Is 2007 the year to start sharing?
14 February, 2007

Anthony Brand, Researcher, NLGN
Public Sector Executive

2007 could prove to be either a difficult or exciting year for those involved with local government. The white paper offered glimpses of the devolution that has long been promised and Lyons could fundamentally change the way that local authorities raise and manage their finances. These are positive steps towards greater local flexibility, innovation and accountability, but if not managed well they could also bring with them a number of problems.

In recent times the public sector has been pushed hard in the direction of, cost savings and smarter procurement. This push has been particularly strong for local government who have been leading the charge on efficiency and the Gershon agenda. Now CSR2007 is likely to tighten their belts further. The LGA recently reported an “unprecedented” 50% rise in local authority spending since 1997 and some believe that council services will have to be cut unless something is done about the growing cash crisis.

It is commonly cited that funding for local government has increased by 39% since Labour came to power in 1997. Nevertheless, despite local government’s ‘best in class’ record on efficiency, these large increases in funding have not always resulted in a proportional rise in the standard of service delivery. Now, with Gershon requiring £20 billion in efficiency savings by 2008 and with local government savings accounting for roughly a third of this (£6.45 billion), the situation is about to get much harder. Initial local government targets have been exceeded by £0.8billion to date, but with the pressure is on to keep making savings. Shared services are expected to be a core efficiency tool in this task.

It is claimed that the potential savings of shared services across Government back-room HR and IT services alone are close to £40bn over ten years. This resource could be freed up to resource vital front-line services. The private sector has been doing this for decades and Government’s across the world have now started to follow suit with varying degrees of success.

And shared services should not just be about efficiency. At its heart is a drive to put the customer at the centre of public services. Shared services can help to design systems in the most practical and helpful way for citizens, creating more responsive and easier to use services. As politicians are fond of saying, the public do not really care who delivers their service so long as it is a good one. Joining-up services and service providers through shared services can be a powerful way of ensuring this is the case.

And there are other benefits that are often hidden beneath the efficiency argument. Shared services can improve the working environment of local government employees, freeing them from the often restrictive and siloed nature of the old systems. They can reduce the time needed to perform routine tasks, allowing a greater focus on more important issues. Shared services can be a powerful informational tool, allowing the introduction of Customer Relationship Management (CRM) systems. These tools can provide more up-to-date, accurate and usable information with which local authorities can build more relevant, responsive and targeted services.

So it appears there is an opportunity for local government to utilise this new technique in driving through costs savings and improving the service available to users. But progress has been slow. Many remain unsure of what shared services really is or what it can offer local authorities. The agenda is fraught with good intentions but relatively few realised examples. That is not for want of trying. 32% of councils are already in a shared procurement function and a recent LGC Survey found that 89% of local government respondents saw shared services as an opportunity, only 3% a threat and just 7% a fad. The question then is why only 20% claim to have a fully operational project, with the rest still at the scoping and planning stages?

What do we know?
Shared services is a concept developed within the private sector and so research has tended to focus on business models for change and traditional organisational obstacles including:

• Organisational inertia.
• Ability of leadership to drive change.
• Lack of capacity and resource.
• Poor change management.
• Effective benchmarking.

There are significant banks of work already dedicated to meeting these challenges and yet widespread shared services remain elusive in local government. A greater understanding is needed of the peculiarities of these projects in a local government context.

For example, like any long-standing institution local authorities can carry ‘baggage’. The underlying historical, social, cultural and political environment in which local government operates has a substantial impact on the way any agenda develops. Previous experience, the make-up of a council and their adversity to risk, the relationships an authority has with its partners and neighbours, all these have an effect on the way that shared services is perceived. These factors are particularly important when we are expecting local councils to work together to deliver services together as many local authorities will need to if they are to achieve the savings expected. The white paper emphasised joint-working in order to deliver ambitious cost efficiencies and to create improved, seamless public services. However the Audit Commission believes a third of organisations in partnerships experience problems.

If we accept that sharing does not come easy, then we need to better understand why. NLGN’s recent report, The Politics of Shared Services outlines the most common political, cultural and social issues impacting on the agenda and paints a picture of the landscape against which shared service projects are implemented. Our report accepts that this is difficult but negotiable terrain, and makes recommendations on how to make it easier and more attractive for local authorities to share.

