Guide to Developing Shared Services in FE
- 1. Shared Services in Further Education Guide to developing Shared Services in FE 1
- 2. Purpose and approach to the development guide This guide has been commissioned by the Association of Colleges (AoC) shared services team and written as a companion for those considering taking forward shared services projects in the Further Education (FE) sector. The Association of Colleges shared services team commissioned AK&N Associates to assist in the creation of this guide. It is intended to provide a practical guide for those considering taking forward shared services projects. 2
- 3. Contents Executive summary........................................................................................... 4 Section One............................................................................................................ 5 Context and background to shared services......................................................... 5 Shared services definition........................................................................................ 6 Urgency of the shared services agenda.................................................................. 7 Section Two.................................................................................... 8 14 steps to developing the project........................................................................... 8 1. Understanding the shared services structure options................................ 9 2. Why are we considering doing something different?................................ 12 3. Reviewing and communicating College / project objectives .................. 13 4. Considering shared services.......................................................................... 14 5. Understanding current functions, services and costs................................ 15 6. Determining services to be shared ............................................................... 16 7. Deciding on potential partners...................................................................... 17 8. Driving the change and financing the project............................................. 19 9. Stakeholder involvement............................................................................... 21 10. Building a shared vision................................................................................. 22 11. Management and governance of the shared services project................... 23 12. Compare current and future activity............................................................ 25 13. The business case............................................................................................. 27 14. The business plan............................................................................................ 30 3
- 4. Executive summary Is there a way to cope with cuts to College budgets whilst improving quality and making savings? Supporters of a shared services solution would say so. They would point out that many back office services need not be delivered by individual Colleges, but can be managed on behalf of a number of partner organisations. They would also argue that this would allow for bigger, more productive teams that will have a number of advantages, including being able to better develop specialisms and expertise and cover staff absences. Add to that the shared use of constantly up-dated technology and the reader can begin to understand the arguments in favour of shared services. The guide explains how to develop a shared services project and move to sharing more efficient and effective services through joint ownership with partner Colleges. In guiding the reader through the development phase of shared services fourteen steps are identified. These steps cover: zz Deciding on the most advantageous organisational structure. zz Being clear about the reasons for embarking on such a project. zz Ensuring the link to chosen partner objectives so as to underline commitment. zz Assessing partner readiness to share services. zz Coming to an understanding of current services and costs. zz Deciding which services to share. zz Identifying preferred partners. zz Driving change, financing the project and involving stakeholders. zz Agreeing and sharing the project vision. zz Drafting and agreeing with partners a Memorandum of Understanding. zz Comparing current and future service activity. zz Justifying the project and drafting the business case. zz Writing the business plan 4
- 5. Section One Context and background to shared services Background to the shared services Shared services became a practical concept for the public sector as a result of the Government’s Modernisation Agenda,(1998 and 2001 Local Government White Papers) that created a framework for local government to share and disseminate services. The concept was used to provide an inclusive model for services provided to the public. Shared services in the public sector Shared services projects have been implemented in various parts of the public sector and to varying degrees. For instance, Darlington and Stockton Borough Councils have co- located their back-office services. In part of County Durham, health, housing and social care staff are co-located and also operate shared processes. The output from the latter project was termed an integrated service, though it bears the hallmarks of being a shared service, evidence that the latter term is still not used universally. Given the success of these and other projects, it may therefore be surprising that the model did not achieve greater prominence at an earlier date within the FE Sector. Service transformation will be the means by which partners in the public and private sectors can address complex and challenging objectives. Through shared services and improved partnership working, they can collectively work to address their shared priorities. It is important for FE and Sixth Form Colleges to consider the possible benefits of developing service delivery with local government, NHS, Fire and Rescue and Police services to achieve additional savings and improvements. Regional improvement and efficiency partnerships may provide a framework for organisations to work together. Shared services in the FE sector A National Advisory Group in 2006 examined the possibility of using shared services across the FE Sector. Both the resulting documents, the shared services blueprint and strategic FE Sector business case lay dormant. In March 2010 Dr Kathy Bland produced a report entitled ‘Shared Services, Further Education Centric’ (1) commissioned by the Learning Skills Council aimed at identifying the support needed by the FE Sector to take forward shared services. By now there was a pressing need to make savings and drive improvement. This report concluded that there was a need for external funding if a FE shared services project covering HR, finance procurement and MIS was to be established. Efficiency innovation fund In June 2010 the Department of Business, Innovation and Skills (BIS) established the Efficiency and Innovation Fund (EIF). This provided the financial resource to allow the Skills Funding Agency (SFA) and AoC to work with the FE Sector and fund a range of projects around creating new ways of working in particular for shared services projects. The EIF saw 41 projects receive funding. Lessons learned from the project have been used in this Guide. Further information can be found here: http://www.aoc.co.uk/en/ policy-and-advice/shared-services/ 5
