Local authorities will not make sufficient progress in achieving cost savings through shared services unless they are forced to do it, a report from business advisory firm Deloitte argues..
“Having worked around shared services for several years, I am convinced making it compulsory is the only way you’ll get real value out of these projects,” says Mark Lawrie, a local government partner with Deloitte.
Local authorities are failing to implement shared service projects that would deliver substantial savings, says the report Stop, start, save. And where they do, the savings are much smaller than for similar projects in the private sector.
Political pressures are the main reason that prevent councils from taking these projects forward, says Deloitte.
“It’s politics with a small ‘p’,” suggests Mr Lawrie. “It goes to the heart of an organisation’s sovereignty. When operating any shared service project, I have to be prepared to give things up [if I am a councillor]. Sometimes the things I am being asked to give up go to the heart of why I think I am here in the first place.”
Deloitte believes that local government is well suited to sharing, because the framework of the services to be delivered is broadly standardised. Yet large-scale shared service projects are seldom successful.
Failure to achieve
This reflects, it suggests, a failure to achieve agreement between potential partners, or even between the political and officer leadership within authorities.
In some instances, the desire to retain jobs locally is greater than the wish to achieve efficiencies. Politicians also often fear that sharing services will lead to a loss of autonomy.
“If you are going to have to give up jobs, that is politically quite difficult, says Mr Lawrie.
“To generate savings we have to build shared services – which may not be in my area. The decision-making is built on consensus, which is a lengthy and time-consuming process in local government. A lot of people in local government are saying, if you made us get on with it, we would make progress.”
Not that Deloitte is suggesting that shared services need to be operated by the private sector. It believes that cross-public body arrangements should be considered, pointing to the experience in Buckinghamshire, where the county council, three district councils and the fire and rescue service are seeking to connect IT, human resources, finance and property services.
But councils can no longer be left to make slow progress.
“There is now a strong case for making the adoption of shared services for certain back-office functions mandatory,” says the report.
Deloitte points to Western Australia, where there are now shared service centres for finance, human resources and payroll administration across local administrations. Scotland requires all police forces to share an ICT system, and Denmark is in the process of making shared service provision mandatory.
Martin Rayson, director of resources at Boston BC, accepts that securing agreement between authorities can be a problem. His own council recently decided to opt out of a back-office shared services project with two neighbouring districts.
“If you do go down the shared service route you are giving up something,” says Mr Rayson, who leads on transformation for the Public Sector People Managers’ Association.
“And maybe it’s an unwillingness to compromise that has got in the way. Some enforcement, some push, might help. Compromise is a prerequisite to make things happen. In the current climate, authorities need to think about what is important for their communities.”
But Heather Wakefield – head of local government at Unison – rejects Deloitte’s case.
“I think that government, the Local Government Association and the local government family are facing two ways at once on this,” she suggests. “They are saying they want local empowerment. The Tories are saying localism will be the order of the day. On the other hand, you have proposals which I think fundamentally undermine local democracy and mitigate against local user involvement.
“So many council services are local and can’t be shared. Some back-office services clearly could be – but some of the more old-fashioned call centres are not tailored to the needs of local people. Shared services remove huge swathes of activity from any type of local accountability.”
Ian Swithenbank, chair of the Improvement and Development Agency, agrees.
“We would not support a move to make it obligatory for all councils to share services,” he says. “Making it obligatory would be an example of the top-down regulation that we are trying to get away from.
“In our experience, prescription undermines ownership of the solution and stifles innovation.”
What you need to share services
- Clarity of vision
- Knowledge of what shared services can deliver
- Baseline knowledge of existing costs and performance
- And understanding of drivers for change
- Knowledge of financing options