the organisation of shared service centres (sscs) in

THE ORGANISATION OF SHARED

SERVICE CENTRES (SSCS) IN PUBLIC ADMINISTRATION

EUROPEAN PUBLIC ADMINISTRATION COUNTRY KNOWLEDGE

StructuralReform Support

EUROPEAN COMMISSION

Directorate-General for Structural Reform Support (DG REFORM)

Directorate B—SUPPORT TO MEMBER STATES’ REFORMS

Unit B2-GOVERNANCE & PUBLIC ADMINISTRATION

Contact: DG REFORM, Unit B2

E-mail: [email protected]

European Commission B-1049 Brussels

mailto:[email protected]

THE ORGANISATION OF SHARED SERVICE CENTRES (SSCS) IN PUBLIC ADMINISTRATION

Nick Thijs

October 2020

This document should not be considered as representative of the European Commission’s official position.

Luxembourg: Publications Office of the European Union, 2021

© European Union, 2021

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THE ORGANISATION OF SHARED SERVICE CENTRES (SSCS) IN PUBLIC ADMINISTRATION I 3

TABLE OF CONTENTS

SUMMARY ............................................................................................................................................5

1. CONTEXT ....................................................................................................................................71.1. Defining shared services centres (SSCs) ....................................................................... 7

1.2. The origins and rationale for shared services centres .......................................... 8

2. ORGANISING SHARED SERVICES ...............................................................................10

CENTRES ...........................................................................................................................................102.1. Organisational set-up........................................................................................................... 10

2.2. Organisational design and implementation ............................................................ 12

2.3. Organisational design and implementation ............................................................ 13

3. COUNTRY CASES .................................................................................................................153.1. Finland .......................................................................................................................................... 15

3.2. Denmark ...................................................................................................................................... 16

3.3. The Netherlands ...................................................................................................................... 17

3.4. Poland ........................................................................................................................................... 18

3.5. Sweden ......................................................................................................................................... 19

3.6. Estonia .......................................................................................................................................... 21

3.7. Portugal ........................................................................................................................................ 24

3.8. Ireland ........................................................................................................................................... 26

4. LESSONS LEARNED ............................................................................................................274.1. Pitfalls and risks ...................................................................................................................... 27

4.2. Key success factors ............................................................................................................... 28

REFERENCES ...................................................................................................................................30


SUMMARY

Shared service centres (SSCs) can be defined as government units providing support services (human resources, information and information and communications technology (ICT), accommodation and facilities, commu-nication, finance, audit and procurement) to more than a single ministry, agency or sub-sector of government (central government, social security funds, local government) (Ulrich, 1995).

While cost savings on ‘overhead’ processes appear to be the main driver to engage in SSC arrangements, governments are also motivated by a desire to improve efficiency and internal service quality through pooling resources and facilitating specialisation. By consolidating these back office activities into a single centre, organisations also have more resources to concentrate on their main mission and frontline services. The services centres on the other hand can specialise, and increase the quality and efficiency of the performed functions.

SSCs are not a new phenomenon. The first centres were created nearly 20-30 years ago. Yet, the need to consolidate budget expenditure and reduce administrative costs in the last economic crisis led to a renewed interest in such centres.. There is no single organisational model, but rather a variety and practices are still evolving. Variants exist depending on the approach (top-down/mandatory or bottom-up/voluntary) and scope (single or multiple services). In the context of financial pressures on (the machinery of) the public administration.

Notwithstanding the large experience of the private sector with SSCs, public sector implementation needs to take care of several design and implemen-tation challenges. These include addressing key questions, such as: What will be the scope and nature of the tasks offered - highly standardised or allowing room for customisation? Where will we position the SSC, centrally or close to the client organisation? How will quality standards be defined and monitored?

Since establishing an SSC is a large-scale change process, governments need to carefully think what is the best strategy to deal with potential resistance and mitigate the risks of failure.

This report starts with the background and context for SSCs in public admin-istration. What are they? When did they make their way into the public sector? What are the drivers and motives for SSCs? The organisation of SSCs is the prime subject of section two, which highlights various responsi-bilities and topics covered (Human resources, procurement, finances, IT, etc.) and explores the design and implementation challenges. The third section briefly illustrates eight EU cases (Denmark, Estonia, Ireland, The Netherlands, Poland, Portugal, Finland and Sweden) and their main experience with SSCs in public administration. Finally, the lessons learned, including pitfalls, risks and critical success factors, are summarised in the fourth section.

This report builds upon previous and numerous work in this area by different authors and organisations. Within the scope of this project, it was not feasible to perform a full-scale original research design. Instead, the study aims to bring together invaluable information on theory, concepts, country case information and practical insights from a wide variety of sources (academic, advisory and practitioner) aiming at a reader-friendly contribu-tion in this area.

6 I THE ORGANISATION OF SHARED SERVICE CENTRES (SSCS) IN PUBLIC ADMINISTRATION

MS coverage Denmark, Estonia, Ireland, The Netherlands, Poland, Portugal, Finland, Sweden

Key words Shared services, human resources, IT, finance, procurement, facilities management

1. CONTEXT

1.1. Defining shared services centres (SSCs)

Shared service centres (SSCs) can be defined as government units providing support services (human resources, information and ICT, accommodation and facilities, com-munication, finance, audit and procurement) to more than a single ministry, agency or sub-sector of government (central government, social security funds, local government) (Ulrich, 1995).

There are certain professional and administrative functions that most organisations perform, irrespective of their core business, including some functions that are largely standardised across operations, for example payroll administration, and others that must be tailored to the organisation’s mandate and needs, such as legal advisory services (Elston and MacCarthaigh, 2016). While these support services are often seen as overheads or fixed costs, especially in a corporate context, they are essential to the functioning of any organisation, even though they are not front-line but entirely back-office.

Table 1 | Professional and administrative support functions

Functions Examples (not exhaustive)

Human resources management

Recruitment; training and development; salary administration; HRM consultancy

Information technologiesAdministration of IT systems; network and software; technical applications; IT helpdesk; IT development

Finance and controlBudget; billing administration; accounting, financial internal control, analysis and reporting; savings and loans; insurances

Source: Huijben & Geurtsen, 2008, p.47-48.

Given the nature of these support functions, organisations face a choice, whether to keep their delivery in-house or to outsource them to specialist providers (the ‘make or buy’ decision). If they are kept in-house1, there is a second-order question for multi-branch organisations,in every functional unit (ministry/agency/municipality) or combine them in SSCs (the ‘concentrate or consolidate’ decision). Then, for those administrations that opt to consolidate in SSCs, there is a third-order question, whether to focus on individual functions, such as procurement, or offer multiple functions, such as accounting and IT (the ‘specialise or diversify’ decision).

The ‘make or buy’ decision has been subject to various studies (e.g. Raudla and Tammel, 2015), which have examined the pros and cons. These include the following factors.

1 Although some studies point to the possibility of outsourcing SSCs (McIvor, McCracken, & McHugh, 2011), the dominant view is that SSCs in public administration are a specific form of in-sourcing (Janssen & Joha, 2006), although this does not preclude the possibility that the SSC might collaborate with third parties, or engage in contracting-out itself or on behalf of other organisations.


● Management: The public administration is responsible for all aspects of in-house service design and delivery, whereas with outsourcing, it should be free to focus on strategic matters.

● Control: In-housing involves total operational control; outsourcing cedes operational decision-making to external contractors.

● Risk: With in-housing, all the risks around service design and delivery are retained, whereas outsourcing enables the public administration to share the risks with the service provider through contracts.

● Investment: In-housing requires upfront investment in facilities or at least maintenance of existing facilities, whereas the investment in outsourcing is priced into the contract.

It is a moot point whether in-housing or outsourcing offers greater flexibility. In theory, external providers should be more nimble in responding to changing needs, as they are typically faced with fewer procedural constraints. In practice, however, certain parameters can be ‘locked in’ to the contract, making it hard for the buyer to require responsiveness from the supplier, especially if there are substantial changes in circum-stance that were not envisaged in the service-level agreement.

In fact, some of these considerations can come into play in (in-house) SSCs, depending on the nature of the relationship between the SSC and its service recipients, whether institutional or contractual. The SSC operates on the basis of a customer-supplier relationship, typically with a formal agreement for the delivery and billing of services. However, SSCs differ from standard outsourcing to external provider in their govern-ance arrangements. As the customers not only invest resources to obtain the service, but also actively engage in the decision-making for the organisation and the delivery which makes the ‘customer’ more of a ‘partner’ and the SSC only semi-autonomous (Schulman et al., 1999). This transforms the relationship from being purely transac-tional (delivering what has been ordered), to one in which the SSC is expected to seek continuous improvement (Bangemann, 2005).

