Lorraine McMillan John W Mundell Chief Executive Chief Executive East Renfrewshire Council Inverclyde Council

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1 The proposal for Shared Support Services between seven Clyde Valley Councils demonstrates that savings of up to 30m per annum can be achieved through this challenging and innovative approach to modernised services. The savings meet the external financial pressures for change whilst addressing efficiencies for the future of our Support Services. Sharing more efficient support services will help us to protect our front line services as budgets continue to shrink. As Chief Executives Sponsors for this workstream, we commend full consideration of this to you with a view to considering your Council s involvement. We believe that the Business Case is based on prudent assumptions and reflects the significant challenges of undertaking a transformation project of this size. The public sector model chosen for delivery is flexible: it leaves the door open for more Councils or other public sector bodies to join at a later date and for further alignment of Support Services as may be necessary in changing future circumstances. At a time of ongoing public sector reform discussion and review we believe this level of flexibility is crucial. The dispersed staffing model proposed in the permits considerable employment to be retained in each Council area and utilises modern technology and our existing property assets. The Business Case is based on sharing in two phases. Phase 1 covers the elements of Support Services that: are most similar across all Councils; are unlikely to be influenced by the strategic direction of the Council; and have the strongest track record of successfully being shared or outsourced in the public sector. These services would deliver over 60% of the potential savings. Phase 2 would deliver further savings by sharing more of the professional and specialist elements. The Model provides flexibility in that each Council is asked to fully commit to joining Phase 1 initially but can then choose when or if to participate in Phase 2. Each Council s decision will depend on local circumstances and their own assessment of risk vs. return. For all Councils, a phased transition would be crucial making sure each Service is working well before the next major incremental transfer. The Model allows us to build on existing best practice within the Clyde Valley; bring in new expertise, where needed, to improve our processes; increase our economies of scale, and pool our resources to invest in modern proven IT solutions that help simplify, standardise and automate manual processes. It will reduce duplication in the procurement of IT solutions, reduce infrastructure costs and allow us to provide more online services to our staff and customers. The proposal has a significant impact on up to 5% of staff across our Councils. The public sector model, where relevant staff transfer under TUPE arrangements, should help protect terms and conditions and pension rights. Staff numbers in these shared services will decrease by 25% over time and perhaps more. This will need to happen with or without shared services. Taking the shared services approach we expect that these reductions should be achieved by natural change and voluntary redundancy. Some staff will have to move location but where possible this will be kept to a minimum. As we move to implement the Shared Support Service there is no doubt that new challenges, opportunities and barriers will emerge. However with strong partnership working, and determination to succeed, the Shared Support Service should provide increasing savings over many years. We would like to thank particularly David Amos, the Project Director and Business Case Author, who has worked tirelessly to produce this detailed Business Case, and the staff from all seven Councils involved in the various project teams who helped develop the case and the Finance Directors who have provided constructive challenge and the necessary due diligence. Lorraine McMillan Chief Executive East Renfrewshire Council John W Mundell Chief Executive Inverclyde Council

2 Clyde Valley Shared Support Services Status: FINAL FOR RELEASE Project Director: David Amos Document Author: David Amos Version 1.0 August 2011

3 Partners The participating Local Councils are:

4 Contents 1. EXECUTIVE SUMMARY Summary of key conclusions Introduction & Background An Ambitious Vision for Clyde Valley Maintaining the Ambition A Compelling Financial Case The Right Delivery Vehicle Making it happen Managing the Risks Guiding Principles Conclusion and Recommendations 9 2. INTRODUCTION Purpose of this document Context and background Approach to developing the Design principles BACKGROUND RESEARCH Mixed track record of shared services 3.2 Market Sounding Exercise SCOPE OF SHARED SERVICE Introduction and Background Maintaining ambition Overview of Scope Scope and Phasing FINANCIAL CASE Background to the development of the financial model Financial summary Implementation costs Operating costs and savings Indicative allocation of costs and savings by Council Financial assumptions THE RIGHT DELIVERY VEHICLE Assessment of delivery vehicle options IMPLICATIONS OF THE TARGET OPERATING MODEL Introduction Overview of the proposed target operating model Overview of Strategic Client Function Scope APPROACH TO IMPLEMENTATION Key next steps Implementation planning and governance Empowering the workforce Augmenting existing skills and expertise Equality Impact Assessment LOCATION AND ACCOMMODATION CONSIDERATIONS MANAGING RISK Key strategic risks 10.2 Operational risks APPENDIX 1 - FUNCTIONAL SHARING PROPOSALS 68 APPENDIX 2 ASSESSMENT OF DELIVERY VEHICLE OPTIONS 84 APPENDIX 3 - COUNCIL STAFF LOCATION MAPS 100 Version: 1.0

5 1. Executive Summary 1.1 Summary of key conclusions There is a compelling business case for sharing the support services of Finance, Payroll, Revenues & Benefits, Human Resources and IT across the Clyde Valley: o o after 5 years the shared support service could generate gross annual recurring savings of up to 30m per annum, rising to over 34m after 10 years; an investment of between 28m and 31m over the first five years will be required to realise these savings, but this includes some costs already budgeted for by individual Councils. The detailed business case is significantly wider in scope than the previous Outline Business Case put before Leaders in December The detailed business case now includes services that were regarded as retained by Councils in the Outline Business Case and includes related services that were previously not covered. o Overall projected gross savings have increased by 2% despite the business case having one less Council and assuming no savings from Housing Benefits services due to the impact of the UK governments universal credit plans. Creating a public-public arms length organisation was assessed on balance as the best option for taking the shared service forward on the basis that it would be: o o o o much quicker to set up and create early momentum and savings; more flexible and adaptable within a changing Public Sector environment; able to contract with Private Sectorto bring in necessary skills and expertise; more attractive for staff and trade unions. This is the most ambitious shared service project currently being taken forward in the UK and, as such, comes with significant risks. It is essential that the project is managed effectively to ensure the shared service is sustainable, effective and successful: o o services and Councils must be transitioned into the shared service, taking account of service readiness and internal change programmes to reduce the risk of service failure; initial focus will be on those service areas that offer greatest opportunities for early success to create momentum, positive feedback and early savings. The initial focus must be on what is realistic and achievable. Support service delivery will not be unchanged. More services will be online, managers will have to self serve, new IT skills will be required and service levels could dip during transitions. Councils participating in the shared service will be required to make an up-front investment, however the detailed business case has been constructed to make the entry level as low as possible and should be achievable for all Councils. Services with a present cost of up to 155m per annum could transfer to the shared support service, involving a transfer of up to 3357 staff. Approximately 25% of these could leave the service over the first 5 years primarily by voluntary redundancy and natural staff turnover. A distributed model will be adopted for the location of the shared services staff and by making use of existing Council property assets, will reduce the need for major relocations of staff across the Clyde Valley and ensure shared service jobs will be located in each participating Council area. Version: 1.0 1

6 1.2 Introduction & Background The Scottish Public Sector is facing a period of prolonged budgetary constraint, with total Scottish Government spending falling by 11.6% in real terms between 2010/11 and 2014/15. In response to this unprecedented financial environment, Councils have to re-think the way in which services are delivered to drive down costs while continuing to meet the priority needs of their local communities. Anticipating the reduction in Public Sector budgets the eight Clyde Valley Council Leaders commissioned Professor Sir John Arbuthnott in March 2009 to lead an independent review of joint working and shared services which was published in November The Clyde Valley Partnership met in January 2010 to consider its response and it was agreed that East Renfrewshire Council, supported by Inverclyde Council, would lead the work stream group looking at Support Services. In June 2010, Leaders and Chief Executives agreed that the Support Services Work Stream should develop an Outline Business Case by November This work was completed on time and in accordance with the original agreed programme. Based on this, Leaders requested that a Detailed Business Case be developed by June 2011 and that work be undertaken to assess the best option for setting up the shared service organisation. Seven of the eight Councils subsequently formally ratified their involvement in the development of the detailed business case phase of the project. A large amount of work has been undertaken by relevant staff from all participating Councils and the project team to bring forward the detailed business case, which is outlined in this Executive Summary. More detailed information can be found in Sections 2 onwards within this document. 1.3 An Ambitious Vision for Clyde Valley The Vision underlying this business case is far reaching, both for the Clyde Valley Councils and the wider Public Sector. The aim is to create a publicly owned shared service organisation which will: deliver best practice support services to partner Councils and local citizens; drive down support service costs to help protect priority frontline services; support equitable sharing of investment and gains amongst the participants; have flexibility to expand and develop over time in response to wider Public Sector reforms. It builds on the significant work that individual Councils have undertaken in relation to their own internal programmes to simplify and standardise support services and, creates the opportunity to collectively move to the next logical step in this journey; the sharing of services. This will unlock additional savings opportunities that many individual Councils could not achieve on their own. It will also add critical mass to the Clyde Valley s position as a competitive global centre for shared services, creating opportunities for cross fertilisation and skills sharing between sectors, and further strengthen this important part of the Clyde Valley economy. 1.4 Maintaining the Ambition Scope & Phasing This work on the took the sharing model set out in the Outline Business Case and sought to further refine and develop this through a series of workshops with functional managers and senior Council stakeholders. The result has been a further development in the ambition of the proposals, and a recognition that over time, a greater depth of sharing is possible than that assumed in the outline business case. Diagram 1 below illustrates the range of services within the baseline and proposed phasing. Version: 1.0 2

7 Diagram 1 - Phasing and Scope of sharing In phase 1, services valued at approximately 111m will be transitioned into the shared service. These services will primarily be transactional based services and ICT where there is a good track record of success in shared services for Councils around the UK (i.e. the phase 1 services shown in diagram 1 above). The savings will build up over time and after 5 years could be up to 19m per annum. In phase 2, a second tranche of services will be transitioned into the shared service with an additional value of 43m. These services are the more complex and specialist advisory services (phase 2 services in diagram 1 above) and could lead to an additional 11m of savings per annum 5 years after implementation. These services carry more risk than those in phase 1 as the model is less well tested, and there is the potential for a Council s strategic control being compromised if implemented poorly. The business case shows little financial benefit in sharing Customer Access e.g. call centres and face to face services. In addition a number of Councils have integrated their customer access arrangements with a wide range of front line operations. However it may suit some Councils for the Shared Service to manage their customer access activities and therefore this is included as an option. Benefits will be achieved by sharing the development of online customer services and this has been included in the business case. It would be the role of the new management team for the Shared Service to work with partner Councils to determine the most appropriate sequence for transferring services into the Shared Service vehicle to achieve early savings and success. Version: 1.0 3

8 Significant Scale Across the Clyde Valley Councils there is a significant amount of resource deployed within the in scope functions as shown in Table 1 below: Table 1 Baseline Resource Deployment Functional Area Total Cost Total FTE Finance 25.4m 677 HR and Payroll 32.0m 823 ICT 58.4 m 552 Revenues & Benefits 33.4m 1,070 Customer Access 5.9m 236 Clyde Valley Total 155.2m 3,357 This expansion in the identified total spend within these functional areas has further increased the potential for the Shared Service operation to unlock substantial savings to help protect priority front line services within the participating Councils. A Clyde Valley Shared Support Service (CVSSS) of this scale would be the largest in the UK. The participating Councils would be taking a clear leadership role in the development of innovative and progressive responses to the financial challenges faced by the Public Sector. Participation by other public organisations The shared support service being proposed by the Clyde Valley Councils has attracted wider Public Sector interest. The proposals have been developed to ensure flexibility for future expansion and the provision of robust and scalable technology platforms to support this. The recently published report on the McLelland Review of ICT Infrastructure in the Public Sector in Scotland, highlights the opportunity for Public Sector bodies to make better shared use of ICT infrastructure. The implementation of the CVSSS would place the Clyde Valley partnership in a good position to pilot any proposals from the report. 1.5 A Compelling Financial Case The additional work undertaken on the detailed business case over the last six months has further strengthened the financial case for a Clyde Valley Shared Support Service (CVSSS). Two scenarios are presented below to demonstrate the potential savings. In the first scenario, phase 1 services are transitioned in over 2 years, embedded and then phase 2 services transitioned in from year 5 onwards and this could be seen as a conservative medium risk option. In the second scenario there is a rapid transition of both the phase 1 services and phase 2 over 2.5 years which could achieve higher savings by year 5 but will carry more risk primarily due to the rate of change. Diagram 2 below illustrates the annual savings profile projected over a ten year period for both scenarios. The growth in savings from year one reflects the phased transition of Council functions into the Shared Service and the impact of moving to best practice processes for service delivery. There is significant variation in performance across functions within the participating Councils, with best practice spread across different Councils for different functions. The business case prudently assumes that by the end of the first five years, all of the functions within the Shared Service will be operating levels of productivity currently achieved by the most efficient in the Clyde Valley at present. From year five onwards, the continuous improvement culture created within the organisation will drive annual efficiency improvements in line with that achieved by other successful Shared Service operations in the public and private sector. Version: 1.0 4

9 000s Clyde Valley Shared Support Services Diagram 2 Annual Savings Profiles Projected gross savings against 2010/11 baseline budget 000s 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Scenario 1 Scenario / / / / / / / / / /22 While Councils own internal improvement plans may enable them to achieve a proportion of these savings, the Shared Service must allow them to go further than can be achieved individually by:- collaboratively developing and implementing best practice and lean processes; investing in shared skills and expertise; removing the duplication inherent in seven separate operations of the same service; pooled investment in implementing world class technology to automate and simplify manual activity and introduce self service; creating a unique organisation with an empowered workforce focused on meeting their customer needs in the most efficient way possible. The business case assumes that all seven Councils participate in the Shared Service and it should be noted that both the savings and costs above would be impacted if some Councils chose not to participate. Sensitivity modelling has been done and the business case remains robust across a range of different Council combinations. However a particular strength of the Clyde Valley proposals is the scale of savings that can be achieved collectively and the ability of Councils of very different sizes to come together and gain equitably from their involvement in the Shared Service. Investment requirement The delivery of the business case identifies an investment requirement of up to 31 million over the first five years, which is split approximately 16m capital (for systems and infrastructure) and 15m revenue (primarily for change programme and staff release costs) as shown in Table 2 below. The majority of the early investment relates to capital spend on systems and infrastructure and work will continue to identify the most appropriate means of funding this to achieve a balance between the cost and savings profiles to ensure early net savings can be delivered. Table 2 Summary of Investment and Savings forecasts Scenario Total Investment Annual saving by end Yr 5 Annual saving by end Yr 10 Scenario m 18.6m 32.4m Scenario m 30.1m 34.3m It is also recognised that some Councils will have elements within their budgeted capital programmes for spending on ICT which will not be required if they participate in the Shared Service. Equally, some Councils have also budgeted for significant staff release costs over the next two years, and participating in the Shared Service would simply provide a mechanism by which some of those budgeted staffing reductions would be achieved. While this position varies across the different Councils, the result is that overall net additional investment across the participating Councils will be less than the 31m identified above Version: 1.0 5

10 1.6 The Right Delivery Vehicle A major part of this second phase of the project was to identify the most appropriate vehicle for delivering the Clyde Valley Shared Services vision. A detailed comparison was made between the following options: a lead Council; a joint board; a company wholly owned by the participating Councils; a company jointly owned by the participating Councils and a Private Sector partner. This assessment was further informed by a significant market sounding exercise involving a wide range of Private Sector suppliers. This valuable exercise helped to both confirm the soundness of the Shared Service proposals and, highlighted the different ways in which necessary Private Sector expertise and innovation could be drawn in to support successful implementation. Creating a public-public arms length organisation was assessed on balance as the best option for taking the Shared Service forward on the basis that it would be: much quicker to set up and create early momentum and savings; more flexible and adaptable within a changing Public Sector environment; able to contract with Private Sectorto bring in necessary skills and expertise; more attractive for staff and trade unions. 1.7 Making it happen Next steps On the assumption that Councils will agree to seek a formal decision later in the summer to participate in the Shared Service implementation, it will be important that momentum is maintained in the intervening period. This will help ensure that the Councils are in a position to rapidly establish the Shared Service vehicle and appoint a management team, following final Council approval in September. Diagram 3 below outlines key next steps but it should be noted that this timescale is highly ambitious and will require significant commitment from all Councils to achieve it. Diagram 3 Indicative next steps Phased implementation The business case assumes that there is a phased transfer of services from Councils to the Shared Service, and that this process would run over a period of time as determined by Council service readiness and the implementation planning undertaken by the Shared Service management team. Version: 1.0 6

