Government shared services are getting beaten up again. Most of the information in the Commons Public Accounts Committee’s report on government shared services was drawn from the NAO report published earlier this year (See previous post.) but it gave MPs the chance to give the Civil Service another kicking. The headlines are that Civil Service shared service centres cost £500 million (55 percent) more to implement than expected and none have shown any clear savings. Two have even managed to increase the cost of support services by a total of £255 million. That takes some doing!
Some of this is due to the all-too-common problems with central government IT projects but other key factors are the failure to mandate the use of the centres and the failure to standardise processes:
Shared service centres were built without a confirmed number of users and the use of these centres by departments has been voluntary. Some centres have failed to attract users and continue to have spare capacity so have therefore not achieved economies of scale. The Cabinet Office acknowledged that the “one thing that drives benefit and efficiency in shared services is scale.”
Many of the customers of shared service centres have insisted on services that have been tailored to their systems rather than the shared service centre providing one process suitable for all customers. This has resulted in overly complex systems and processes which are less economic. The Cabinet Office’s new strategy proposes that shared service centres will provide the same “basic, simple and reusable” process for all customers. Whilst this is welcome, the Cabinet Office must be able to ensure much greater usage of the centres on this basis.
So you end up with departments where some bits are in and some are out. For those areas covered, you have mini HR, finance, IT and procurement dedicated to each customer, ruining any chance of economies of scale.
Colin Cram provides some historical context:
Shared services existed in central government 30 years ago. ‘Joint services’ is a better phrase. They included the Whitehall estate – owned by one organisation, the Property Services Agency, which was also responsible for all construction work and held the budget for it. Other joint services included HR, ICT, training, legal services, procurement including contracting, audit, payroll and recruitment. They were inefficient, delivered poor service and serious corruption existed in the Property Services Agency. The units were broken up and departments were made responsible for running the functions themselves on the grounds that they would have an incentive to run them more efficiently. Unfortunately, departments generally did not have the skills to do so and massive duplication was created. So, we have a Conservative government rolling back the reforms of a previous Conservative government.
Another case of trying to use organisational structure to solve a problem that was nothing to do with organisational structure. Weak managers and corrupt employees don’t become any less weak or corrupt just because you move them elsewhere.
Trouble is, the decentralisation also opened the way for more complexity. Managers in devolved organisations changed things like grading structures, pay review processes and HR policies because….well….because they could. It was less about business imperatives and more about spraying trees to mark territory. Look, we’re autonomous now and to prove it, we’ve got separate grading structures and pay review dates.
Which is all very well until you try to pull it back into the centre again. What had once been similar processes now have considerable variation and the users cling to their preferred way of doing things. Once again, it was hoped that changing the place where things sit on the organisation chart would solve the problem. Once again, it hasn’t.
As Colin Cram says, there is way too much wriggle room here. And civil servants, being very clever people, are good at coming up with justifications for their wriggling.
So, there is plenty of wriggle room for departments, particularly the larger ones. One can bet that a huge amount of wriggling has already taken place, hence the shared services plan already sounding like the lowest common denominator.
There will no doubt be much sophistry in the next few months from civil servants anxious to maintain the status quo or adopt rather ineffective collaborations.
The government needs to maintain its nerve, be genuinely radical and implement joint services very quickly. Funding cuts forced local government to start to address shared services seriously. Further funding cuts to central government departments might help concentrate minds.
Devolution and voluntarism may be where it’s at, daddio, but they haven’t delivered much in the way of savings. Shared services only work if everybody uses them and everybody does things the same way, otherwise you might as well not bother. Unless someone in government forces managers to comply, they will continue to make excuses for opting out. And the cash will keep flowing down the drain.