- 6. Collaboration and shared services grant fund In 2011 the SFA provided the AoC and the 157 group with funding under the name of the Collaboration and shared services grant fund. The aim of the grant is to develop and implement significant and fundamental changes to the business model of shared services within the FE sector to drive innovation and secure efficiency savings. This work is currently ongoing. Shared services definition So what is shared services, and why might it just be the most important idea and contribution to the need to identify and deliver efficiencies and savings in the FE Sector? Surprisingly, there is no universally accepted and agreed definition for Shared Services. For our purposes, we will use the LSC National Advisory Group definition of 2006: ” Shared Services is a business model whereby multiple organisations converge and streamline some of their business functions in order to deliver services as effectively and efficiently as possible. It often involves creating a stand-alone organisation… ” (LSC, 2006) There are some characteristics that are present in a significant percentage of shared services organisational or structural models. Annex A shows organisational structures and characteristics that are frequently mentioned in the literature. Obviously, the more of these characteristics that a project exhibits, the more it is likely to be thought of as a shared services project. Of course any project might justifiably claim to be a shared services project if it were to exhibit any of the characteristics shown in Annex A. This table was developed by Dr Bland while acting as Project Director of the EIF funded project it displays the Shared Services Structures and Characteristics. A cell traffic light system is used in Annex A to indicate whether, on balance, a particular organisational structure increases the likelihood of a particular characteristic. So where does analysis of Annex A leave us? Well, it helps us focus on the options available in sharing services. We can see that each of the structures that are shown in Annex A can be used to deliver something which could have elements of a shared services model within it. This document will offer a step-by-step guide to those wishing to utilise the joint initiative model. The justification for taking this approach is this model is most likely to exhibit the full range of characteristics highlighted in Annex A as well as by the literature search carried out in support of writing this guide. Many of the steps will apply to the other structural models as well though, so this guide may also help there as well. 6
- 7. Urgency of the shared services agenda There are a number of factors that mean taking forward the shared services agenda is a matter of some urgency. The more important of these are shown below: Economy Reference has already been made to the economic crisis. There can be no doubt that the global crisis will continue to force change as Governments seek to make public sector cuts. Efficiencies Making efficiencies should be part of the on-going management and decision-making process of every organisation. If efficiencies are possible it means that investments can be made elsewhere in an organisation or cuts to income more easily coped with. Quality of service provision An important factor in the minds of those who lead the College will be the need to ensure that the quality of front-line service provision and of the student experience within the College is everything it could be. There is recognition that shared services can make a real contribution here. Dr Kathy Bland has led on a shared services project in the North East of England. She has pointed out that: ” Shared services can help the quality of front-line services in several ways. It can free up resources for reinvestment. It involves mapping processes and identifying data points and performance indicators used to monitor the quality of shared service provision. It also involves the use of dynamic Service Level Agreements. The latter comes about because of the need for clarity of shared service provision. Finally, shared services is best delivered by an independent organisation, one that, if it wishes to continue in existence, has to provide top quality services, which in turn can only help the quality of the Student ” experience. (2) Kathy Bland, Project Director North East Shared Services Project It is the last point that Dr Bland makes that is arguably the most important. It is the cultural change that will bring about the desired change and a focus on outcomes and user experience. This will be best achieved by the setting up of a new, independent organisation. How to go about this, and other steps that need to be taken, will be the subject of the remainder of this guide. 7
- 8. Section Two Steps in the development phase of a shared services project This Section will look to break down the development phase of the shared services project into steps. However, each shared services project will vary. It is recognised that it is right to take these steps in the order that best meets individual project circumstances. The flow chart that follows summarises the 14 steps to be taken. More detail can be found in the following pages. Summary of the steps Step 1 Understanding the shared services structure options Step 2 Why are we considering doing something different? Reviewing and communicating College / project Step 3 objectives Step 4 Considering shared services Step 5 Understanding current services and costs Step 6 Determining services to be shared Step 7 Deciding on potential partners Step 8 Driving the change and financing the project Step 9 Stakeholder involvement Step 10 Building a shared vision Step 11 Management and governance of the shared services Project Step 12 Comparing current and future service activity Step 13 The business case Step 14 The business plan 8
- 9. Understanding the shared services structure Step 1 options Colleges should examine the available structure options before deciding if and how to develop shared services. A Strengths/ Weakness/Opportunities and Threat (SWOT) analysis would be useful and should help inform the final decision. Characteristics outlined in Annex A will help with this exercise. As explained in the previous section, this compares advantageous characteristics with possible structures. Given these characteristics, perhaps the most desirable structural model is that which offers the greatest concentration. Such options and some considerations, though by no means all, would include: Do Nothing Approach. There would be no organisational change but there could be a review Step 1 of internal processes and the introduction of benchmarking, if available. zz Understand the options Outsourcing. This would entail contracting with an outside agency to provide services such as payroll, zz Carry out a SWOT cleaning, security and catering. There will be TUPE analysis issues to resolve if staff are moved from one employer to another. The College will have to manage the zz Decide which option outsourced contract and there would also be an to pursue additional VAT burden to consider. Federal structure. Partners would have to be found for a new federation, or an existing federation would have to be joined. This would offer up the opportunity