1.2. The origins and rationale for shared services centres

While SSCs emerged in the 1960s, in the form of ‘rural shared services’ in which an edu-cational function is provided for students through the combined efforts of two or more local districts (DeBlassie and Ludeman, 1973), and possibly earlier in various forms, shared services really came to the fore in the private sector during the 1980s, particu-larly with General Electric (Schulman et al, 1999).

SSCs first appeared in state government in Australia and Canada in the 1990s (Juozapavicius, 2000). SSCs have become immensely popular in the public sector, and were even labelled a ‘global mega-trend’ (Elston and MacCarthaigh, 2014). Over the past 20-30 years, several large-scale SSC developments have occurred, Denmark, Estonia, Ireland, the Netherlands, Finland, Sweden, and in the UK, Australia and the United States, (Boon, 2019), clearly inspired by an Anglo-Saxon management rationale.

Before 1990, support services in these countries were often already concentrated, such as in Denmark and the Netherlands, which had central procurement offices (OECD, 2009). But central control was loosened after the kick-off of the New Public Management (NPM) movement, particularly in New Zealand and the UK. The message ‘let managers manage’ (Kettle, 1997) led to additional freedoms of line managers in both core ministries and agencies. The OECD reported that ‘this applied to the use of inputs (outsourcing, staffing levels and remuneration including variable pay), and also to the organisation of support services’ (OECD, 2010). Consequently, the position of central ministerial support service units weakened. These units were spread over line ministries and agencies. Each organisation started to develop its own support or


back-office services, or alternatively, managers could buy-in their support functions from the market or from other government organisations.

However, the downside of this movement became clear, resulting in increasing staff levels, duplication of tasks, and lower levels of efficiency. The 2007-08 global financial crisis gave a new impetus, and even prompting more urgent and ambitious reforms in many local, regional and national governments around the world, leading to ‘another change of direction and to a more pragmatic approach involving re-concentration of central ministerial support services, ad hoc downsizing operations, and shared services’ (OECD, 2010).

Three main rationale have been identified for SSCs, based on various sources (Bond, 2019).

● The main driver and pressure for governments to implement SSCs is cost savings on overhead processes, which should be achieved by ‘economies of scale and scope, reductions in duplication, elimination of redundancy in operations, created synergies and lower staff costs’ (citing Raudla and Tammel, 2015).

● SSCs can also improve the quality of internal services through specialisation, enabling employees to professionalise, enhance their content and technological know-how, strengthen their skills, and share their knowledge and practices. By pooling overheads, they can also often access innovation and investment that would otherwise be unthinkable in smaller organisations.

● The creation of SSCs enables the ‘parent’ organisations to concentrate on their main mission, by removing the day-to-day operational concerns for these ‘peripheral’ activities. Indeed, by freeing up this responsibility and providing more effective support, SSCs have the potential to induce quality improvements in the core business.

2. ORGANISING SHARED SERVICES CENTRES

2.1. Organisational set-up

Although the position of SSCs weakened in the high times of NPM, they have found themselves again in the centre of interest. Many new SSCs were established in the EU in recent years, such as Ireland’s National Shared Service Office in 2013, Finland’s Valtori in 2014, and Estonia’s State Support Office in 2015. Others, however, have a longer history, being created nearly 20 years ago and in constant evolution, such as Palkeet in Finland, P-Direct in the Netherlands, and the Agency for Public Finance and Management in Denmark. The resulting picture therefore shows a mix of old, recently re-invigorated organisations next to new ones. Some are situated in core ministries, some in agencies, and some in public enterprises or foundations, sometimes with private sector participa-tion. In addition, organisational policy with respect to support services is still very much in development. The resulting picture is highly country-specific, determined by national constitutional arrangements, historical developments and recent policy initiatives. In summary, there is no single organisational form, but rather a range of them, each still in development. (OECD, 2010).

In general, however, there are two distinct models for the creation and the use of SSCs, the top-down model (mandatory) and the bottom-up model (voluntary).

In the top-down model, the use of the shared service centre is imposed and the personnel that provide the support services are transferred from the line ministries to


the shared service centre. In the bottom-up model, the use of the shared service centre remains voluntary, but there may be incentives in place to stimulate its use, such as personnel reduction operations (sometimes specified for support services) or other cuts (OECD, 2009).

The Netherlands and Sweden are examples of the bottom-up approach, while most other countries in the EU apply the top-down approach (see comparative Table 2 below, which summarises eight EU cases that are the subject of Section 3). The top-down approach however many go through different phases. In Portugal and Italy for example, the shared service centres established by the government deliver services to a certain number of organisations and the Centre itself needs to prove its efficiency and attract more ‘clients’. Establishing or rebuilding shared service centres can only be done by the co-operative effort of the top managers of ministries concerned. The success of these initiatives is crucially dependent on the willingness of the co-operating minis-tries and agencies to transfer tasks to these centres (OECD, 2010). For efficiency and savings, the attribution of responsibility for organisational policy and standard setting with respect to support services is an important factor (OECD, 2010). Most often, these responsibilities are concentrated in the Ministry of Finance or another body responsible for the public administration (Prime Minister’s Office, Minister of the Interior or Public Administration). This makes it possible to follow a top-down approach in which support service personnel and budgets are transferred from line ministries to shared services centres (OECD, 2010). In countries where this is the case, a top-down approach can more easily be realised.

In terms of scope and operations, most SSCs started with the issues of payroll, account-ing and more general aspect of HR administration. For specialised IT services, most countries have installed a separate SSC, with eSPap in Portugal as the main exception. Countries also tend to create a dedicated SSC for procurement (see Poland).


Tabl

e 2

| Com

para

tive

over

view

of

SSCs

in t

he E

U2

Coun

try

Shar

ed S

ervi

ce C

entr

ePo

sitio

nM

odel

Staff

HRFi

nanc

eIC

TPa

yrol

lPe

nsio

nsPr

ocur

emen

t

Denm

ark

Agen

cy fo

r Pub

lic F

inan

ce a

nd M

anag

emen

t

IT S

ervi

ce C

entre

(SIT

)

Min

istry

of F

inan

ce

Min

istry

of F

inan

ce

Top-

dow

n

Top-

dow

n

220

260

X -

X -

- X

X -

- -

- -

Finl

and

Pate

et (H

R &

Fin

ance

s)

Valto

ri (IT

)

Min

istry

of F

inan

ce

Min

istry

of F

inan

ce

Top-

dow

n

Top-

dow

n

630

1 20

0

X -

X -

- X

X -

- -

(X)

-

Portu

gal

eSPa

pM

inist

ry o

f Fi

nanc

e &

Min

istry

of

Publ

ic Ad

min

istra

tion

Top-

dow

n30

0X

XX

X-

X

Swed

enOffi

ce o

f Ad

min

istra

tive

Affai

rs (

only

for

cor

e m

inist

ries)

Lega

l, Fi

nanc

ial &

Adm

inist

rativ

e Se

rvice

s Ag

ency

(o

nly

for s

mal

l age

ncie

s)

Prim

e M

inist

er’s

Office

Min

istry

of F

inan

ce

Botto

m-u

p

Botto

m-u

p

700

200

X X

X X

- X

X X

- -

- -

Irela

ndNa

tiona

l Sha

red

Serv

ice O

ffice

Depa

rtmen

t of P

ublic

Exp

endi

ture

an

d Re

form

Top-

dow

n80

0X

X-

XX

X

Italy

Depa

rtmen

t of G

ener

al A

dmin

istra

tion,

Per

sonn

el

and

Serv

ices

and

Dire

ctor

ate

for I

T Sy

stem

s an

d In

nova

tion

Min

istry

of E

cono

my

and

Fina

nce

Top-

dow

n21

0-

-X

X-

X

The

Neth

erla

nds

P-Di

rect

Min

istry

of

th

e In

terio

r &

Ki

ngdo

m R

elat

ions

Botto

m-u

p10

0X

--

X-

-

Pola

ndCe

ntra

l con

tract

ing

auth

ority

Prim

e M

inist

er’s

Office

Top-

dow

n-

--

--

X

Esto

nia

Stat

e Su

ppor

t Offi

ce (R

TK)

Min

istry

of F

inan

ceTo

p-do

wn

140

XX

XX

-X

Sour

ces:

Dep

artm

ent o

f Pub

lic E

xpen

ditu

re a

nd R

efor

m (2

015)

, An

Exam

inat

ion

of S

hare

d Se

rvic

es in

the

Irish

Pub

lic S

ervi

ce a

nd In

tern

atio

nally

, Ire

land

, Del

oitt

e, 4

8p. e

SPap

(202

0), S

hare

d se

rvic

es s

trat

egic

dep

loym

ent

plan

– b

ench

mar

k, p

roje

ct p

rese

ntat

ion

(SRS

P19P

T16)

for t

he E

urop

ean

Com

mis

sion

(DG

REF

ORM

) 226

p.