11 This provides flexibility in relation to the timing of transfer of services from partner Councils to ensure a best match between service readiness and Council preferences and priorities. The business case financial model has assumed that services would be transferred to the Shared Service on a function by function basis, with Councils being transitioned into the Shared Service on a phased basis. This will allow for learning to be accumulated within the programme change team, and accelerate the process of transitioning in Councils over time. The final implementation approach will be determined by the CVSSS management team in consultation with the participating Councils. Empowering the workforce The success of the CVSSS will largely be determined by the work and commitment of the staff transferred to it. The setting up of the CVSSS presents a unique opportunity to create a culture that is fully focused on meeting customer needs in the most efficient way possible and a workforce that is empowered to achieve that. This will be supported by the adoption of a lean system thinking methodology for service redesign and continuous improvement. Bringing in new skills and expertise Developing and training existing staff will be a key feature of the CVSSS, but it is recognised that during the implementation phase, significant skills and expertise in Shared Services and large scale change management will be required. While the participating Councils do have staff skilled and experienced in change management, these are in short supply and very heavily utilised within existing change and transformation programmes across Council service areas. If the risks associated with the programme are to be effectively managed and the anticipated benefits secured, it is crucial that the existing resources are augmented with the best available from external sources. 1.8 Managing the Risks As highlighted in the Outline Business Case, undertaking change of this scale and complexity brings with it a number of risks. The detailed business case process has sought to further highlight these and identify how they can be managed. The Councils will be breaking new ground in creating a Shared Service arrangement of this size and this will be challenging at both a partnership level and internal to each Council. Table 3 below highlights the key strategic risks and approach to mitigation. Table 3 Strategic Risks Key strategic risk area Trust and Commitment between Partner Councils. Joint strategic management of Service. Shared Service managerial autonomy. Shared Skills and expertise to deliver change and manage Shared Service operation. Adoption of new ways of working within partners Councils. Impact on service quality and performance. Impact of Shared Service on existing Council transformation programmes. Mitigation approach Partnership Agreement document will create contractual framework for long term commitment and understanding between partner Councils, and resolution of problems. Clear, simple and transparent Governance arrangements created, together with detailed scheme of delegation identifying responsibilities to be held at different governance levels. Clear scheme of delegation drawn up giving appropriate operational autonomy to Shared Service management team. Shared Service organisation empowered to identify skills gaps and recruit/contract external support as necessary to deliver Shared Service vision. Partnership Agreement between partner Councils will create contractual obligations for each Council to adopt the necessary internal changes. Steady state transactional based charging mechanism will encourage adoption of internal new ways of working. Implementation planning and phasing of transition will seek to minimise impact on service quality and performance (although some initial reductions may take place during the initial transition phases). Increased use of self serve solutions may lead to perception that service levels have decreased, requiring effective internal communications to explain changes and training in use of new ways of working. Implementation planning and phasing of transition will take account of service readiness and internal change programmes to minimise disruption. This will be supported by strategic Client arrangements will provide an effective interface between Councils and the Shared Service. The CVSSS has included some capacity to support joint re-design of customer access processes which may feature within some Council transformation plans. Version: 1.0 7

12 Key strategic risk area Standardisation of relevant policies and any necessary harmonisation of Shared Services staff terms and conditions (and associated cost impact). Existing ICT third party contracts or joint venture arrangements. Workforce Risk - arising from loss of skilled and experienced staff and resistance to move to Shared Service and associated new ways of working. Inconsistency in baseline data provided leading to errors in forecast savings, productivity measures and benefits sharing. Timescales not met for the implementation and delivery of benefits with negative impact on individual Council budget positions. Information Security. Equality Impact. Mitigation approach Business case does not assume changes to staff terms and conditions to achieve savings and CVSSS will seek to use organisational structure and role design to mitigate differences amongst transferring staff. Partnership Agreement will create framework within which agreement on adoption of common policies, where required, can be reached. Best practice staff consultation and dialogue processes will be adopted within Shared Service to support any required harmonisation. Detailed analysis and assessment of options undertaken to establish the best practical economic option for the CVSSS and relevant Councils and to reduce the risk of challenge. Adoption of best practice approaches to staff and trade union engagement and consultation once final Council decisions taken on participation. Adoption of lean systems thinking approach to service redesign and continuous improvement to ensure staff participation and empowerment within the CVSSS. Further review of baseline when Council participation is finalised and adjustment of model and targets as required. Further detailed implementation planning will be undertaken when Council participation is finalised and robustness testing by the CVSSS management team. Implementation of a robust benefits realisation process within the CVSSS, with regular reporting to the established governance arrangements. An information security and privacy risk assessment of each strategy will be carried out, so the findings can be considered as part of the decision making process and recommendations can be built into implementation strategy. An equality impact assessment will be undertaken once Council participation has been finalised and an action plan produced to address any identified issues. Councils also recognise that their own internal change programmes are not without significant risk. Participation in the Shared Service programme has the benefit of enabling pooled access to substantial expertise and change resources which will help mitigate some of these risks and challenges. 1.9 Guiding Principles If Councils wish to progress to formal ratification of the proposed Shared Service, a more detailed Partnership Agreement will require to be prepared over the summer period, covering the governance arrangements and operation of the Shared Service. This will be based on the following guiding principles. Councils will: work in a way that encourages mutual respect, openess and trust; commit to the successful achievement of the shared support services; operate in a transparent and clearly accountable manner; share investment costs and benefits gained proportionate to their scale of service; work constructively together to manage key strategic risks; adopt the necessary internal changes to enable them to work effectively with the new Shared Service organisation; undertake to resolve any conflicts through appropriate governance arrangements with a view maintaining strong relationships; develop a full memorandum of understanding that will form the basis of clear, binding contractual arrangements between partner Councils, the Shared Service organisation and its customers and suppliers and, develop a framework for service charging, service levels and customer compliance. Version: 1.0 8

13 1.10 Conclusion and Recommendations Conclusion The detailed business case work has further strengthened the business case for a shared support service for the Clyde Valley and demonstrated the commitment within the participating Councils to take bold and progressive steps to address the unprecedented financial challenges faced by the Public Sector. The implementation of the Shared Service as described in the business case provides a unique opportunity for the Clyde Valley Councils to take a strong leadership position on Public Sector reform, and set a precedent for others across the UK. Recommendation Councils are asked to agree to: 1. Seek approval by September to: participate in establishing a Public-Public company vehicle for shared support services; commit to a phased approach to sharing key support services including a firm commitment for Phase 1 services ( IT, Revenues and Benefits, transactional HR and transactional Finance) to be shared ideally within two years as a minimum; determine each Councils planned commitment and timescales to implement phase 2 services; commit to provide their share of the investment required to establish the Shared Service as set out in the detailed business case. 2. Agree to the guiding principles set out in Section 9 above, which will form the basis of the Partnership Agreement which will be drawn up between the participating Councils, 3. Agree to continue with the current joint working arrangements over the summer period to oversee and co-ordinate: preparatory legal work for the establishment of the Shared Service entity; the development of the Partnership Agreement; the development of an approach to be used for the appointment of the management team for the Shared Service; further detailed implementation planning activity. Version: 1.0 9

14 2. Introduction 2.1 Purpose of this document This document details the outcome of the (DBC) phase of the Clyde Valley Shared Support Services (CVSSS) Workstream involving seven of the Councils within then Clyde Valley Community Planning Partnership: East Dunbartonshire, East Renfrewshire, Glasgow, Inverclyde, North Lanarkshire, Renfrewshire and West Dunbartonshire. This document, and the analysis that has been undertaken to support its preparation, has assumed that all seven Councils participate in the proposed Shared Service. To avoid unnecessary project expenditure in advance of final decisions on Council participation, detailed implementation planning has been kept at an appropriate level, since the actual implementation plan will be heavily influenced by the final line up of participating Councils and their specific choices in relation to scope. Equally, the senior management team appointed by the Councils to implement and operate the Shared Service will have a significant influence on the implementation plan, as they will be responsible and accountable for its delivery. As a consequence of this, the proposals and figures contained within this business case document will be further reviewed and developed to reflect the outcome of future individual Council decision making processes and the expert views of the appointed senior management team. 2.2 Context and background A forward thinking response to the Public Sector financial environment This (DBC) has been developed in the context of the unprecedented financial challenges faced by the Clyde Valley Council and the wider Public Sector. Total Scottish Government spending is forecast to fall by 11.6% in real terms during the current three year financial planning cycle (2010/11 and 2014/15) with further prolonged budgetary constraint anticipated in subsequent years. In anticipation of this challenging environment, the Clyde Valley Council Leaders recognised that Councils would need to re-think the way in which services are delivered to drive down costs while continuing to meet the priority needs of their local communities. In March 2009, they took the bold and forward thinking step of commissioning Professor Sir John Arbuthnott to lead an independent review of joint working and Shared Services. The output of this review was published in November The Clyde Valley Partnership met in January 2010 to consider its response to Sir John s review, and agreed to pursue a number of collaborative workstreams. Each workstream was to be led by a sponsor Council, with the Support Services workstream being led by East Renfrewshire Council and supported by Inverclyde Council. In June 2010, Leaders and Chief Executives agreed that the Support Services Work Stream should develop an Outline Business Case (OBC), and this was presented to the Clyde Valley Leaders and Chief Executive s Forum meeting 26 th November At this meeting, Leaders agreed to continue this work and requested that a (DBC) was developed by June Following the 26 th November 2010 meeting, seven of the eight Clyde Valley Councils subsequently formally ratified their involvement in the development of the detailed business case phase of the project. This document is the output of the DBC phase of the workstream and aims to provide sufficient information to support Councils to take an informed decision on whether to participate in the implementation of the proposed Shared Service Protecting front line services Faced with reducing budgets and rising demand for many services, the Clyde Valley Councils have put much effort into reducing the cost of support services to ensure as much of the budget as possible can be re-directed to supporting the priority frontline services their local communities rely on. All of the participating Councils took advantage of the Scottish Government and Improvement Service support for the diagnostic pathway and have included aspects of support services simplification, standardisation and internal sharing within their internal transformation plans. Version:

15 The CVSSS project has provided an opportunity for the Councils to further progress this journey by moving to the final stage in the process: sharing between organisations. Many of the participating Councils have identified they are reaching the limit of the savings they can achieve within their own support services, without significantly reducing effectiveness. Participating in the proposed Shared Service will enable further cost reductions to be achieved while maintaining effectiveness. Without the Shared Service, further savings would require to be made within frontline service areas. The Shared Service will create a joint centre of excellence for service redesign work utilising the most effective lean systems thinking type approach. This will help ensure that the processes adopted by the Shared Service meet the needs of customers and that any waste and failure demand within the existing Council processes is designed out. In addition, Councils will be able to achieve economy of scale savings that would not be available to them on their own, in areas such as management and specialist staff, systems and infrastructure costs. Overall, as this business case document demonstrates, this will enable the participating Councils to achieve significant savings in support service areas that can be used to reduce the impact of budget reductions on front line services Supporting public service reform The Clyde Valley Councils are not alone in seeking to bring forward proposals to meet the financial challenge faced by the Public Sector. In support of its own planning, the Scottish Government commissioned two reviews, the outcome of which have recently been published: The McLelland review of ICT Infrastructure in the Public Sector in Scotland The Christie Commission on the Future Delivery of Public Services The output of these reviews has been considered to ensure that the plans being developed by the Clyde Valley are complementary and supportive of the general direction of travel being sought by the Scottish Government. The McLelland Review The McLelland review sought to review the strategic management of investment in Scottish Public Sector information and communication technology (ICT) infrastructure and report on how best to deliver improved value for money and support multi-agency working and Shared Services. As part of the review process, John McLelland met with the CVSSS project Sponsor and Director to gain an understanding of the project. The project is referred to in his report as an example of the opportunities for saving in ICT that can be achieved through ICT infrastructure and service consolidation. The recommendations contained within the report in relation to increased adoption of online completion for routine transactions and consolidation of ICT governance and infrastructure (such as applications, networks and data centres) are all features of the CVSSS project. The Councils also believe that the implementation of the CVSSS will provide significant momentum for many of the McLelland recommendations, given that approximately one third of the total Scottish Local Government sector by expenditure is involved in the project. The Christie Commission on the Future Delivery of Public Services The Christie Commission report deals with more generic cross cutting strategic issues than the McLelland report, but again the proposals of the Clyde Valley Councils fit well with the strategic principles outlined in the report. Clearly the principle that Our whole system of public services public, third and private sectors must become more efficient by reducing duplication and sharing services wherever possible (Christie Commission report Foreword, pvi) is fully endorsed by the work that has been undertaken by the Clyde Valley Councils in developing their Shared Services plans. Equally the report identifies the importance of engaging with service users and the staff delivering services in the re-design of services we believe that front-line staff, along with people and communities are best placed to identify how to make things work better, it is critical that managers at all levels support staff in empowering users and communities, and to give fresh meaning to their own work. (Christie Commission report P 37, para 4.46). The plans for the CVSSS to adopt a lean systems approach to service design and improvement is fully in line with this view (see section 8.3 for more detail). Version:

16 2.2.4 Wider Clyde Valley Economy The Clyde Valley region is home to a number of Private Sector Shared Service and call centre operations. These represent an important component of the Clyde Valley economy, and already a number of Councils have benefited from the recruitment of staff with experience of working in these customer focused operations. The creation of a Public Sector Shared Service operation within the Clyde Valley of the scale being proposed would add significant critical mass to this aspect of the local economy. The important role that the public service can play in economic development was recognised by the Christie Commission which noted that public services are crucial in helping many to achieve the skills needed to be part of the labour market and thus vitally important to improving our economic performance (Christie Commission report, Foreword, p vi). The cross fertilisation between public and private sectors that will result from the establishment of the CVSSS and, the increase in a regional workforce skilled in Shared Services will help further strengthen the competitiveness of Clyde Valley as a Shared Services location. 2.3 Approach to developing the Wide range of activity undertaken The DBC activity was broken down into 2 main workstrands, as identified in Table 4 below. Workstrand 1 related primarily to activity that could be undertaken in advance of the outcome of individual Council ratification process being known (up to end Feb 2011). Workstrand 2 related to activity that required detailed engagement and input with the participating Councils. Table 4 Activity Areas Deliverable ID Deliverable Name WORKSTRAND Project Mobilisation 1.1A Project Initiation Document 1.1B Internal project team resources in place 1.1C External subject matter expertise procured 1.2 Soft market testing/supplier engagement 1.2A Document summarising analysis of market engagement 1.3 Evaluation of as-is IT environment and to-be requirements 1.3A Updated as-is ICT baseline 1.3B Evaluation of potential for use of existing ICT assets within Shared Service 1.3C Articulation of high level ICT requirements for Shared Service 1.3D Updated estimated ICT costs for CVSSS implementation 1.4 Initial analysis of location options 1.4A Data gathered on in-scope staff home and office locations 1.4B Identification of available office locations 1.5 Assessment of delivery vehicle options 1.5A Agreed criteria for assessment of delivery vehicle options 1.5B Initial assessment of delivery vehicle options Version:

