be determined by how they set up their business and approach investment and improvement action. Read the rest of this entry →

As a further sign pressure in the UK for the public sector to deliver savings is increasing, the Cabinet Office’s new Efficiency and Reform Group now has control of the the Office of Government Commerce (OGC) and Buying Solutions.

Including the authors of earlier efficiency reports – Sir Peter Gershon, and Dr Martin Read, the Group aims to deliver a significant programme of change.

Referring to the creation of the Efficiency and Reform Group, Francis Maude, Minister for the Cabinet Office was quoted as saying -

“We want a slim but strong centre that can drive down the cost of government, so protecting as best we can the crucial front line services on which our citizens depend”

The newly strengthened group will have the power to make sure departments work together to tackle waste in areas including ICT spend, procurement, advertising and marketing spend, and Civil Service expenses and recruitment.

There was speculation before the election that OGC would be brought closer into the government, in part to address criticisms that it lacked political clout. The move clearly reflects the points made at the Operational Efficiency Conference in November that it was far easier to address issues within the sphere of Whitehall departments than in the wider public sector.

The impact of the efficiency programme for local government and NHS organisations will probably take longer to materialise – and will probably reflect the “devolving” ambitions of the coalition government.

Attractor has already commented on the potential impact of a simplified approach to Civil Service terms and conditions and on the potential for outsourcing Whitehall’s back office functions and the calls to increase outsourcing and shared services. The actions of the Efficiency and Reform Group stretch to a far wider remit however. 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 →