2 In

form

atio

n co

llect

ed f

rom

Age

ncy

for P

ublic

Fin

ance

and

Man

agem

ent (

Den

mar

k): w

ww

.oes

.dk;

SIT

(Den

mar

k): w

ww

.sta

tens

-it.d

k; P

alke

et (F

inla

nd):

ww

w.p

alke

et.fi

; Val

tori

(Fin

land

): w

ww

.val

tori.

fi; P

-Dire

ct (T

he

Net

herla

nds)

: ww

w.p

-dire

kt.n

l; Ce

ntra

l Con

trac

ting

Auth

ority

(Pol

and)

: ww

w.u

zp.g

ov.p

l; Th

e O

ffice

of

Adm

inis

trat

ive

Affai

rs (S

wed

en):

ww

w.g

over

nmen

t.se/

the-

gove

rnm

ent-

office

s; N

atio

nal g

over

nmen

t ser

vice

cen

tre

(Sw

eden

): w

ww

.sta

tens

sc.s

e; le

gal,

finan

cial

and

adm

inis

trat

ive

serv

ice

agen

cy (S

wed

en):

ww

w.k

amm

arko

llegi

et.s

e; S

tate

Sha

red

Serv

ices

Cen

tre

(Est

onia

): w

ww

.rtk.

ee; e

SPap

(Por

tuga

l): w

ww

.esp

ap.g

ov.p

t; N

SSO

(Ir

elan

d): w

ww

.nss

o.go

v.ie

.

http://www.oes.dk

http://www.statens-it.dk

http://www.palkeet.fi

http://www.valtori.fi

http://www.p-direkt.nl

http://www.uzp.gov.pl

http://www.government.se/the-government-offices

http://www.statenssc.se

http://www.kammarkollegiet.se

http://www.rtk.ee

http://www.espap.gov.pt

http://www.nsso.gov.ie


2.2. Organisational design and implementation

Because of the several unique features of public administration, which distinguishes it from the business community and which prevents exact replication of successful private sector experience, the concept of SSCs needs customising to their own organisa-tion. The introduction of any SSC is a critical decision on a strategic level, which implies some long-term decisions and essential choices to be made in the design phase and during the process of change. We list the most important here.

2.2.1 Scope

What tasks will the SSC cover and which services will be offered? Efficiency gain is the result of economies of scale, which argues for the largest possible SSC. For some straightforward functions, like fleet management or payroll processing, the relationship between organisational scope and efficiency will indeed be directly proportional. But for other support functions a continuous increase in scope may eventually lead to loss of efficiency, due to more staff, higher co-ordination burdens, less transparency, etc. Furthermore, as deployment of shared services across the administration is a gradual process the real efficiency gains may come overtime, when the number of clients increases.

Second, which tasks should be transferred to an SSC? Are only completely standard-ised tasks transferred? A classic example is the monthly processing of salary payments. Or do we aim higher? Do we also aim for tasks that are less standardised and more department-specific, but whose performance could be more efficient and perhaps more substantive, such as shared legal research efforts, project management support, etc.? We see that most SSCs in Europe “limit” themselves to the classical processes and services, while more recently, SSCs in Finland, Portugal and Estonia are also offering some services related to project management, or analysis and reporting.

2.2.2 Implementation: radical or incremental

What will be the pace of implementation? Usually, the one-time, big bang strategy of change is goal-oriented: the ideal SSC is created at the drawing board and implemented as quickly as possible. This radical change has the advantage that those concerned get a clear picture of the form, shape and way of implementation. Such an approach prevents resistance from gain momentum as it creates a fait accompli. Evidently, this strategy also carries risks. Resistance to (fast moving) change is one, as we will describe more in details below under the challenges. As the SSC is realised in a short timeframe, problems arising during the implementation become evident only afterwards and have to be solved usually at the expense of a high commitment and costs (Wagenaar, 2006).

An alternative strategy is a gradual implementation, which allows actors involved to regularly adjust the design to the specificities (and challenges) encountered. This has the advantage that objections can be handled and overcome during all stages of the implementation project, with room for negotiation and accommodation. Here, a process approach is chosen and support of the departments for the SSC is considered essential for its quality. During the process, there is the opportunity to learn and the involved departments will feel it as if they are the owner of the SSC. This ownership is essential, for potential problems are then shared problems. But this strategy also carries the risk of underperformance and being slow. The process may proceed too slowly which will increase the chance of resistance and the change process gets blocked.

These two strategies can be viewed as extremes (Wagenaar, 2006). The main question for practitioners is therefore: how to use the potential advantages of these strategies and minimise the risks of underperformance at the same time? The answer lies in the capability to combine both strategies cleverly. The manner in which this combi-nation is to be realised depends strongly on the scope and context of the project. In reality, various forms of gradual implementation: (1) start with assigning a number of


activities, especially highly standardised activities, to an SSC and subsequently extend the package of activities, i.e. process scope, and (2) start with giving the service level agreements (SLAs) a ‘soft status’ - using an SLA as a guideline, and give it more binding force in the course of time (Van der Voort,S 2009).

2.2.3 Service levels & user relationships

How to shape the relations between SSC and the client organisation? There must be a certain distance/independence between the SSC and the client organisation. At the same time, the taking on board client’s needs and expectations is a key factor for suc-cessful relationship. This requires an intensive interaction between the SSC and client. Relations that are too formal or too professional are counterproductive in such situ-ations. This is the case when SSCs are organised in a physically separated manner from their clients. Physical concentration improves the identity of SSCs and prevents old routines from dominating the SSC. In the other option of formally organising an SSC as a separate virtual entity, but de-concentrating its staff, they remain at the department as an SSC outpost. The advantage thereof is that the SSC employees may become more sensitive to the client’s needs, but the risk here is that loyalty will not be with the SSC, but with the client department.

Another issue is setting the level of services and standards. One option is to choose a product orientation. Here, a shared service centre defines its products unequivocally and fixes a price per product. This allows for clear agreements on the products and their costs and provides a benchmark against different SSCs. However, a product orientation in itself is insufficient to form an opinion about the performance of a shared service centre. When an SSC supplies more than just standard products, the quality of services delivered (such as research) or the satisfaction of key stakeholders (including senior public management) are important additional criteria. The level of quality is agreed, monitored and evaluated via quantitative indicators (numbers of services delivered, response times, mistake rates, etc.) on the one hand and qualitative indicators (satis-faction rates) on the other, via SLAs.

2.3. Organisational design and implementation

SSCs are presented as panacea for many public sector ills. However, actual experiences with SSCs have uncovered also difficulties and challenges for practitioners implement-ing SSCs.. Several sources of resistance can be discerned, according to Knol, Janssen and Sol, (2014).

2.3.1 Organisational resistance

As establishing a SSC is a large-scale change project, all aspects of change manage-ment are involved. As Boon (2019) states: Moving in the direction of a SSCs means departing from a traditional control relationship based on hierarchical responsibil-ity towards a form of network governance that forces managers to manage across organisational borders. This might trigger resistance (Elston and MacCarthaigh, 2016). Second, the shift to an SSC model also involves a range of interoperability problems at the administrative, legal, operational, technical, semantic and cultural levels (Bekkers, 2007). Third, SSCs require the dismantlement of existing and (what are perceived to be) functional systems. They sometimes involve the relocation of entire divisions and units that have been part of the organisation for years (Joha and Janssen, 2014). Fourth, NPM reforms transformed many bureaucratic organisations into more complete organ-isations with their own identities, resources and management. An SSC requires these organisations to give up full and unconstrained discretion over what they feel was rightfully allocated to them. Dealing with these sources of potential resistance calls for effective (project) leadership.”


2.3.2 Implementation costs

As raised before, cutting costs is an important reason to introduce an SSC. However, implementation costs may rise unexpectedly higher than anticipated. These costs not only pertain to the project costs themselves but also to the necessary conditions preceding a project, for example the costs of reorganisations. The question is whether the benefits will balance these additional costs. Moreover, resistance may imply that a choice will be made for a less beneficial model, with the result that the actual reduction in costs will, also in the long term, be less than expected.

2.3.3 Corporate governance

A central executive board at corporate level, as is present in many business contexts, does not exist in public administration. SSCs, on the other hand, will benefit from a group steering. This requires the development of a new organisation model, in which the property of the SSC is undivided yet in which users can exercise enough influence on the SSC. Since both the implementation and the functioning of an SSC are driven to an extent by uncertainty, a permanent political and administrative commitment to SSCs is necessary. If such commitments do not exist and the support for SSCs would evaporate, it is deemed to fail.

2.3.4 Standardisation and customisation

Efficiency can be gained through standardisation. A uniform and standardised offer to all departments can save costs. However, client departments might require some tai-lor-made solutions and services. The supply of tailor-made services will perhaps hardly decrease the available staff of the departments, so efficiency advantages get lost. The costs of tailor-made services are to be made transparent. Making proper arrangements and recording these in SLAs can overcome some potential threats from SSCs. These agreements need to be evaluated and adjusted frequently.

