Shared Services
A SHARED APPROACH TO BUILDING A BETTER SCOTLAND
- A CONSULTATION PAPER ON A NATIONAL STRATEGY FOR SHARED SERVICES
The UNISON Scotland Response
July 2006
Executive Summary
Introduction
UNISON Scotland welcomes the opportunity to submit
a response to the Scottish Executive regarding A National Strategy
for Shared Services. We are Scotland's largest union representing
over 150,000 members across the public sector.
UNISON Scotland recognises that all public sector
organisations should be aware of opportunities to work more efficiently
and effectively. We also welcome the commitment to reinvest savings
in services, the retention of key skills and the presumption against
redundancy. Public Service Organisations (PSOs) in Scotland already
continuously review their operations under best value and have
a record of achieving efficiencies under the existing best value
arrangements. For example Scottish local government has already
contributed £621m of savings under the Best Value regime.
There are however significant challenges facing
a shared services strategy and these are largely absent from the
paper. We will address these issues in this response.
Approach to developing a shared services strategy
UNISON Scotland feels that the consultation document
itself would have benefited from earlier trade union input. UNISON
members as providers and users of public services are better placed
to comment on service delivery than the management gurus from
the private sector whose very careers rely on ensuring that there
is a new best way to do things. It's not that long since decentralisation
was the buzzword for service delivery!
Equally the delivery structures outlined in the
paper make very little reference to a partnership approach to
this strategy. The principles only refer to ‘communication' when
there are substantial issues that will be a matter for negotiation.
This top down, expert led approach is bound to attract significant
resistance. In addition there is no evidence that this matter
has been addressed properly under the STUC/SE Memorandum of Understanding.
The literature on shared services is inevitably
dominated by companies and consultants who are selling a ‘new'
product or by government departments tasked with delivering this
vision. This means the practical problems are glossed over in
favour of the often theoretical gains. Hard evidence is more limited.
Sharing services in the public sector is in its infancy. There
is therefore little to evaluate.
The Executive paper highlights the success of shared
services in Western Australia. Yet much has still to be evaluated.
The Western Australia Department of The Premier and Cabinet's
one stop shop for Finance and HR only went live at the end of
2005 with pilots in selected agencies starting in April 2006;
the roll out to the rest starts in July 2006. It is not possible
to evaluate of this project yet. The Whitehall ONE project has
recently been cancelled because the projected savings were too
small to justify the disruption involved in reorganisation. Even
when projects have delivered the wider costs are rarely mentioned
and UNISON and other trade unions' private sector experience with
shared services have not been wholly positive. In particular the
complexity of large scale computer systems and the displacement
of workload and tasks are often forgotten.
Any reorganisation creates disruption and moves
the focus of an organisation internally rather than on the delivery
of services to the public. This means the approach to shared services
whilst starting from a position that it is a good idea in principle
has to be developed with more realism than is evident in this
consultation paper and with a more inclusive approach. The alternative
is delay, delivery failure, system breakdown and industrial conflict.
Centralisation
While UNISON is broadly supportive of the aims of
the Efficient Government Initiative and of PSOs working together
to improve service delivery we have concerns about shared services
leading to increased centralisation and the attendant decrease
in service access for users and the loss of democratic accountability.
Public services are different to private sector operations and
some of the language in the consultation paper is incompatible
with the values of public service.
Economies of scale could lead to the bigger authorities
providing services for the smaller ones and so to increased centralisation.
This centralisation of service delivery leads to less personal
service for both for users and for the staff. Disadvantaged groups
in particular lose out when services are delivered remotely. Private
sector examples of this include the energy industry where high
street contact points were closed in favour of remote contact
centre working. Whilst this may be more efficient for the companies
involved it has led to significant customer confusion. Public
bodies cannot opt out of dealing with disadvantaged service users
who often need time and personal contact to assist them to access
the services they need.