to share out the work to be done across Colleges or other potential partners. It would not need a new organisation, but rather Colleges would agree to work together in a federal system. There would of necessity be no changes to College organisation, and therefore no new structure to drive cultural change. The federal arrangements would have to take into account that some partners would be cooperating within whilst competing outside the federal structure if sharing with other Colleges. Joint procurement. A narrow service range focussing on procurement. As with a Federal Structure there would be no need for a new organisation. Cultural change would therefore not be driven by new organisational arrangements. There would be a VAT liability to consider. Joint initiative. A partnership of Colleges who jointly own, lead and manage a new organisation delivering at least one service to all members. Reference is made in Step 13 to the VAT issue and how this approach to Shared Services would avoid liability from April 2012. Legal implications would also have to be considered with information on this being available on the AoC Website. 9
- 10. Merger. Is when one or more Colleges join together to create one organisation. ” The theory suggests that there may be benefits to larger College size but these benefits are not guaranteed, and the impact of college mergers on choice and competition in FE is ambiguous. Quote from: The Evidence Base on College Size and Mergers in the ” Further Education Sector, Laura Payne, Department for Innovation, Universities and Skills Referring back to Annex A, we can see that the Joint Initiative model is likely to offer the greatest concentration of advantageous characteristics, closely followed by the Federal model. Outsourcing and merger offer the least advantageous models. The chart (Continuum of Collaboration and Control) on the following page, developed by Dr Bland, shows the possible structure models in a continuum that moves from greater to lesser control. The chart also indicates those models requiring on-going and significant levels of cooperation in order to function properly. Both of these considerations, the level of control on the one hand and working together in a cooperative way on the other, may be key in helping to choose the model to be adopted for a Shared Services Project. Once the model has been considered it is time to move to the next stage and to reinforce the commitment to working in a different way by examining the reasons why this is necessary. 10
- 11. Continuum of collaboration and control Significantly less control more risk/barrier Third party provider takes full Outsource responsibility for managing and operating services. Member organisations operate within a shared governance umbrella. Each organisation retains independent legal status, Federal but are fully accountable via local boards to federal governance structures. C A contractual arrangement with a third party O Strategic partner provider to provide Shared Services (e.g., College A and a Private Company) L L Joint procurement of services based on a shared strategy and harmonised business processes and A Commissioning designed to provide shared service provisions to its members (e.g., the LSC Collaboration Fund B projects were mainly focused on this model) O A An agreement between two or more organisations to set up and operate Shared Services (e.g., College Joint Initiative T A and College B establish a separate Shared Services department) I O Centralising a business service that will be shared by N Lead other organisations (e.g., College A shares Finance with College B; College B shares HRM with College A) The acquisition of one college by another (e.g., Newcastle Merger College acquiring Skelmersdale College) More control, less risk Unitary A single organisation centralising business services 11
- 12. Step 2 Why are we considering doing something This is an important step. The strategic need to do something different has to be agreed. There will be important key drivers for change. These might include: Increased competition that demands efficiencies as a response Falling requirements due to demographic changes that further reduce student numbers, and demands still more efficiencies Smaller class sizes across the board that means that front line staff are a bigger percentage overhead Step 2 Agree the need within A competitive market that creates the need for economies of the College to do scale and use of technological advances to do more for less something different. Increasing student expectations that mean processes have to be simplified and standardised around best practice to cut costs and improve quality The demand for modern services means innovation has to be encouraged Reduced spending in the public sector that means survival depends on being able to protect front line services by creating efficiencies in back office services The strategic need to take decisive action, and to examine the option of developing a shared services project, should now have been identified. If this is the case, the next steps towards a shared services project need to be taken. Examples of Savings from Shared Services zz Reduced cost of high and low zz One Head for each Shared Services volume purchasing Area rather than one for each College zz Less need to buy in expertise from outside the organisation saves on zz Consistent, comprehensive policies professional fees and procedures that only have to be up-dated once rather than for every zz Streamlined processes across College. all service areas eliminate unnecessary work zz Some estate re-used or disposed of as back-office staff move to new zz Greater capacity within teams accommodation. means greater specialisation, less disruption to services when staff absent and fewer mistakes as skill and knowledge levels are higher 12
- 13. Reviewing and communicating College / project Step 3 objectives Senior management One way to support the goal of exploring the potential for developing a shared services project is to include it in the College strategic plan. This will signal a commitment to shared services by top management in the College. Examining the potential will be tough, the change management tougher, and a written commitment will be important in order to ensure that the potential project has the best possible chance of a full and proper exploration and possibly even implementation. In short, it must not fall off the agenda if the identified strategic need is to be met. It will also mean that objectives for the soon-to- be explored, and possibly implemented, shared services project are explicitly stated in a permanent record available to all. Expected outcomes Step 3 Show commitment: So what might the expected outcomes be? The following list demonstrates the potential Ensure shared services is part outcomes of sharing services: of the College Strategic Plan Consider the expected out- zz Savings achieved through streamlined comes and impacts processes zz New services such as in-house procurement zz Increased staff specialisation leading to enhanced knowledge, speed of work and fewer errors zz Improved quality of service through a change in culture, driven by the customer/ supplier relationship that will underpin the SLAs signed up to by both the customer/owner Colleges and the shared services project zz Access to the increasing expertise of specialised staff zz Improved curriculum offering zz Increased demand from students as quality improves zz Improved reputation of shared services partners 13