3. COUNTRY CASES

3.1. Finland3

Finland has built up quite some tradition in government shared services and today several specialised centres exist: Palkeet (finance and HR), Valtori (ICT), Senaati (buildings and properties), Hansel (procurement), and Haus (Finnish Institute of Public Management providing training and advisory services).

The Finnish Government Shared Services Centre for Finance and HR (Palkeet - www.palkeet.fi) is a provider of services in the administrative branch of the Ministry of Finance. The centre counts 630 staff members, providing finance and HR services for nine ministries and 60 agencies, departments and funds, as well as state-owned busi-nesses and fully state-owned limited companies that provide services for the Finnish government. Although Palkeet started in 2010, Finland had some previous experiments with SSCs leading to the creation of Palkeet as a single SSC.

3 This sub-section draws on the following sources: (a) a presentation by Tomi Hytönen of Finland’s Ministry of Finance in 2012, which summarises some of the history of Palkeet SSC. (b) Department of Public Expenditure and Reform (2015), An Examination of Shared Services in the Irish Public Service and Internationally, Ireland, Deloitte, 48p. and (c) eSPap (2020), Shared services strategic deployment plan – benchmark, project presentation (SRSP19PT16) for the European Commission (DG REFORM) 226 providing main description and figures. (d) Finally the respective websites of Palkeet: www.palkeet.fi and Valtori (Finland): www.valtori.fi provided latest info on recent changes, developments and data.



https://www.palkeet.fi/

https://valtori.fi/etusivu


Early experiments were already taking place in the 1990s. The State Treasury offered finance and payroll services for state agencies. This was done only for a few small agencies using their services. These services were transferred in 2001 to a separate organisation in which the government was a minority shareholder. Because of the envisaged potential of cost reduction, the State Treasury carried out pre-studies and benchmarking in finance and HR shared service functions in the following years.

In parallel, other ministries started to create SSCs as a result of the 2005 Finnish ‘Productivity Programme’, that was launched to raise productivity. HR and financial services became an important part of the ministries’ productivity initiatives and measures. In 2005-2006, the Ministries of Defence, Interior, Justice and Finance created SSCs for HR and financial services to centralise their support services, reduce personnel and increase productivity. This action increased the use of four SSCs and the number of service agreements between SSCs and agencies. As the next logical step, the 2007-2009 merger project transferred the operations and resources from four SSCs to one single SSC under the Ministry of Finance, which led the project, but with active involvement from all four ministries, all four SSCs’ directors and SSCs‘ key personnel and labour organisations. This resulted in the launch of Palkeet in 2010; all the personnel and services were transferred to this single SSC, and since then, it has provided the central government HR and financial services to all ministries and agencies.

Palkeet operates on a cost-price basis, whereby payments cover the costs of service provision and development. The turnover in 2019 was EUR 54.4 million. Besides the administrative headquarters, Palkeet has 4 regional branches, and offers the following:

● Digital financial services: expense processing, revenue processing, accounting, and travel.

● HR services for payroll, employment relationship management, recruitment process support, hiring, managing employment relationships, the employee information service, supplementary service for supervisors and HR experts, training services, recruitment.

● Expert services that entail, for example, reporting services and training services, reporting services, analysis services and project services.

● All the support and maintenance services, user support, user rights management, application control, system version management and further development.

The Government ICT Centre, Valtori (www.valtori.fi), started in 2014. By June 2016, independent ICT tasks, persons and agreements of all state agencies and ministries had migrated to Valtori. Valtori has 1 200 employees in 30 locations with a EUR 300 million turnover. Valtori provides sector-independent ICT services for the central gov-ernment, as well as information and data communications technology services and integration services. Valtori’s services are a combination of their own service production and commercial services provided by their trusted partners. In other words, Valtori acts as an integrator.

Valtori’s objective is to provide high-quality, reliable and harmonised basic IT services, allowing their customers to offer their services to citizens and companies and enable interoperable solutions and flexible reorganisation between the different government agencies. The objective also includes achieving savings through harmonised processes and services ensure disruption-free and continuous communications required by the cooperation of the Government’s executive leadership and the authorities that are vital to the safety and security of society in both normal and exceptional situations and ensure the availability, integrity and confidentiality of the information required in deci-sion-making and leadership.

http://www.valtori.fi


3.2. Denmark4

Denmark has adopted a top-down model of service sharing. Organisational policy and standard setting with respect to support services are entirely concentrated in the Ministry of Finance, with standards set by: the Deputy Secretary for Administrative Policy and an agency, the State’s Employers Authority (human resources); the Economic Management Division of the Agency for Government Management (finance); and the Deputy Secretary for Administrative Policy (internal audit, procurement, internal and external ICT). Standard setting with respect to accommodation and facilities is largely left to the line ministries.

Shared services are largely concentrated in four agencies of the Ministry of Finance: the Agency for Public Finance and Management; the Agency for Governmental Administration (AGA); the Agency for Governmental IT Services (Statens IT – SIT); and the Palace and Properties Agency.

The Agency for Public Finance and Management (www.oes.dk) handles HR services through its Centre for Systems and Personnel (including the budgeting system and the salary payment system), facilities (office, equipment, reproduction, cars, catering, security) through its Centre for Finance and Procurement, and information and IT through its Centre for Digitalisation and Efficiency. In procurement, in particular, the Agency for-mulates common contracts under the rules and legal framework established by the Ministry of Economics and Business Affairs and the Ministry of Finance. Individual min-istries and agencies remain responsible for handling everyday procurement. Currently, common procurement contracting can only be transferred to the Agency of Public Finance and Management on the basis of agreements with clients. The shared services centre in the Agency has approximately 470 employees.

The Agency for Governmental Administration (AGA – www.statens-adm.dk) also provides shared services in the area of HR and organisation. The focus is on personnel administration and salary payment, financial services and administration of state grants, pensions and loans. In the area of financial services the AGA is charged with accounting (for all ministries except justice and defence) and services in the area of budget execution (travel, invoice, loans, grants) (OECD, 2015).

Denmark pressed on with shared services on the basis of two motivations: creating a more attractive work environment for professionals in administrative and ICT dis-ciplines against the background of a recruitment challenge; and the need to achieve efficiency gains. For the tasks to be transferred, an elaborated procedure was set up (McKinsey, 2015). In 2008, the Ministry of Finance set out to modernise the overview and control of public administration costs at all levels, from the state to councils and municipalities. To streamline processes, improve internal efficiency and ensure the delivery of eGovernment services, the government established shared service units under the Ministry of Finance in 2010 (OECD, 2010). The Agency for Public Finance and Management was to take responsibility for finance, salary and transport (as mentioned above), while the second, Statens IT (SIT – www.statens-it.dk), was to provide all IT services for public bodies, centralising IT operations and maintenance to increase efficiency, foster economies of scale, drive savings and improve service quality and customer satisfaction. In 2011, the government also established the Agency for Governmental Administration (AGA) merging functions from across the ministry with the

4 This sub-section draws on the following sources: (a) McKinsey (2015) World-class government. Transforming the UK public sector in an era of austerity: Five lessons from around the world, 53p. (b) Department of Public Expenditure and Reform (2015), An Examination of Shared Services in the Irish Public Service and Internationally, Ireland, Deloitte, 48p. (c) OECD. (2010). Value for Money in Government: Public Administration after “New Public Management”. Paris: OECD Publishing. (d) OECD. (2015). Building on Basics (Value for Money in Government). Paris: OECD Publishing. (e) Finally the respective websites of Agency for Public Finance and Management: www.oes.dk and SIT: www.statens-it.dk provided latest info on recent changes, developments and data.

http://www.oes.dk

http://www.statens-adm.dk

http://www.statens-it.dk

https://oes.dk/

http://dx.doi.org/10.1787/gov_glance-2017-en

http://dx.doi.org/10.1787/gov_glance-2017-en


Danish Economic Council and the Central Human Resources Body to form a platform for improving efficiency and financial management across the public sector.

SIT was set up in 2010 by means of a top-down approach in which support service personnel were transferred to the shared service centre and ministerial budgets were reduced accordingly. In the first phase, from 2010 to 2012, eight ministries joined SIT and their IT departments were merged. The aim was to merge servers, streamline IT processes and build common platforms over the two years. As of 2015, SIT provides IT services for ten ministries and their 11 000 users. The agency’s main goal is to build the foundations for the digitalisation of the state, including the development and harmoni-sation of IT policies and services across public bodies. SIT is responsible for operating an effective IT support service and ensuring a high-quality and consistent IT service throughout the Danish government. It operates under a contract with the Ministry of Finance that sets performance requirements, measures the agency’s performance and sets annual goals.

