Defining the Concept of SharedDefining the Concept of Shared Services

IPAA WorkshopFriday 10 SeptemberFriday 10 September

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grey advantagestrategic business advisors

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Session OverviewSession Overview

Discussion Points

1. Defining shared services – What is it and what is it not?

2. What are the benefits and risks of shared services?

3. What are the key principles that underpin service delivery in a shared services environment? What are the critical success factors in implementation?implementation?

4. Where are the best opportunities for efficiency gain?

5 What is required to manage shared services in a public sector environment?5. What is required to manage shared services in a public sector environment? Does shared services meet the needs of the public sector better than existing arrangements?

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Successful implementation of Shared Services h t i ithas two pre-requisites….

TransformationTransformationA change in culture and behavior is required by Both shared service providers and customers

Who is accountable? What skill sets arerequired?

What are the metricsand rewards?

TransitionTransition

The people, processes and technology required to provide services fundamentally change

(Wh t i th iti l th d d d i t t t ?)

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(What is the critical path and dependencies to move to new arrangements?)

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What is Shared Services?at s S a ed Se ces

Feature DescriptionpDefinition 1. A model of service delivery that leverages economies of scale

and skill sets by consolidating common processes and services.

Strategy 1. “transactional processes” are separated into a self contained business or function that is organised to deliver a more effective “end to end” service, at a lower cost.

2 M hi ti t d d l i l d t t i hi h l2. More sophisticated models include strategic or higher value expertise functions e.g. management accounting, performance management.

3. Services do not need to be co-located however there should be common governance, service management, employee conditions and performance metrics.

4. Common IT infrastructure and systems are implemented, preferably with minimal customisation except for agreed

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preferably with minimal customisation, except for agreed interfaces to retained legacy systems.

Evolution of Shared Services Centre Model

Where’s next?AP, T&E,

Key to ProcessesAP= Accounts PayableT&E= Time & ExpensesCM= Cash managementAR= Account ReceivableGL= General LedgerFA= Fixed AssetsAP, AP, T&E,

AP, T&E, CM, AR,GL,FA, I/Co,

T

CM, AR,GL,FA, I/Co, Tax,

MI, BA, RM

Ti 1990 199 2000 200 2010

I/Co= Inter-companyTax= Tax ServicesMI= Management InformationBA= Business AnalysisRM= Risk Management

,T&E,CM,

, ,CM,

AR,GL,FATax

Time 1990 1995 2000 2005 2010

Size >250 seats , >75 seats

Tend

Increasing adoption by smaller scale operations

Sector

Technology

Functions

Private SectorPublic Sector

ERP Standardisation Global Commutation

g gyEnabling technology gFinance & general admin p gExpanding Finance

Expanding from Private sector into Public sectorOptimising investment in ERP & global technology

Extending up value chain adding

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IT HR

Local Regional Global

functional breadthMovement from domestic to global centre's

Shared Services, Off shoring and Outsourcing S a ed Se ces, O s o g a d Outsou c g

A Shared Service can include elements of off shoring/outsourcing•Off shoring is putting shared services activities into a low cost locationO t i i hi i b tt lt b i d f di i t l•Outsourcing is achieving better results by sourcing and funding using an external

partner

A shared services strategy can examine five options in order to identify the

Shared Services

S SShared Service (with Offshoring)L

Shared Services (

gy p ymost appropriate solution. Public sector organisations only consider 3.Maximise

SavingsMinimum risk

Standardisation •Adopt best practices

Shared Services•Capture economies of scale•Focus on continuous

•Leverage very low global cost locations

(with outsourcing)•external supplier where beneficial•Leverage supplier economies of scale C

ost S

avin

g

•Adopt best practices consistently across all business units

improvements

Simulation•Improve by applying best practice

Pot

entia

l C

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Complexity of Solution

Technology and service complexity determine th f f h d i d t dthe form of shared services adopted

Virtual Shared Services / Self Communities / Networks of

HIGHServiceProcess automation eliminates routine tasks and users take responsibility for transaction processing governed by

kfl d b i l

excellenceInteractive communication and effective knowledge sharing. Teams can form without the necessity to co-locate. Teams

b t l fl ibl d b ith

TechnologySophistication

workflow and business rules embedded in systems.

can be extremely flexible and can be either permanent, temporary or periodically formed.

