The chance to perform
A move to shared services, says Cliff Evans, Head of Shared Services, Capgemini, takes the public sector one step closer to the adoption of a performance culture.
8 September 2006
Publication
The two concepts of shared services and outsourcing are distinct in theory and in practice. In the public, as in other sectors, the offshoring of any process should not be contemplated before two earlier steps — each involving fundamental change — have been taken.
The first step is standardisation of business processes. That is because the efficiency of many repetitive business processes is, quite simply, at a miserably and unacceptably low level. That applies to most of the UK public sector and much of our private sector. In areas from financial processing to procurement to human resources and many others, there are simply no performance standards, no concept of best practice, and no real accountability. As a result, we don’t know where we stand in terms of efficiency and don’t know where we ought to be. This means that there is no real hope of improvement.
By standardising whatever is capable of standardisation, you can establish clear lines of accountability — and see exactly what needs to be done, and what services and outputs need to be delivered, by whom, to whom, by when, in what volumes and at what quality levels.
Best efforts
You start, in short, to introduce a performance culture. And it is a culture based on clear customer-supplier relationships, even when all parties are in-house employees. You start getting a clear view of what it is you are trying to achieve and how well your efforts measure up against needs. This provides a factual base upon which to drive forward improvements.
That is the step where, in my experience, the biggest gains are to be had. And make no mistake, gains are not just possible but vital. In one of our largest departments of state, a particular routine financial process is scoring 5,000 operations per person per year. Which sounds fine unless you know that the upper quartile of our private sector scores 15,000 per person per year for almost exactly the same process.
In many cases it is only when you have completed step one successfully that you should consider step two — the move to shared services. That step is frequently — but not always — a logical one, driven by economies of scale, by the elimination of replicated activity, by the possibility of sharing assets and resources (from office space to IT systems) or by a better ability to handle peaks and troughs in the workload.
Such a move does, of course, generally amount to a major reorganisation. But it is one that can bring you very significant additional efficiencies, quality improvements and cost savings.
Of course you may choose to reorganise first and then standardise your processes. A number of private and public sector organisations have successfully done things this way round, and there are circumstances in which this route is quicker and easier.
Efficiency testing
But it is only when you actually have a well-oiled shared services machine up and running that you can compare it with other machines to check performance – its smoothness, speed and acceleration, safety and running costs. And that, of course, invites at least a look at step three — outsourcing, including outsourcing to an offshore provider. Can your machine compare with what’s on offer from third-party business process outsourcing providers? Can they do things better or cheaper? This third step has already been taken in a few parts of our public sector, but it is far from an inevitable outcome. With the efficiencies of steps one and two in place, any such comparison might or might not come down in favour of outsourcing.
Even so, the presence in our economy of third-party vendors seeking more business in the public sector can have a powerful incentive to in-house teams to stay on their toes.
When it comes to offshoring, the experience of the private sector suggests that this will indeed be a realistic option for many business processing operations, but not for all. Among UK private sector operations that have moved to standardised processes and shared services, more than half have kept those services in-house. Of the ones taking an outsourcing route, some have adopted the offshore model and some haven’t.
So if we are to be realistic, let us accept that while there is certainly huge scope for improvement in service and process efficiency across the public sector, in back-office and front-office functions that improvement will come from injecting a performance culture, with proper objectives and targets, monitoring and accountability. It will certainly involve standardisation of processes and, in many cases, shared services.
But let’s not confuse those developments with outsourcing and offshoring. The key issue is not outsourcing versus insourcing, still less offshore versus onshore. Rather, it is the move towards a performance culture and the in-house business transformation that so many of our public sector organisations need if they are to make such a move.
Cliff Evans is head of shared services at Capgemini UK
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