3.3. The Netherlands5

In the Netherlands, the approach consisted of the establishment of new shared services centres in the Ministry of the Interior and Kingdom Relations. There are three such centres: one for salary and personnel administration (P-direct), one for human resources expertise and facilities (post/mail, security, reproduction, catering, etc.) and one for archives. The build-up of these centres was partly based on transfer of existing min-isterial personnel. However, the savings in the line ministries/agencies have not been imposed by the Ministry of Finance by simultaneous reduction of ministerial budgets (as is the case in Denmark, where there was a strict one-on-one relation between personnel being transferred and budget cuts) (OECD, 2010). Beginning 2003, the Dutch Cabinet charged a committee with the task of making the business case for an SSC Human Resources Management with all central government departments as clients. Along the policy guidelines as set out in the document ‘Renewal HRM systems and procedures central government’, the business case should be the input for a go/no-go decision later that year. Costs savings were estimated as high as 40 million euros per year. Summer 2003, the Cabinet and Parliament decided for a “go” and assigned the Ministry of the Interior Relations ownership of the SSC, from then on named “P-Direct” (www.p-direkt.nl). Besides these centres under the Ministry of the Interior and Kingdom Relations, a wide variety of shared service centres started to exist on central and local level (numbers mentioned are 25 and more).

Organisational policy and standard setting with respect to support services have recently been reorganised and are now largely concentrated in the Ministry of Interior and Kingdom Relations, except for finance and internal audit. For that purpose a new Directorate General Operational Management has been created in 2016. It consists of three directorates: the Human Resources Directorate is based on an existing direc-torate in the Ministry; The Directorate for Internal ICT is largely built up from scratch; and the Directorate for Housing, Procurement and Facilities has largely come over from the Ministry of Economic Affairs (procurement) and other branches in the Ministry of the Interior. The three new shared service centres, which have the status of agencies, are also under the umbrella of the new Directorate General. The directorates of the new Directorate General set standards with respect to human resources, procurement,

5 This sub-section draws on the following sources: (a) Wagenaar, R. W. (2006). Governance of Shared Service Centers in Public Administration: Dilemma’s and Trade-offs. Presented at the Proceedings of the International Conference on Electronic Commerce (ICEC), (b) Department of Public Expenditure and Reform (2015), An Examination of Shared Services in the Irish Public Service and Internationally, Ireland, Deloitte, 48p. (c) eSPap (2020), Shared services strategic deployment plan – benchmark, project presentation (SRSP19PT16) for the European Commission (DG REFORM) 226 p., (d) OECD. (2010). Value for Money in Government: Public Administration after “New Public Management”. Paris: OECD. (e) Finally the www.p-direkt.nl. website provided latest info on recent changes, developments and data.

http://www.p-direkt.nl

https://www.p-direkt.nl/


internal ICT and accommodation and facilities. However, standard setting for external ICT (e-government) falls under another Directorate General of the Ministry (General Administration, Directorate for Public Administration and Democracy) and so does shared service delivery in that area (the Foundation ICT Executive Organisation and the agency Common Administrative Organisation). Standard setting with respect to finance and internal audit are not in the Ministry of the Interior and Kingdom Relations, but in the Ministry of Finance and so are some shared services centres in these areas.

3.4. Poland6

In Poland, the SSCs are functioning both at the central and self-governmental levels. In governmental administration from 1 January 2011, there has been a Shared Services Centre at the Ministry Cabinet President’s Office. This budgetary economic institution arose from the – gradual- transformation of the Centre of Serving the President’s Office.

The Shared Services Centre at the President’s Office is otherwise referred to as the Central Contracting Authority (www.uzp.gov.pl)and accounts for conducting shared or central public procurements, accomplishment of public tasks within services and supplies, construction supplies, on-going servicing of the Presidents’ Office and entities transformed within the Ministry of Digitalisation, as well as printing services for gov-ernmental institutions, comprehensive automotive services within servicing of various cars, organisation of training courses, conferences, integrative events and individual recreation.

In 2015 the SSC accomplished the shared order for 12 institutions for the provision of licences, updating and subscription of Microsoft products. Accomplishment of shared services by public administration authorities brought some savings. The mobile com-munications services contracted in result of the procedures conducted by the Shared Services Centre for the years 2012 – 2015 for 600 governmental administration units yielded over 60% of savings as compared to estimated value of the order. Another procedure which referred to the provision of electrical power for the years 2013 – 2018 to 100 public administration entities yielded 45% of savings in relation to the assumed budget. Before 2015 the Shared Services Centre carried out many other procedures, including tenders for the purchase of paper for administration, DKV cards, and deliver-ing the correspondence for over 100 institutions, including ministries and central offices (Kaczorowska, 2017).

The idea of shared action within the SSC finally found also a favourable response at municipal level. The act of 25 June 2015 about amendment of the act on municipal self-government and certain other acts enacted on the 1st of January 2016 allows to form SSCs for joint administrative, financial and organisational services for territo-rial self-governmental units. The SSCs are functioning in Poland, at self-governmental level, as educational economic and administrative teams and municipal companies. An example of this type of cooperation is the Association of the Wisłoka Catchment Area (focussing 22 geographically clustered municipalities belonging to three different counties situated in two voivodeships), conducting jointly the water-supply-and-sew-age investments. The value of the projects so far implemented by the Association exceeds 340 million PLN, and the mentioned amendment allowed the municipalities to formalise the existing cooperation. Before 1 January 2016, each local self-government unit had to have its own financial plan, its accounting policy, its main accountant, and it had to conduct independently its staff management. For self-governmental adminis-tration offices particularly attractive is the use of shared economic and administrative services for schools and educational institutions (over 46% of all municipalities formed

6 This sub-section draws on the following sources: Kaczorowska A.(2017), Shared Service Centres in Public Administration in Poland, Information Systems in Management (2017) Vol. 6 (3) 181−191 and the website of The Shared Services Centre at the President’s Office - the Central Contracting Authority (www.uzp.gov.pl) provided latest info on recent changes, developments and data.

http://www.uzp.gov.pl

https://www.uzp.gov.pl/

https://www.uzp.gov.pl/


educational services units) and they employ e.g. one chief accountant managing the finances in the children’s nurseries, kindergartens and schools. SSCs play an increasing part in the entities’ IT infrastructure management. An interesting case is the Municipality Office in Lublin which presently conducts a project which standardises and centralises the IT infrastructure management at schools, including computer rooms. The project involves 11 thousand computers on which the software is standardised, the configura-tion is unified in functional and administrative respect, besides uniform standards and protection means are developed, as well as the procedures of management and access to the Internet (Kaczorowska, 2017).

3.5. Sweden7

Sweden is a special case as far as support services are concerned. First, there is the long tradition of separation of policy making and policy execution, with the latter concentrated in independent agencies, not subject to ministerial responsibility as far as decision-making in individual cases is concerned. Second, Sweden had one of the largest and most rapidly growing public sectors in the EU, but in the mid-eighties and in the late nineties the country went through deep economic and financial crises (OECD, 2010). These crises led to a series of major operations to streamline the central govern-ment, especially the agencies, prompted by the necessity to achieve deep cuts in public expenditures and public employment. During this period organisational policy has been in a permanent flux, including organisational policy in regard to support services. Only in the last few years a certain stability seems to have been achieved.

The major problem facing the Swedish government in the area of support services is the autonomy of the agencies in combination with the extremely small size of the core ministries relative to the size of the agencies. This implies that there are very few support services in the core ministries. Core ministries were always so small (on average 375 employees per ministry) that it made no sense for them to develop full-fledged support units for themselves. Moreover, there is the constitutional arrangement of col-lective government in Sweden that supposes a single Government Office, governed by a single board (the cabinet). In this arrangement the Office of Administrative Affairs under the Prime Ministers traditionally served as the single (shared) services unit under the Prime Minister (OECD, 2010).

The Office of Administrative Affairs (www.government.se/the-government-offices) under the Prime Minister mostly provides services in the sphere of HR,such as salary payments. Government agencies are expected to choose the most rational and cost-ef-ficient way of managing their business and are free to make their own choices. It is relatively common for government agencies to rely on external service providers. These normally concern non-strategic functions and are mainly provided by private enterprises.