Ph i l h d i Centres of excellenceSophistication

LOW

Physical shared servicesTeams of transaction processing staff operating out of a single facility providing services to multiple business units Centres process more complex

Centres of excellencePersonalised, flexible and expert intervention to support the agency. Services that are required infrequently and therefore are not cost effective to embed in LOW units. Centres process more complex

and higher volumes of transactions to support a self service environment

each business unit. These services will be located wherever the trade-off between cost and quality is optimised.

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LOW Service Complexity HIGH Service ComplexityCommodity, Transactions Services Expert, Knowledge Based Services

Shared services can be a core enabler of public t fsector reform……

Sharing of New outcomes

med t

bene

fiton

s

Wholly different policy views

Sharing of New Services

and

nsiv

eTr

ansf

orm

en’s

ben

efi

ExampleStandard Business

reporting

d fo

r ow

n b

orga

niza

tio Unique and different combinations of services

Example solutions: Broadband enabled Health Support

Sharing for citizen centered solutionsDelivery Mechanism: Example solutions:

Human Services Portfolio egra

ted

Agi

le a

resp

on

d fo

r citi

ze

orga

nise

dou

gh s

ilo o Cross-agency progammes

Human Services Portfolio

Sharing of Specialisation

ompe

tent

Inte

orga

nize

d

Delivery Mechanism: Specific competencies

Example solutions:WoG Travel Contract

over

nmen

t el

iver

y th

ro

Sharing of Resource Management

Res

ourc

e

W

ise

Co

over

nmen

t

Delivery Mechanism:C t S i R f

Example solution:Shared Service Centre for HR & Finance

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Go

De R

GoCorporate Services Reform Shared Service Centre for HR & Finance

Shared Services FrameworkShared Services FrameworkContext

• Political Considerations Customer / User demographics• Market Capability and Capacity Efficiency Targets

Shared Service Capability

Transition•Planning

Skill

Strategy•Agency

People and Organisation

Management & Governance

S i d P •Skills•Resource transfers•Training

•Sequencing•Cut-over

Objectives•Operating Principles

•Performance Metrics

•Procurement

Services and Processes

Service Management

Transformation

Cut over•Testing

•Incentives•Evaluation

•Procurement Strategy•FMA Act•CAC Act

Infrastructure

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•Organisational Development Skills & Resources•Culture & Values Performance Mgmt.•Change Management Transition Out

Key transformational success factorsKey transformational success factors

Success DescriptionFactor

p

Sponsorship Sponsorship by the Secretary. Leadership by an accountable senior executive with knowledge of the organisation.

Business Case

The strategy must be informed by a robust business case that engages relevant stakeholders and presents a compelling case for change.

Governance Small but high impact Board / Steering Committee focused on driving th b ithe business case.

Change Management

Significant investment in change management to ensure acceptance of new ways of doing business.

B i “B i ” th th “ t ” f i f d b i i fBusiness Focus

“Business” rather than “system” focus, informed by re-engineering of processes, to deliver new business capability.

Benefits Management

Rigorous scope and cost management to capture and track benefits.

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Management

Implementing shared servicesImplementing shared services

Understand Key SSC

Design issues & assumptions

Develop OperationModel guiding

Principles

Develop Scenarios

Propose draft model

Review and revise proposed

model

What are your organisations specific issues and concerns?

What are specific guiding principles for developing your shared

What combinations of business unit, function,

Which aspects of the model are generally agreed?

Does the model fit the guiding principles and all discussion to

What minimum expectations are there?

yservice organisation?