- 14. Step 4 Considering shared services In deciding whether your College is ready to pursue a shared services option, the following need to be considered: zz Have you identified key drivers for change? A move to shared services is a radical step and implementation will Step 4 require much determination. Assess you zz Is there sufficient impetus from drivers for change to readiness for make your College want to participate in a major project? sharing Without this it is unlikely that the necessary effort will be sustained. zz Who is going to drive the change and champion this moving forward? zz Are the outcomes ones you would wish to pursue and do they fit with your existing College objectives and desired outcomes? zz Are you ready to share? zz Do you have a culture of openness? zz Is this the best approach for your College? zz Is it a financially sound idea for your College and can you cope with the transition costs? zz What are your expected outcomes and are they realistic? Should working through these points produce a positive answer, you are ready to progress to the next step. 14
- 15. Understanding current functions, services and Step 5 costs This step focuses on getting to the point at which the services to be shared can be identified. It is advisable to first undertake a review of the current processes. The reason for this will become clear as we progress. What this means is that a College should: zz Look at the functions carried out. Are they the right ones? What is the feedback from your customers? Step 5 zz Determine the costs of each function. Become an efficient zz Benchmark these costs if at all possible. If your College organisation – does not have readily available costings for each understand and service area a great deal of work would be needed to reorganise get at this. In a situation where staff will work across many processes, with time commitments constantly varying, it may be more effective to get at costings for service areas, albeit broken down to show salaries and other costs separately. zz Ensure that whole life costing is used to determine the cost to the College of any area being considered for a shared services project, e.g. IT equipment needs to include purchase costs, licence costs, technical support and energy usage zz Understand the quality of the service on offer by gathering and analysing data and information on error rate and user feedback zz Are service level agreements being met? zz Look for where there are hold-ups caused perhaps by lack of skills, insufficient resource or poorly motivated staff who may not have the right abilities. zz Look for stages in work processes where there is spare capacity that can be moved to help cope with stresses elsewhere By undertaking a review of your current processes this should enable you to ensure the correct services are being provided by the College whilst reducing the cost of delivery. In this way, there is a confidence that any further savings are due to shared services and are not the result of cutting away inherited unnecessary costs. 15
- 16. Step 6 Determining services to be shared At this point options can be determined for which functions could be shared. How is this to be done? Refer back to the list of functions and processes drawn up earlier and: Decide whether they can be carried out remotely for the most part. It is worth remembering that before incorporation Colleges had services such as HR and finance provided by Local Authorities, so clearly some services, if not most, can be delivered off site. zz Look for those which are common and probably done in the same or a similar way across all Colleges Step 6 zz Look for savings from only doing things once. For Draw up Options instance, partners agreeing common policy, procedure, for Services to be guidance and work instruction documentation may Shared mean that such documents need to be created only once. zz Look for areas where greater specialism would be beneficial. zz Are there services already outsourced and could they be better delivered in a shared services model? zz Has a contract review been undertaken to discover contractual impediment to sharing services? Working through the above points should help in drawing up options that can then be agreed within the College. 16
- 17. Step 7 Deciding on potential partners It is vital to the success of the project that the correct partners are selected. When deciding who partners should be, consider some of the following points: Do you want to share with FE or external partners? It is imperative to consider who your partners might be: zz Do you want to share with others in FE? Step 7 zz Is there a potential to share with Academies, Local Draw up a list of Authorities, HE or other organisations? preferred potential zz What do you know about potential partners? partners zz Research into ideas of who your potential partners might be zz Meet with potential partners to gain a strategic understanding of how to drive this forward and who is interested ” In the early stages of the project there was a long debate about the number and type of partners to be included in the project. ” As a result it was agreed to keep the maximum to 3 to ensure the projects deliverability AoC Shared Service case study (2011) Number of partners zz The greater the size of the partnership the more difficult and complex decision- making becomes. zz Certainly, in the development phase it would be advisable to limit the number of partners. zz The ideal number for joint working and decision-making purposes is probably two, however it would only take one partner to drop out and all efforts would have been in vain. For this reason, and given that the development process is extremely difficult, it may be better to start with four partners. This gives a certain safety-in- numbers, but is not overly complex and large in number. zz More could join the partnership later, once the development and implementation phases are over and this would help maximise economies of scale. 17
- 18. Existing working relationships with Colleges zz Who you are already working with is an important consideration. Where there are already good working relationships, it is worth thinking about continuing with those same Colleges. zz Which Colleges would be the most committed? This is a question worth considering, but it may be one that is difficult to answer. Even so, it may be known that a certain partner is looking for efficiencies and is willing to innovate. Such a partner would be ideal. zz Are there some partners that you would consider to be your competitors? If so, would you be happy to share with them? zz Are there some Colleges with a good track record of working collaboratively with others? Again, these would be ideal partners. zz Do you know of Colleges that might have similar requirements or have a similar vision? zz Do you want to start a new shared services project or join an existing partnership? Do the latter and you avoid the development costs, do the former and you are able to participate in the shaping of your own future services. Which is more important to you or your College? By the time these questions are worked through you should have a reasonable idea of who you would like to work with. Agree in principle who your partners will be: Once the review has been done from a strategic level and potential partners have been considered, further work will be required into the detail which is outlined in the following steps. Starting with the Project Manager meeting with the individuals which is outlined in the following step. 18