However, this almost ideal sharing arrangement for core ministries does not address the real problem of Sweden, which is the support services of the agencies. Until 2012, Sweden had a shared service centre (Kammerkollegiet) that provided services to agencies with les then 40 employees, mostly in the sphere if HR. The government appointed a special inquiry chair to prepare the establishment of a national govern-ment service centre. The committee submitted a report, which referred to the principles prerequisite in the Swedish government arrangements that each agency has the

7 This sub-section draws on the following sources: (a) Department of Public Expenditure and Reform (2015), An Examination of Shared Services in the Irish Public Service and Internationally, Ireland, Deloitte, 48p. (b) OECD. (2010). Value for Money in Government: Public Administration after “New Public Management”. Paris: OECD. (c) (c) eSPap (2020), Shared services strategic deployment plan – benchmark, project presentation (SRSP19PT16) for the European Commission (DG REFORM) 226 p. (d) Finally the websites of The Office of Administrative Affairs: www.government.se/the-government-offices; National government service centre: www.statenssc.se; legal, financial and administrative service agency: www.kammarkollegiet.se provided latest info on recent changes, developments and data.

http://www.government.se/the-government-offices

https://www.government.se/the-government-offices

https://www.government.se/the-government-offices

https://www.statenssc.se/

https://www.kammarkollegiet.se/


responsibility to decide whether to provide the back office services by itself, in cooper-ation with other agencies or by outsourcing with no specific fiscal incentives such as ad hoc productivity cuts in place. The agencies therefore are free to choose whether to use the services of the new service centre or not. However, agencies deciding not to use the service centre have to demonstrate that they produce or acquire the services concerned in a way that it is a least as efficient as having them delivered by the service centre. The report acknowledged that if a sufficient broad use of the service centre takes too much time, the government may have to increase the pressure for change. The service centre would not produce services on its own if the market can provide the same services more efficiently with equal quality.

On the basis of the proposals of the inquiry, the government decided to set up the national government service centre (www.statenssc.se)on 1 June 2012. It provides administrative support services on a voluntary basis to other government agencies. The service centre offers services within three areas: finance and accounting, payroll man-agement, and e-gov. The agency is financed by user fees with the requirement of full recovery of all costs.

The agency is built on parts of the operational support units (internal service centres) of the Swedish tax agency and the Swedish social insurance agency as they were identified as best practices within the central government. In October 2012, the admin-istrative service centre within the legal, financial and administrative service agency (www.kammarkollegiet.se) was integrated within the service centre. The governments motive of incorporating the business within the service centre is holding down the gov-ernment administration’s overall it costs and ensuring the government administrative support activities as a whole are developed based on common goals and aspirations. The service centre’s standardised production is located in two regional cities. There is also a small branch in Stockholm for consultative services. The national government service centre provides services on a voluntary basis to other agencies to be remuner-ated by user fees. The objective is to make the agencies administration more efficient and thereby release resources for the agencies’ core activities. The agency has 200 FTE and approximately 50% of the government agencies use the Legal, Financial and Administrative Services Agency for accounting services and/or salary administration. The demand for these services is constantly growing.

3.6. Estonia8

Although the financial crisis did not cause major administrative reforms in Estonia, it gave a boost to several initiatives that had been discussed before and that aimed at cost-saving. One of those initiatives was the creation of a Shared Service Centre (SSC). It has been argued that the context of fiscal crisis helped to claim the need for an urgent reform and get the political approval for the reform advocated by the Ministry of Finance (Tammel and Raudla, 2014).

The transformation of Estonian financial accounting principles started in the early 1990s. Throughout the 1990s and early 2000s, the financial accounting of the Estonian public sector was highly decentralised: all ministries in the central government and also the subordinate agencies were free to develop their own financial accounting systems (Tammel and Raudla, 2014). In 2003-2004, an extensive reform of government accounting took place, led by the newly appointed State Accountant General who was

8 This case description is largely based upon (a) the case of the Estonian shared service centre as documented in the European Commission’s (2017): Quality of Public Administrations – A Toolbox for Practitioners, DG Employment & Social Affairs. (b) Tammel, K., & Raudla, R. (2014). Consolidation of support services in Estonia. In Organizing for coordination in the public sektor: practices and lessons from 12 European countries. (pp. 32–42). Basingstoke: Palgrave MacMillan. (c) Finally the website of State Shared Services Centre (Estonia): www.rtk.ee provided latest info on recent changes, developments and data.

http://www.statenssc.se

http://www.kammarkollegiet.se

https://www.rtk.ee/


the Head of the State Accounting Department of the Ministry of Finance (Tammel and Raudla, 2014).

The result was that Estonia had 253 state agencies, each with their own independent financial accounting, HR accounting and payroll calculation. The agencies were operating with different systems, according to the ministries to which they were accountable: 14 financial accounting and 11 HR accounting software solutions. There was no common reporting system across the whole administration. The financial and personnel account-ing software were not linked to the main IT systems. This fragmentation was the starting position for reform, because of the inefficiencies created by high investment needs (any changes to accounting methods required changes in 14 different systems), the poor quality of data which was not comparable across the administration, and the lack of management information. Something needed to be done. The Government was also already using accrual accounting and was planning to move to accrual budgeting, and hence the future demands on financial management systems was a live concern.

The Government engaged in a considered approach, to set out and reflect on the pros and cons of four options, starting with the most minimal change:

Standardisation would mean that every state entity would retain its own systems & solutions, but they would be expected to conform to the same standards. On the plus side, this would be the easiest option to implement with low initial investment costs, as no new IT system or people would be needed, it would allow the entities to retain their independence, while at the same time making it easier to link with the State’s main information systems. On the minus side, the State would continue to bear high administrative costs (operation and maintenance) for IT. There would be a low level of automation, so data would need to be collected and processed centrally, with an on-going risk of quality problems, and there would be no access to information that could be used for management purposes in real-time. The conclusion was that this option would be a marginal improvement only and would not address the underlying inefficiency in internal service provision.

Common IT solutions but still decentralised services would still afford State entities a high degree of independence and would be relatively easy to implement. On the plus side, it would reduce the costs of IT maintenance, incorporate a higher level of automation, and ensure real-time management data was available. On the minus side, however, service provision remained inefficient and data quality continued to face risks. With so many small units, there would be less comparable data in practice to assess service quality, and the lack of a common platform across State entities meant it would be more difficult to implement future developments. This second scenario would be better than standardisation, but did not lay down a path to easily take on board further improvements.

Common IT solutions and centralised services within ministries would mean less independence for state agencies, but a stronger superintendence role for ministries. It would be more difficult to implement than above scenarios, and would continue to risk data quality problems, but like option 2 would make real-time management data available, and would also lower the costs of IT maintenance. It would increase the effi-ciency of internal service provision, and like above options 1 and 2 would be sub-optimal for implementing future developments. There would also be less data for comparison of service quality and a lesser focus on client relationships.

Common IT solutions and a single service centre for all state agencies would be the most difficult to implement, and would lead to the least independence for state agencies. On the plus side, however, it would reduce the costs of IT maintenance, make available real-time management data, lower the risk of data quality problems, make it easiest to implement future developments and, crucially, would offer the greatest focus on ‘client’ relationships and the highest efficiency in internal services provision. With this option, however, there was a risk that the service centre would lack understanding of


the agencies’ core activities, what these institutions do and what problems they have. The Government decided to proceed with option 3 in the first phase.

3.6.1 Phase I: Common IT solutions and centralisation

According to a State Government decision of 29 December 2009, there should be cen-tralisation of accounting, personnel & payroll services within administrative areas of ministries, and all state agencies should use common financial accounting, personnel accounting and payroll software. This was achieved by the end of 2015, with SAP being the chosen system. The decision also required the introduction of e-invoicing and a web-based reporting system to the relevant accounting areas. Again, by the end of 2015, there was one service point for accounting and payroll services in every area of government (17 accounting entities). All personnel information is gathered and processed through self-service environment, and there is a common standard and quality for man-agement information. Integration of state core activity information systems to financial management, personnel and payroll information system. Implementation of opera-tional models, which regulate the division of functions between government institutions and service provider. By the end of 2015, the costs of accounting had been cut by 30%.

The ‘Support Services Centralisation Project’, under the responsibility of Ministry of Finance, involved all 253 state authorities (41 000 employees) and a budget of EUR 5.5 million for 2010-2014, of which EUR 3.8 million consisted of investment in informa-tion systems, and EUR 1.7 million went towards personnel costs. The project involved:

● Centralisation of accounting, HR accounting and payroll within administrative areas of ministries;

● Introducing a common financial accounting, HR accounting and payroll information system under enterprise resource planning (ERP), with Germany’s SAP being the chosen solution;

● Development of self-service information system for automatic data transmission;

● Introduction of e-Invoices for fast processing; and

● Development of web-based reporting system for financial and HR data that allows citizens to access all the government’s financial data in the interests of transparency and scrutiny.

Under the new self-service and integrated system, for example, an employee can request annual leave from their manager electronically, and once the latter agrees online, this information is automatically recorded with HR.

The goals were reduction of support service employees by 40% (from 440 to 265 accountants), improvement of the quality of accounting according to the National Audit Office’s assessment, paper-free accounting, and availability of comparable manage-ment data both on central and institution level.

3.6.2 Phase II: State Shared Services Centre (Riigi Tugiteenuste Keskus - www.rtk.ee)

While option 3 was the selected scenario, the Government’s decision allowed ministries to combine their services into a shared centre, if they desired – effectively a hybrid of option 4.

