Peter Holden, Director of business development, Serco Solutions looks at the shared services strategies being used by some local authorities to generate efficiency savings in year two of The Gershon Review.
Many Local Authorities have produced significant efficiency savings in line with the Gershon Review announced in 2004. However, as Gershon’s reign continues there is no time for local authorities to rest on their laurels. Industry watchers predicted that savings would be easier to realise in year one, whilst years two and three would present major challenges for organisations looking to generate efficiencies.
Sharing a variety of services has been heralded as a key way to achieve savings. Sharing services refers to the bringing together of support functions such as finance, human resources, information technology and procurement into a centralised format to capture economies of scale and provide a higher quality of expertise and service to citizens.
As 2006 gets underway, what are the barriers facing local authorities in their quest to achieve shared services strategies? And how can local authorities ensure that their strategies successfully generate obligatory efficiency savings?
Breaking through barriers
The barriers to achieving a shared service approach are primarily related to culture and securing buy-in at board level. Winning support from the chief executive is paramount to ensuring that shared services strategies deliver maximum benefit. However, securing a place on the chief executive’s agenda is not always easy. Given the cost savings and increased service levels derived as a result, why is this the case?
In year one of the Gershon Review chief executives of local authorities were focused on activities which generated ‘quick hit’ cost savings.
Now, the focus is very much on the delivery of high quality services to citizens, driven by the Government’s Modernisation Agenda.
However, as many of the outlets for quick savings have been exhausted, chief executives need to now invoke long term strategies which deliver both cost savings and significant step changes in service delivery. Shared services strategies are one of the key ways to achieve this in the long term. But there is no such thing as a free lunch and it takes hard work to get it right.
The first step is to establish whether a culture which lends itself to outsourcing exists. If it does, local authorities can then begin to understand the best approach and long term strategy to take.
The second is to decide on this strategy. Local authorities need to establish whether it is best suited to a centralisation, collaboration or commercialisation of services. To achieve this, local authorities need to consult closely, both internally and externally on its long term objectives and ambitions.
The third is to determine which business functions can be shared. Lichfield and Staffordshire Moorlands District Councils for example, came together to form a collaborative strategy. The councils came to this decision following the Best Value Reviews of IT Services and a desire from both sides to focus on providing a high level of service to citizens. The strategy has paid dividends, allowing the authorities to achieve savings in excess of £700,000.
Sharing the benefits
Providers must work closely with Local Authorities to help them understand that shared services strategies are not simply about economies of scale. Strategies can enable authorities to provide a greater level of expertise and a higher quality of service for citizens and staff. Authorities can tap into new capabilities to deliver a broader and deeper range of services at a lower cost.
All parties involved in the approach must work hard to ensure that demonstrable ROI can be delivered both in the short and long term. Shared services strategies must concentrate on services where the leaders of local authorities can see the greatest benefit, the least loss of political and managerial control and the lowest costs of transaction.
For those local authorities looking to increase quality and reduce costs, shared services strategies should not be underestimated. Cultures which are conducive to sharing services must be fostered. Chief executives must commit fully to the activities which will create the greatest efficiencies and achieve the highest service levels. Those that do this successfully will achieve this much sought after Holy Grail.