- 19. Step 8 Driving the change and financing the project Resource To maximise the chances of achieving success it is necessary to have a Project Manager Such a person would need to have the following: 1. Experience of project and change management 2. Experience of working at senior management level Step 8 3. Have a good knowledge of the Further Education Identify the sector; and Project Manager and allocate 4. Strong leadership skills. realistic resources. There would be a need to have a project board for the development and implementation phases. The board would approve the project plan, take strategic decisions and receive stage reports from the Project Manager, as well as dealing with issues that cannot be dealt with at a lower level and which are causing slippage and difficulties. Given the strategic role of the project board, membership ought to be at Principal level. Where external funding is or has been sought for transition costs and has yet to arrive, it may be necessary to have a Senior Manager from one of the Colleges to manage the project on a temporary basis. ” With hindsight I realise we needed far more resources than we had available resulting in long hours for the staff involved AoC Shared Service case study (2011) ” Partnership requirements Once the Project manager has been appointed, engagement with potential partners can take place. As a starting point the Project Manager should meet individually with the relevant potential partners. In the case of sharing with a College, Principals of prospective partners should be met with to explain the strategic aim of the project, desired outcomes, key challenges of the shared services concept and outline the proposed project. The chart on the following page is taken from the Association of Colleges Eastern Region Developing Soft Federation Services Project. A Chart such as this may be useful in describing the journey on which a shared services project would hope to take partner members with Colleges. In so doing it may help to introduce the potential benefits of the shared services project. It describes the ambition that the shared services project would hope to help partners realise, that is to respond to the opportunities to share services and thereby generate savings. 19
- 20. The meeting with potential partners is also an opportunity to discuss the project areas to be shared. Typically, these would usually focus on back-office services such as Finance, HR, IT, MIS, quality and performance, procurement and payroll. However the scope should not be limited to back office and potentially the discussion could be centred around front office areas. ACER Developing Soft Federation Services Project- Ambition The project strategy outlines a clear ambition for the ACER colleges. A step change is required to deliver this ambition... ACER Strategy and long term Shared ambition services for What the two areas colleges delivered and currently deliver savings measured Implement quick wins and savings captured Colleges map processes Developing deep Using insights to inform, influence Insights from comparing and create mutual benefit Generating saving to support ACER colleges Responding to and anticipating the potential shared opportunities of colleges 20
- 21. Step 9 Stakeholder involvement At this stage you need to consider the varied stakeholder groups, which groups need to be consulted now or at a later date. Principals or heads of other organisations will already have been involved, but at this stage it is necessary to think about: zz Governors/Senior Managers Step 9 zz College staff Involve stakeholders zz Students Sell the idea zz Unions zz Other Public Sector organisations e.g. Improvement and Efficiency Partnerships, NHS, Department for Work and Pensions and Local Government. Given that the project would not have got this far without the involvement of Principals, their support is a given, and seeking the approval of Governors may well be the next step. Again, without the support of Governors the project may not go any further. This is probably also the point at which you wish to have preliminary discussions with Senior Managers. Such discussions may, at this stage, only go as far as explaining the concept of shared services and the service areas that may be affected. 21
- 22. Step 10 Building a shared vision This is a key step as it will ensure that all partners are clear on the outcomes of the project. Therefore it is vital to have a clear and concise vision that is agreed by all the partners. There is however the temptation to make the vision vague and ambiguous. This should be avoided. Consider the following actions to assist you in achieving a shared vision: 1. Hold a visioning workshop with all partners Step 10 - Ideally the Principals, Governors (at least the Chairs and possibly the Vice Chairs) and Senior Agree the vision Managers should all attend the meeting to draft Make reference to the up an agreed vision. It is imperative to have shared vision once involvement from all partners on it’s creation to agreed ensure it is understood and illustrates what all partners wish to achieve. 2. Agree on the shared vision – Once all the work has been done around creating a shared vision, this needs to be signed off by all partners involved. It is recommended that this is agreed by partners and a formal sign off is agreed. 3. Communicate the shared vision - The shared vision then needs to be communicated back to the individual Colleges to ensure it is known by key individuals involved in the project at a high level. At this stage it may not be appropriate to share this with all SMT as long as key stakeholders are aware of vision this will ensure the project can be driven forward. 4. Make reference to the shared vision – Once the vision has been agreed it is important that throughout the project it is referred back to, the vision can then act as a reference point to ensure you are achieving what you set out to do. 22
- 23. Management and governance of the shared Step 11 services project All Partners now need to demonstrate real commitment and dedication to make the project happen. Each of the partners will need to approve their involvement in the project. In addition, one of the partners may have to agree to be the lead. This will give the partnership a finance facility until the independent shared services organisation can be established and functioning. The partners will need to agree a Memorandum of Understanding. This will need to include the following: zz Project background zz Purpose zz What is in and what is out zz Management and reporting arrangements and obligations zz Period of operation zz Financial Arrangements zz Delegated authority arrangements zz Monitoring zz Communications zz Confidentiality zz Commitment – buy in and expectations 23