The creation of the SSSC grew out of the Support Services Centralisation Project. Four ministries (out of 11) decided to create a common service centre, to be co-located with the Accounting Centre of Courts, an existing state institution under the Ministry of Finance. The SSSC started operations on 1 January 2013, and offers the following services: financial accounting; HR accounting and payroll; general accounting; develop-ment of state financial standards, implementation and advice; management of state claims; development and administration of common accounting and payroll informa-tion system; and (since 2016) public procurement. Since its inception, the SSSC has

http://www.rtk.ee


expanded to take on the services of seven ministries in total. As of February 2016, the SSSC had 138 employees, an annual budget of EUR 4.03 million (mainly salaries), and was based at three sites (Tallinn, Tartu and Viljandi), overseen by a Supervisory Board.

The SSSC operates on the basis of a clear division of responsibilities with the client ministry, set out in a service level agreement (SLA), which regulates the rights and obligations of the parties. It lays down: principles concerning the provision of services; modes of communication and responsible persons; detailed model of operations; who does what; deadlines for each activity; and forms or minimal requirements of infor-mation provided. It does not include key performance indicators (KPIs). The respective functions for financial accounting are shown in the diagram below. The process is highly automated.

As the SSSC takes on the services of a new ministry (client), it follows an agreed plan each time. Regarding staff transfers, the legal advice is that relocation to any institution is within the rights of the State as the employer, which in principle might mean any of the three SSSC sites. In practice however, as most transferred staff were previously working for ministries or agencies in the capital city, Tallinn, the SSSC has offered them the option of working from the Tallinn base. As the diagram shows, all efficiency savings are returned to the central government budget, rather than being retained by SSSC.

It should also be noted that SSSC does not operate any support services itself (outside its own core activities), such as legal services, financial planning, and training. These are contracted out through SLAs with other ministries.

The SSSC now accounts for 85% of all government services in financial accounting, and 35% in HR accounting and payroll. The number of employees has fallen by 16.7% (from 30 to 25), but the level of customer satisfaction for specific functional areas, measured over in the last three years (right), shows a consistently high service standard. Staff reductions have largely been through ‘natural wastage’ (e.g. retirement). The expert know-how of SSSC and the organisation’s reputation has equipped leavers with excellent skills to apply for jobs, including as finance managers within state agencies.

The SSSC can also contrast the learning points of a shared services approach with a tra-ditional centralised (ministry) service. The most difficult transition and also the most important success factor is a change in mind-set of the ‘public official’ to a customer orientation. There is a strong client focus and an emphasis on service quality, efficient and continuous development, reflected in client relationship management (regular not ad hoc meetings), satisfaction measurement and incident management. The SLA provides clarity over the respective roles of service provider and client, agreement on common processes and service standards. Costs are not the primary concern, but the fact that the SSSC can be located anywhere means that inexpensive sites outside of the capital city become a viable option, which can mean job creation in less prosperous regions.

3.6.3 Results of phases I and II

As at 31 December 2015, all state agencies were using common financial software (SAP), all invoices were processed in e-invoice environment (although just 10% are presented as fully digital e-invoices), financial and HR information is available on web-based reporting system (SAP BusinessObject), and a self-service environment has been developed for information concerning vacations, business trips, trainings and assets. The number of employees in support services had reduced by 24%, but the quality of accounting has improved. The National Audit Office was initially sceptical of the centralisation approach and felt it ‘could hurt the quality of accounting”, but noted in its 2015 report that it had “made the quality better’.

Regarding the future, the next phase has already begun. Full-digital business-to-gov-ernment (B2G) e-invoicing will be implemented, as will accrual budgeting in 2017 and result-based state budgeting in 2020. The Government Decision of 29 May 2015 lays


down a path for the further development of SSSC, including offering shared services to state foundations. The financial, HR and payroll accounting of all state institutions will be consolidated into the SSSC by 1 April 2017, and at least 50% jobs related to provision of support services in SSSC will be based outside of Tallinn. SSSC’s central pro-curement unit will be built up, and analyses continued to implement additional support services through SSSC, including recruitment, training and other HR services.

3.7. Portugal9

In 2010 the Portuguese Government launched the ‘Plan for the Reduction and Improvement of Central Administration’ (PREMAC), several measures were implemented towards the rational and efficient use of public resources, as well as to the reduction of public expenditure, which included the creation of the Shared Services Entity of the Public Administration.

The Entidade de Serviços Partilhados da Administração Pública (Public Administration Shared Services Entity – eSPap- www.espap.gov.pt), was created in 2012, with its mission to ensure the development and provision of shared services in the Portuguese Public Administration. It assumed the mission and assignments of the previous Instituto de Informática (II), Shared Management of Resources in Public Administration (GeRAP - Empresa de Gestão Partilhada de Recursos da Administração Pública -, E.P.E. (GeRAP) and National Public Procurement Agency (EPE), terminated by merger. Because of the integration of the three entities the process took over a year to be completed (Xmagazine, 2017).

The merger of the assignments of II, GeRAP and ANCP in eSPap had the objective to refunde and improve the performance of functions related to the development and management of shared services in the Public Administration, speeding up the adoption of common and more efficient solutions and operating models, namely in the areas of financial, human resources and Information and Communication Technologies (ICT) management, fostering synergies of the values scattered throughout the three entities.

The creation of eSPap, integrated in the administration of the State, maintains the purpose of extending the shared services model to the entire Public Administration, thus seeking a more efficient allocation of existing resources, as well as effectiveness improvements.

eSPap is a public institute with a special regime, part of the Public Administration, endowed with administrative and financial autonomy, and equivalent to a public corpo-ration in what concerns the scope of its activity. The Finance Minister plays the authority and oversight roles over eSPap, in coordination with the Modernisation and Public Administration Minister, with the exception of the Human Resources Shared Services, in which the Modernisation and Public Administration Minister plays the authority and oversight roles.

The mission of eSPap is to increase effectiveness and efficiency through the rational use of common public resources and the provision of shared services to achieve an agile and focused public administration towards a more sustainable development of the country. EsPAp has a wide range of operation and is responsible for the supply of:

Public procurement: this plays a core role in the strategy of reducing public spending, through the centralised contracting of cross-sectional goods and services to Public Administration bodies, fostering synergies and economies of scale. To this extent eSPap developed and manages the National Public Procurement System (SNCP).

9 This sub-section draws on the following sources: (a) eSPap (2020), Shared services strategic deployment plan – benchmark, project presentation (SRSP19PT16) for the European Commission (DG REFORM) 226 p. (b) Xmagazine (2017), The case of eSPap Portugal, pp 6-14. (c) Finally the website of eSPap: www.espap.gov.pt provided latest info on recent changes, developments and data.

http://www.espap.gov.pt

http://www.espap.gov.pt/

http://www.espap.gov.pt/


Human resources shared services: the purpose of Human Resources Shared Services is the integration and normalisation of processes and the resulting application of laws, the provision of more and better information and the enhancement of good practices, contributing to increased efficiency and cost savings in Public administration services. This is supported by two solutions: (1) Management of Human Resources in shared mode (GeRHuP), which integrates the human resources management processes. (2) Integrated Management of Public Administration performance evaluation (GeADAP), which implements the Management and Performance Evaluation Integrated System in Public Administration (SIADAP).

Finance shared services: The provision of Finance Shared Services aims the integra-tion and normalisation of processes, as well as the enhancement of good practices, contributing to the increased effectiveness and efficiency and con- sequent cost savings in Public Administration services. The Finance Shared Services are supported in the Financial Resources Management in shared mode solution (GeRFiP) that inte-grates budget, financial, equity and logistics management, based on the Official Public Accounting Plan (POCP).

ICT shared services: eSPap also ensures the provision of services in the areas of development and maintenance of application solutions and in the management of infrastructures of information and communication technologies. The services provide in this area have three main operating fields: (1) Management of technological environ-ments, which provides infrastructure and application of hosting services, (2) Application development and (3) Professional Services, which provide means and expertise in technical areas, such as the migration of Data Centers or technical consulting in various fields of Information and Communication

PMO shared services: The eSPap offers Project Management Office Shared Services (SP PMO) to the Public Sector, technologically based on a cross-sectional platform to support strategic and project management, available in SaaS (Software as a Service), aimed at strategic alignment of projects, the optimisation of its execution and the max-imisation of its benefits.

State Vehicles and Logistics Shared Services: The objective of the State Vehicles and Logistics Shared Services is the centralised management of the vehicle fleet of the several services and users of PVE’s entities that integrate the direct administration and the public institutes of the indirect administration of the State.

In all areas of operation / business the services are contracted with the clients and on whose contract the SLAs are defined and so are the roles and responsibilities of eSPap and the Customers. eSPap manages an annual budget of EUR 24.5 million, and employs around 300 people, distributed across 5 business functions and 2 corporate functions.

