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Open Services

Open ServicesThe changing face of service delivery

Shared services? You could think virtually

To talk about shared services is very fashionable. Ministers exhort

councils to “share back-office functions”. Councils up and down the land are talking to their neighbours about sharing certain functions.

In a few places even chief executives and management teams are being shared, though what looked like a growing trend has somewhat slowed in recent months.

This is in contrast to the world of outsourcing, another form of sharing: I know of more than nine major contracts that are due to be let in the next year and there is a flurry of activity in the market for smaller, service-specific, contracts.

So sharing is fashionable and much talked-about and outsourcing is on the increase. But do we think that this must be a coming trend that will sweep through local government? Well, up to a point.

True, most councils have always shared some services and many have been involved in outsourcing for decades. True, activity is on the up, but still a majority of services in a majority of authorities are delivered in broadly traditional ways. If sharing is so fashionable and can deliver savings and/or improvements, why is there not a landslide of activity?

Perhaps the answer is organisational culture.

Forging ahead…Genuine shared services need a radical transformation of delivery models, says DAVID CLARK

FOREWORDLLOYD CLARK Director of local government business groupLiberata

In the drive for efficiency, shared services appear to present an ideal solution to balancing budgets and achieving service levels.

But large-scale success stories remain the exception rather than the rule. While cost saving is a key driver, geography, control and local employment are also factors that can’t be ignored. What is needed is a way to combine the economies of scale of shared services with the skills retention and control advantages of local delivery.

Liberata faced this very challenge five years ago. We had more than a dozen processing sites across the country. Each was a silo that

had to have access to sufficient resources to manage peak demand and had to move people around constantly to handle the full scope of work. We had invested in shared services in the north-west but couldn’t justify a wholesale move out of our local sites on cost and skill grounds.

So we approached the problem another way – virtually. We enabled all our people in all sites to connect to all systems. We harmonised the processes, codes and procedures – even though we continued to work on different systems. We segmented work into ‘types’ so that it could be batched together to achieve greater quality and productivity. And we implemented workflow automatically to match the right skill – wherever it was – to the available demand.

Councils can now use this model to connect to each other. We call this the Capacity GRID™. It combines the benefits of insourcing, outsourcing and sharing without the challenges that have so often beset shared services over costs, timescales and staff relocation.

By connecting capacity that already exists, high performance becomes more accessible. Councils can achieve economies of scale, benchmark productivity and service resilience by sharing resources virtually through the Capacity GRID™.

Local authorities can develop the ability (and flexibility) to buy and sell capacity according to demand while retaining complete control over their people and their services. They have a choice – whether to source their capacity locally, virtually or in combination.

To an extent, of course, this model is not earth-shattering. Buying in only what you need, selling what you don’t – that’s basic business common sense. But it is, in our view, a new, exciting alternative for local government and one that has the potential to lower the cost of achieving high performance.

Shared services? You could think virtually

FOREWORD SUPPLIED BY LIBERATA. www.capacitygrid.com

Virtual shared services ▼

Forging ahead…

Sharing and giving up authority and day-to-day decision making does not come very easily to many councils. Often neither the political nor the managerial cultures are very good at letting go and delivering services in new ways.

A true shared service agenda does not begin with the pursuit of specifications and contracts. It begins with each delivery partner spending time and effort gaining a true understanding of the needs and ambitions of the other.

It goes beyond contract and is based on trust and a genuine co-ownership of the outcomes of a service.

For a local authority this is particularly difficult. Councils are political bodies and councillors are, quite rightly, concerned about the service RE

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‘‘ We enabled all our people in all sites to connect to all systems. We harmonised the processes, codes and procedures

Forging ahead… Virtual shared services allow councils to pool skills and resources. LGC updates you on this new partnership approach

performance for which they feel ultimately accountable. In some areas the management culture is focused on the quality of service today, with little thought for radical transformation in delivery models.

I believe that many councils need to examine their own cultural stances before they go anywhere near a service partner.

Most shared service arrangements lie along a spectrum which begins with co-production models, where the citizen or user is part of the process of constructing and delivering a service, moves through community ownership and mutual models and ends in the full-blown outsourcing approach.

The thing all of these have in common is that they

require the authority to ‘give up’ control, to understand another point of view and to be prepared to carry the risk that things will go wrong that are outside of their control but are in areas that are their responsibility. Many find this a big ask.

But, done properly, sharing can drive out costs, can deliver innovation and transformation, and make services more responsive, so ways of making it work need to be found.