- 24. When the Memorandum of Understanding is in place and signatures obtained from Principals or relevant external partner, this step is almost complete. But there is one more major component of this step. The communications strategy needs to be written and implemented. The communications strategy needs to have a straightforward aim. This will need to say something about keeping all interested parties or stakeholders informed of the progress in a way that is timely and maximises the potential for their constructive involvement in the project. Principals will know what works best in their own Colleges and will want to lead on developing a communications plan for their own use. Nevertheless, the following could be a useful template: Principals make presentation to Board of Gover- nors to: zz Explain shared services and proposed project zz Gain project development and implementation commitment zz Gain agreement for formation of project board and to receive stage reports Principals hold participatory staff road Project Manager meets with and shows to explain Shared Services and involves Trade Unions at appropriate the opportunities they will have to level (probably Regional). engage in the project. Project Manager holds regular Project Board meetings, presenting stage reports, escalating issues and agreeing content of newsletters. Those staff directly affected, participate in process mapping workshops. Principals issue regular newsletters to staff and additional road shows at critical times, e.g. at the end of the development phase and the start of implementation 24
- 25. Step 12 Compare current and future activity This step is key. For all partners this step should help ensure that value for money is obtained from services that pass into the remit of the new project. A further reason for undertaking this step is to gather information on the feasibility of the project that will then feed into Step 13, on developing the business case. Process mapping By now it is known the service areas that are to be delivered by the shared services project. For each of these service areas, process maps need to be drawn up. There will be quite a few processes in Step 12 each of the work areas. This work should be facilitated by an independent person, possibly an external expert. Each Establish a cost and College needs to field a member of staff who understands service specification the process to be mapped and how it is currently baseline undertaken. The aim of the exercise is to arrive at a new set of processes that cut out waste. In doing this it is important to remember that these are high level and that much of the detail of the work to be undertaken will appear in related procedures. Having said that, it is important to have sufficient substance to guide the work that will be undertaken. Re-engineering processes can make the processes leaner. Representatives of partners will walk through the various processes that they are responsible for or are familiar with. They will challenge one another, share expertise and decide on the best way forward. In this way they will arrive at the best processes, streamlining as they go and eliminating unnecessary work. Examples of quality improvements Shared Services can bring about: zz Process mapping identifies zz Services are consistent as processes data points and performance and procedures are adhered to and indicators. Areas for shared service common to all Partners improvement can be swiftly and zz Partners use ‘best of breed’ IT accurately identified and actions software to ensure greatest level of implemented automation and fewest mistakes zz Partners in shared services can act zz Shared services work to tight SLAs as a benchmarking group that are constantly up-dated and zz College Partners can receive in-year closely monitored performance information rather zz Shared services are customer than waiting for end of year results focussed. To be otherwise could lose customers and threatens jobs Care must be taken at this stage not to over complicate the process maps. Only the 25
- 26. following need be included at this stage: A. The start and end of the process B. Each step in the process, whether that be the next task or decision C. The member of staff that would carry each step out D. A separate dialogue box listing the performance indicators that would be used to monitor a particular process E. A separate dialogue box that would include the version number, date written or revised (which ever is later) and the author’s name Cost of delivery The cost of delivering the service also needs to be examined. It is important to get an accurate assessment of salary and non-pay costs for the whole service area before shared services commences the delivery of services. In this way costs can be tracked and added to information on the quality of service. This work has another purpose. Comparison is a powerful analytical tool. The levels of spend on each process and by each partner will produce some interesting comparisons. One partnership has already discovered that there are very real differences in spending on MIS. This may be money well spent, however, as the highest spending College also attracts a higher level of funding per student. Further investigation is warranted, which could lead to a quick win for the partnership. IT A further consideration at this time is to think about technological differences. The best way forward is to think of what each partner needs and wants from technology. A specification can then be drawn up and the best available chosen. This particularly applies to IT software. It will be difficult to get all partners onto the same package, but this has to be achieved if efficiencies are to be maximised. Having a relational database covering all work areas will also be essential and issues about data storage and connectivity will need to be resolved. 26
- 27. Step 13 The business case The purpose of this task is to have a document available for Principals and Chairs of prospective partner Colleges. This will make the business case for a committed involvement in the project. The Project Manager would, ideally, draw up the business case. A business case needs to include the following: Background to the project - where the idea for the project or the type of project came from. Step 13 Shared vision, ambitions and success criteria which will be drawn from the visioning workshop held earlier. Draft and have approved the Business Progress to date – The project plan will identify key Case document milestones and individual work packages together with a timeframe for delivery. Regular reports would be presented to the project board identifying any slippage and suitable remedial actions. Coverage – what services are to be shared and the options that were considered, and again, something that would be taken from the visioning workshop and discussions with Principals. The economic/financial case and the return on investments (ROI). It is important here to catalogue some of the many ways in which a shared service could benefit partners. These could include: yy Only one Head of Service for each area needed yy Lean processes that reduce costs, speed up work and help specify IT need yy Increased use of workflow tools to streamline process and provide an auditable system yy Consistent service facilitated by adherence to agreed SLAs, processes, procedures, and guidance documents yy Grade appropriate work facilitated by having more staff in each team yy Increased specialisation leading to error reduction and less need to access external advice yy Increased buying power leading to cost reductions on both high and low volume spend items yy Less data entry with integrated packages 27