How would you rank each

,process, information flow and location are feasible given guiding

g

Which areas need more discussion and evaluation?

discussion to date?

Does the business case

What are the “non-negotiable”?

rank each option?

guiding principles and issues?

How could th b

evaluation?

Where are the points of contention?

match expectations?

Who is the decision maker?

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these be grouped?

What options are there to resolve?

decision maker?

Poor service quality is often viewed as the t t i kgreatest risk

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Key transitional success factorsKey transitional success factors

Success Factor Descriptionp

Staff Transition Migrate staff to new positions with merit based selection.

Client focus Engage users in design. Invest in customer service training for g g g gshared services staff.

Service management

Document business processes. Implement performance management (SLA’s, KPI’s, Reporting).

Business Management

Confirm business unit structure. Adopt “business improvement” rather than “systems replacement” mindset for new systems.

Expectations Set realistic timeframes for implementation and stick to them. ManagementBenefits Management

Scope benefits and monitor their achievement.

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Performance Management Framework

OWNERSIP & LEGAL STRUCTURE• Form of Business Unit / Entity

GOVERNANCE

StrategicManagement

Strategy, Org. Structure, Monitoring, Evaluation

PERFORMANCE MANAGEMENTService PERFORMANCE MANAGEMENTCRM, Service Scope, SLA, Reporting, Contract Mgmt.

OPERATING MODEL

Management

FINANCIAL MANAGEMENT

BusinessProcess

People & Culture

Systems & Technology

Facilities & Location

OPERATING MODELOperationalManagement

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FINANCIAL MANAGEMENTBudget, Funding, Costing, Benefits Realisation

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Governance Board ModelGovernance Board Model

GovernanceBody Membership Meeting

Frequency

GovernanceBoard

•Chair•Shared Service Director• Senior Cross Agency Representatives

Quarterly

Customer GroupMeetings

•Shared service managers•Agency Representatives•Agency Business Partners•Functional Specialists•Account Managers

Service& Customer

ForumMeetings

Agencies meet to

g

Operational •Shared service managers

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Agencies meet to review

performance

OperationalManagement

Team

•Shared service managers•Shared service management team

Weekly

Project Team StructureProject Team StructureShared Services

Programme Sponsor

Project Director

Programme Sponsor

P j t M

j

Change ManagementBusiness Case

T h l &

Project Manager Change ManagementSMEDeveloper

Technology &Systems Lead

IT ManagerShared Service / Operating

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Location and Physical Infrastructure SMETechnology

Architect SME

Shared Service / Operating Model SME

Components of a typical Business CaseComponents of a typical Business Case

Ongoing Benefits Ongoing Costs

Reduction in B i C•Reduction in Transactional headcount •Reduction in managerial Headcount•Salary differential•Reduction no. of IT

•New SSC Operation costs•SSC Headcount & related overheads•Site Lease costs

Business Case•Operating model•Service Delivery Benefits•Financial Benefits Reduction no. of IT

maintenance cost•Saved local overhead (e.g., building and related HR costs)•Procurement savings

•Site Lease costs•Additional Telecoms and Infrastructure•Additional IT support Cost.

(NVP,/Payback/Rol)•Risk

���

•Supply Chain Savings.

Implementation Costs•Internal Project team cost- Time and expenses•External Project team cost Time and expenses

•IT implementation costs- Software & Infrastructure

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���•External Project team cost- Time and expenses•HR implementation costs- Recruitment, Retention, Redundancy, Re-training, Re-location, Training

•Site selection and fit out

A minimum efficiency gain of 15% is required to j tif th t f i l t tijustify the cost of implementation…..

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The arguments for shared services in the public tsector……

RationaleWe can achieve efficiencies

Our observationsAn equitable basis forWe can achieve efficiencies

of at least 20% through business process improvements enabled by shared services.

An equitable basis for sharing savings is critical. Agencies need to be able to re-invest savings in front line service delivery.