There are other models. Virtual sharing, for example, allows councils to be part of a network so they can share resources during peaks and troughs of activities.

Other models allow for organisations not to share actual delivery, but to share high-level expertise. Yet in many areas authorities are carrying full services that would be better delivered through a shared agenda.

We in Solace have been struggling with these issues for a while, which is why we have a whole workstream at our Solace Summit in October devoted to transformation and sharing.

During this, we hope to pin down the characteristics that can make an organisation good at sharing and thus cut costs while maintaining or even improving outcomes.

I will let you know if we succeed!

l David Clark is director, Solace Enterprises

What are virtual shared services?They are shared services where the resources and skills, rather than the location, are shared. Local authority teams – wherever they are in the country – can link into a common network rather than having to relocate to a physical shared service centre. How do they work?The first imperative is to harmonise procedures and align types of work. This doesn’t mean, of course, everything has to be the same but it does mean variation is minimised while still providing for local requirements. By grouping people according to their skills and knowledge, work is matched and directed to the right person in the network.

How do they differ from conventional shared services?Conventional shared services normally require significant investment in facilities and systems. They can sometimes be frustrated by governance or incentives issues, and may often require the authority to transfer control to a centralised service operator. Virtual shared services, conversely, avoid this by taking advantage of existing facilities and systems and keeping control firmly in the hands of the council.

If I decide to do this, what will it mean for a. My workers. b. My service delivery?Under a virtual shared services model, councils can actually retain skilled employees who will continue to work in the same environment rather than being uprooted to a remote centre. They also get much broader exposure for their professional skills and the opportunity to

develop faster. Crucially, local services remain delivered by local people who understand their customers’ needs and the unique demographics of the authority and its communities.

Won’t it require up-front investment?No. Virtual services can be built on to an existing infrastructure and take advantage of the authority’s existing systems. This means councils can get started in weeks rather than years, and investments are minimal.

What exactly does sharing capacity mean?Capacity is simply a measure of an authority’s ability to complete work and can be determined by the level, productivity and skills of its resources. In this context ‘sharing capacity’ simply means sharing resources to complete work. What sort of benefits might I see from this model?Virtually connected authorities can immediately improve service resilience. They no longer need to resource to peak demand because they can buy capacity when they need it and sell capacity when they don’t.

This flexibility to exchange or share capacity ensures resources are used in an optimal way; capacity that isn’t being used in one authority will be being used elsewhere.

Productivity and quality improve dramatically – by up to 60%, according to Liberata – and customers receive consistent and reliable services. With improved transparency, councils also have much greater ability to benchmark like-for-like performance.

Q&A: VIRTUAL WORLD

First published in Local Government Chronicle September 2011 LGCplus.comFirst published in Local Government Chronicle September 2011 LGCplus.com

Bromley LBCLiberata has been providing services around revenues and benefits and encompassing associated customer services, payroll and pensions administration for the Bromley LBC since 2002, with a new seven-year, £42m contract being agreed as recently as October last year.

“It has clearly reduced our costs in terms of those services, somewhere in the region of £750,000 per annum. But what is equally important is that we have been able to maintain high service standards. We have seen improvements in performance around council tax and housing benefit that have led to real income being generated for the council,” explains Pete Turner, finance director at the council.

“We have improved collection and reduced levels of housing benefit paid when it is not eligible for grant funding. Our arrears collection has improved and we have reduced our bad debt provision,” he adds.

“We do not even call it a contract, we call it a partnership. It is not a traditional ‘parent/child’ relationship. It is a partnership that has matured over time, and we work with Liberata at much more of a strategic level now, developing services. It’s about working together and enabling partners to contribute to strategy. That’s critical in a climate of tight

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financial constraints and reducing resources,” he adds.

Such collaborative working – squaring the circle between declining resources and an imperative for maintaining or even improving service delivery – is likely to become even more important in the future, Mr Turner says.

Authorities will need to look at how they share resources and capacity better to manage fluctuating demand, and so deal with peaks and troughs of activity much more effectively.

“Like most authorities we have inflationary pressures to contend with, cost and service pressures, demographic changes and a real reduction in government grants and budget allocations,” Mr Turner says.

“Because the authority is reducing in size, there is an issue of becoming less flexible and adaptable to change if you don’t have key partners you can work with.

“You can no longer afford

Case studies: spreadinG the Load

to resource simply to manage the peaks on an ongoing basis. But the risk in that scenario is you end up with a deteriorating service in peak periods as a result,” he says.