- 28. Legal Implications & Structures: It is important to include the legal implications the project will have on your College. This would include understanding VAT issues, Pensions, TUPE & Procurement rules. Detail of this information to assist you with this can be found here: http://www.aoc.co.uk/en/policy-and-advice/shared-services/eif- funding/legal.cfm Governance arrangements: This should address how an independent shared services organisation that will deliver the services would be run. It is not likely that the legal documentation such as the Articles of Association will cover all the detail of all the questions that need to be answered here. It may be that a separate governance document should be created to which all new member Colleges would sign up. Key questions would be: yy Who owns the Shared Services Company? yy Who will carry out the role of Company Secretary? (This role still needs to be carried out even though there is no legal requirement to have a Company Secretary.) yy Who will participate in Board meetings? yy How often will Board meetings be held? yy Will there be any limits to membership and ownership? If so, what will they be? yy If membership extends, how will participation in strategic decision-making by all be facilitated? yy What will be the role of the Board, the CEO and the Senior Managers of the Shared Services Project and the Colleges? yy What are the limits to the powers of the major stakeholders in the Shared Services Project? Risk analysis associated with project implementation (more will be said about Risk Analysis in step 14): This will need to include a list of potential risks along with prevention and mitigating factors. The level of business impact and likelihood of risk occurring also needs to be highlighted. This analysis will have to take into account the options for hard and soft issues such as: yy Legal issues concerning the form of the shared services organisation. What might prospective partners have to take account of before they can join? Do they have to amend any of their incorporation documents for instance? What might the shared services project have to take into account? What documentation would be needed to satisfy legal requirements and how would these be drafted and what would they contain? Work done by Mills and Reeves on behalf of the AoC comments on and summarises many of the legal issues and is a useful reference. (2) yy What are the TUPE requirements and what would the shared services partnership and the Colleges need to do meet to these? 28
- 29. yy Are there any VAT barriers? These will very likely have become less formidable by April 2012 with the adoption of the cost sharing agreement by the UK. Provided the shared services project is an independent organisation that only provides shared services to partners at cost and provided partners are actively involved in the management of the Project, there should be no VAT liability. yy How would the different stakeholders react to the proposals and how would they be kept involved? The need here is to discuss the communications strategy and how this will unfold, as well as to explain the roles of each of the interested parties. Having drafted the business case it would then need to be approved by the project board. It is for project board representatives, most likely Principals, to ensure that their respective Governing bodies are on-board and are kept appraised of developments This step is now complete and we are about to look at the final step in the shared services project development phase. The VAT barrier From April 2012, VAT liability can be 33 Owned by partners who avoided where the Shared Services participate in its management Project is: 33 Providing services at cost and 33 An independent exclusively to partners organisation 29
- 30. Step 14 The business plan A business plan is, in a sense, a living document. It will change over time, as it is up-dated to reflect the progress of the business and the challenges that lie ahead. When first Step 14 drafted it may not be possible to included all the headings Draft and have and detail described below, but the attempt has to be made to approved the get as close as possible. The plan should probably cover a 3 Business Plan. year period, but be up-dated annually. It could be that if there were a large capital project involved then a business plan covering a longer period could be justified. As with the business case, you need to be clear about the audience for your business plan. This will include your committed and your potential partners as well as any actual or possible grant or external funding providers. But you should also remember that your business plan should help internally and that it is not a painful chore to update but a necessary step. It will help the project to develop the business and to think about destination or where the business is headed. In so doing it will help boost confidence, as partner Colleges ought to feel that there is clarity of purpose about the project. It will also help to identify risks and build on the work in your business case document. Problems, issues and critical success Factors will be identified as the business plan is worked through. The business plan will need to include sections on the following: An Executive Summary – This is all that some people will read. It is therefore of extreme importance and should not be treated lightly. By definition it therefore needs to include key points or highlights. The idea is to grab the reader’s attention. So when you put the business plan together the executive summary should be completed last. Then the key points or highlights can be culled from each section and carefully crafted into an exciting executive summary. Definition and description - The shared services project needs to be defined along with a description of the business activity, products and customers. This is something that runs through this guide, from the definition at the start through the visioning workshop to the business case document. Shared Services Partners retention and recruitment: The shared services project will need to develop and keep selling itself. Customer or partner retention is of paramount importance, and there needs to be a reaffirmation of a commitment to quality and lowest possible cost. Recruitment will also be important and there needs to be a reference to what the deal will be for new shared services project partners. Given that additional partners may have the potential to increase economies of scale, you may wish to encourage more Colleges to join the shared services project. The question therefore arises as to whether your partnership would expect new partners to pay their own transition costs or whether at least a portion would be shouldered by all existing members in order to help new partners join the shared services Project. In addition, you would need to say how you would make contact with Colleges who were your prospective customers. What would be the mechanism? How would you market the project? 30
