Ie SSC2010 SharedServicesPublicSector Oct10

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Shared Services in the Public Sector

How shared services can contributeto cost reduction in the Public Sector

Annual Shared Services and Business

Process Outsourcing Conference

Four Seasons Hotel, Dublin, Ireland

13-14 October 2010

Roelant Reijmerink

Werner Mullink


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2010 Deloitte & Touche

Contents

Introduction 3

Trends in the public sector 5

Differences between public and private sector 9

Case study 13

How can Shared Services contribute to cost

reduction in the Public Sector 15

Summary 17

How shared services can contribute to cost reduction in the Public Sector


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Introduction

Whilst the private sector has been adopting the concept of shared services since the

early 1980s, the public sector has viewed the concept with skepticism.

It wasnt until the mid 1990s that governments and other public sector organisations

began to look at shared services as a remedy for redundancies in their corporate

services (such as finance, HR, IT, facilities).

Today the public sector is widely adopting shared services as a solution to reduce

costs and increase the quality of corporate services.

There are differences between the public and private sector:o Several independent organisations form a SSO

o Multiple decision makers involved

o Political and public interest context

o Money is often not the key driver

This context results in a growing importance of trust and relationship: you are not

just dealing with yourself:o Citizens demand transparency and efficiency

o There is an emphasis on added (public) value

o Accountability is key



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2010 Deloitte & ToucheHow shared services can contribute to cost reduction in the Public Sector

Trends in thePublic Sector


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Why do Public Sector organisations adopt shared services now?

There is an economic downturn: this calls for substantial cost reductions

Growing expectations that public-sector organisations need to be moreaccountable to stakeholders and deliver better public services, has left

governments struggling to provide more citizen-focused services with less

funding

Labour shortages at crucial points in the organisation as an agingworkforce retires means many governments will find it difficult to retain the

knowledge workers needed to run their operations.

The demand for more and easieraccess to services grows.For many smaller governmental organisations the costs for the

development and implementation of these new services is too high.

Governments face the challenge of needing to accomplishseemingly endless objectives with limited resources



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Typical drivers for shared services in the public sector can be divided into

both cost savings and qualitative benefits

Cost savings

Consolidation effects

Economies of scale

Greater specialisation

Increased spans of control

Wage rate differentials Standardisation effects

Reduced operational costs

Re-engineering effects

Reduction in cost of quality

Greater automation

Qualitative benefits

Release of management time

Increased business flexibility and

scalability

Better information

Greater accountability Better audit and control

More customer and service

focused

Easier technology /

training rollouts

Improved staff morale


Shared services helps public sector organisations to be more client-centered, outcome-oriented

and accountable, by allowing governments to focus on their core responsibilities and to operate

more efficiently. Ultimately, shared services can increase public-sector valuethe return

government gets on its investmentsby decreasing administrative costs and freeing up human

resources to be redirected to citizen facing front-office programs.


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What activities can be shared?


What processes are in your organisations SSCs?

82%

67%

57%

38%

32%

Increase # of

Transactional processesIncrease # of Internal

locations served

Increase # of advisory

processes

Increase # of processes

offshored

Increase # of externalorganizations served

82%

67%

57%

38%

32%

Increase # of

Transactional processesIncrease # of Internal

locations served

Increase # of advisory

processes

Increase # of processes

offshored

Increase # of externalorganizations served

What direction is your organisation pursuing regarding itsuse of Shared Services?


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Differences betweenpublic and private sector



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What makes shared services in the public sector different from the private

sector?

Legal status of employees

Multiple parties

Multiple stakeholders

Legislation and other terms

Drivers for shared services

Political context and decision making



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Decision-making in the Public Sector: who make the decision?

There are many people who

have to decide on the SSO.There are some issues

however:

Who decides for what reason a

SSO is formed?

Who decides what services will

be placed in a SSO?

The decision maker seldom

have a proper insight in and

knowledge of the issue at hand

The horizon is short: many

decision makers are in their

position for a limited amount of

time: the business case needsto take this into account.

Who can you trust and who do

you know?


Organisation 1:

Council Board

Organisation 1:

Council Board

Organisation 1:

Council

Board

Organisation 1:

Council

Board

Services provided Services provided

Services providedServices provided

SSO


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How can you face the challenges regarding the decision-making process?

Let everyone involved stick to their role: who is responsible for what?

Make sure you have all necessary knowledge and experience available:

Make sure you have a structure in place where all key players are in place and use thisstructure

Create a governance contract with decision makers with clear roles and responsibilities

Plan your journey from start to finish: this journey needs to be clear and with explicit

go/no go moments. From each of those moments there is no way back.

Build a business case that meets all requirements. This means:

a focus on money as well as other criteria (quality, agility),

with a politically acceptable timeframe,

with insight in the consequences for all individual participating organisations (not a general business case that

sums up the consolidated results)

with realistic assumptions (knowing the political context) and a clear strategy and plan

Take decision-makers by the hand: many of them dont know what they are getting into

Invest in relationship and trust before, during and after your journey


Even an enthusiastic leader will not be able to push the change through

without the fundamental skills to do it.


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Case study


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Case study


How to realise cost reduction in the Public Sector?


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How can shared servicescontribute to cost reductionin the Public Sector


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How to realise benefits from your SSO?

Benefits are driven by: Increased process efficiency & effectiveness

Better quality of services (first time right) Increased flexibility & continuity of services

Transparency of costs and roles and responsibilities

Better process control and faster/easier compliance

Potential savings on future investments


The implementation of shared services can bring significant benefits for the processes

that are located in the SSO.

Shared services also has a positive impact on the retained organisation. Since

management attention is no longer required for support processes, more effort can be

spent on the primary process.


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Summary


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Summary, some common challenges for all shared service centers

If we look at successfully achieved shared services in the Public

Sector, we see the same universal themes emerging:

1. Avoid analysis paralysis

2. Seek common processes and standardise

3. Do your best to implement a standard solution

4. Get your governance right

5. Your cost / benefit analysis may surprise you

6. Remember its a people business

7. Clear roles and responsibilities

8. Trust among stakeholders9. Drive continuous improvement


Ie SSC2010 SharedServicesPublicSector Oct10

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