Comparing Public Sector Shared Services in US and Canada

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1 THE RACE IS ON? Comparing Public Sector Shared Services in US and Canada Chazey Partners Chas Moore, Managing Director Canada & Grant Farrell, Managing Directors US, share insights about shared services development in both of these countries. While Canada has historically led the way in shared services adoption, the US is beginning to play catch up, both within the US government and other public service organizations. In this article, Chas and Grant discuss case studies, keys to success, and the future outlook. Grant will be one of the many prominent experts speaking at Shared Services & Process Improvement for Higher Education, Healthcare & Government. This three day conference in San Diego, November 13-15, features University administrators, Government directors, and Healthcare leaders. AN OVERVIEW: Canada is leading the way in its adoption and advancement of Shared Services in the public sector. Shared Services in Canada is structured and managed well at both the federal and provincial levels. Canada is one of the few countries that have more mature Shared Services in the public sector than in the private sector. This has occurred for two primary reasons. Many of the largest private sector organizations are branch offices of US or global operations, therefore the Canadian operations typically leverage the related global Shared Services solutions rather than establishing a standalone Canadian operation. Secondly, Canadian taxpayers are open to centralizing in order to become more efficient and lower the tax burden. These taxpayers typically do not express fears about larger government, privacy and cost sharing between communities that can often be seen in citizens of the USA. A high profile example of Shared Services in the public sector is the Government of Canada creation of Shared Services Canada (SSC) in The SSC is primarily focused on transforming how the Government manages the Information Technology (IT) infrastructure in order to create a more efficient use of technology. It is expected that this will increase productivity across departments. Both upfront and ongoing savings have been identified since the inception of the SSC in After proving the concept with IT, the SSC has planned to develop Shared Services beyond IT in the future. To date, it has launched HR Modernization, the first of a number of standardization and consolidation projects for back office systems. Questions remain regarding the structure of SSC, the 1

2 client interaction framework and monitoring performance, but it is clear that the Government of Canada is committed to Shared Services by making SSC a high-profile, standalone and mandatory initiative. In addition to federal Shared Services, most provinces have Shared Services of some type. Information Technology infrastructure and healthcare procurement are the most prevalent examples of provincial Shared Services. The strongest examples of Shared Services at the provincial level are Ontario Shared Services and the New Brunswick Internal Services Agency. There are also multiple successful examples in British Columbia and Nova Scotia. Although there has been great movement towards Shared Services by the U.S Government in recent years, Shared Services in the public sector is less mature than Canada or the UK. Shared Services is not a new concept in the U.S. but much of it has been siloed within various Federal agencies over the years rather than organized as a single Shared Services initiative across a majority of the Federal Government. The Government is looking to develop Shared Services further across federal departments and work is underway to truly share services. Shared Services has become more relevant in recent years at many universities across the U.S. Schools such as at Yale University, Harvard College, University of Michigan, University of Illinois and Cornell have all adopted Shared Services in areas such as Finance, HR and Payroll. In May 2012, an ambitious government-wide initiative was launched by the Office of Management and Budget. The Federal IT Shared Services Strategy was launched to address the federal Government s two biggest technology challenges: tight funding and outdated tools. The strategy aims to help agencies reduce what they spend on redundant IT systems and services and re-invest that money back into new technologies and technology-enabled innovations. The benefits that Shared Services bring are now being seen and there is a definite shift towards further adoption of the model in both federal and local government. THE KEY DRIVING FORCES: The key driving force in Canada is reducing costs and productivity enhancements to fund savings to mitigate cost inflation. In the last decade the public sector has been extremely efficient, but we are now seeing the impact of the 2008 economic crisis on government taxation revenues and consequently on the funding levels to the public sector. At the same time, the unions are demanding pay increases after several years of holding the line. Shared Services is becoming a necessity in the public sector whereas it may have previously been a nice-to-have option. Although underway before the economic crisis of 2008, the debt crisis accelerated a move toward Shared Services. Several factors, including technology advances, lower IT costs, increased IT complexity, increased health and labor costs, a demand for lower taxes and media scrutiny on 2