Efficiency

Many small agencies are committed to legacy ERP systems that they can not afford to maintain or replace

An opportunity exists for a Central Agency or outsourced provider to provide fully hosted ERP system provided on a Shared Service basis

Rationalisation of ICT investment

replace.

Citizen centered policy solutions support the wider application of shared services principles

Shared Service basis.

The Human Services Portfolio is embracing these developments.Innovation

shared services principles.

Shared Services is a proven model for achieving sustained business

.New and innovative ways of delivering government programs are required to

Improved Resource management

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improvement that will enable agencies to meet their Efficiency Dividend Targets.

achieve efficiency dividend targets.

The arguments against shared services in the bli tpublic sector……

Rationale Our observationsSmaller agencies lack critical mass of staff to leverage efficiencies.

A greater role by Central Agencies is required to establish the shared services infrastructure to support small agencies..

Payback is typically 4 6 years (or

We are not big enough

Investment is upfront. The biggest costs are Redundancy, Implementation and EPR.

Payback is typically 4-6 years (or longer). Shared services should not be viewed as a silver bullet but as a performance improvement strategy.

We cannot afford this investment

10-25% of savings are typically driven through process efficiency improvements.

Practical tools and approaches need to be developed and shared between agencies. This may require some revision of the CPG’s to remove bottlenecks.

We can get savings through focusing on standardisation

Compliance risk been a key issue facing CFOs over the last four years.

Compliance requirements are more onerous in the private sector – but they still do it. The greatest scope for efficiency gain relates to

We cannot risk this change in current control environment

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Accountabilities under the FMA Act make Secretaries reluctant to transfer functions to a SSC.

scope for efficiency gain relates to “expertise” rather than transactions services.

Example Improvement ProjectsRELATED IMPROVEMENT PROJECTReduce the volume of invoices through• purchasing cards• consolidated invoices

RELATED IMPROVEMENT PROJECTApprove Invoices by Exception• eliminate 100% audit procedures• Increase standardise exception limits for reconciliations and approvalsI t it li ti th h ld

Eliminate Simplify

•Increase asset capitalisation thresholds.

5 Principles for improvingthe effectiveness of corporate

Support functions

Outsource

Standardise

Automate

RELATED IMPROVEMENT PROJECT•Payment processing•Invoice Imaging and data extraction•Supplier Statement ReconciliationRELATED IMPROVEMENT PROJECT

•Common Chart of Accounts•Common Financial Policies

RELATED IMPROVEMENT PROJECT Implement automated invoice matchingIncrease number of Electronic Payments• EFT Payments• Automated Clearing House to disburse Cash Payments

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•Reduce number of ERP ImplementationsCommon processes

yReduce number of Supplier Queries• Self Service•Reduce spreadsheets and manual data entry

Agency Self Assessmentg y

DefensivePhysical /

Virtual SharedCentre /

Community of

• Stay with • Reduce Costs by i i

DenialDefensive

PositioningVirtual Shared

Services

• Services migrated t /f t

• New Business I iti ti

Community of Excellence

Stay with existing Business Processes and systems

re-engineering • Upgrade / replace

legacy systems• Placate Key

St k h ld

to/from agency to SSC

• Infrastructure established, including

Initiatives, are delivering citizen centred solutions / breaking down silos

• Strategic Capability• Seek Protection from Legislative Framework

Stakeholders through benchmarking

• Shift costs from Corporate to Other

including technology and systems.

• Governance and performance

Strategic Capability established in Partnership with Key Industry Stakeholders

Corporate to Other Programs. to budget

management framework implemented.

• Change reporting structure and

• Virtual teams working across agencies

• Common ICT platform and

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structure and accountabilities.

platform and enabling tools

d tgrey advantagestrategic business advisors

• strategic business advisors • program and project assurance • procurement and contract management • market soundings• procurement and contract management • market soundings• program evaluation • costing • viability reviews • reengineering• strategic planning • change management • business transformation

D id R bj t@G d tDavid.Robjent@Greyadvantage.com

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