shared services – opportunity or last resort?
22 February 2011
In 2008 we commissioned a survey of senior and middle public
sector managers to gauge their views of shared services and other
forms of partnership. Nearly three years later we repeated this
exercise with senior local authority managers, and the results are
striking.
Long before the severity of cuts in local government spending
became a reality, many authorities were seeking efficiencies
through various forms of joint working. If there had not been an
economic downturn, pressure to work more efficiently is likely to
have increased in any event in line with ever-rising demand for
front line services.
But the recent cuts have transformed shared services and joint
working from a good idea into something approaching a necessity, if
local authorities are to manage reduced budgets and protect
services.
Where now for shared services?
In 2008, a majority of public sector managers saw the
opportunity for joint working in either front line services, back
office functions, or both. Nearly three years on, the enthusiasm
for shared services remains high with almost nine in ten local
authorities actively engaged in sharing functions. Some might be
surprised that one in ten authorities remain free of any joint
working arrangements – but our latest research also shows that the
number of authorities sharing services is set to increase
further.
Around nine in ten local authorities say they are planning to
share further functions (whether back office, front line, or both)
over the next two years. Environmental services and social care are
cited as the most likely areas for shared services
arrangements.
This is perhaps not surprising. Government and European
environmental targets remain in place, and greater efficiencies
must be sought in order to achieve them. Even ignoring targets,
waste collection and disposal services are often not best carried
out by single authorities within the confines of their area.
Demographic trends also mean that pressure on social care provision
is only ever set to increase in the medium term.
But it is not just in areas such as waste collection, where the
case for joint working was already clear even without financial
pressures, that radical steps are being taken. For example, the 10
local authorities within Greater Manchester are seeking to save £2
billion by collaborating on a range of front-line and support
services.
What are the barriers, and are they
changing?
In 2008 lack of financial resources, workforce opposition and a
lack of collaborative culture were identified by public sector
organisations as significant obstacles. Interestingly, as the need
to reduce costs has become more pressing, opposition from staff is
being seen as less of a hurdle.
In 2010 political and public opposition was identified as the
biggest barrier, with the previous concerns noted above regarded by
fewer than 10% of local authority managers as the most significant
issue.
This may show that, although the need for greater cooperation is
becoming undeniable to those primarily tasked with service
delivery, the public and politicians remain understandably
concerned. Effective communication, transparency, and a clear
business case showing the concrete benefits of the proposals will
be key. As one of our respondents (who leads a successful shared
service arrangement between public bodies) noted: “There is often a
tension between the interests of a shared services partnership, and
its individual members. To overcome this, it is important for
strong and flexible relationships to exist between those
who…support the overall benefits [of the partnership”.
It will perhaps be no surprise that political will, and flexible
relationships between officers, are key factors in establishing a
thriving shared service. However, given the numbers above (and
indeed in 2008) it is clear many authorities, to some extent at
least, have tackled these challenges and taken major steps towards
joint working.
Private sector involvement, and the key
risks
In our 2008 survey, most public sector managers preferred to
partner only with other public sector bodies. As one might imagine,
concerns about job-security, reconciling the differing ethos of the
private and public sectors, and loss of control featured high on
the list of concerns.
But in this area we have seen one of the greatest step-changes.
Unsurprisingly, the great majority of local authorities still
prefer to partner with other public entities. But three-quarters
(78%) are now prepared to consider modes of partnership that
include private sector involvement.
More striking perhaps, is the willingness of some authorities to
consider deeper partnerships with private providers. From
outsourcing of some back office services to more radical moves to a
“commissioning authority” approach, where a large proportion of
services are outsourced to a private provider. The latter is at the
extreme end of the spectrum, and will be unpalatable to many.
Nevertheless, one in three senior managers now believe that their
authority would consider some form of large scale outsourcing to
cut costs.
This suggests that the greater pressure on local authorities is
perhaps forcing them to consider a more enterprising approach –
seeking to secure greater private sector investments or perhaps tap
into the commercial experience of the private sector that might
complement existing skills.
There is little doubt that partnering, and working with private
sector entities, can drive efficiencies when well managed. It is
equally clear that any public body considering this will have to
address certain risks.
For example, the authority will of course be ultimately
accountable to its electorate for defective services. It will
therefore have to be certain where responsibilities lie under the
arrangement (whether with private or public sector partners) and
that it has a mechanism to secure proper service delivery from its
partner or bring the service back in-house in extreme cases.
There is also a question of cultural fit where two or more
services are to integrate. This may, all things being equal, be a
larger concern where private and public sector bodies come
together. But public to public partnerships also have to deal with
this issue.
All of the inherent risks can be addressed. If not, it is clear
that there can be a price to be paid for efficiencies.
Where now?
Local authorities were already attempting to drive efficiencies
through shared services several years ago. It is likely this
process would have continued and accelerated even without the
pressure of budget cuts and need to make significant savings.
But our recent survey shows a change in attitudes – a move from
a gradual process to a more sweeping change in the way local
authorities do business; an increase in more innovative thinking
and a greater preparedness to work with private sector partners in
some circumstances.
This means shared services cannot be seen only as the last
resort for local authorities under pressure – there were already
compelling reasons to consider them in some cases. Equally, there
is strong evidence that the economic climate is driving some to
enter into more arrangements, and push further and faster, than
they would otherwise have done. If the current trends continue, the
landscape of local authority service provision is likely to be very
different were this survey to be repeated three years from now.
This article was first published on
www.localgovernmentlawyer.co.uk