3 government waste, have all led to the acceleration of Shared Services in federal Government. Shared Services is seen as a way to reduce cost and improve operational efficiency. CASE STUDIES FROM EACH MARKET: The implementation of Shared Services in Canada has been as a result of a legislated approach. This has resulted in a clear determination of scope, mandate, and vision. This clarity explains why Canada has numerous examples of successful Shared Services. Additionally, Canada has had success in implementation of Shared Services because each province has its own legislature and Government that can mandate changes for their own province without having to have agreement of Central Government. Therefore, changes can be undertaken quicker. This has resulted in provincial Shared Services being further advanced than at the Central Government level. One example is the creation of the Internal Services Agency in the Government of New Brunswick in This was mandated in order to increase efficiency and drive down costs. The organization s goal was to provide common services, streamline processes, to provide services more efficiently and effectively, acquire and maintain infrastructure to support the delivery of services while creating a new culture, focused on the client and operating as a business. The successful conclusion of the three year project was achieved through collaboration between government departments to promote efficiencies and share common services. Actions included adding evaluation mechanisms, such as LEAN process improvements, for any new and existing programs and a reduction of shadow bureaucracy assuring transparency and openness. The current Shared Services Organization provides services to 10,500 employees working in 28 departments and agencies: Accounts Payable, Payroll and Benefits, IT Service Desk, Computing Facilities and Print Optimization. The shift to Shared Services has produced savings of over $1 million. In the US there are a number of examples of Shared Services Centers/Operations, mainly at the Federal and Municipal level, rather than broadly at the State level. The most significant ten examples within Federal Government are as follows: 1. Program Support Center, Health & Human Services 2. Administrative Resource Center, Department of Transportation 3. NASA Shared Services Center, NASA 4. Interior Business Center, Department of Interior 5. Enterprise Services Center, Department of Treasury 6. Department of State Payroll Services, Department of State 7. Employee Services, Office of Personnel Management 8. National Finance Center, Agriculture 9. Federal Acquisition Services, General Services Administration 10. Financial Services Center, Department of Veteran Affairs 3

4 Within the ten listed above, the Program Support Center (PSC) for the Department of Health and Human Services has been an excellent example. The PSC is a federal entity that provides products and services on a competitive fee-for-service basis. The PSC was established in 1995 as the first true Shared Services enterprise within the Department of Health & Human Services (HHS). It was originally created to support HHS and has since expanded its services to 31 other federal agencies. At the Municipal level, the City of Charlotte, North Carolina, is another good example. The City of Charlotte was one of the forerunners in developing Shared Services in the US public sector, starting back in the 1990s. At that time, the city consolidated fourteen departments into a multi-function Shared Services center with five divisions: Administration, Equipment Management, Information Technology, Procurement and Resource Management. Shared Services is now a citywide provider of equipment and fleet maintenance, IT and public safety, communication services and procurement. In collaboration with a rural telecommunications company it is currently poised to become a pilot site for the nationwide interoperable wireless broadband network for first responders and emergency management officials being developed by FirstNet. WHAT DOES IT TAKE TO BE SUCCESSFUL: Develop a business case that provides a strong rational and cost/benefit analysis Make the initiative high profile, with strong governance and mandatory participation. Have regular, meaningful Steering Committee meetings of key stakeholders. This should be an active Committee and not just a chore to get through unscathed every week. Reliable cost and performance benchmarks are essential. Ensure that the move to Shared Services is well planned and tracked to ensure the project is delivered on time and on budget. Delivery of Shared Services is not a core Government skill and bringing in operational and commercial expertise could be vital to improving capability. Keep working towards your goals and be relentless in pursuit of them. Shared Services initiatives are a significant commitment both in terms of resources and energy. Chargebacks are always a contentious issue, so agreeing a structure up front is essential. Good customer relationship management is essential. If your organization is not focused on the customer, you will not have Shared Services for long. Senior level Executive sponsorship is key. Make sure that key executives understand and support the roll-out. It is really important to distinguish between solutions vs. quick fixes. A culture of innovation and continuous improvement is critical. A passion for value ensures success in the longer term. A proper base lining and a clear business case is key. Budgets need to be set and managed to. Do not underestimate the change management required for any such initiative, including a turnaround. Carry out regular communication with all relevant stakeholders. Assign your best resources and people to the project. Remember that training is key. WHAT CAN CANADA & USA LEARN FROM EACH OTHER: 4