The delivery of complex public services requires
experienced staff with local knowledge. Centralised services are
less responsive to local needs and the lack of local knowledge
means that problems have to be resolved by senior staff, increasing
costs and the time. Many experienced staff, usually women and
low paid, will be unable to relocate to a centralised service
and their knowledge will be lost. In addition contact centre turnover
rates are amongst the highest in any industry further adding to
the dislocation of service. It also means that other staff (so
called ‘front line' staff) in contact with users have to resolve
problems and act as an intermediary between the user and the remote
contact centre - leaving less time for service delivery.
There is a conflict between current moves to devolve
decision making to local levels and pulling service delivery to
the centre. It is possible to resolve these tensions but not without
acknowledging their existence and fully involving staff and the
communities they service in the process. The current political
crises around A and E provision has partly arisen from not involving
communities in defining the problem and so created a suspicion
about the reasons behind the decision made by health boards. One
way of minimising these problems is to focus on developing local
and virtual solutions as distinct from centralised ‘big shed'
arrangements or outsourcing. Auckland Libraries joint automated
library management system is an example of how a locally managed
"shared service" can work.
The consultation paper is also weak on the management
arrangements for shared services and in particular how conflicting
priorities would be resolved.
Savings
The paper holds out the promise of massive savings,
although there is little detail on how exactly these figures are
arrived at. The alleged savings are not always realised once projects
are in place. The consultation paper suggest only 67% of savings
are realised and even this may be optimistic. The Australian "Whole
of Government Information Technology Infrastructure Consolidation
and Outsourcing Initiative" announced in 1997 claimed it
would save $1 Billion over seven years. The Auditor-General now
says the savings were "overstated. The Department of Finance
announced in 2003 that it was abandoning its outsourcing model.
Its contract with IBM was not renewed and IT work would be brought
back in house. Whitehall's plans for shared services are currently
under review partly because of the difficulties involved in quantifying
non cash savings. There are relatively few actual examples of
the large scale shared service provision envisioned in this strategy.
Even these claims only reflect the staff savings of staff directly
providing the services they replace. The knock-on costs to other
departments are rarely taken into account. The costs and disruption
of reorganisation also have to be taken into account when savings
are quantified.
The investment needed to realise these savings is
high. The paper states past experience shows an investment ratio
on 2:1, in other words an investment of £60m to save £30m. It
is unlikely that many PSOs will be willing to divert capital programme
priorities in this way. This will then lead to expensive private
finance options that will divert revenue from front line services.
Even the biggest cheerleaders for PFI in the UK government accept
that IT PFI projects have not been a success.
This would reinforce the early evidence highlighted
by the Scottish Parliament Finance Committee that most efficiency
savings are coming from front line services such as health and
local government.
There has to be recognition that whilst new technology
does offer opportunities to work differently and provide an improved
local service it is not in itself a magic bullet. Not all of the
new technologies are proven and can often come at a high cost.
The recent computerisation of government departments does not
have a good track record of improved service.
Staffing
The consultation paper focuses on so-called back
room activities. This term is resented by the staff that provide
support services and is extremely de-motivating. Their roles are
often fully integrated and provide essential functions to support
service delivery. This de-motivation can lead to a high turnover
of staff and consequently a reduction in the service provided.
The creation of a new two tier workforce is highly undesirable.
Public services are often very complex involving
not only a wide range of service delivery options but also partnership
working skills across a number of agencies. Personal professional
relationships are the key to successful cross agency working.
These relationships cannot be created overnight but need time
to develop trust and understanding. This is a factor that is often
little understood by the salespersons and the external consultants
brought in to advise on shared service projects. They are used
to commercial operations that have a more focussed product or
service to deliver and recent trends in commercial fields have
moved further in this direction. Even at fairly junior levels
effective delivery of public services requires staffing by people
who understand the working of the whole organisation. A process
that cannot always be turned into a simple contact centre script.
In the current labour market there is a great deal
of competition among employers for skilled staff. The Employers
Organisation recently published a report stating that nine out
of ten local authorities experience difficulties with recruitment
and retention of professional staff. Public sector employees will
move to other sectors where financial rewards are often higher.
It is important for organisations to retain skilled and experienced
staff. Recruiting and training staff is costly and time consuming.
The CIPD estimates that the average cost of labour turnover per
employee is £8200 rising to £12500 for managers/professionals.
Average staff turnover in Scottish contact centres exceeds 25%,
above the UK average. In addition outsourced services experience
double the staff turnover rates of the public and not-for-profit
sectors.
Job losses are an obvious concern as are changes
in employment terms and conditions. Past efficiency drives have
a focussed on cutting staff numbers. Whilst we welcome the commitments
in the consultation paper to retraining and redeployment, experience
in the past have not always been positive. Similar joint working
initiatives such as Joint Future have often struggled to properly
tackle the staffing consequences of integrating staff from different
organisations. There also needs to be a much clearer relationship
between the anticipated savings and the cost of retraining staff
for new roles. Long term planning for this type of organisational
change is always helpful.
As highlighted above the commitment to ‘communications
with staff and their representatives' is insufficient. There will
be a range of negotiation, contractual and statutory consultation
requirements on PSOs. A few glossy newsletters will not suffice.
Again the consultation paper would have benefited from a more
substantial and professional staffing input.
Procurement
The paper is extremely vague on shared service structure.
The options given are public, private or hybrid models but little
discussion of the implications of these options. There is also
little discussion of EU procurement rules despite the problems
they have caused for NHS shared services in England and some Scottish
local Authorities.
As set out above there are very real problems with
outsourced delivery of these services and UNISON will strongly
oppose any attempts to privatise service delivery. Within a public
service delivery model there is of course a role for other suppliers
to assist with systems and expertise although even this has significant
procurement challenges as similar large scale public and private
sector projects have demonstrated.
The Executive's own review of procurement recognises
that there is a growing awareness of savings that can be made
in the procurement process but there are problems in implementing
the many positive ideas that come forwards. The Authorities Buying
Consortium has only 20% of the spending of the local authorities
involved, this cannot be just because they don't want to share.
Communities have different priorities and needs and want their
authorities to be able to make local decisions.
A key challenge is to develop models that address
the requirements of EU procurement rules without leading to front
or back door privatisation. This is a fast developing area of
EU and Scots law and requires national solutions. One PSO simply
providing services for another PSO may well open up these procurement
difficulties. We have similar reservations over the viability
of joint venture models. The Teckal case and subsequent case law
(e.g. Stat Halle and Carboterma) highlights the complexity of
joint working, particularly when private sector partners are involved.
There are further complications when the voluntary
sector or bodies that are not ‘contracting authorities' under
EU law are involved in shared services.
One possible solution might be a common service
model along the lines of the NHS and Police models although even
these may have to be changed to meet developing legal requirements.
This may require the development of statutory common services
arrangements and we would wish to enter into a dialogue with the
Executive on this issue. We recognise that further EU and UK government
guidance is expected on these issues. However, they start from
a policy perspective that is hostile to the Scottish public service
model and will promote contestability and privatisation. It is
therefore clear that Scottish policy and guidance is required.
Until that guidance is in place UNISON will be forced to advise
our branches and service groups to approach any proposals with
great caution.
Conclusion
UNISON Scotland recognises that sharing can lead
to cost savings and improved services for communities however
the current paper glosses over the many difficulties that will
have to be overcome in order to achieve the promised efficiency
gains. The paper is weak on evidence and over influenced by the
consultants and salespersons who are often the biggest beneficiaries
of this type of government initiative. Not least of the issues
that are simply ignored is the impact of EU procurement legislation
and this must be addressed before any progress can be made.
We do welcome the commitment to reinvest savings
in services, the retention of key skills and the presumption against
redundancy. However the processes of negotiation with staff and
their representatives are absent and the consultation document
itself would have benefited from earlier trade union input. We
expect therefore further involvement in this process at all levels.
It is the detail and the processes for introducing shared services
that will determine whether it will improve Public Services and
there is still a great deal of work to be done in this area.
