In private industry, shared services are common and widely accepted. Even very large companies can have single administrative processes and systems supporting billing, procurement, human resources, training and finance, as well as communications, marketing, legal and technology support. Private industry uses shared service models to help reduce operating costs and increase profitability, or to help the enterprise stay afloat in hard times.
Government is different. Public sector organizations aren’t looking for profitability and are not at risk of closing their doors in the large scheme of things. That said, government is being driven to look towards shared services more and more. This is a result of both shrinking budgets and a growing population of citizens who expect services to be available 24/7 through various channels. Even if there were a slight increase in funding, there wouldn’t be enough to cover the new “business as usual.” Given these facts, shared services, which can bring significant savings and support innovation when implemented correctly, are here for the long haul.
Implementation of government shared services has seen both success and failure. Private industry has it easier because typically there is an authoritative, accountable executive who can ensure funding, mandate new standards, allocate or re-assign resources, and then pull the trigger on the start date. Government generally lacks such a champion, especially if shared services are to be provided centrally across multiple agencies, whether federal, state, local or provincial. Therefore, to be successful, governments need to be mindful of choosing the right functions to place into a shared service model and ensuring there are standards in place and a long-term champion.
Drawing from lessons learned in government shared services, following are key success factors for ensuring the long-term sustainability of a program:
- Choose the right business functions prior to establishing the shared service. In identifying¬ a candidate function for shared services, consider whether the function is severable, scalable and standards-based. Absent these qualities, the shared service will fail.
- Develop a business case and agree upon expected outcomes. Sustainability of a shared service is predicated not only on transitioning the people, processes and technology around the shared service, but also on the expected outcomes. A key driver for shared services is the promise of cost savings, but other benefits may include:
- Cost recovery/avoidance
- Better service delivery
- Access to more data and tools
- Reduced risk in ongoing operations
- Improved compliance
- Improved end-user/client satisfaction
In some instances, shared services can foster innovation as well. The cost savings and efficiencies from standardization allow for investment in innovation. For example, it is easier and cheaper to develop a single mobile application to support a large population of users.
- Address barriers around funding, organizational leadership and governance. Make sure there is a strategy for how the shared services will be funded. The preferred method is to have funding levels and organizational leadership defined through legislation to ensure longevity. Since this method is not always viable, the funding strategy and approach are very important. When there is not a legislated owner of the shared service, ownership should be placed in an agency with an aligned mission and responsibilities. Finally, include a governance structure to ensure that all “customers” of the shared service have a voice or way to provide input into ongoing improvements.
Creating and implementing shared services in government is hard, but with careful planning and an incremental approach, it can generate huge returns in terms of both cost savings and innovation. Read more about this topic in our white paper, “Shared Services in Government: Critical Success Factors for Sustainability.”