5 Canada does not have the same barriers to getting started as one typically sees in the US. Therefore, sometimes an organization gets started before developing a strong business case and performance framework that will help ensure success. In the USA, proponents need to provide a clear cost/benefit analysis and work harder to bring their stakeholders onside. Canada can learn from this slow start model to ensure Shared Services are set up appropriately, including a rigorous business case, in order to achieve the promised benefits. Canada has been seen as the leading light in the development of Shared Services, although some of their initial forays into Shared Services, particularly in Ontario, suffered a significant number of issues and budget overruns. They learned from their mistakes however and we will learn from their mistakes and those of other governments around the world. As our Shared Services matures in the USA we can review and question what Canada has done. We can learn from their mistakes and successes and try to get it right first time. In terms of practices that the US can learn from Canada, we can all learn from each other. The Canadians seem to be very good at Customer Relationship Management. Maybe we can follow some of the models they have used in this area. Ensure that when embarking on a Shared Services journey that there was a clear and detailed plan in place, that everyone involved was on the same page and knows their responsibilities. Strong leadership is essential as is good governance and good communications. Communication is central to buy in. WHAT WILL THE FUTURE LOOK LIKE? Citizens in general are used to receiving prompt efficient service from private sector retailers and online stores in their day to day life. As a result they have come to expect a similar level of service from their dealings with the public sector. This has driven a need for change within public sector bodies to ensure they meet the expectations of their citizens. Increasing demands from citizens combined with a need to cut costs following the economic downturn will mean that more public sector bodies will look to Shared Services as an established method of driving cost efficiencies and improving service delivery. It is a strong likelihood that the Shared Services model will expand in the coming years to include more complex functions within the current centers. There is also a strong possibility in a rise in the number of SSCs. Although relatively new to the public sector, the private sector has been reaping the benefits of Shared Services for many years. Public sector bodies around the globe, many of whom had disastrous starts with implementing Shared Services, are now seeing the financial and productivity benefits. Undoubtedly there are more barriers to implementing Shared Services in the public sector but these can be moderated with good planning and communication. In the future there will be ever more increasing demands on public sector organizations to deliver high quality services, reduce costs 5

6 and drive new insights. Adopting Shared Services is a proven method of enhancing the efficiency and driving down costs. ABOUT THE AUTHORS: Grant Farrell Managing Director, US, Chazey Partners Grant has over 20 years of experience in Finance, Shared Services and Technology implementations. He has managed change programs on the back of Shared Service implementations significantly reducing the cost base, enhancing controls and service levels. Prior to his recent assignments he was the Shared Service Controller for Interpublic. Prior to Interpublic Grant was the European Operations Director for McGraw-Hill where he was responsible for the set-up and subsequent running of the European Shared Service Centre. He is well suited to strategic planning and set up but is equally at home focusing on daily operational issues, managing staff at all levels and ensuring a high level of customer service. Grant is a Chartered Accountant and has a BSc Honours Degree in Engineering from the University of Nottingham. Chas Moore Managing Director, Canada, Chazey Partners Chas has 17 years of experience in business leadership, management and Shared Services implementations. He leverages his extensive experience in healthcare to help teams innovate effective and realistic solutions for complex industries. Prior to his recent assignments he was the Interior Health Business Support Director for Corporate Initiatives leading shared services implementations involving the Canadian healthcare sector. Prior to the formation of Interior Health, Chas was the Chief Financial Officer of one of its 18 predecessor organizations. Chas led integration and innovation initiatives for the five health authorities that operated in the Cariboo region. He has extensive experience in project management, business case development, mentoring & coaching, and public speaking. Chas is a Chartered Accountant and has a BSc Degree in Microbiology from the University of British Columbia. For more information about Chazey Partners, please visit 6