3.8. Ireland10

Shared Services as a business model has been used in the Irish Civil Service in some form for a number of years. It was the 2011 Public Service Reform plan that called out new Shared Service models as an opportunity to deliver reform and innovation across the public service. In 2012, the Government of Ireland gave a mandate for the implementation of Shared Services to support the Public Service Reform Plan. The first Shared Services centre (formerly called Peoplepoint, now HR Shared Services as part of the National Shared Services Office - NSSO) started operating in 2013. This was joined

10 This sub-section draws on the following sources: (a) Department of Public Expenditure and Reform (2015), An Examination of Shared Services in the Irish Public Service and Internationally, Ireland, Deloitte, 48p. (b) the website of the National Shared Services Office www.nsso.gov.ie provided latest info on recent changes, developments and data.

https://www.nsso.gov.ie/


by Payroll Shared Services later the same year (Department of Public Expenditure and Reform, 2015).

In 2014, the government established the National Shared Services Office (NSSO - www.nsso.gov.ie)as an administrative office within the Department of Public Expenditure and Reform. Drafting of the National Shared Services Bill (to establish the NSSO as an inde-pendent civil service office) commenced in 2016 and in July 2017 this was signed into law. The NSSO became a statutory civil service office on 1 January 2018.

The NSSO is leading on Shared Services strategy and the implementation of Shared Services in the Irish Civil Service, under the aegis of the DPER. The NSSO is directly responsible for delivering business Shared Services within the civil service and, as part of its wider leadership role, it also provides expert guidance and support to other public service sectors in progressing their Shared Services commitments. The NSSO sets high standards for Shared Services in the Public Service. The NSSO works in partnership with client departments to deliver quality services that lower costs and improve the informa-tion available to managers for decision-making.

The legislation establishing the Office empowers it to provide human resources, pension, payroll and financial management services to all Government Departments and Offices and some additional organisations - a total of 57 public service bodies. The NSSO has 770 staff in six civil service offices around the country, in Dublin, Galway, Tullamore and Killarney. It is one of the fasting growing offices in the civil service, with an additional 200 staff to be recruited over the next two to three years.

4. LESSONS LEARNED

The SSC concept is, in essence, straightforward and simple: bring together support activities (such as cleaning personnel, HR staff or an IT helpdesk) that are frequently duplicated across organisations, and provide them more efficiently in order to increase the quality of the support activities and allow organisations focusing on their core business. In this, SSCs are said to remedy several administrative shortcomings that arose after NPM reforms: ‘overhead inefficiencies due to duplication; lowered compe-tences due to fragmentation; and risks of deficient capabilities due to the small scales of operations in certain organizations’ (Elston and MacCarthaigh, 2014).

‘Even though the basic idea behind SSCs is straightforward, their organisational design can take many forms’ (Boon, 2019) as we described in Section 2 and illustrated in the more-in-depth country cases in Section 3. To conclude we formulate a number of lessons learned following the main pitfalls and critical success factors in designing and implementing shared service centres in public administration.

4.1. Pitfalls and risks

The practice of shared service centres has become widespread and lead to several positive examples and benefits. Nevertheless, public sector organisations need to be aware of potential pitfalls and risks. In Section 2, we already mentioned some opera-tional challenges. Here we formulate three potential general pitfalls and risks: escalating start-up costs, functional duplication and opportunity costs (Elston and MacCarthaigh, 2014).

4.1.1 Escalating start-up costs

While there are cases of shared services being delivered on time and within budget, often there are delays and significant cost overruns. This clearly reflects the difficulty




of any change project of a substantive scale and size, as many SSC usually are, An upfront or early investment in time, effort, and money is indispensable in designing and launching the SSC. Sometimes, the price of foregoing this prior investment is obvious, as when shared services bring staff redundancies, increase productivity and efficiency in terms of process times. But often costs are hidden; for instance, when abandoning existing technology that has yet to run its full economic life. Unforeseen or underes-timated interdependencies between back- office and frontline systems can increase start-up costs. Launching an SSC also takes time for a new system’s capabilities and dysfunctions to be observed and accommodated by staff.

4.1.2 Functional duplication

Sharing services should eliminate duplicated activity, over-capacity and ‘redundancies’ in public agencies. “However, the emergence of shadow teams in client organisations, repeating the work, is a well-known post-consolidation risk to efficiency” (Elrich and MacCarthaigh, 2016). There is some evidence to support this institutional explana-tion for shadow teams emerging after shared service adoption. In Estonia, amid strong pressure for reform, client agencies created ‘parallel accounting systems which served their own special purposes and informational needs better’ (Raudla and Tammel, 2015). For example, a survey of finance officials in Northern Ireland found the majority were supplementing shared accounting services in order to ‘double-check’ the SSCs work (NIAO, 2013). This partly explains why staff savings were less than expected.

4.1.3 Keep the focus on simplification and improvement

Finally, as with any reform, there are opportunity costs to adopting shared services. By focusing particularly on shared services, what are governments not doing, and is this sacrifice worthwhile from a cost-saving perspective? Shared services might indeed enable economies of scale, scope and learning; but did governments followed this path blindly or did they also featured–in the advantages of the reverse strategy of devolving decisions and resources to individual agencies. Clearly this strategy has its challenges in terms of coordination and control, but it potentially increases agility and innovation. These also can contribute to cost saving, but are difficult to achieve when the main thrust of reform is centralisation.

The main aim (and major challenge) of setting-up an SSC is the streamlining of complex back-office processes. Organisational restructuring might distract from this underlying aim or might divert attention away from the much greater challenge of reshaping frontline systems and processes (which, after all, is where the majority of public money is spent). This is not to suggest that administrative cost-saving is not possible or desirable, but that less resource-intensive alternatives to full SSC might also lead to the necessary simplification and improvement of processes.

4.2. Key success factors

Despite the potential risks and pitfalls formulated above, shared services centres have the potential to solve the problem of getting an efficient economic solution and also improving customer satisfaction. The key to achieving both economies of scale and customer satisfaction is to get the governance right (Bergeron, 2003). The right gov-ernance strategy links an efficient provider to a responsible user. A number of success factors can be put forward.

4.2.1 Be clear on expected outcomes

The success of the SSC is measured not only on transferring the staff, processes and technology around the shared services, but also on the expected outcomes. If the shared service is launched and supported because it is expected to save millions after a couple of years and the savings are not realised, it may be determined as a failure. Cost savings


is one of the key drivers but other benefits may include, cost recovery/avoidance, better service delivery, access to more data and tools, reduced risk in on-going operations, improved compliance, etc. (Strikwerda, 2010).

4.2.2 Clear client – service provider agreement and Service Level Agreement

There must be a link between that cost of the services delivered and user satisfaction. This can be done through fee-for-service arrangements or some other mechanism. This link must be reflected in agreements between providers and users (Bergeron, 2003). These agreements should involve requirements on both user side as well on the supplier side via Service level agreements. The provider may be accountable for a price and service quality, but the user needs to be accountable for using the service appropri-ately (for example, conveying a requirement that is defined well enough to be met). It is important to be able to quantify at least some of what the organisation is getting through a shared service. Quantification should involve more than just the direct costs of a service, though this may be the easiest to measure. Quality matters, too. Since not everything can be quantified, there may be a need for qualitative measures as well.

4.2.3 A sound and solid project management approach

As mentioned before, shared service centre transformations are often large-scale change projects, including the various aspects of change management. Various key success factors for a successful shared services implementation can be identified (Burns and Yeaton, 2008). These areas require attention early in the planning so that the appropri-ate mechanisms can be developed and built into the implementation process.

The first factor identified is strong project management skills. Shared services initia-tives need clearly defined goals for the implementation and strong project leadership, not only at the senior level but also at the project team level. A carefully chosen project team should facilitate the planning process and serve as the liaison between the various constituent groups. For the implementation to progress as smoothly as possible, there is a need to unambiguously define an appropriate governance structure and assign responsibilities so that individuals can be held accountable for the progress of necessary tasks.

Secondly, senior-level support entails someone willing to champion the shared services project and sell the concept to constituencies. This leader should have both credibility and tact. Senior-level support further ensures that both financial and human resources will be made available to support the project. The complex structural changes often required by shared services initiatives require special attention during the implementa-tion process. Change management provides a structured approach designed to transition an organisation from its current state to the desired future state. Change management efforts should begin very early in the planning and implementation process.

As described above, there are three approaches to system implementations: a direct cutover approach, a parallel approach, a phased approach. In general, a phased shared services implementation was commented as proven to be effective (Elston, 2014). This means that while the entire shared services implementation may be planned at the same time, taking the systems online in a phased process or incrementally. A phased process deems to be more manageable and less risky than a direct cutover approach, or ‘big bang’ approach, whereby all systems go online simultaneously.


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