The Politics of Shared Services
The report concludes that there are three broad groups of factors that must be addressed :

• Internal factors; such as building support and understanding among members, staff and management, both across and within political parties.
• Environmental factors; including the relationship between central and local government.
• Relationship factors; which include elements from both areas above, and also encompasses the way in which partnerships are formed and sustained over time.

There are dozens of factors within each, many of which have been described before, but most of which remain very real and difficult issues for those involved in shared services. To complicate this further, several issues contradict each other. How do you find a balance between local flexibility and standardisation? Between local accountability and aggregated service delivery? How can local authorities balance the competing priorities of maintaining local employment and cutting costs? These issues each deserve a great deal of time and thought on their own, but it is helpful to highlight a few briefly here.

For example, we found that how organisations chose their shared service partners was enlightening. As Jo Cliff, Director of Shared Services in the Cabinet Office recently stated, “projects work best where they are based on already existing relationships.” Our research found indeed, that most existing attempts at shared services operate on a geographical basis with neighbouring authorities joining-up. At first this may seem slightly contradictory to the ethos of shared services. Many practitioners suggest that shared services should not be bound by geographical or organisational differences, but that technology can facilitate sharing over long distances which will bring economic benefits to all parties. Others have concerns that working with neighbours will open up local rivalries, political cultural and personal, which might prevent effective joint-working. Each council has particular historical political circumstances coloured by previous relationships, local animosity, changing boundaries and multiple re-organisations imposed from above. Not all are willing to jump into new working relationships with their neighbours and most are careful about thy they choose their partners in shared services.

Nevertheless, in reality, this ‘local’ approach is simpler and more effective for many attempting to find a shared services partner. Local authorities in a region often know each other well already and have experience of joint-working on regional and cross-border issues. They find it easier to meet and form relationships, particularly at senior levels, and they often serve a similar make-up of electorate with similar needs.

Other important questions were raised over the strategic direction that shared services was taking. It is noticeable that the cooperation and joined-up thinking between Scottish local government and the Executive was providing a more solid platform on which to build a long-term shared services strategy. This more considered and collaborative approach has fostered greater support and momentum for the agenda at a local government level.

Connected to this were concerns that too much time was spent re-making the shared services wheel and developing projects in silos. After all, a long-term shared services market should aim to provide a ‘plug and play’ flexibility between providers which would drive continual improvement, best practice and innovation. Some senior local government representatives felt that the private sector were too keen to push their own closed systems and that local authorities had not always been outward-looking enough to take account of what was happening elsewhere. This lack of a comprehensive local government strategy might suggest a greater leadership and facilitation role for the LGA and agencies such as Regional Centres of Excellence.

If any new vision or strategy is to be successful, shared services should also be framed within a wider agenda for improvement, re-focussing services around real public need. When Sir Gus O’Donnell said “doing nothing is not an option” it was not meant to drive the public sector wildly into a shared services implementation frenzy. It meant that tools like shared services should be seen as powerful tools for delivering on key local government priorities, within a wider vision for developing 21st century public services. There are times when this gets lost in the push for ever greater cost efficiencies.

Other obstacles included the perceived threat of enforced unitary status, which can make smaller councils wary of getting too close to their larger neighbours. The recent white paper has done little to ease these concerns. Further more, consistently bad press around private sector involvement in public services undermines public-private partnerships and ignores some of the very good progress made in privately developed shared service partnerships. This external environment is not conducive to effective partnership building.

Finally, the dearth of successful, well-publicised examples from the public sector is stunting the progress of the agenda as a whole. Potential shared service users want to see a coherent, sustained push from within local government before they fully embrace joint-working. Until now, successful local government shared service ventures have been relatively slow in expounding their achievements within the sector and authorities have consequently been hesitant in following their good examples. Incentives are needed for these projects to share their experiences with the wider local government sector and to consult with others trying achieve the same levels of success. It will be important to support this with a deeper, more widely used, and more accessible bank of available knowledge and good practice on shared services.

In general, there remains a need for a greater understanding of shared services and its impact across the local government world. This goes for all stakeholders, private and public. Only through a deeper understanding of the political context, priorities and goals of shared services can private sector providers really engage with local government on this agenda in the long-term.

These are just some of the issues at the heart of the shared services debate, many of which will take time to overcome. Others have a wider resonance beyond shared services. Many require new skills and a new outlook from all stakeholders before we can make progress. But if we can start to solve them here it could do more than just improve joint-working and increase efficiency. It could be a step towards preparing the whole of local government for the opportunities that are likely to be made available to them in the coming months and years.