17 Deliverable ID Deliverable Name WORKSTRAND Refinement of target operating models for each functional area 2.1A Agreed definitions for Level 2 processes for each functional area 2.1B Identified best practice benchmarks for in scope functions 2.1C Agreed split of Level 2 processes between Shared Service and retained organisations and extent of flexibility that can accommodated. 2.2D Updated to-be baseline and future improvements for input to CVSSS financial model 2.2 Updating as is baseline information 2.2A Guidelines produced by Finance Directors for baseline data updating 2.2B Updated as-is baseline information for input to CVSSS financial model 2.3 Further analysis of location options 2.3A Initial assessment of potential location options 2.3B Impact assessment of location options on staffing for each Council area 2.3C Estimated cost impact of accommodation for inclusion within financial model. 2.4 Updating financial model costs/benefits breakdown 2.4A Updated and robust financial (spreadsheet based) model 2.5 Final assessment and recommendation on delivery vehicle options 2.5A Recommendation on the most appropriate delivery vehicle for participating Councils for inclusion within the business case 2.6 Produce Document 2.6A document 2.6B Presentation of and Recommendations to Clyde Valley Leaders and Chief Executives Forum 2.7 Development of implementation plan 2.7A Draft implementation plan for inclusion in Business Case Extensive Stakeholder Involvement The (DBC) phase aimed to continue and extend the wide range of stakeholder involvement achieved during the development of the Outline Business Case. The key stakeholder groups involved are summarised below. Clyde Valley Chief Executives Forum this group acts as the Programme Review Board for all the Clyde Valley Shared Services workstreams. The group receive regular updates on all Shared Service developments and consider options choices and recommendations and take decisions as required. Sponsor Chief Executives the Chief Executives of East Renfrewshire and Inverclyde Councils were the nominated project sponsors and provided leadership and advice for the project and agreed the recommendations to take to the Clyde Valley Chief Executives Forum meetings. Workstream Group this group was attended by one senior officer from each Council in the Clyde Valley (nominated Workstream Lead ). The main focus was to act as a sounding board for the project and provide support and advice as required. Individual members also ensured that their own Council was providing the necessary input for the project. Director of Finance Group this group advised on a consistent approach for the baseline updating exercise and on how a robust business case should be developed. Functional Leads - a lead officer (senior manager) for each service area in scope from each Council was identified to undertake this role. They acted as the primary point of contact for gathering and validating baseline information and participation in workshops for the refinement of the target operating models developed during the OBC phase of the workstream. Service Champions a senior manager was identified to act as a champion for their functional area, working as part of the project team and supporting the engagement with their colleague functional managers across the other Councils. Version:

18 2.3.3 Project Scope A summary of the scope covered by the (DBC) phase is given in Table 5 below. Table 5 Project Scope Summary Component Participating Councils Description The following Clyde Valley Councils formally ratified their participation in the DBC phase: East Dunbartonshire East Renfrewshire (Joint sponsor) Glasgow Inverclyde (Joint sponsor) North Lanarkshire Renfrewshire West Dunbartonshire The following functional areas were identified as within scope for the DBC phase: Services within scope of DBC analysis Depth of service scope Finance Human Resources & Payroll ICT Revenue & Benefits. Customer Management To support the assessment of Shared Service options, the activities undertaken within each functional area were categorised into the following elements: Transactional services (often high volume, repetitive activities, administrative in nature); Professional / Advisory (more variable, often case based activity, requiring professional expertise and knowledge); and Strategic (high level strategic planning and decision making activity). It was acknowledged that the Strategic component would be significantly retained in any Shared Service arrangement It was agreed at the end of the OBC phase, that the following options for delivery vehicle would be considered as part of the DBC activity: Shared Service Delivery Vehicle Options Lead Council; Joint Board A Public:Public company (jointly owned by the participating Councils) A Public:Private company (jointly owned by the participating Councils and one or more Private Sectorpartners) Version:

19 2.4 Design principles A concise set of design principles were developed and agreed as part of the previous Outline Business Case (OBC) phase and which have continued to underpin the (DBC) activities. These are set out in Table 6 below: Table 6 Design Principles Clyde Valley Shared Support Services (CVSSS) Design Principles 1 Cost savings 2 Sufficient gain for all The Shared Service will provide a mechanism by which participating Councils can significantly reduce the cost of services within scope. Participation in the Shared Service must provide a mechanism for delivering costs savings that is more compelling than the alternative internal options. The Shared Service will provide a mechanism for all Councils to gain sufficiently from participation. There must be sufficient equity within the mechanism for benefits sharing to maximise the incentives for Councils to participate Protected customer service and key performance measures Continuous improvement Strategic benefit for Clyde Valley Flexibility and robustness The Shared Service must meet the identified key customer service and performance golden measures. While some aspects of customer service could potentially decrease for a period during the implementation phase, the Shared Service operation will be expected to meet customer service and performance levels that are equivalent to the current best practice within the Clyde Valley across a range of agreed golden measures. The Shared Service will provide a mechanism to drive continuous improvement in efficiency and service quality. The Shared Service will be expected to develop a continuous improvement culture that puts customer needs and staff involvement at the centre of the design of improved processes and enable participating Councils to gain from ongoing efficiency improvements in the long term. The Shared Service should support wider strategic benefit and improvement within retained services across the Clyde Valley Councils The Shared Service operation should be an enabler for improvement within retained Council services and wider economic and strategic developments across the Clyde Valley. The Shared Service should be able to develop flexibly and respond effectively to changing external circumstances The Shared Service operation should have the ability to expand both the range of services and Public Sector participants, and be robust enough to adjust to future changes in government policy and Public Sector reform proposals. Version:

20 3. Background Research 3.1 Mixed track record of Shared Services Delivering significant change within any organisation is difficult and all of the participating Councils have their own experience of challenges within their change programmes and differing degrees of success. Support service change generally impacts all departments in a Council because of the corporate nature of the services and the need for the adoption of Council wide new ways of working. Undertaking collaborative support services change across multiple organisations adds another level of complexity to this. This added complexity has resulted in Shared Services being frequently allocated to the too difficult box and only considered when internal change activity has been exhausted. This view of difficulty has also been strengthened by publicity surrounding high profile Shared Services projects which have run into difficulties, such as the Western Australia Government Shared Service, or the UKs own NHS ICT programme. Perhaps not surprisingly, less publicity has been given to the Public Sector Shared Services success that can be found around the country, some examples of which are highlighted below. NHS Shared Business Services (SBS) Joint venture between Steria and Department of Health providing finance, procurement and payroll services for 130 NHS trusts in England. On track to deliver contracted 250m savings over the 10 year contract period. Anglia Revenues Partnership Long established Revenues and Benefits Shared Service for Breckland Council, East Cambridgeshire District Council, Forest Heath District Council and St Edmundsbury Borough Council. Since its creation in 2003 the Partnership has provided both significant improvements in service delivery & annual financial savings in excess of 1m per annum. Xentrall Shared Service between Stockton and Darlington Councils for HR/Payroll, Finance, ICT and design and print. Went live in April 2008 and achieved annual savings of 30% by April Local Government Shared Services (LGSS) - Shared Service between Cambridgeshire and Northamptonshire Councils for Hr/Payroll, Finance, ICT, Legal and Procurement. Went live Oct 2010 with budget of 34m and have delivered 1.26m savings to date, and on track to deliver up to 32% savings in some functions. Customer Services Direct (CSD) Successful Long term joint venture between Suffolk County Council, Mid-Suffolk District and BT, providing customer and ICT services for both Councils. Tayside Contracts Set up following Scottish local government re-organisation, this commercially focused local Council contracting organisation has successfully provided catering, cleaning, roads maintenance, vehicle maintenance and winter maintenance for Angus, Dundee and Perth and Kinross Councils. What is clear from the evidence available is that like any major change programme, Shared Services can be done badly or well. Research into effective change by the Improvement Service highlighted a number of critical success factors that apply across all types of change activity, including Shared Services, as illustrated in Diagram 4 below. Version:

21 Diagram 4 Improvement Service Change Capability Model While all of the factors apply to Shared Services, the Leadership and Governance category is of crucial importance given the multi-organisation nature of Shared Services. It is considered that a characteristic of many high profile Public Sector Shared Service failures has been a lack of a clear, consistent vision that all of the participants sign up to and, collective leadership and support for the achievement of that vision. It would appear that in a number of the Public Sector Shared Services that have run into difficulties, the Shared Service was mandated and therefore may not have benefited from the full support and commitment of the leadership and staff within the participating organisations. The Public Sector ethos does not lend itself to the more assertive approach that can be adopted within a large Private SectorShared Service arrangements where performance management arrangements may be used to ensure all business units or subsidiaries within the organisation fall into line with the company strategy. It is vital therefore that any Public Sector Shared Service arrangement has the full and committed support of the leadership of the participating organisations. The participating Clyde Valley Councils meet this vital component and this has enabled them to bring forward this ambitious business case: the participating Councils have a long track record of successfully working together through the Clyde Valley Partnership, the Leaders of the Councils commissioned Sir John Arbuthnot to undertake the initial review which led to the development of this support services business case, and have remained engaged throughout the process and have taken the key decisions to proceed, the Chief Executives of the Councils have met throughout the project and overseen the development of the business case and ensured that their own organisations fully supported the process, the Chief Executives have ensured that their own managers have been kept briefed on the project, striking the necessary balance between raising unnecessary staff concerns about change while the project was at a developmental, pre-decision stage, and keeping staff informed. The strength and maturity of the Clyde Valley Partnership is further illustrated by the ability of a Council to withdraw from a particular workstream where it does not fit with their long term strategy (as one did with this workstream) while still remaining engaged with other workstreams. Version:

22 3.2 Market Sounding Exercise In line with the Office of Government Commerce (OGC) good practice, an extensive market sounding exercise was conducted as part of the (DBC) phase. This aimed to sense check the ambition and scope of the Clyde Valley Shared Support Services (CVSSS), learn from the collective experience and knowledge within the private sector, and seek views on the way in which CVSSS could be structured and engage with the Private Sectorto ensure it was best able to draw in the necessary expertise to deliver the Shared Services vision. This valuable exercise helped to both confirm the soundness of the Shared Service proposals and, highlighted the different ways in which necessary Private Sectorexpertise and innovation could be drawn in to support successful implementation. Table 7 below identified the companies that participated in the market sounding exercise. Table 7: Companies Participating in Market Sounding Exercise Company Managed Service Providers/Outsourcers 1 Accenture Major player in Government outsourcing globally. Rationale 2 BT Significant local government outsource/joint venture experience including service that are inscope for CVSSS. 3 Capita Significant local government outsource/join venture experience including service that are inscope for CVSSS. Also supply Academy Revenues and Benefits system used by Glasgow. 4 IBM Major player in Government outsourcing globally with local Government experience via South West 1 joint venture. 5 SERCO Major player in Public Sector outsourcing/joint venture, with ACCESS arrangement with Glasgow City Council of particular relevance for CVSSS. 6 Steria Major player in ICT related outsourcing but very significant NHS joint venture shared finance support service experience following take over of Xansa. ICT Managed Services/outsourcers 7 Atos Origin Major public and Private SectorICT outsourcer with strong Scottish Experience through NHS Scotland ICT contract and recently won contract with Aberdeen City on ICT. 8 Logica Public and Private SectorICT outsourcer, but major supplier of hosted SAP managed services to English Local Government and also hold UK Government managed Payroll services contract. 9 Cap Gemini Major Public and Private SectorICT outsourcer with a number of Scottish central government dept/ndpb outsource contracts. Technology suppliers 10 Northgate Supplier of majority of Line of Business systems used within local government, including within the Clyde Valley (CV) Councils for the functions in scope. Also developing managed service/outsource options utilising these systems. Northgate Arinso is also a major international payroll managed service provider. 11 SAP Major Tier 1 Enterprise Resource Planning (ERP), as used by Glasgow City Council. 12 Oracle Major Tier 1 ERP software and hosted service supplier. Oracle database software used by all CV Councils. 13 Advanced Business Solutions Tier 2 ERP software supplier (Cedar product), used by two of the participating Councils, but is the national finance solution used by the NHS Scotland 14 Lagan Supplier of Customer Management Software used by majority of CV Councils 15 Microsoft Supplier of operating system and desk top applications used by all CV Councils. 16 CISCO Technology and services provider, (networking infrastructure and communications technologies) used by all CV Councils 17 EMC Technology and services provider (data centre and virtualisation technologies). Currently advising Irish Government on consolidated virtualised ICT government infrastructure as part of efficiency programme (EMC is one of biggest Private Sectoremployers in Eire). 18 Virgin Media Major supplier of communications network infrastructure, including a number of the CV Councils. Version:

23 3.2.1 Market sounding panel sessions A series of panel sessions were organised where the suppliers were asked to present their views on the following key themes, together with any additional information they felt appropriate. Theme 1 - the art of the possible i.e. how can we use the opportunity of bringing together the service areas in scope to maximise the delivery of efficiency savings for the Councils while maintaining or improving service quality? e.g: Where are the most significant opportunities for delivering efficiency savings and service quality improvements and how can these be realised? What are the main factors that would inhibit the delivery of these benefits? How would Private Sector input add most value to this? Where have these types of benefits been achieved elsewhere and what are the key lessons learned? Are there service areas not included in the current scope that we should consider including and why? How can we best engage staff in this process and create a satisfying work environment within a future Shared Service operation? Theme 2 structuring the opportunity i.e. how can we best structure the Shared Service, the nature of the delivery vehicle/s and any procurement process to maximise market interest and leverage the most value from Private Sector investment, knowledge and expertise e.g. What are the main factors that would positively and negatively influence the level of interest in this opportunity (e.g. service scope and depth, scale, number of Councils involved, nature of delivery vehicle and ownership opportunities, governance arrangements, timing of procurement, contract duration etc) and your ability to add most value? What type of procurement approaches and delivery vehicles have been used elsewhere to implement similar Shared Services and what are the lessons learned? Current UK Government planned changes to Benefits Administration will impact on the Revenues and Benefits component of project scope, and there is also the potential that the new Scottish Government formed after the May 2011 election will introduce policies on public service reform that could impact on the project. Do these, or any other national developments, influence market interest in the opportunity? How could the Councils best seek to accommodate, or benefit from, any issues and uncertainties arising from these? Findings from market sounding exercise A summary of the key points expressed by suppliers participating in the market sounding exercise is given below. Art of the Possible Standardisation and consolidation will drive savings, but need to maintain flexibility for differences between Councils in citizen facing areas. Potential contractual savings suggested of between 20-30% (up to 40% for ICT). Move to self service (for both internal and external customers) is a key component. Common applications generally viewed as best, but differing views on how quickly you should aim to get there (cost v benefits). Differing views on whether should standardise on an existing Council platform, or move to hosted (cloud) model. Move to common/consolidated ICT infrastructure (networks, data centre, desk top, etc), generally viewed as way forward. Version:

24 Differing views on whether it is best to have staff in single location (or at least functional hubs) although all agree on the need for a single management structure for all Shared Service staff. Biggest opportunities for savings in Councils are in adults and children s services Shared Service should support transformation in these areas (end to end re-design). Better Management Information from Shared Service can support improved management and decision making in the Council (procurement compliance, financial management, staff management). Strategic Procurement (category management) should be included in the Clyde Valley Shared Service. Key Lessons from other Shared Service initiatives TUPE is preferable to secondment (more clearly aligns staff with the Shared Service and makes effective performance management easier to implement). Effective governance is crucial, both between partner Councils, and within each Council CMT (to ensure change takes place in depts.). Governance must be able to tackle areas of foot dragging. The technology change is relatively easy. Managing the Politics and the People change is the hard bit. Must be able to mandate change in the Councils e.g. adoption of self service and ensure the necessary training is provided to managers and staff in the participating Councils. Avoid doing big bang do it quickly but carefully aim for some early quick wins. Allow Councils to go at different speeds. Shared Service management team must be empowered and accountable for delivering the required benefits. Keep the retained function in each Council as small as possible. Early and regular communication and engagement with staff (both those that would transfer and those impacted) and trade unions is essential. Need to focus on creating new service focused culture and putting in place performance management arrangements. Structuring the Opportunity The Clyde Valley opportunity is the biggest currently being considered in the UK. Big risk associated with scale and complexity of plans nobody has done this before. A private partner can help manage this risk with technical, transformation and operational management expertise. Clarity, agreement and commitment on objectives and direction of travel (over next 5 to10 years) amongst partner Councils is vital better to have fewer, but committed, partners. Will need simplified client/governance arrangement 1 body acting on behalf of the partner Councils (strategic board that can act as single client and sits above the operational management board of the Shared Service). Range of strategic partnering options suggested from Joint Venture, Outsource (some or all), Service Integrator, Technology and/or Management partner. When procuring, must get the Official Journal of the European Union (OJEU) notice right to allow for flexibility to expand contract (more scope and/or more partners). Guaranteed savings can be offered by a private partner (by JV or Outsource route) and which can be provided from start if required (but requires long term contract 8-10 years +). Contracting with a private partner provides focus on delivering the contracted benefits catalyst to drive change. Version:

25 Potential Partners (both Joint Venture and some of the technology suppliers) can provide investment (which may be more flexible than prudential borrowing longer terms and can be used for both capital and revenue). Involvement in wider Council transformation activity of interest to some of the larger players (increased revenue/profit opportunity). Consider the economic development opportunities that the Shared Service could bring (e.g. this could be the start of a Scottish Hub, bringing more jobs in to the Clyde Valley area). If some activity can be done well in house, then it should not be outsourced. Should consider use of existing frameworks for procurement (instead of an OJEU route). The key findings gathered from this exercise subsequently helped inform a number of the other activity areas undertaken as part of the DBC phase, including the delivery vehicle assessment, the scope and implementation phasing considerations and the assessment of risk. Version:

26 4. Scope of Shared Service 4.1 Introduction and Background The scope of services taken forward in both the Outline and Detailed Business case phases was originally determined by Council workshops in early 2010 and captured in the CVCPP Support Services Business Case Initiation Document. This document identified five broad services that presented the greatest sharing potential: HR (including Payroll); Finance; ICT; Customer Access; and Revenue & Benefits. The degree to which you could share aspects of these services was a key issue, and was explored in some detail as part of the Outline Business Case (OBC) phase of activity completed in November The OBC document presented to Council Leaders and Chief Executives on the 23 rd Nov 2010 presented two main options for sharing as shown in Table 8 below: Table 8: Outline Business Case Options Option 1 Transactional Shared Service The creation of a separate entity that delivers transactional services to the participating Councils. Option 2 Enhanced Scope Shared Service The creation of a fully integrated Shared Service organisation, providing the complete breadth of professional, advisory and transactional services to participating Councils. The OBC recommended that Option 2 be progressed and this recommendation was accepted by Council Leaders at their meeting 23 Nov This formed the basis of the (DBC) workstream summarised in this document. 4.2 Maintaining ambition In modelling the enhanced scope option during the development of the OBC, a view was taken on where the line should be drawn between activity retained within Councils and activity transferred to the Shared Service operation. A degree of ambition was built into this, but it was recognised that beyond the non-negotiable transactional elements of service, the depth of transfer of value added services in some functional areas required further refinement. In response to this, a further series of workshops and meetings were undertaken during the DBC phase to develop a more definitive and transparent definition of scope as follows: the definition of each service in terms of its role, functions and responsibilities; the definition of roles, functions and responsibilities that should be retained by each Council as a client function and would never be transfer to the Shared Service organisation; the definition of roles, functions and responsibilities that could be transferred to the Shared Service organisation, differentiating between: o o activity that can be considered core (i.e., the elements of the scope that partner Councils will transfer to the Shared Service as a minimum); and activity that can be considered optional (i.e., the elements of scope that partner Council may wish to transfer to the Shared Service). Allied to the definition of the total, retained and shared (core and optional) scope, all the services have been re-baselined in terms of current expenditure, staff (measured in FTEs) and 3 rd party expenditure. Version:

27 4.3 Overview of Scope Description of Total Scope The services included within the scope of the Shared Service are described at a high level in Table 9 below in terms of functional description, current operating model and direction of travel for service development. Table 9 Service Scope HR Finance ICT Revs & Bens Customer Access Function description Council Human Resources and Payroll services. Council financial accounting and related financial processes and advisory and support services. Council ICT services covering infrastructure, applications and development/project services. Council revenues collection (Council Tax, NDR, Sundry Income) and Benefits payments (Housing and Council Tax). Council corporate customer access function involving three main customer access channels telephone contact centres, one stop shop face to face and web based self service Current Council operating models Vary by Council in relation to the extent of integration between Payroll and HR and centralisation v decentralisation of HR services. Some variation in operating models in relation to the extent of decentralisation of finance activity. Some variation in operating models in relation to the extent of decentralisation and the use of managed service contracts for some or all aspects of services. Some variation in extent of area based teams for Council Tax/Benefits, approaches to debt recovery and the extent of activity undertaken by Council Customer Access function. Vary in relation to the extent of corporate ownership across telephone, face to face and web contact, the degree of integration between these areas and the range of services covered and the depth to which they can deal with contacts before passing to departmental services. Direction of travel for service development Towards integration and centralisation and the adoption of a business partner model, to realise efficiency savings Towards increased centralisation to realise efficiency savings Towards increased centralisation and consideration of managed service options to realise efficiency savings. Towards increased centralisation and transfer of face to face and telephone contact elements of service to the corporate customer access function. Towards increased integration and corporate control of access channels, the redesign of delivery processes to transfer more activity from departments into the customer access function, to make it easier for customers to use online self service arrangements, all in order to realise efficiency savings. Customer Access From the baseline analysis this total scope of services is provided to the 7 Councils at an annual cost of 155m and employing 3,357 staff. Table 10 below illustrates the high level breakdown of costs and FTEs for each of the major services. Table 10: Baseline staff and cost breakdown Service Total FTE Total expenditure Total addressable expenditure HR & Payroll ,047,651 32,047,651 Finance ,439,196 25,439,196 Revenues & Benefits 1,070 33,392,994 26,939,305 ICT 552 * 58,436,800 ** 29,416,800 Customer 236 5,927,256 5,927,256 Totals 3, ,243, ,770,208 * includes 140FTE seconded from Glasgow City Council to its Access joint venture ** includes total cost of Glasgow City Council Access joint venture which also provides property related services Version:

28 The distinction between total expenditure and addressable expenditure is the ability to achieve savings and relates to two key areas: Glasgow s existing ICT service delivery a joint venture called Access, which is a long term contractual commitment with Serco. Given the scale and duration of this contract, further detailed work is being undertaken to identify the options available for Glasgow and the Clyde Valley Shared Support Services (CVSSS) to arrive at an optimal arrangement; and Housing Benefits This function will be transferred to the CVSSS but will be impacted by the UK Government s universal credit plans and the anticipated changes in the structure and design of benefits. The CVSSS would manage the transition of this service to the new Department of Work and Pension (DWP) arrangements, but it was deemed prudent to exclude Housing Benefits from any savings calculations because of the uncertainty on the timing of the DWP plans. While most of the participating Councils operate an integrated Council Tax and Housing Benefits service, an analysis was undertaken to estimate the proportion of the workload that was related specifically Housing Benefit activity. This concluded that current benefits activity would be reduced by 50% when Housing Benefit is removed. The business case financial model therefore removed 50% of the benefits staffing across the participating Councils (approx 290FTE) from the savings calculations. No savings projections have therefore been factored into the financial case relating to these two areas of expenditure Strategic client activity It is important to highlight that each Council would always retain responsibility for the key strategic planning and decision making activity for the functional areas in scope and that this will not be within the scope of the Shared Service organisation. These essential corporate management activities would continue to be undertaken by a core of senior professional officers within each Council, who would be supported by the services and information provided by the CVSSS to undertake these activities. Further detail on this strategic client function and its crucial role for the success of the CVSSS is given in Section Scope and Phasing With the exception of the strategic retained activity referred to above, there are some choices open to Councils in relation to the sharing of the services in-scope in relation to both the depth of scope to be transferred and the timing of this transfer. In considering these choices it is important that the risks associated with the implementation of a Shared Service as large as that being proposed are taken account of. The learning from the collective experience within the participating Councils and, the market sounding exercise referred to in Section 3 has strongly indicated that the implementation of the Clyde Valley Shared Support Service (CVSSS) should be carefully phased. This allows for effective learning at each phase, which accumulates over time within the implementation teams and supports faster transition during the later phases of the project. Participating Councils are also at different stages on their internal service transformation journeys, the outcome of which influences the ease by which services can be transferred to an external Shared Service. For example, it will be easier to transfer to the CVSSS a function from a Council that is already based on an internal Shared Service/business partner model, than one that is still devolved across a number of departments. This combination of the need for effective risk management and learning, and the need to accommodate differences in service readiness and strategic preferences across the participating Councils points strongly to a carefully managed, phased implementation approach. Clearly the timing of implementation has a significant influence on when efficiency savings are realised and when costs incurred. While the detailed planning for this implementation will need to be carried out by the CVSSS management team, certain assumptions on phasing have been made within the business case to enable the financial savings forecasts to be produced. Implementation would start with the re-design of process and development of the necessary ICT infrastructure, but following these preliminary stages, it is assumed that services would be transferred Version:

29 to the Shared Service on a function by function basis, with Councils being transitioned into the Shared Service on a phased basis Phasing assumptions used for business case For the purposes of constructing the financial model for the DBC and to reflect differences in Council service readiness and strategic preferences, the functional areas were grouped into the three categories shown below and further illustrated in Diagram 5: Phase 1 minimum scope that a partner Council must adopt as part of their commitment to the Shared Service. These are primarily the transactional based services and ICT, which have commonly been shared successfully elsewhere; Phase 2 additional professional, specialist and advisory functions in Finance, HR and Customer Access, where there is further significant scope for savings and/or strategic benefit for Councils; Optional Customer Access areas where the financial business case is weaker and strategic preferences for transferring to the Shared Service vary between Councils. Diagram 1 - Phasing and Scope of sharing The speed by which services are transferred to the Shared Service will have a major influence on how quickly savings can be realised, but equally will have an impact on the level of risk being taken. Achieving the optimum balance between early savings delivery and risk management will be a key responsibility for the CVSSS management team working in conjunction with client colleagues in the participating Councils. For the DBC however, two scenarios at either end of the speed/risk spectrum have been chosen to illustrate the difference in impact these have on the realisation of savings, and to help inform Council decision making. Scenario 1 This represent the lower end of the risk spectrum where the Phase 1 services described above are transitioned into the CVSSS over 2 years. This is then followed by the Phase 2 services being transitioned in from year 5 onwards. Version:

30 This scenario assumes a measured approach to implementation in order to reduce risk and allow a significant bedding in time for the transactional service elements, before you commence the transfer of the professional and advisory elements. Scenario 2 The upper range: Scenario 2, assumes the same timing for Phase 1 services as Scenario 1, but a much more rapid implementation of Phase 2 services over the first 2.5 years. This scenario allows for earlier delivery of savings, but also carries more risk due to the increased pace of change. Further detail on the actual financial projections arising from these two scenarios is given in Section 5: Financial Case Detail on proposals for sharing within the in-scope Functional areas Further information on the detailed activities that will be shared within each of the in-scope Functional Areas is contained within Appendix 1. This detail was informed by a series of workshops attended by Functional Managers from across the seven Councils and facilitated by Deloittes. These workshops provided the opportunity to further review and refine the scope of sharing developed during the Outline Business Case and ensure that the opportunities for sharing were being maximised. The workshops also provided an opportunity for Functional Managers to discuss the risks and issues associated with the Shared Service proposals, and these are reflected in the information provided in Section 10: Managing Risks. Version:

31 000s Clyde Valley Shared Support Services 5. Financial case 5.1 Background to the development of the financial model This section summarises the savings and investment projections which are forecast from the implementation of the Clyde Valley Shared Support Service (CVSSS). The financial spreadsheet model from which these numbers have been generated has also been made available to all participating Councils, providing them with access to further detailed information. The financial model is underpinned by a number of assumptions which are summarised in Section 5.5. The two scenarios referred to in Section relating to the speed by which services would transferred to the CVSSS from participating Councils have also been used to provide the upper and lower range of savings shown in the tables and graphs below. The Finance Directors/Heads of Finance across each of the participating Councils have been regularly briefed on the development of the financial model and the assumptions used within it. The spreadsheet model was made available to each Council to enable detailed scrutiny during its development and it has been adjusted to reflect the feedback arising from this scrutiny. As a result of this regular engagement, the figures produced by the model and presented within the business case are deemed sufficiently robust and prudent by the Finance Directors. Rather than create a range of sensitivity forecasts on these figures, it has agreed that it was more appropriate for each Council to apply their own sensitivity adjustments when considering the projected investment costs and savings to enable them to adopt their normal risk based assessment approaches. 5.2 Financial summary A summary of the cost and benefit position for the implementation of CVSSS is shown in Table 11 below, which illustrates the overall strength of the business case. Table 11 Summary of Investment and Savings forecasts Scenario Total Investment Annual saving by end Yr 5 Annual saving by end Yr 10 Scenario m 18.6m 32.4m Scenario m 30.1m 34.3m The table shows the upper and lower ranges from the two Scenarios described in Section 4.4. Diagram 6 below illustrates the annual savings profile projected over a ten year period for both scenarios, with additional detail provided in the subsequent tables. Diagram 2 Annual Savings Profiles Projected gross savings against 2010/11 baseline budget 000s 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Scenario 1 Scenario / / / / / / / / / /22 Version:

32 The growth in savings from year one reflects the phased transition of Council functions into the Shared Service and the impact of moving to best practice processes for service delivery. There is significant variation in performance across functions within the participating Councils, with best practice spread across different Councils for different functions. As described in Section below, the business case prudently assumes the initial target operating levels of productivity will be that currently being achieved by lowest cost Council in the Clyde Valley. It is also assumed that it will take three years following transition into the CVSSS to achieve this initial target productivity level. Thereafter, it is assumed that the continuous improvement culture created within the organisation will drive annual efficiency improvements of 3%. This is in line with that reported from other successful Shared Service operations in the public and private sector. Tables 12 and 13 below show a summary of the annual project costs and savings for the two modelling scenarios and the annual net cashflow position over the first five year period. Table 12 - Scenario 1 Five year financial summary (annual 000s) Project costs 2012/ / / / /17 Capital - 7,750-4,000-4, Revenue - 3,458-4,193-3, Contingency Total project spend - 11,381-8,403-7, Baseline budget change Savings against 10/11 base budget 1,209 5,961 12,491 17,039 18,583 Net cashflow Annual net saving - 10,172-2,442 4,673 16,561 18,804 Table 13 - Scenario 2 Five year financial summary ( 000s) Project costs 2012/ / / / /17 Capital - 7,750-4,000-4, Revenue - 3,654-5,161-4,696-1, Contingency Total project spend - 11,587-9,419-8,931-1, Baseline budget change Savings against 10/11 base budget 1,961 9,667 20,257 27,634 30,138 Net cashflow Annual net saving - 9, ,327 26,380 30, Implementation costs The delivery of the business case identifies a total investment requirement of up to 31.2m. This is split approximately 50:50 between capital (for systems and infrastructure) and revenue (primarily for the change programme and staff release costs). The principle has been agreed that each participating Council will provide their share of the required investment from the most appropriate internal sources of funding (pro-rata to their proportion of the overall baseline spend being transferred to the CVSSS). This allocation is modelled in Section 5.5 below. It is recognised that some Councils may have elements within their budgeted capital programmes for spending on ICT which will not be required if they participate in the Shared Service. Equally, some Councils have also budgeted for significant staff release costs over the next two years, and participating in the Shared Service would simply provide a mechanism by which some of those budgeted staffing reductions would be achieved. While this position varies across the different Councils, the result is that overall net additional investment across the participating Councils will be less than the 31.2m identified. Version:

33 Given that the majority of the early investment relates to capital spend on systems and infrastructure, further work is being undertaken to identify funding options with the aim of improving the balance between the cost and savings profiles during the early stages of the project to support the earliest delivery of net savings. Tables 14 and 15 below provide an annual breakdown of the main implementation cost areas for the two modelling scenarios over the first five years. Note that estimated pre-implementation programme costs to be incurred from Sept 11 to end Mar 12, have been included within the figures shown for the Change Programme for 2012/13. Table 14 - Scenario 1 Implementation cost summary ( 000s) Project (Capital) Costs 2012/ / / / /17 5 Yr total Systems Integration -4,000-4,000-4, ,000 Technology Infrastructure Software Costs -3, ,250 Total -7,750-4,000-4, ,750 Project (Revenue) Costs 5 Yr total Change Programme team -1,560-1, ,640 External advisory -1, ,477 Training Team Technology Infrastructure ,500 Software Costs (net over existing costs) People Transition (redundancy) ,388-1,520-1, ,641 Total -3,458-4,193-3, ,532 Contingency 5 Yr total Assumed contingency rate on programme costs 5% Overall programme total costs -11,381-8,403-7, ,859 Table 15 - Scenario 2 Implementation cost summary ( 000s) Project (Capital) Costs 2012/ / / / /17 5 Yr total Systems Integration -4,000-4,000-4, ,000 Technology Infrastructure Software Costs -3, ,250 Total -7,750-4,000-4, ,750 Project (Revenue) Costs 5 Yr total Change Programme team -1,560-1, ,640 External advisory -1, ,477 Training Team Technology Infrastructure ,500 Software Costs (net over existing costs) People Transition (redundancy) ,355-2,580-1, ,877 Total -3,654-5,161-4,696-1, ,768 Contingency 5 Yr total Assumed contingency rate on programme costs 5% Overall programme total costs -11,587-9,419-8,931-1, ,257 Version:

34 5.4 Operating costs and savings A breakdown of the projected annual operating costs and savings by function is given in Tables 16 and 17 below for the two modelling scenarios over the first 5 years. Table 16 - Scenario 1 Forecast operational costs and savings ( 000s) Baseline operational revenue costs 2012/ / / / /17 Human Resources 12,702 12,476 11,588 10,367 9,517 Finance 6,753 6,644 6,218 5,632 5,224 Revenues & Benefits 33,942 33,504 31,779 29,410 27,759 ICT 58,437 57,983 56,199 53,747 52,040 Total baseline (addressable) budget 111, , ,784 99,156 94,540 Projected operational revenue savings 2012/ / / / /17 Human Resources 226 1,114 2,335 3,185 3,473 Finance ,121 1,529 1,667 Revenues & Benefits 439 2,163 4,533 6,183 6,743 ICT 454 2,238 4,689 6,397 6,977 Total annual saving (excluding strategic client cost) 1,227 6,050 12,677 17,293 18,860 Gross revised baseline spend at year end 110, ,784 99,156 94,540 92,973 Table 17 - Scenario 2 Forecast operational costs and savings ( 000s) Baseline operational revenue costs 2012/ / / / /17 Human Resources 32,048 31,468 29,190 26,060 23,880 Finance 25,439 24,950 23,027 20,384 18,543 Revenues & Benefits 33,942 33,504 31,779 29,410 27,759 ICT 58,437 57,983 56,199 53,747 52,040 Customer 5,927 5,895 5,766 5,590 5,468 Total baseline (addressable) budget 155, , , , ,690 Projected operational revenue savings 2012/ / / / /17 Human Resources 580 2,857 5,987 8,167 8,908 Finance 489 2,412 5,055 6,896 7,521 Revenues & Benefits 439 2,163 4,533 6,183 6,743 ICT 454 2,238 4,689 6,397 6,977 Customer Total annual saving (excluding strategic client cost) 1,994 9,831 20,601 28,103 30,649 Gross revised baseline spend at year end 153, , , , ,144 A further breakdown of the operating savings into the constituent components that make up these totals is given in Tables 18 and 19 below. The figures shown are the steady state annual figures achieved at the end of year five (2016/17). Version:

35 Table 18 - Scenario 1 Breakdown of forecast savings at end of year 5 Scenario 1 (Phase 1 only) Projected steady state annual cash saving (Yr 5) Projected Potential % steady state cash saving total FTE saving (Yr 5) Potential % FTE reduction Baseline addressable spend Baseline nonaddressable spend Baseline nonaddressable FTE Baseline addressable FTE nos. HR administration and payroll (transactional only) 2,323, % % 8,103, HR & Payroll Direct and 3rd party costs 1,149, % 4,598,912 Financial administration (transactional only) 1,504, % % 6,102, Finance Direct and 3rd party costs 162, % 649,737 Revenues (Council Tax) 2,017, % % 8,256, Revenues (NNDR) 268, % % 666, Revenues (Ctax Benefiits) 1,666, % % 7,003, Revenues (Housing benefit) - no savings included None assumed 7,003, Revenues "other related staff costs" 20, % 160,406 Revenues direct and third party costs 1,649, % 6,599,075 Revenues management staff costs 1,121, % % 4,253, ICT (Service Mgt) 2,282, % 8,955,811 ICT (Strategy & Archtecture) 267, % 892,878 ICT (Solutions Development) 1,318, % 3,296,245 ICT (other SFIA roles) None assumed 1,918,228 ICT (3rd party spend) 3,108, % 14,353,638 ICT (overall staffing change) % ICT Glasgow Access Contract (no savings included) 29,020, Total Core Scope 18,860, % % 75,810,715 36,023, ,757 Grand total including non-addressable scope - Access 104,830,715 Grand total including non-addressable scope - Housing 82,813,734 2,049 Benefit Grand total including both Access & Housing Benefit 111,833,734 2,189 PREVIOUS OBC scope 45,200,000 1,527 Table 19 - Scenario 2 Breakdown of forecast savings at end of year 5 Scenario 2 (Phase 1 & 2 inclusive) Projected steady state annual cash saving (Yr 5) Projected Potential % steady state cash saving total FTE saving (Yr 5) Potential % FTE reduction Baseline addressable spend Baseline nonaddressable spend Baseline nonaddressable FTE Baseline addressable FTE nos. HR & Payroll Staff (Professional) 3,636, % % 10,483, HR & Payroll Staff (Transactional) 2,323, % % 8,103, HR & Payroll Staff (Training Delivery) 1,731, % % 8,655, HR & Payroll Additional Staff costs 66, % 206,622 HR & Payroll Direct and 3rd party costs 1,149, % 4,598,912 Finance Staff (Professional exl specialist) 4,375, % % 13,772, Finance Staff (Internal Audit) 829, % % 2,765, Finance Staff (VAT, Treasury etc) 604, % % 2,013, Finance Staff ( Transactional) 1,504, % % 6,102, Finance Additional Staff costs 44, % 134,075 Finance Direct and 3rd party costs 162, % 649,737 Revenues (Council Tax) 2,017, % % 8,256, Revenues (NNDR) 268, % % 666, Revenues (Ctax Benefiits) 1,666, % % 7,003, Revenues (Housing benefit) - no savings included None assumed 7,003, Revenues "other related staff costs" 20, % 160,406 Revenues direct and third party costs 1,649, % 6,599,075 Revenues management staff costs 1,121, % % 4,253, ICT (Service Mgt) 2,282, % 8,955,811 ICT (Strategy & Archtecture) 267, % 892,878 ICT (Solutions Development) 1,318, % 3,296,245 ICT (other SFIA roles) None assumed 1,918,228 ICT (3rd party spend) 3,108, % 14,353,638 ICT (overall staffing change) % 412 ICT Glasgow Access Contract (no savings included) 29,020, Customer Services (Channel shift) 501, % % 5,927, Total 30,649, % % 119,770,208 36,023, ,926 Grand total including non-addressable scope - Access 148,790,208 Grand total including non-addressable scope - Housing 126,773,228 3,357 Benefit Grand total including both Access & Housing Benefit 155,793,228 3,357 PREVIOUS OBC scope 101,700,000 2,889 Version:

36 5.5 Indicative allocation of costs and savings by Council A breakdown of the indicative annual forecast costs and savings by Council is provided in Tables 20 and 21 below. These are based on an allocation that is proportional to the percentage of the total baseline (by cost) that each Council represents. While it is anticipated that such an allocation model will be used during the transition phase, that once fully operational, the CVSSS would move to a transactional charging based model. Further detailed work will be undertaken to refine and develop the approach to benefits and cost sharing and service charging. Table 20 - Annual gross savings and cost allocations for scenario 1 over the first 5 year period Project Summary 000s 2012/ / / / /17 Total project spend - 11,381-8,403-7, Gross Savings against 10/11 base budget 1,209 5,961 12,491 17,039 18,583 5 year projections savings - scenario 1 Council share of saving 000s Baseline % 2012/ / / / /17 East Dunbartonshire 7.08% ,206 1,315 East Renfrewshire 7.20% ,227 1,339 Glasgow 33.36% 403 1,989 4,167 5,684 6,200 Inverclyde 5.61% ,042 North Lanarkshire 23.48% 284 1,399 2,932 4,000 4,363 Renfrewshire 13.79% ,722 2,349 2,562 West Dunbartonshire 9.49% ,185 1,617 1, % 1,209 5,961 12,491 17,039 18,583 5 year projection costs - scenario 1 Council share of costs 000s Baseline % 2012/ / / / /17 East Dunbartonshire 7.08% East Renfrewshire 7.20% Glasgow 33.36% - 3,797-2,803-2, Inverclyde 5.61% North Lanarkshire 23.48% - 2,672-1,973-1, Renfrewshire 13.79% - 1,569-1,158-1, West Dunbartonshire 9.49% - 1, % - 11,381-8,403-7, Table 21 - Annual gross savings and cost allocations for Scenario 2 over the first 5 year period Project Summary 000s 2012/ / / / /17 Total project spend - 11,587-9,419-8,931-1, Gross Savings against 10/11 base budget 1,961 9,667 20,257 27,634 30,138 5 year projections savings - scenario 2 Council share of savings Baseline % 2012/ / / / /17 East Dunbartonshire 7.07% ,433 1,954 2,132 East Renfrewshire 7.59% ,537 2,096 2,286 Glasgow 36.20% 710 3,499 7,333 10,003 10,909 Inverclyde 5.56% ,127 1,537 1,676 North Lanarkshire 21.87% 429 2,114 4,429 6,042 6,590 Renfrewshire 13.27% 260 1,283 2,688 3,667 3,999 West Dunbartonshire 8.45% ,711 2,334 2, % 1,961 9,667 20,257 27,634 30,138 5 year projection costs - scenario 2 Council share of costs Baseline % 2012/ / / / /17 East Dunbartonshire 7.07% East Renfrewshire 7.59% Glasgow 36.20% - 4,194-3,410-3, Inverclyde 5.56% North Lanarkshire 21.87% - 2,534-2,060-1, Renfrewshire 13.27% - 1,537-1,250-1, West Dunbartonshire 8.45% % - 11,587-9,419-8,931-1, Version:

37 5.6 Financial assumptions The following section details the assumptions made and rationale used in preparing this business case and supporting financial model Investment Costs The following assumptions have been made in relation to the capital and revenue investment for the Clyde Valley Shared Support Service (CVSSS): Change Programme and Training Table 22 below indicates the range and number of roles that have been included in the programme revenue costings. Table 22 Programme Roles Programme Role Programme Director 1 Functional Programme Managers 5 Programme Manager 1 Programme Change Manager 1 Procurement Lead 1 Benefits Manager 1 Programme Management Office Lead 1 Project Managers 20 Functional Subject Matter Experts 5 Communications Manager 1 Administration Support Staff 11 Training Manager 1 Functional Trainers 5 Technical material designer 1 Training Administration support 1 Total 56 No. It has been assumed that 50% (by cost) of these roles will be recruited from within the existing participating Council staff groups. The other 50% will be recruited externally The change programme is assumed to run for three years. Not all the identified roles will be required for the full three years and the input has been profiled to reflect the anticipated timing of input. It is anticipated that the Programme team and CVSSS Management team may require access to additional specialist technical expertise across the range of functional areas to ensure that best practice is being adopted for the service redesign and setup of the CVSSS and to maximise the opportunity to realise benefits. A budget of 1.7m has been included for this purpose, with the model assuming that the bulk of this will be utilised in the first two years. Technical Implementation costs The business case assumes a move to single systems for the Functional areas of Finance, HR, Payroll and Revenues and Benefits. For the core corporate functions (Finance, HR and Payroll) is has been assumed that an integrated Enterprise Resource Planning (ERP) system will be chosen, Indicative costings were sought from suppliers for both the licence purchase costs and the technical integration costs for migrating Councils to a single ERP. These have been costed at 2.25m and 12m respectively. For revenues and benefits, the indicative cost provided for moving all seven Councils onto a common platform was 1m inclusive of licence purchase and migration. A further 0.5m was identified for joining up the networks of the seven participating Councils to support distributed operation of the Shared Service. This cost assumed the latest UK Government Public Sector Network (PSN) standards would be adopted. Version:

38 It should be noted that further detailed analysis and development work will be required once it is clear which Councils are participating in the Shared Service, as this will influence the choice of systems for the CVSSS that will be made by the CVSSS management team. Annual Support and Maintenance The costs associated with the annual support and maintenance for the single Enterprise Resource Planning (ERP) and Revenues and Benefits application, and a new Clyde Valley wide network infrastructure were also included in the financial model. It was assumed that it would take three years on average to step back from the existing legacy application contracts. For the first three years therefore it was assumed that the single application software related costs would be treated as additional costs, over and above the cost of the existing legacy applications. The net savings achieved from the difference between the annual costs of the new single applications and the existing legacy applications do not appear until year 4 onwards. The 300K annual support and maintenance cost for the new network infrastructure is assumed to be additional from year 1 onwards. Staff release costs A significant proportion of the savings forecast for both Scenarios 1 and 2 come from reductions in the number of staff undertaking these functions. In modelling the cost impact of releasing staff a number of key assumptions have been made: Re-deployment into vacant positions within CVSSS with associated re-training will be the preferred option for managing staff reductions; A 4% annual turnover figure has been used to calculate the potential number of vacancies that will arise within the CVSSS On an annual basis, it is assumed that 25% of the staff whose posts are removed as a result of the changes to processes and efficiencies being made within the CVSSS, will choose voluntary redundancy rather than re-deployment. An average figure of 39,000 has been used for the cost of voluntary redundancy (including pension strain costs). Council internal costs The business case assumes that each Council will retain a small strategic client function, headed up by the existing Director of Finance or Corporate Resources (see Section 7.3 for more detail). For the purposes of the business case it has been assumed that this function would comprise 4 FTE in addition to the Director. It is also assumed that these roles would be drawn from within each Council s baseline figures, and will therefore not represent an additional cost to the Council. It will have the effect however of removing these 4 posts from the efficiency savings calculations, which have been adjusted accordingly. Individual Councils will decide on the most appropriate size of the strategic client function and therefore this figure could increase or decrease depending on Council preferences. The cost associated with the provision of training for Council staff in the adoption of the new ways of working required by the Shared Service has been included in the Change Programme and Training costs referred to above. It is assumed that any other costs associated with other internal changes required to support the implementation of the Shared Service will be borne by each Council. Pre-implementation costs (Oct 2011 to Mar 2012) The Business Case assumes that the main change programme and training team are in place from April 2012 and costs are profiled from that date. However, significant pre-implementation activity and planning will require to be undertaken from October 2011 to March 2012 if the timescales outlined in the Business Case are to be achieved. An estimated cost of 452k has been included for this purpose ( 200k estimated external legal, financial and procurement input, and 250k for a full time dedicated project team of six staff). This assumes that the project team cannot be resourced from existing Council staff, but this cost would be reduced if appropriate staff were made available from within the participating Councils. For the purposes of adding this figure into the overall project totals shown in the business case, it has been included within the figure for the 2012/13 Change Programme Team costs. Version:

39 5.6.2 Financing approach It has been agreed in principle that each Council will provide their share of the identified investment costs, pro-rata to their share of the total baseline being transferred to the Shared Service (see Section 5.4 for more detail on this allocation). This is assumed to be a cash investment to the CVSSS and therefore no financing (borrowing) costs have been assumed within the business case. As highlighted in Section 5.2, the budget position of each Council differs in relation to the availability of funding to meet this investment requirement. However, additional work will be undertaken to explore different options for funding those capital aspects of the programme to identify whether there are any mutually beneficial approaches for achieving this investment Savings calculations High level productivity based measures have been used were possible as the basis of the efficiency targets used within the financial model. Where productivity measures were not available, prudent and justifiable targets were used, evidenced where possible. The productivity efficiency targets chosen were those currently being achieved by the lowest cost participating Councils. It is assumed that it will take three years following transition for the Shared Service operation to achieve the same level of efficiency as that currently achieved by the lowest cost Council in the group. These target levels were further sense checked against a Deloitte database of high performing English Councils to ensure that the targets being set were not overly ambitious. In the area of revenues and benefits, a further check was made against information provided by Capita, to ensure that the level of efficiency targets being set reflected the differing demographic and economic environments across the participating Councils. The metrics used within the financial model are listed in Tables 23 and 24 below. Table 23 - Productivity based metrics used within the financial model Function HR (transactions/payroll) HR (professional) HR "other related staff costs" Finance Transactional Finance (professional excl. specialist and Internal Audit) Finance "other related staff costs" Revenues (Council Tax) Revenues (NNDR) Revenues (Ctax Benefits) Productivity Ratio or Savings Basis Total Council FTE / Transaction HR FTE Total Council FTE / Professional HR pro-rata to overall FTE reduction ratio Gross Council Budget / Transactional Finance FTE Gross Council Budget / Professional Finance FTE pro-rata to overall FTE reduction ratio Dwellings / Council Tax FTE NNDR Properties / NNDR FTE Benefits caseload / Benefits FTE Clyde Valley Average Ratio Clyde Valley lowest cost ratio Comparison Industry target ,438,229 26,829,268 NA 13,546,424 25,531,272 25,000,000 2,878 3,526 1,261 3, Revenues (Housing Benefit) No saving anticipated Revenues "other related staff costs" ICT (Service Mgt) pro-rata to overall FTE reduction ratio Number of end user devices / Service Mgt FTE Varies by Council Varies by Council Varies by Council Version:

40 Table 24 - Non Productivity based metrics used within the Financial Model Function Activity area 5yr target metric Justification HR Finance Training delivery Internal Audit 20% 30% A single centre of expertise for training provision, covering both vocational (technical) and competency development, could achieve savings through: removing duplicated management posts and restructuring teams; aggregating training demand to enable more efficient delivery planning across the Councils; creating and maintaining course content only once, across multiple organisation There will also be the opportunity to reduce 3 rd party training provision costs, through the consolidation of training contracts. The consolidation of internal audit functions into a single centre of expertise, should achieve savings through: removing duplicated management posts; restructuring resources, building deeper service expertise and working across Councils; creating greater specialist auditor capacity, reducing demand for higher cost external resources; improved workforce and audit planning; and adopting a more commercial approach to service pricing and cost recovery to manage demand and encourage on-going operational efficiencies. Case studies, such as the partnership led by the London Borough of Croyden, have demonstrated savings of 20-40%, varying by Council. Finance Specialist Finance (VAT, Treasury, Insurance, Risk, Projects) 30% In addition, internal audit functions serving multiple, large Councils tend to fundamentally revisit their focus and approach to structuring / planning audit input. Working with their client Councils, due to the adoption of a more commercial pricing model, the emphasis on a challenging business risk assessment, rather than historic approach, can both raise the value of the service and reduce costs. Efficiencies will be achieved through the removal of duplicated roles, the consolidation of advisory activity and the creation of greater shared capacity. Although, this saving, in cash terms will be small, a Shared Service model will improve service resilience by reducing the dependency on key individuals through the creation of a team. Revenues Management Ratio of managers to processing staff 1:10 These savings are based on restructuring the revenues and benefits teams, adopting industry standard line management ratios. The initial saving will be to achieve the same ratio (1 manager to 10 staff) already achieved by one of the Clyde Valley Councils, and then to move towards between 1:12 and 1:15. These ratios are typical within a high volume transactional service centre environment, and are adopted by outsourcing vendors. ICT Strategy & Architecture (includes management) 30%. The proposal is to adopt a common ICT strategy for the Clyde Valley partnership. Over a period of time, the current fragmented ICT architecture will be harmonised, with a common design, common technologies, common applications and common delivery models. With the proposal in mind, it will be possible to significantly reduce the ICT strategy and architecture roles over time. Initial savings will be geared to reducing duplicated management posts and consolidating teams. However, as the architecture is harmonised and the complexity is reduced, the team can be further reduced. As defined above, the move to a common set of applications and a common infrastructure will lead to development activity being undertaken once and being used by all the Clyde Valley Councils. ICT ICT Finance HR Revs & Bens Solutions Development 3 rd Party Contract consolidation 40% 5% per annum for first 5 years (total 25%) This process of rationalisation will not be immediate, but initial savings will be possible through the reduction in management posts and consolidation of teams. The approach to rationalising development resources will need to based on a technical skills needs analysis and effective workforce planning, identifying potential areas of over capacity and gaps elsewhere. The profile of savings will need to align with the convergence of the architecture itself. The potential savings from the third party contract consolidation is based on revenue spend and is benchmarked against feedback from industry and the Glasgow City Council Access experience. This should be achievable through the consolidation of support, infrastructure management and licensing agreements. Savings of this scale have been achieved by several other partnerships and are typical targets by outsourcing suppliers. Version:

41 Function Activity area 5yr target metric Justification Customer Impact of channel shift 3% per annum reduction in call volumes (total 15%) Limited savings have been assumed in this area due to the optional nature of this function and the variation in the back office systems and processes which would reduce the level of productivity and occupancy rates that can be achieved through sharing until systems and processes converge. A small amount of saving has been assumed arising from the impact of the CVSSS joint development activity assumed in the business case in relation to the development of on-line self service technology for customers. The CVSSS support for service re-design will also help achieve savings within each Council as they move more activity from services to customer access channels, but these savings will be realised within each Council budget and therefore have not been included within the business case. Annual Recurring Savings from year 6 onwards A key aim for the CVSSS is to develop the type of continuous improvement culture found in the best public and Private Sector organisations. This will be achieved through the adoption of a lean systems based methodology for change and improvement and the training of all management and staff in this approach, as referred to in Section 8.3. The impact of this continuous improvement focus is assumed to flow through from year 6 onwards, where a 3% annual efficiency improvement has been assumed in the financial model Timing and phasing In order to model the impact on savings of the timing of transfer of services to the CVSSS a number of assumptions have been made. These relate to the phasing of the transfer of services into the Shared Service, and the subsequent realisation of benefits over time following the transfer. As highlighted in Section 4.4.1, two Scenarios were used to provide a range of savings options depending on how quickly different elements of the scope were transferred to the Shared Service, as described below: Scenario 1 - This represent the lower end of the risk spectrum where the phase 1 services are transitioned into the CVSSS over 2 years. (Phase 1 services represent the minimum scope that a partner Council must adopt as part of their commitment to the Shared Service. These are primarily the transactional based aspects of the in-scope services and ICT). This is then followed by the phase 2 services being transitioned in from year 5 onwards (Phase 2 services represent the additional professional, specialist and advisory functions in Finance, HR and Customer Access). This scenario assumes a measured approach to implementation in order to reduce risk and allow a significant bedding in time for the transactional service elements, before you commence the transfer of the professional and advisory elements. Scenario 2 - The upper range: Scenario 2, assumes the same timing for Phase 1 services as Scenario 1, but a much more rapid implementation of Phase 2 services over the first 2.5 years. This scenario allows for earlier delivery of savings, but also carries more risk due to the increased pace of change. In order that the financial model reflected the likely phased implementation approach, a further subset of phasing assumptions were made and described below. These further assumptions apply to both the Scenarios referred to above. It should be noted however that the actual timing of transfer to the Shared Service may vary significantly from this depending on the final number of Councils that decide to participate in the implementation and the subsequent detailed planning undertaken by the CVSSS management team. Transactional (Phase 1) services - transfer to the Shared Service in four sequential tranches, each equivalent to 25% of the baseline. First two tranches take 4 months each, second two tranches take 3 months each, allowing for learning. Transfer commences month 7 and is completed by month 20. Version:

42 Professional (Phase 2) services - transfer to the Shared Service in four sequential tranches, each equivalent to 25% of the baseline. First two tranches take 4 months each, second two tranches take 3 months each, allowing for learning. Transfer commences month 18 and is completed by month 29. ICT (phase 1) and Centres of Finance and HR expertise (Phase 2) services - transfer to the Shared Service in four sequential tranches, each equivalent to 25% of the baseline. First two tranches take 4 months each, second two tranches take 3 months each, allowing for learning. Transfer commences month 4 and is completed by month 15. Third party spend consolidation It is assumed that work on the consolidation of third party spend commences in month 1 and runs through to month 60. Table 24 below identifies the assumptions that have been made about the timing of the realisation of efficiency savings following the transfer of services to the Shared Service. As can be seen, it is not assumed that all of the target efficiency saving is achieved until 3 years after the transfer has been completed. Table 24 Savings profile assumptions Savings profile assumptions % achieved %age of total saving delivered by end of each of the transition phase for 5% each tranche %age of total saving delivered by end of 1st full year of operation 40% %age of total saving delivered by end of 2nd full year of operation 80% %age of total saving delivered by end of 3rd full year of operation 100% Version:

43 6. The right delivery vehicle A major part of the DBC phase of the project was to identify the most appropriate vehicle for delivering the Clyde Valley Shared Services vision. A detailed comparison was made between the following options, as set out in Table 25 below: a lead Council; a joint board; a company wholly owned by the participating Councils; a company jointly owned by the participating Councils and a Private Sector partner. Table 25 Delivery vehicle options Delivery Vehicle Option Lead Council Description One or more of the partner Councils takes responsibility for delivery of all or some of the functions in scope. In relation to the Clyde Valley Shared Service this would most likely be one of the larger Councils (e.g. Glasgow or North Lanarkshire) running all services, or splitting the different functions across a number of participating Councils. Joint Board Public Public Public Private Company Limited by Shares (CLS) Company Limited by Guarantee (CLG) Limited Liability Partnership (LLP) Company Limited by Shares Limited Liability Partnership This would most likely be overseen by a Joint Committee of the participating Councils, set up using powers provided by Section 56 of the Local Government (Scotland) Act 1973 Joint boards are well established vehicles for delivery of public services which cross multiple Council boundaries (e.g. Joint Valuation Boards, Police and Fire Boards, Forth and Tay Bridge Boards). They are created by secondary legislation from Scottish Government ministers. The creation of a Joint Committee is therefore entirely at the discretion of Ministers. Most common form of UK company, where ownership is proportional to the shares held in the company. Must comply with company law and requires appointment of board of directors with legal obligations to act in best interest of company Company form more associated with non-profit making activity (often used by charitable organisations). Can be regarded by some as having more of a Public Sector feel. The constitution can be drafted to prevent the distribution of profits to members (this can also be achieved with a CLS, but is more commonly done with a CLG) Must also comply with company law and board of directors have same obligations. Relatively new legal partnership form, most frequently used in professional service firms (accountancy, legal), but has been used successfully by Glasgow City Council for a number of recent arms length organisations. Does not require a board of directors independent of the owners (partners) and management structures can be designed to suit needs. As above As Above 6.1 Assessment of delivery vehicle options Assessment Criteria A range of assessment criteria relevant to the creation and successful operation of a Shared Service were identified. Each delivery vehicle option was then assessed again each and a colour coded result was used to highlight where the significant differences arose between the between the options. The impact of these differences in relation to the ability of the delivery vehicle to achieve the benefits being sought be the participating Councils was then assessed. Version:

44 Table 26 below identifies the 31 criteria used for the assessment and the key assumptions related to them. Table 26 Delivery vehicle assessment criteria 1 TRACK RECORD OF VEHICLES Assessment Criteria and Assumptions 2 PARTNERSHIP GOVERNANCE OF SHARED SERVICE The ability of partner Councils to have oversight of the Shared Service operation, control its strategic direction and ensure that their respective Council strategic and service needs are met. The assumption is that each Council would want to have an appropriate level of strategic influence and oversight of the Shared Service. 3 BINDING PARTNER COMMITMENT The assumption here is that arrangements that provide strong binding commitment between partners for the long term is viewed as positive. 4 OPERATIONAL AND CHANGE MANAGEMENT 4.1 Shared Service Operational management/empowerment The extent of empowerment of the Shared Service management to make the changes necessary within the transferred functions to deliver the required savings and other benefits. The assumption is that giving operational managers strong delegated responsibility for delivery of the change is positive 4.2 Retained Council operational management The ability of each Council to mandate the internal changes necessary for the success of the Shared Service (adoption of new processes and systems etc) and ensure successful adoption across their own Council departments. The assumption is therefore that having some ability to exert influence over each Council to ensure they are making the necessary internal changes, is a positive 4.3 Access to skills and expertise The ability to provide the necessary operational, change management and technical skills within the Shared Service and participating Councils to deliver the required benefits. The assumption is that there is limited capacity within the Councils to take on additional major change activity and Shared Service management experience. 5 TRANSFER OF IN-SCOPE SERVICES The way in which the current in-scope services can be transferred to the different Shared Service options. 6 FLEXIBILITY FOR EXPANSION The assumption is that having the flexibility for expansion over time is viewed as a positive feature. 6.1 Future expansion of the Shared Service to include new services from existing partners 6.2 Future expansion of the Shared Service to include new partner Councils 6.3 Future expansion of the Shared Service to include new partners (other public bodies) 6.4 Future expansion of Shared Service to include new Public Sector customers 7 LEGAL AND REGULATORY 7.1 Vires 7.2 Best Value 7.3 Data protection 7.4 Freedom of information 7.5 Health and Safety 7.6 Section 95 officer role 8 RISKS/LIABILITIES The extent to which financial and other relevant risks and liabilities would transfer between participating Councils and the Shared Service operation. 9 BUSINESS TRANSFER ISSUES Issues relating to the transfer from Councils to the Shared Service of assets, liabilities, existing contracts, software licences etc Version:

45 10 STAFFING RELATED Assessment Criteria and Assumptions 10.1 Employment T&Cs Impact of the different options in relation to application of TUPE, employment liabilities and obligations, equal pay disparities etc 10.2 Pensions 10.3 Employee Relations Anticipated views of staff and trade unions to the different options and risk of negative workforce relations issues, or legal challenges. 11 FINANCIAL 11.1 VAT implications 11.2 Corporation tax implications 11.3 Access to Capital The ability to provide necessary investment required to implement the Shared Service e.g. from Councils own capital, public borrowing or from Private Sectorsources 11.4 Early (Guaranteed) Savings The ability to provide early (guaranteed) savings for the participating Councils 11.5 Cost of establishment of the delivery vehicle entity Anticipated costs associated with the creation of the delivery vehicle entity e.g. legal, procurement etc Timescale for establishment of entity How long would it take to create each delivery vehicle option and what it the impact on the timing of subsequent benefits delivery 11.7 Whole life net benefits profile Over a ten year time horizon, what impact would the different options have on anticipated flow of net benefits 12 ACHIEVEMENT OF FUTURE REVENUE STREAM AND/OR CAPITAL RECEIPT 12.1 Future Revenue Stream Ability of options to enable future trading for profit/surplus with external (Public Sector) customers to generate revenue stream for participating Councils Future Capital Receipt Ability of options to enable future whole or partial sale of the operation to provide a capital receipt. 13 ECONOMIC DEVELOPMENT/JOBS CREATION Ability of the Shared Service to be a catalyst for the transfer of new jobs to the region through expansion and growth Results of Assessment The full results of the assessment are provided in Appendix One of this document but a summary of the results for each of the delivery Vehicle Options is given below Lead Council Option A lead Council option was ruled out because: Weak binding commitment between Councils Non-lead Council Councils have limited strategic control or influence over the lead Council Difficult to create empowered Shared Service management team with right skills mix Difficult to create the right Shared Service culture, performance management and incentive arrangements Lead Council carries significant (operational and reputational) risk Joint Board Option A joint board option was ruled out because: Statutory nature of board provides very little flexibility for change (during period when change in Public Sector is likely to be significant) Scottish Government would have significant influence on plans and timing Extended timescales (12-24months) to set up and change Expansion options severely constrained Version:

46 Public:Public v Public:Private The assessment between the Public:Public and Public:Private option was relatively finely balanced and it was considered that both would provide an effective option for implementation of the CVSSS. On balance however it was concluded that the Public:Public option was the most pragmatic choice on the basis that it would be: much quicker to set up and create early momentum and savings more flexible for adaptable within a changing Public Sector environment able to contract with Private Sector to bring in necessary skills and expertise more attractive for staff and trade unions Detailed governance arrangements will require to be developed on the basis of the guiding principles set out in section 3.3. These arrangements will ensure that the Public:Public vehicle has: democratic oversight and governance; the required level of operational management autonomy and responsibility; targets set for the delivery of minimum levels of savings to an agreed timescale Assessment and selection of preferred form of company Further assessment work will be undertaken over the summer period to determine the most appropriate form of company (e.g. Company Limited by Shares, Company Limited by Guarantee, Limited Liability Partnership) for the Public:Public Vehicle. This work will be done in conjunction with the Clyde Valley Waste Management workstream which is similarly aiming to set up a Public:Public vehicle to implement the recommendations from that workstream. This assessment will draw in external legal and financial expertise as required to ensure the recommendation is informed by all relevant factors. Version:

47 7.Implications of the Target Operating Model 7.1 Introduction This chapter considers the target operating model for Shared Services across the partner Councils, and in particular considers the key changes that will need to be delivered if the operating model is to successfully deliver the anticipated benefits. The proposed operating model will be familiar to many within the participating Councils as it follows the same principles behind the transformation journey that many have been engaged in as they move towards more simplification, standardisation and sharing of support services and common internal processes. This journey towards increased sharing was implicit within Scottish Local Government s adoption of the diagnostic pathway, supported by Scottish Government funding. The Clyde Valley Councils are taking this activity to its next logical step, which is the cross organisation sharing of services where this allows for further efficiency savings and improvements for internal and external service users. 7.2 Overview of the proposed target operating model Currently there are a wide range of bespoke services and solutions provided to departments and user groups within the partner Councils, and there is variation in the degree of complexity of processes. The service interactions tend to be personal and, in many cases, perceptions of service quality and effectiveness depend on users being able to access individuals that they know and trust. Often, for advisory services, the support professionals become closely acquainted with the business of the departments they support and are able to anticipate needs and manage risks, taking responsibility and accountability away from managers. Diagram 7 below illustrates the overarching target operating model for the Shared Service organisation, although it is most relevant to the support functions of HR, Finance and ICT. It presents a fundamentally different approach for the partner Councils to their current operating model: Diagram 7 Target operating model Transactional, routine requirements Council A Council B Council C Council D Council E Council F Council G Design Authority Lead for Shared Service Governance/ Standards Self-Service (information, processes & guidance) Helpdesk (resolving queries / transactional problems) Professional Centres of Expertise Business Partners / Advisors Transactional Processing & Operations Senior management / business change requirements Council A Council B Council C Council D Council E Council F Council G Version:

48 The principal purpose of a Shared Service model is to provide a consistent range of professional and transactional services to all of the partner organisations. Typically, a Shared Service operates effectively due to five key components shown in Table 26 below, that help to optimise the balance between cost saving and service quality. Table 26 Key Shared Service components Component Centres of excellence Transactional service centre Helpdesk facility Business partners Self-service processes Description These are the teams of professional experts for each functional area. Typically this would consist of professionally qualified staff (for example, CIPFA, CIMA, ACCA and ICAEW qualified accountants for finance). This is the hub for the processing of all transactional activity in each functional area (for example, the centre would process invoices for all client organisations). It should deliver economies of scale benefits through consolidating transactional activities and appropriate third party contracts. This is the front-line for all service requests or queries entering the Shared Service by the customer organisations made by Members, managers or staff. This element is key to ensuring effective customer access and responsive customer service. Business Partners are responsible for the primary liaison with the client organisations in terms of understanding, articulating and delivering upon strategic business requirements. They are professional experts, having a deep insight into and close relationship with their customer organisation. They are advisors and provide access to the right specialists to meet the challenges facing front-line service managers and management teams. This service ensures that staff and managers within the partner organisations can access information, processes and services rapidly and efficiently on-line from any location and at any time. This functionality and service design makes support services appear more responsive and reduces costs. Typical processes include, for example, the submission of expense claims, purchase ordering, recording staff absences, etc. In summary, under the target operating model, processes and interactions across all functions become standardised so that operations can be simplified. Managers and staff across the organisation are trained in the competencies required to operate the processes and the result is self sufficiency underpinned by self service. The relationship between support services and other functions of the Council becomes one of supplier and customer, with the quality and cost of support services being assessed against measurable performance indicators, rather than tailored solutions. The cultural change for all parts of the partner Councils will be significant. All support service users will be impacted and expected to adapt to a new way of working. Often, users feel like they are being given additional responsibilities and, in the transition to the new culture, this may seem like a backward step. The cultural shift could be compared to the introduction of desktop computers and the resulting trend away from employing pools of typists. The transition will require all partner Councils to accept the principles of standardisation and self service, and to forgo the personalised solutions currently available. The remainder of this section considers each of these changes in more detail. Although several of these changes are overarching in nature, key function-specific changes are also detailed Self-service The move towards self service is an important feature of any shared support service operation. Although self service is currently used in several of the partner Councils to varying degrees, and the extension or introduction of self service activities features in many of their future plans, the impact of introducing self service should not be underestimated. The target operating model will result in staff and managers within each Council undertaking many basic and transactions support activities themselves, as part of business as usual through selfservice access channels. For example, this could include raising an invoice or completing a return to work form following an absence. There are numerous benefits for staff within the Councils and for the Councils themselves. The overall effort required by a member of staff to record the details into the system is required whether the service is provided through self-service or according to the traditional process. However, the overall organisational effort is reduced. Version:

49 A significant amount of training, change management and communication will be required to support the cultural change required to implement self-service effectively and to ensure staff compliance. It was apparent during the functional workshops that there could be a general perception within Councils that implementing self-service results in the burden of transaction processing being shifted to the management line, as opposed to there being a direct business benefit. This is a common misconception. The use of self service has the potential to reduce the overall volume of work required across the organisation because it removes the need for form-filling, duplication and hand-offs before data is entered into the system. It is recognised that self-service may not be appropriate for all staff in Councils, particularly any field based staff with limited access to ICT systems. Such groups of stakeholders would need to be considered in more detail as part of the training development and change management development An integrated and common systems architecture The cost efficiency of Shared Service projects depends on the ability of the service to operate consistent processes, manage information in a consistent format and reduce duplication and data entry between systems. A consolidated set of support service applications is therefore a key requirement for taking forward greater joint working and achieving more efficient practices. This means for example a single solution for managing the financial data of the Councils; and a single solution for managing people data. Many organisations in the Public and Private Sector have recognised that there is a core set of data that supports their enabling and support functions. Implementing a system which reuses this core data across as many of the functions as possible reduces the burden of data entry, improves the timeliness and quality of information and provides more robust management information. The result is the implementation of an Enterprise Resource Planning (ERP) solution. In local government, the range of processes or functions that can be supported by ERP include: General ledger; Payroll; Accounts Payable and Online Supplier Integration; Accounts Receivable and Online Payments; Treasury Management; Core Purchasing; Online Ordering; Order Management; Inventory; Online Supplier Management; Human Resource Management; Online Recruitment; Employee self service; Manager self service; Time recording; Online Expense Recording; Online Learning and Online Training Development; Fixed Asset Management; Project Costing; and Management Information and Advanced Data Analysis. In other current Shared Service projects in UK local government, one or more of the Councils has already undergone the change to the new service delivery model and has invested in technology to support this model. For the CVSSS, the financial model and outline implementation plan assumes the use of an Enterprise Resource Planning (ERP) application Capability, Confidence and Compliance Through the workshops with Functional leads, it is apparent that the current level of support provided to each Council varies significantly, reflecting the current level of management competency and the culture of each organisation. If the target operating model is to optimise the balance of support service costs and value effectively, the following three factors will be critical. Managers and employees in the Councils: Version:

50 will need to demonstrate their capability to operate processes themselves and to be generally more self-sufficient; will need to have the confidence that they are operating new processes correctly; this will be dependent on training and on the accessible of guidance materials. This will also require managers to accept accountability for processes that previously would have been the responsibility of support services functions; and must operate within a compliance culture and adopt the new processes and new ways of working that underpin the target operating model. The target operating model, supported by self-service processes, provides staff with one best way of doing things. For example, one way of monitoring budgets, one way of recording and submitting timesheets, one way of recording and analysing absences, one way of ordering office supplies, etc. Staff will be given mandatory training to operate the processes and performance management practices exist to monitor compliance with the new processes. The target operating model will deliver clarity in the roles operating the new processes. Additionally, the self-service methods adopted within the new processes should be less time consuming for staff than traditional processes that require interactions between the staff and the support service. However, the change management to achieve this new culture will require significant investment in training and employee development, and will require strong leadership at all levels of management throughout the Councils to instil the new culture of compliance A shared IT strategy Information Technology (IT) is a key enabler of the Shared Service operating model. In order to deliver the benefits of the model, the partner Councils will need to agree to the Shared Service organisation developing a shared IT strategy and function for all partner Councils. This will support the rationalisation of IT support service, it will reduce management layers, and it will remove duplication of identical support provision across all Councils (e.g. helpdesk, service management, supplier management). It will also manage and control IT investment budgets to enable a process of systems convergence, reducing license, application management and hosting costs. 7.3 Overview of Strategic Client Function Scope The concept of the strategic client function was referred to earlier in the document in Section Each Council will require to retain a small strategic function to undertake strategic planning and decision making as well as managing their Council s engagement with the Shared Service. It is assumed that this strategic function would be headed up by the existing Director of Finance or Corporate Services supported by a small team, which for the purposes of the business case, has been assumed to comprise 4 FTE officers. The exact shape of this team will be determined by each Council, depending on their own needs, but it would be expected that as a minimum, each Council retains at least one Finance Officer to carry out the section 95 role. However, it is for individual Councils to decide on the appropriate number of staff and if they chose to retain fewer staff, additional savings will be achieved. This strategic client function will act as the intelligent intermediary between the service provider and the Council. It acts to help articulate strategic Council requirements that may require changes in services by the Shared Service organisation. It also is responsible for monitoring service performance and costs. Finally, this function will be responsible for owning and shaping key strategic deliverables for their Council, such as the annual budget and three year financial plan, with support from the Shared Service. The activities that would form part of the client function are summarised in Table 27 below. Version:

51 Table 27 Strategic client function activities Service Strategic Client Function Scope Rationale Finance Strategy and Policy This represents a key part of an organisation s strategic planning, based on the policy priorities of elected Members and business plans shaped by corporate management teams and therefore should remain as part of the strategic client function. This would involve the retention of the Chief Finance Office CFO (Section 95). In this context, the function would: Manage the operational relationship between the Council and Shared Service organisation; and Be a commissioning function, particularly for project based professional finance support; Actively engage with the Shared Service Business Partners and service management teams to retain an insight into current / forecast financial issues. HR Strategic HR Strategic HR should be retained as part of the strategic client function. Strategic HR sets the policy and direction for resourcing and employee relations whilst all other HR roles would have responsibility to implement or to support the Council to implement a strategic decision or policy. Policy development should be a retained HR function, however Councils should work together to develop consistent and shared HR policies in areas such as absence, grievance, and terms and conditions etc Although not all employee and trade union relations would be undertaken by a strategic HR function, any initiative that was significant in terms of size, scale, and impact on the Council, and those which required significant negotiation with trade unions and staff, should be retained by Councils. This is primarily to ensure that each Council has the necessary control and risk management practices to satisfy members. ICT Customer Access Revenues & Benefits Business relationship management Customer service management IT Strategy and Business Alignment Financial management Strategy, performance monitoring &/or transformation of customer service Strategy and Performance monitoring The engagement with services and each Council s corporate management team will be mediated by the strategic client function, which will be responsible for prioritising requirements, interpreting strategic business requirements, and serving as the local point of contact regarding major ICT performance issues. The function would be responsible for: reviewing the performance of the shared organisation, in terms of performance indicators and cost, on behalf of their Council; prioritising and structuring their Council s changing strategic requirements for the shared organisation to develop potential solutions; controlling variations in the baseline budget. Major change requests will need to be subject to business cases for review by Council management teams. Depending on whether a Council chooses to transfer the management of its customer access function to the Shared Service, they strategic client function may be limited in scope. If the Shared Service is only dealing with supporting the development of online capability, then the relevant strategic client activity may be considered part of the ICT activity above. If it includes support for service redesign than the relevant client activity may sit within the Councils internal transformation team. The strategic client role would be responsible for revenues related policy and strategy matter and monitoring and escalating, if necessary, KPIs regarding service performance. Ideally, the Strategic Client Function would work as an integrated team within each Council, possibly within a wider corporate change or transformation programme team. These retained strategic client roles are significantly different to the existing roles undertaken by staff, and therefore this new function will need to be developed alongside (or slightly in advance of) the development of the Shared Service organisation. Typically, this strategic client team can be a useful change agent to support their Council during the transition to the Shared Service. As these will be new and unfamiliar roles in many Councils, it will be important that support and training is provided to the staff that fulfil these important roles, as the success of the Shared Service is in part determined by how effectively these roles are undertaken. Version:

52 8. Approach to implementation 8.1 Key next steps Council leaders have agreed to seek a formal decision by the end of September to participate in the Shared Service implementation. It is important that momentum is maintained in the intervening period to ensure that the Councils are in a position to rapidly establish the Shared Service vehicle and appoint a management team, following final Council approval in September. Diagram 8 below outlines key next steps but it should be noted that this timescale is highly ambitious and will require significant commitment from all Councils to achieve it. Diagram 8 Indicative next steps Partnership Agreement (Guiding Principles) In advance of formal Council ratification of the recommendations given in the Executive Summary Section 1.10, a Partnership Agreement document will require to be prepared over the summer period, covering the governance arrangements and operation of the Shared Service. This will be based on the following guiding principles. Councils will: work in a way that encourages mutual respect and trust; commit to the successful achievement of the shared support services; operate in a transparent and clearly accountable manner; share investment costs and benefits gained proportionate to their scale of service; work constructively together to manage key strategic risks; adopt the necessary internal changes to enable them to work effectively with the new Shared Service organisation; undertake to resolve any conflicts through appropriate governance arrangements with a view maintaining strong relationships; develop clear, binding contractual arrangements between partner Councils, the Shared Service organisation and its customers and suppliers; and develop a framework for service charging, service levels and customer compliance. Version:

53 8.2 Implementation planning and governance Overview of implementation planning The successful implementation and deployment of CVSSS will enable significant savings for the participating Clyde Valley Councils and provide a scalable platform for expansion should other Councils or public organisations wish to participate. In order to realise this ambitious vision, a clear implementation strategy to drive the critical success factors of the programme will be essential. Much more detailed work will be required to develop the implementation plan, which will require significant input from the management team appointed to run the CVSSS, together with the individual Council client managers, who will require to jointly own the plan and be held accountable for delivery. This plan will not be an end in itself, but will continually be developed and adapted as the programme develops Indicative programme governance arrangements It is recommended that the project will adopt a formal PRINCE2 approach, in that a detailed product breakdown structure and product flow will be developed showing both the nature of, responsibilities for, and sequence of the delivery of all aspects of the project. This standardised approach should be applied to all transition and deployment phases. The Programme Governance team should put in place the necessary structures to ensure consistency with this approach. Further work will be undertaken to develop detailed proposals for programme governance, but an indicative programme governance structure for the implementation of the CVSSS is shown in Diagram 9 below. Diagram 9 Indicative programme governance arrangements Version:

54 A CVSSS Sponsor Group would have responsibility for formalising the agreed vision for the CVSSS and putting in place the necessary structures and mechanisms to ensure that all programme activities are managed appropriately and are aligned with the overall programme vision. They would provide strategic direction to the wider team and ensure that the programme has the necessary budget, resources and experience required to successfully deliver the programme and required business change. Once appointed, the Head of the CVSSS would assume a position in the CVSSS Sponsor Group. The Sponsor Group will be supported by a CVSSS Programme Board comprising Senior Responsible Officers with accountability for the success of the programme. 8.3 Empowering the workforce The success of the CVSSS will largely be determined by the work and commitment of the staff transferred to it. As the Christie Commission report referred to in Section states we believe that front-line staff, along with people and communities are best placed to identify how to make things work better, it is critical that managers at all levels support staff in empowering users and communities, and to give fresh meaning to their own work. (Christie Commission report P 37, para 4.46). The establishment of the CVSSS presents a unique opportunity to create a culture that is fully focused on meeting customer needs in the most efficient way possible and a workforce that is empowered to achieve that. Several of the participating Councils have successfully adopted improvement approaches based on lean systems thinking methodologies, which place staff and customer involvement at the heart of service redesign and improvement. The research undertaken by the Improvement Service referred to in Section 3.1, identified the impressive results that can be achieved when these methodologies are applied successfully. The Business Case has assumed that the CVSSS will adopt from the start this type of approach to the development and continuous improvement of the services it provides. The Management team of the CVSSS will be expected to both understand the benefits of this approach and be committed to its adoption. 8.4 Augmenting skills and expertise Developing and training existing staff will be a key feature of the CVSSS, but it is recognised that the implementation phase will require significant new skills and expertise in Shared Services and successful, large scale change management. While the participating Councils do have highly skilled and experienced staff in change management, these are in short supply and very heavily utilised within existing change and transformation programmes. There is therefore insufficient spare capacity within these existing change teams to absorb the significant additional work associated with the CVSSS proposals. In addition, the experience of Council staff in relation to the specific implementation of large, complex, multi-council Shared Services, is limited. If the risks associated with the programme referred to in Section 10 are to be effectively managed, it is crucial that the Councils augment their existing resources with the necessary additional capacity, skills and specific expertise from the best external sources available. The recruitment of the new management team for the Shared Service would be the first component of this. They would then be required to review the existing skills bases and gaps within the participating Councils and identify the most appropriate way of drawing in the additional external skills and expertise necessary to ensure the success of the project. 8.5 Equality Impact Assessment Equality Impact Assessment (EQIA) is a tool for assessing the effects of a particular policy, function or service on addressing barriers to equality. Each Council will have its own toolkit and process to implement EQIA; these will follow broadly similar stages which will be recognised as common elements of a review process Version:

55 The Equality Act 2010 requires public Councils to assess the impact on equality of new policies and practices including changes or redesign of policies, practices, services or provision. Implementation of the CVSSS could have impacts on the following broad areas: Workforce composition: approximately two thirds of the workforce of Councils are women and women also tend to be more highly represented in lower grade posts within Councils. Terms and Conditions of employment for the new delivery vehicle: Councils tend to provide better than the statutory minimum requirements in areas such as leave, work life balance policies. Work location and accessibility for employees. for customer facing services such as Council tax and benefits ; a redesigned service would need to take into account the differing demographic make up of the different Council areas and take steps to ensure that barriers to accessing services are minimised for specific population groups There are certain key stages at which these impacts will need to be more fully analysed and this will be built into the implementation plan for the project as more detail becomes available. If potentially negative impacts on particular groups are identified then consideration will be given to any steps that can be taken to mitigate these. A fuller analysis of equality impacts will be concluded by April 2012 and an action plan produced, detailing how any issues identified will be addressed. Version:

56 9. Location and accommodation considerations The Clyde Valley Shared Support Service (CVSSS) will be a significant organisation in its own right, with potentially over 3000 staff transferring from the participating Councils (depending on the options chosen). The location and accommodation choices for these staff will therefore be a significant factor within the implementation planning required for the CVSSS. To support this planning, an analysis was undertaken during phase 2 activity of the current home and work locations of the staff employed within the in-scope service areas. Anonymised data was supplied by each Council with the home postcode and work location postcode for each staff member, and this data was input to a Geographic Information System (GIS) analysed to identify the current travel to work distances and impact of different location choices. More detailed analysis of location options will be undertaken when formal agreement has been reached about the participation of Councils in the Shared Service and preferences in relation to transition timing. The creation of the GIS data base will provide a valuable tool to support this further detailed planning Results of analysis A summary of some of the key findings in the analysis is provided below. In addition, Appendix Three also contains staff location distribution maps for each of the participating Councils. Distance to existing Council HQ Diagram 10 below shows that the majority of employees in scope for shared support services live within 10km of their existing Council HQ building. The percentage of staff living with 10km of the Council HQ building is almost identical for each of the 7 Councils, and ranges between 70% and 75%. This suggests that the majority of employees are willing to commute up to 10km, but only 25-30% of staff travel over 10km. In-scope employees currently working at North Lanarkshire Council and Inverclyde Council are most likely to travel more than 10km to work each day. Diagram 10 Percentage of staffing living within 10km of Council HQ building Percentage of staff living within 10km of the Council HQ building 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% East Dunbartonshire East Renfrewshire Glasgow Inverclyde North lanarkshire Renfrewshire West Dunbartonshire Version:

57 Diagram 11 below shows the percentage of employees travelling over 20km to work. The in-scope staff at Inverclyde Council are most likely to travel more than 20km from home to the Council HQ, with 16% in this category (approximately 40 people). In contrast, employees at North Lanarkshire Council are least likely to travel over 20km, with only 5% of staff in this category (approximately 29 people). At Glasgow, 7% of employees travel over 20km, and this equates to approximately 96 people. Diagram 11 Percentage of staffing living over 20km form Council HQ building Percentage of staff living over 20km from the Council HQ building 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% East Dunbartonshire East Renfrewshire Glasgow Inverclyde North lanarkshire Renfrewshire West Dunbartonshire Employees living and working within the same Council In five Councils, the majority of staff in scope for shared support services live within the same Council that they currently work for. Diagram 12 shows that 51% of East Dunbartonshire employees and 58% of East Renfrewshire employees do not live in their respective Councils. In contrast, a large majority of staff (over 70%) at Inverclyde, West Dunbartonshire and North Lanarkshire live within the local Council boundary. 45% of employees in scope at Glasgow City Council live outside the local Council boundary (approximately 628 people). Diagram 12 Percentage of staffing living and working in the same Council area Percentage of staff living and working in the same authority 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% East Dunbartonshire East Renfrewshire Glasgow Inverclyde North lanarkshire Renfrewshire West Dunbartonshire Live and work in same authority Live outwith the authority Version:

58 9.1.2 Input from Market Sounding exercise In addition to the detailed data analysis referred to above, the market sounding exercise referred to in Section 3 also provided a valuable opportunity to discuss location options with a range of companies with experience of operating Shared Service and outsourced operations. A clear message from these discussions was that majority of suppliers did not consider it necessary to centralise staff in a single location to be able to achieve the benefits being sought. The majority regarded a move to a single location as an expensive and unnecessary step, which they would not take if they were operating the service on a joint venture or outsource basis Conclusion on findings a distributed model most appropriate The detailed staff location analysis indicated that for many Councils, the adoption of a centralised location option for CVSSS (and the associated staff relocations) would have a significant impact on staff travel to work arrangements and introduce patterns of travel that were very different to the current choices being made by staff. Participating Councils are understandably concerned about significant job losses from their area because of the economic impact of lost spend to the area, as well as the impact on existing staff who may have to travel to a new area. The analysis of travel to work arrangements highlights that this is a particular issue for Councils such as West Dunbartonshire, Inverclyde and North Lanarkshire, where over 70% of the potential Shared Services staff live in their Council area, in comparison to under 50% in East Renfrewshire and East Dunbartonshire. When this was combined with the informed views of experienced suppliers that a centralised location model was not considered necessary, it was concluded that a distributed model would be the most appropriate for the CVSSS. A distributed model would enable locations to be chosen for CVSSS staff in each of the participating Council areas, reducing the need for large scale changes in travel to work arrangements for staff. Wherever possible, the aim will be to utilise existing Council accommodation to minimise costs. This does not mean that the CVSSS staff will continue to work in exactly the same office as they currently do, since it is likely that the CVSSS management team will wish to create distinct Shared Service areas (floors or wings) within buildings to help with the development of the new organisation culture and ways of working. Further detailed planning work will be required with each participating Councils property management teams to develop the accommodation strategy for the CVSSS Flexible working A more general trend being adopted within the Public Sector, and well established within many Private Sector organisations, is the use of flexible and remote working arrangements, where staff are able to work from different locations, including home working, rather than travel to a fixed office and desk every day. This has largely been facilitated by developments in technology which allow remote and secure access to information and systems required by staff to undertake their jobs. A number of the participating Councils are already actively looking at this type of option for some groups of staff. These type of arrangements have been reported to benefit both staff and their organisations in a number of ways: reduced accommodation needs and costs; less travelling for staff; reduced carbon emissions arising from travel and accommodation reductions; more flexible working arrangements for staff providing work life balance benefits; improvements in productivity; reduced sickness absence. Given this trend and the geographic spread of on-scope staff across the Clyde Valley, it is likely that some element of flexible working will be a component of the staff location strategy developed by the CVSSS management team. Version:

59 To be effective, the implementation of such arrangements would have to be phased to allow a coordinated approach to the development of the customer and efficiency focused culture within the new Shared Service, the implementation of performance management arrangements, the availability of the necessary technology and the training and development of staff. Over time however, it could become a valuable component of the way in which the CVSSS operates. Version:

60 10. Managing Risk This section summarises the key strategic risk areas as well as those specific to each functional area as identified through the functional workshops. Importantly, alongside each of the issues raised, initial mitigation strategies have been identified which can be factored in the detailed programme implementation and stage plans. These will be further developed once the final participating Councils are known and the Management Team for the Clyde Valley Shared Support Service CVSSS is in place. As highlighted in the Outline Business Case, undertaking change of this scale and complexity brings with it a number of risks. The detailed business case process has sought to further highlight these and identify how they can be managed. The Councils will be breaking new ground in creating a Shared Service arrangement of this size and this will be challenging at both a partnership level and internal to each Council. The participating Councils also recognise that their own internal change programmes are not without significant risk and that participation in the Shared Service programme has the benefit of enabling pooled access to substantial expertise and change resources which will help mitigate some of these risks and challenges Key strategic risks Table 28 below highlights key strategic risks and approach to mitigation. Table 28 Key strategic risks Key strategic risk area Trust and Commitment between Partner Councils. Joint strategic management of Service. Shared Service managerial autonomy. Shared Skills and expertise to deliver change and manage Shared Service operation. Adoption of new ways of working within partners Councils. Impact on service quality and performance. Impact of Shared Service on existing Council transformation programmes. Standardisation of relevant policies and any necessary harmonisation of Shared Services staff terms and conditions (and associated cost impact). Mitigation approach Partnership Agreement document will create contractual framework for long term commitment and understanding between partner Councils, and resolution of problems. Clear, simple and transparent Governance arrangements created, together with detailed scheme of delegation identifying responsibilities to be held at different governance levels. Clear scheme of delegation drawn up giving appropriate operational autonomy to Shared Service management team. Shared Service organisation empowered to identify skills gaps and recruit/contract external support as necessary to deliver Shared Service vision. Partnership Agreement between partner Councils will create contractual obligations for each Council to adopt the necessary internal changes. Steady state transactional based charging mechanism will also encourage adoption of internal new ways of working. Implementation planning and phasing of transition will seek to minimise impact on service quality and performance (although some initial reductions may take place during the initial transition phases). Increased use of self serve solutions may lead to perception that service levels have decreased, requiring effective internal communications to explain changes and training in use of new ways of working. Implementation planning and phasing of transition will take account of service readiness and internal change programmes to minimise disruption. This will be supported by strategic Client arrangements will provide an effective interface between Councils and the Shared Service. The CVSSS has included some capacity to support joint re-design of customer access processes which may feature within some Council transformation plans. Business case does not assume changes to staff terms and conditions to achieve savings and CVSSS will seek to use organisational structure and role design to mitigate differences amongst transferring staff. Partnership Agreement will create framework within which agreement on adoption of common policies, where required, can be reached. Best practice staff consultation and dialogue processes will be adopted within Shared Service to support any required harmonisation. Version:

61 Key strategic risk area Existing ICT third party contracts or joint venture arrangements. Workforce Risk - arising from loss of skilled and experienced staff and resistance to move to Shared Service and associated new ways of working. Inconsistency in baseline data provided leading to errors in forecast savings, productivity measures and benefits sharing. Timescales not met for the implementation and delivery of benefits with negative impact on individual Council budget positions. Information Security. Equality Impact. Mitigation approach Detailed analysis and assessment of options undertaken to establish the best practical economic option for the CVSSS and the relevant Councils and to reduce the risk of challenge. Adoption of best practice approaches to staff and trade union engagement and consultation once final Council decisions taken on participation. Adoption of lean systems thinking approach to service redesign and continuous improvement to ensure staff participation and empowerment within the CVSSS. Further review of baseline when Council participation is finalised and adjustment of model and targets as required. Further detailed implementation planning will be undertaken when Council participation is finalised and robustness testing by the CVSSS management team. Implementation of robust benefits realisation process within the CVSSS, with regular reporting to the established governance arrangements. An information security and privacy risk assessment of each strategy will be carried out, so the findings can be considered as part of the decision making process and recommendations can be built into implementation strategy. An equality impact assessment will be undertaken once Council participation has been finalised and an action plan produced to address any identified issues Additional note on Information Security Information security and risk management is considered by the Information Commissioner as being the foundation of design and planning decisions and the approach also supports current privacy policies and security standards of both the Scottish Government and Westminster. Advice was therefore sought from the East Renfrewshire Council Information Security Officer on what information security and assurance challenges might be faced in a Shared Service environment, particularly if personal information will be part of the service delivery. A very high level analysis was carried out and a paper presented to the project team for discussion. This highlighted the need to fully understand the impact of the proposed Shared Service on information assurance and wider Council operations, as there could be implications in a number of areas (including technical, contractual, privacy and operational). To fully understand these needs, an information security and privacy risk assessment will be carried out once final Council participation has been agreed, so the findings can be considered as part of the development process and any issues addressed. Version:

62 10.2 Operational risks Tables 29 to 33 below summarise the main identified operational risks for each of the in-scope functional areas. These were informed by the workshops held with the Functional Lead officers. Table 29 - Finance service risks Theme Key issues Potential Mitigating strategies Financial Affordability of investment in new systems, processes and staff transition. Distribution of savings / costs to encourage the right behaviours & foster partnership. Explore prudential borrowing / use private finance. An initial proportional based benefits and investment allocation model will used during transition and be replaced by a transactional payment mechanism for steady state operations. Operational service performance Ability to ensure processes, practices and customer expectations across the Councils are harmonised, with high levels of compliance with agreed processes. Future performance of professional finance roles (retained or otherwise) will be largely reliant on the effectiveness of the transactional services / ERP. Create a strong change team within each Council. Create effective governance and communications arrangements within each Council. Supporting Council transformation Ability of in-scope services to support both the corporate change priorities of each Council while also driving the transformation of shared support services. Development of project plans, enabling skills / capacity gaps to be addressed. Customer relationships Effectively managing the change process, to bring key stakeholders (such as service managers, directors and Members) on the journey, managing expectations. Clear programme plan for each Council. Definition of changes that will occur / impacts. Use of leans systems approach to service re-design. Create effective governance and communications arrangements within each Council. Employees and skills Readiness of the current organisation. Competence of managers. Suppliers Planning and managing the transition from existing supply contracts (e.g., software applications, services) affected by the scope without loss of service / penalties. Readiness / gap-fit analysis to inform plans. Management development programme. Incorporation of financial competence within Managers Personal Development Plans. Development of strategic procurement function for CVSSS to enable effective forward planning and supplier engagement. Version:

63 Table 30 HR and Payroll services risks Theme Key issues Potential Mitigating strategies Financial Investment in new systems and processes. Investing for the cost of change (re-skilling staff, redeployment, recruitment, redundancy etc). Determining how savings and costs will be distributed. Ability to realise quick wins to deliver efficiencies. Undertake a cost modelling exercise across HR to understand key cost levers and implications. An initial proportional based benefits and investment allocation model will be used during transition and be replaced by a transactional payment mechanism for steady state operations. Undertake discrete piece of work to determine scope and requirement of quick win non-transactional areas that can be shared from commencement of the Shared Service. Operational service performance Current variations in working practices and different customer expectations. Managing variations across systems. Understanding the implications of phasing / transition on other areas of business such as assets, management of service. Coping with the transition given the different baseline (maturity of process) across the Councils. Supporting Councils to implement their own efficiency plans. Lack of understanding of the model by the business. