Services. grey advantage. IPAA Workshop. strategic business advisors

Transcription

1 Defining the Concept of Shared Services IPAA Workshop Friday 10 September 1 strategic business advisors

2

3 Session Overview Discussion Points 1. Defining shared services What is it and what is it not? 2. What are the benefits and risks of shared services? 3. What are the key principles that underpin service delivery in a shared services environment? What are the critical success factors in implementation? 4. Where are the best opportunities for efficiency gain? 5. What is required to manage shared services in a public sector environment? Does shared services meet the needs of the public sector better than existing arrangements? 3

4 Successful implementation of Shared Services has two pre-requisites. it Transformation A change in culture and behavior is required by Both shared service providers and customers Who is accountable? What skill sets are required? What are the metrics and rewards? Transition The people, processes and technology required to provide services fundamentally change (What is the critical path and dependencies d to move to new arrangements?) 4

5 What is Shared Services? Feature Description Definition 1. A model of service delivery that leverages economies of scale and skill sets by consolidating common processes and services. Strategy 5 1. transactional processes are separated into a self contained business or function that is organised to deliver a more effective end to end service, at a lower cost. 2. More sophisticated t models include strategic t or higher h value expertise functions e.g. management accounting, performance management. 3. Services do not need to be co-located however there should be common governance, service management, employee conditions and performance metrics. 4. Common IT infrastructure and systems are implemented, preferably with minimal customisation, except for agreed interfaces to retained legacy systems.

6 Evolution of Shared Services Centre Model AP, T&E,CM, AP, T&E, CM, AR,GL,FA AP, T&E, CM, AR,GL,FA, I/Co, Tax AP, T&E, CM, AR,GL,FA, I/Co, Tax, MI, BA, RM Where s next? Key to Processes AP= Accounts Payable T&E= Time & Expenses CM= Cash management AR= Account Receivable GL= General Ledger FA= Fixed Assets I/Co= Inter-company Tax= Tax Services MI= Management Information BA= Business Analysis RM= Risk Management Time Tend Size >250 seats, >75 seats Sector Private Sector Public Sector Technology Global Commutation ERP Standardisation Enabling technology Functions Finance & general admin Expanding Finance IT HR Region Local Regional Global Increasing adoption by smaller scale operations Expanding from Private sector into Public sector Optimising investment in ERP & global technology Extending up value chain adding functional breadth Movement from domestic to global centre's

7 Shared Services, Off shoring and Outsourcing A Shared Service can include elements of off shoring/outsourcing Off shoring is putting shared services activities into a low cost location Outsourcing is achieving i better results by sourcing and funding using an external partner Potential Cost Saving Maximise Savings Simulation Improve by applying best practice A shared services strategy can examine five options in order to identify the most appropriate solution. Public sector organisations only consider 3. Standardisation Adopt best practices consistently across all business units Shared Services Capture economies of scale Focus on continuous improvements Shared Service (with Offshoring) Leverage very low global cost locations Minimum risk Shared Services (with outsourcing) external supplier where beneficial Leverage supplier economies of scale Complexity of Solution

8 Technology and service complexity determine the form of shared services adopted d HIGH Technology Sophistication LOW 8 Virtual Shared Services / Self Service Process automation eliminates routine tasks and users take responsibility for transaction processing governed by workflow and business rules embedded in systems. Communities / Networks of excellence Interactive communication and effective knowledge sharing. Teams can form without the necessity to co-locate. Teams can be extremely flexible and can be either permanent, temporary or periodically formed. Physical shared services Centres of excellence Teams of transaction processing staff operating out of a single facility providing services to multiple business units. Centres process more complex and higher volumes of transactions to support a self service environment Personalised, flexible and expert intervention to support the agency. Services that are required infrequently and therefore are not cost effective to embed in each business unit. These services will be located wherever the trade-off between cost and quality is optimised. LOW Service Complexity HIGH Service Complexity Commodity, Transactions Services Expert, Knowledge Based Services