- 31. Staffing Structure: This is something that will be informed by the process mapping process. It may be that you want to appoint Service Heads and then work with them on the rest of the structure. Accommodation A decision needs to be taken on where to locate the shared services project. One option is to recycle office accommodation within a partner College premises. This may have the advantage of keeping costs to a minimum. The danger is that members of staff are not perceived as working for an independent organisation and that their former colleagues in the host College consider them to be part of their staff. Alternative accommodation away from partner Colleges may therefore be the better option, if it is affordable. In this situation it would be down to Colleges to perhaps shrink their estate when staff move out, or recycle to provide teaching staff work rooms, meeting rooms, or additional teaching space. Certainly, where Shared Services members of staff need to meet College staff on-site this may create the need for additional meeting space. For whatever purpose it is reallocated, it is therefore unlikely that vacated accommodation will be wasted or mothballed. MIS This section will need to make clear the MIS system to be used to deliver the service as well as manage the shared services project. Customer and shared services need will have to be analysed and the best available MIS chosen. Timescales and costs for roll out across all partners will have to be clarified. IT Again a needs analysis has to be completed, with major issues such as security, connectivity and data storage being addressed. Once more, implementation costs and timescales will need to be specified Finance forecasts Included here should be: zz A cash-flow statement. This should take account of the starting cash balance, known expenditures and income needed. It will be necessary to notify Colleges of anticipated expenditure and the level of service charges. zz An estimate of profit, which may seem strange given that the shared services project will be run on a not-for-profit basis. Nevertheless, it is necessary to reassure your audience and to aim to hold reserves whilst making a small surplus or breaking even. 31
- 32. Risk Analysis (see the guide to the Risk Management Standard from the Institute of Risk Management (5)) This has been mentioned in relation to the business case document. Once identified each risk should be evaluated in terms of the possible business impact as well as the likelihood of occurrence. Finally a TEAR decision needs to be taken to determine whether the shared services project would be transferring the risk elsewhere, eliminating the risk altogether, accepting the risk, reducing the risk. The following risks should be dealt with in the way suggested: zz Operational risks including IT security breaches and failure. zz The possible unwillingness on behalf of staff to transfer to the new shared services Project, with the consequential loss of expertise. Local availability and costs of replacing staff with the required skills. zz The wider environment and the emergence of competitors in terms of merger options, new shared services projects and private sector outsourcing. zz Resistance to proposed fee levels from partner Colleges. zz VAT imposition The following template may be useful in completing this task: Business impact How dealt – what the with: Transfer, impact would be Likelihood of Risk eliminate, accept and whether a occurrence or reduce the high, medium or risk low risk Operational risks, e.g. IT security breaches and failure Loss of key staff Environmental dangers e.g. mergers, outsourcing and other shared services projects Unwillingness or inability of partners to pay for services VAT imposition TECKAL / competitions law requirements 32
- 33. Once drafted the business plan would need to be approved by the shared services project board. This will be made up of the representatives of Colleges, who would be the owners of the project for as long as they remain customers. You are now ready to implement your business plan. It will need to be communicated to all stakeholders along with a clear timeline. As a starting point, you may wish to have ‘quick wins’ implemented which would ensure that benefits accrued in timely fashion for partners. Summary This user guide has provided the basis for implementing shared services. The starting point was around understanding why you want to do something different, going on to review what you wish to share, partnerships you want to share with, comparison of activities between partners and then from this creating a business case and business plan. The guide is aimed to assist you with shared services development and the steps are by no means exhaustive. For further information on shared services please email us at sharedservices@aoc.co.uk 33
- 34. Annex A –Shared services structures and characteristics Key Structures Structure will Federal Joint Joint Lead Single not help deliver Characteristics Outsourcing Merger Structure Procurement Initiative Department organisation characteristic Delivers support processes needed by and Structure may or common to all partners may not deliver Separate organisation characteristic within the partnership group Structure offers an Has to compete in an excellent chance open market of delivering Focus is on cost and characteristic quality of service Is operatedby partners as a normal business 34 Demonstrates collaborative working Clearly defined partner responsibilities Dynamic service level agreements Culture of high performance Reuses assets Shared Investment Consolidated, best practice, re-engineered processes with reduced staffing and maximum automation Cost saving Improved quality Has best of breed IT Technology
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- 36. 21. KPMG (2008) Higher Education and the barrier to shared services, Removing the VAT burden. KPMG LLP. 22. Middleton, C. (2010) The Age of Austerity. Professional Outsourcing. Issue 2 p. 6 – 13 23. Russell, G. (2010) Further Education Mergers, Confederations and Shared Partnerships, Skills Funding Agency Press Release. 24. Schulman, D. Dunleavy, J. Harmer, M. Lusk, J. (1999) Shared Services: Adding Value to the Business Units. PriceWaterhouseCoopers and James S Lusk 25. Schulz, V. Hochstein, A. Uebernickel, F. and Brenner, W. (2009). Definition and Classification of IT Shared Service Center. Proceedings of the Fifteenth Americas Conference on Information Systems, San Francisco, California. 26. Schwarz, G. (2007) Shared Service Center. Harvard University 27. Thomson, A. (2010) Spending cuts put 34,000 jobs at risk, warns union. The Times Educational Supplement, Further Education Focus, p. 1. 28. Thomson, A. and Lee, J. (2010) Colleges face prospect of 3-year pay freeze and course closures. The Times Educational Supplement, Further Education Focus p. 1 29. Totis, K (2007 Application of the Teckal exemption to a services concession contract: Coditel (C-324/07), Norton Rose www.nrtonrose.co.uk 30. Ulbrich, F. (2006) Improving shared service implementation: adopting lessons from the BPR movement. Business Process Management Journal, Volume 12, Number 2: 191-205 31. Whitfield, D. (2007) Shared Services in Britain. A Report for the Australian Institute for Social Research and the Public Service Association. 32. Wilson, P. (2007) Review of Shared Services and Collaborative Activities in Scotland’s Colleges. York Consulting LLP 36
- 37. © Association of Colleges 2012 Cover photograph courtesy of Gateway 2-5 Stedham Place College. London WC1A 1HU Tel: 020 7034 9900 With thanks to all project Fax: 020 7034 9950 partners who contributed to Email: sharedservices@aoc.co.uk the development of the user guide and Keith Web: www.aoc.co.uk Newby of AK&N Associates. 37