Mr Turner adds that with virtual outsourcing models there is the potential to share capacity, something that can provide wider efficiencies and benefits, and a better utilisation of resources.

“What this potentially means is, even if you are having to work from a smaller base, you can have the benefit of managing your changing resource requirements and, at the same time, keep your key expertise,” Mr Turner says.

“As an authority we will, inevitably, have to focus more on our core activities, so this is about securing value for money for that.”

It would seem that it is no longer possible to be good at everything – there are just not the resources. Instead local authorities are having to focus their efforts on finding the right partners and the right approach.l For more details contact: Pete Turner, peter.turner@bromley.gov.uk

North Somerset CouncilNorth Somerset Council’s relationship with Liberata goes back to 1995 and in many respects, illustrates the evolution there has been in the relationship between many local authorities and private sector providers,

Virtual shared services

‘‘ We do not even call it a contract, we call it a partnership … one that has developed and matured over time Pete Turner, finance director, Bromley LBC

Many local authority contact centres are being outsourced with success

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Stretched local authorities are looking beyond traditional contracts and benefiting from new types of partnership. NiC PaToN reports

First published in Local Government Chronicle September 2011 LGCplus.com

tap’ access to specialists.“It is about having the

ability to spread unexpected demand pressures quickly across a network, therefore minimising the impact on customers, without the need for either recruitment or procurement, both of which take time,” he explains.

“In terms of service resilience, it allows us to put operational elements into larger units. For example, the council operated a local scanning and indexing service for many years that always proved a bottleneck when post volumes spiked or when resources were absent because of sicknesses or leave. By accessing a networked bureau service these risks were managed away,” he adds.

Being able to access resources through the network on a temporary or ad hoc basis provides flexibility while, similarly, being able to access specialists ‘on tap’ has been a ‘critical mass’ issue for the council, he stresses.

“Where teams are reducing in size and cannot maintain expensive in-house specialists, being able to access well-resourced specialist teams that service a number of councils has proved invaluable in areas where the council requires expertise to manage financial risks,” he explains.

“It allows us to do things we could not do ourselves, or could not do at pace. It is about bringing in ideas,

flexibility and capacity to help avoid crude cuts and mitigate this with smarter solutions. For example, it has given us access to a small army of project managers in years one and two but who we may be less likely to need after that,” he adds.

More widely, North Somerset, like many councils, is reducing in size, in the case of many services by about 30-40% in the next few years.

For many small- or medium-sized unitaries a reduction in size means their ability to run services themselves diminishes. With a partner the resulting impact on services can to some degree be mitigated. Spreading demand pressures against a partner’s network has also proved invaluable.

“We, for example, saw benefits’ caseloads rise by a significant amount in 2009. Without this partnership we’d have gone straight into long-term backlog but by the second quarter we were out the other side. Previously we would have had to invest in agency resources and overtime. Now by sharing capacity we were able to spread the pressure across the network,” says Mr Penska.

“To us, using a private sector provider is no longer a matter of preference; it is something you have to consider,” he adds.● For more details contact: Richard Penska, richard.penska@n-somerset.gov.uk

CASE STUDIES: SPREADING THE LOAD

explains Richard Penska, assistant director of finance and resources at the council.

“It used to be a discrete transactional service but it has changed into something much more strategic as the authority’s ambitions and pressures have grown. From just providing revenues and benefits, and something pretty much born out of the old competitive tendering regime, it has evolved into a genuine partnership,” he says.

The Liberata contract was

renewed in 2002 and then in October last year repackaged into a 10-year, £85m strategic partnership that now covers areas including revenues, benefits, finance, human resources and payroll and facilities management, as well as contact centre activities.

Within this, being able to access and deliver services through a virtual shared services model has provided four key benefits, argues Mr Penska: performance, service resilience, flexibility and ‘on

Virtual shared services

‘‘ It allows us to do things we could not do ourselves, or could not do at pace. It’s about bringing in ideas, fl exibility and capacity to help avoid crude cutsRichard Penska, assistant director, finance and resources, North Somerset Council

Sponsored by Liberata. The case study subjects were agreed in partnership with LGC, which independently commissioned and edited the report. Liberata is one of the UK public sector’s leading specialist providers of business process services. The Capacity GRID™ is the award-winning next generation approach to

high-performance virtual shared services.

First published in Local Government Chronicle September 2011 LGCplus.com