9 Shared services can be a core enabler of public sector reform benefit ons d for own b organizatio organised ough silo o overnment elivery thro Go De Sharing of New outcomes Wholly different policy views Sharing of New Services Unique and different combinations of services Sharing for citizen centered solutions Delivery Mechanism: Cross-agency progammes Sharing of Specialisation Delivery Mechanism: Specific competencies Sharing of Resource Management Delivery Mechanism: Corporate Services Reform Example Standard Business reporting Example solutions: Broadband enabled Health Support Example solutions: Human Services Portfolio Example solutions: WoG Travel Contract Example solution: Shared Service Centre for HR & Finance Transform med Agile and respon nsive Co ompetent Inte egrated Resource Wise organized for citize en s benefit Go overnment

10 Shared Services Framework Political Considerations Market Capability and Capacity Context Customer / User demographics Efficiency Targets 10 Strategy Agency Objectives Operating Principles Performance Metrics Procurement Strategy FMA Act CAC Act Shared Service Capability Management & Governance People and Organisation Transition Planning Services and Processes Skills Resource transfers Service Management Training Sequencing Infrastructure Organisational Development Culture & Values Change Management Transformation Skills & Resources Performance Mgmt. Transition Out Cut-over Testing Incentives Evaluation

11 Key transformational success factors Success Factor Sponsorship Business Case Governance Change Management Description Sponsorship by the Secretary. Leadership by an accountable senior executive with knowledge of the organisation. The strategy must be informed by a robust business case that engages relevant stakeholders and presents a compelling case for change. Small but high impact Board / Steering Committee focused on driving the business case. Significant investment in change management to ensure acceptance of new ways of doing business. Business Business rather than system focus, informed by re-engineering i of Focus processes, to deliver new business capability. Benefits Management Rigorous scope and cost management to capture and track benefits. 11

12 Implementing shared services Understand Key SSC Design issues & assumptions Develop Operation Model guiding Principles Develop Scenarios Propose draft model Review and revise proposed model What are your organisations specific issues and concerns? What minimum expectations are there? What are the nonnegotiable? What are specific guiding principles for developing your shared service organisation? How would you rank each option? What combinations of business unit, function, process, information flow and location are feasible given guiding principles and issues? How could these be grouped? Which aspects of the model are generally agreed? Which areas need more discussion and evaluation? Where are the points of contention? What options are there to resolve? Does the model fit the guiding principles and all discussion to date? Does the business case match expectations? Who is the decision maker?

13 Poor service quality is often viewed as the greatest t risk 13

14 Key transitional success factors Success Factor Staff Transition Client focus Service management Business Management Expectations Management Benefits Management Description Migrate staff to new positions with merit based selection. Engage g users in design. Invest in customer service training for shared services staff. Document business processes. Implement performance management (SLA s, KPI s, Reporting). Confirm business unit structure. Adopt business improvement rather than systems replacement mindset for new systems. Set realistic timeframes for implementation and stick to them. Scope benefits and monitor their achievement. 14

15 Performance Management Framework Strategic Management OWNERSIP & LEGAL STRUCTURE Form of Business Unit / Entity GOVERNANCE Strategy, Org. Structure, Monitoring, Evaluation Service Management PERFORMANCE MANAGEMENT CRM, Service Scope, SLA, Reporting, Contract Mgmt. Operational Management Business Process OPERATING MODEL People & Systems & Culture Technology Facilities & Location 15 FINANCIAL MANAGEMENT Budget, Funding, Costing, Benefits Realisation

16 Governance Board Model Governance Body Membership Meeting Frequency Governance Board Chair Shared Service Director Senior Cross Agency Representatives Quarterly Customer Group Meetings Service & Customer Forum Shared service managers Agency Representatives Agency Business Partners Functional Specialists Account Managers Agencies meet to review performance Operational Management Team Shared service managers Shared service management team Weekly

17 Project Team Structure Shared Services Programme Sponsor Project Director Business Case Developer Project Manager Change Management SME Technology & Systems Lead IT Manager Technology Architect SME Shared Service / Operating Model SME Location and Physical Infrastructure SME

