FINANCIAL MANAGEMENT/Learning to share
An increasing number of local and state government managers have begun shaking up their organizations and creating “shared services” to save money by consolidating administrative support functions across various departments into single, stand-alone units. Those services can range from payroll, accounts receivable and IT helpdesks to 311 call centers.
By processing administrative functions through a central department, governments can free up other departments and agencies to focus on their core missions. Centralizing business processes typically can cut costs between 25 percent and 50 percent. Some administrative fields, such as general accounting, are ripe for productivity improvements using shared services, with potential cost reductions as high as 55 percent.
Recognizing their the potential for savings, governments worldwide are adopting the shared services model. Accenture’s recent survey of 143 government executives at all levels across 13 countries in Europe, North America, the Asia Pacific region and Africa showed that 85 percent of respondents believed shared services are a vital tool for meeting government challenges. Two-thirds of the respondents said they already have implemented or are implementing shared services. Only 6 percent said they would not even consider a shared services model.
The top three objectives for shared services identified in the survey were to help improve efficiency, reduce costs and address residents’ demands for improved services. Other objectives included standardizing processing environments, and improving service quality and speed of delivery.
Government leaders implementing shared services must decide whether to in-source or outsource them. Internally managed shared service centers tend to mesh more quickly with staff who are familiar with internal policies and procedures. Additionally, participating departments may better accept the new organization because co-workers are familiar with one another’s strengths and weaknesses.
However, an outsourcer for shared services may be able to leverage expertise to drive improvement and increase service levels, provide more contract financing options and offer both industry specialization and application of best practices from the private sector. Most executives surveyed in-sourced their shared service centers, though many said they worked with external consultants before implementation.
Governments face challenges putting into practice fundamental reforms such as shared services, including political sensitivities about dramatic organization and workforce changes. The new organization might require fewer employees, so some will need to be retrained or re-deployed to other areas. Also, because it may take governments more than four years to see a return on the investment, some government officials who are focused on short-term election cycles might be reluctant to make a long-term commitment to change.
Successful shared services can yield a number of benefits. But it requires considerable diligence and the full support and leadership from politicians and senior management to develop a concise business plan, manage workforce issues, transform the internal culture and measure performance. With dedication to shared services, local and state governments can create new models of public sector success.
The author is a managing partner for Minneapolis-based Accenture.