Transitioning back-office functions to a shared services centre sends shivers through most organisations. If it is done well it can provide valuable efficiencies and savings, but if not it can be costly and can consume the forecasted benefits. Our experience has shown that a successful transition is one where clients define their “current state” and future service needs clearly, and select the most suitable mature provider to match those needs.
It is of paramount importance to understand that shared services is about buying a ‘vanilla service’ and so it is unlikely that a provider will be able to directly match your current service processes and practices. In itself, that is not a problem, as long as they can provide the outcomes required. For example, if payroll is outsourced it actually doesn’t matter how this is done as long as the money arrives in everyone’s bank account, is correct and on time. It is important to appreciate that there is a level of compromise with any outsourced arrangement, as ultimately the goal is to achieve savings. Tailoring of services may be possible but the costs can often outweigh the savings opportunities.
Shared services is likely to remain a ‘hot topic’ for public sector agencies for the foreseeable future. For example, the current Commonwealth Government’s shared services agenda continues to gather momentum as part of the government’s “Efficiency Through Contestability” program and the overall push for smaller, more nimble government. Given the complexities of the evolving shared services environment it can be difficult for agencies seeking a shared services platform to fully understand their options. Based on our experience, here are a few important steps to consider before embarking on this journey:
Assess your real suitability for a shared services environment;
Prepare a business cases or options papers to clarify your needs, service requirements and options;
Evaluate and negotiate options with providers, and test the market or providers available;
Assign resources to support transition: this will also require a significant level of internal change management;
Ensure there are practical performance measures in place and regular contract management discussions are scheduled; and,most importantly
Don’t attempt to duplicate any aspect of the service in-house.
Several private sector and government organisations have found shared services transitions to be difficult – perhaps most famously, the Western Australian Government’s Office of Shared Services was decommissioned after a review found the project had achieved minimal savings, was over-budget and was likely to “jeopardise agencies’ operational efficiency” if it continued. It is important to navigate the considerable risks involved in shared services transitions, and understand how risks evolve and emerge throughout the process.
Shared services project risks vary according to each organisation’s experience and needs, but common, broad risks include
Insufficient engagement or “buy in” from leadership, staff and stakeholders;
Inaccurate or insufficient information about the current operational environment;
Haphazard recruitment and staffing transitions; and
Inadequate service during the transition of operations.
Risks can be managed and there are benefits available if the process is undertaken in a collaborative, measured and considered manner. It is important to take the time to plan for the transition, provide the resources to support the provider to implement the new arrangements and follow a post-implementation strategy with sound contract management and performance monitoring.