18 Components of a typical Business Case Ongoing Benefits Ongoing Costs Reduction in Business Case Transactional headcount Operating model Reduction in managerial Service Delivery Headcount Salary differential Benefits Reduction no. of IT maintenance cost Saved local overhead (e.g., building and related HR costs) Procurement savings Supply Chain Savings. Financial Benefits (NVP,/Payback/Rol) Risk New SSC Operation costs SSC Headcount & related overheads Site Lease costs Additional Telecoms and Infrastructure Additional IT support Cost. Internal Project team cost- Time and expenses External Project team cost- Time and expenses HR implementation costs- Recruitment, Retention, Redundancy, Re-training, Re-location, Training Implementation Costs IT implementation costs- Software & Infrastructure Site selection and fit out

19 A minimum efficiency gain of 15% is required to justify the cost of implementation.. ti 19

20 The arguments for shared services in the public sector Efficiency Rationalisation of ICT investment Innovation Improved Resource management Rationale We can achieve efficiencies of at least 20% through business process improvements enabled by shared services. Many small agencies are committed to legacy ERP systems that they can not afford to maintain or replace. Citizen centered policy solutions support the wider application of shared services principles. Shared Services is a proven model for achieving sustained business improvement that will enable agencies to meet their Efficiency Dividend Targets. Our observations An equitable basis for sharing savings is critical. Agencies need to be able to re-invest savings in front line service delivery. An opportunity exists for a Central Agency or outsourced provider to provide fully hosted ERP system provided on a Shared Service basis. The Human Services Portfolio is embracing these developments..new and innovative ways of delivering government programs are required to achieve efficiency dividend targets.

21 The arguments against shared services in the public sector We are not big enough We cannot afford this investment Rationale Smaller agencies lack critical mass of staff to leverage efficiencies. Investment is upfront. The biggest costs are Redundancy, Implementation and EPR. Our observations A greater role by Central Agencies is required to establish the shared services infrastructure to support small agencies.. Payback is typically 4-6 years (or longer). Shared services should not be viewed as a silver bullet but as a performance improvement strategy. We can get savings through focusing on standardisation 10-25% of savings are typically driven through process efficiency improvements. Practical tools and approaches need to be developed and shared between agencies. This may require some revision of the CPG s to remove bottlenecks. We cannot risk this change in current control environment Compliance risk been a key issue facing CFOs over the last four years. Accountabilities under the FMA Act make Secretaries reluctant to transfer functions to a SSC. Compliance requirements are more onerous in the private sector but they still do it. The greatest scope for efficiency gain relates to expertise rather than transactions services.

22 Example Improvement Projects RELATED IMPROVEMENT PROJECT Reduce the volume of invoices through purchasing cards consolidated invoices RELATED IMPROVEMENT PROJECT Approve Invoices by Exception eliminate 100% audit procedures Increase standardise exception limits for reconciliations and approvals Increase asset capitalisation ti thresholds. h Eliminate Simplify 5 Principles for improving the effectiveness of corporate Support functions Automate Outsource Standardise RELATED IMPROVEMENT PROJECT Implement automated invoice matching Increase number of Electronic Payments EFT Payments Automated Clearing House to disburse Cash Payments Reduce number of Supplier Queries Self Service Reduce spreadsheets and manual data entry 22 RELATED IMPROVEMENT PROJECT Common Chart of Accounts Common Financial Policies Reduce number of ERP Implementations Common processes RELATED IMPROVEMENT PROJECT Payment processing Invoice Imaging and data extraction Supplier Statement Reconciliation

23 Agency Self Assessment Denial Defensive Positioning Physical / Virtual Shared Services Centre / Community of Excellence Stay with existing Business Processes and systems Seek Protection from Legislative Framework Reduce Costs by re-engineering i Upgrade / replace legacy systems Placate Key Stakeholders through benchmarking Shift costs from Corporate to Other Programs. to budget Services migrated to/from agency to SSC Infrastructure established, including technology and systems. Governance and performance management framework implemented. New Business Initiatives, are delivering citizen centred solutions / breaking down silos Strategic Capability established in Partnership with Key Industry Stakeholders Virtual teams working across agencies Change reporting structure and accountabilities. Common ICT platform and enabling tools 24

24 strategic business advisors strategic business advisors program and project assurance procurement and contract management market soundings program evaluation costing viability reviews reengineering strategic planning change management business transformation d t 24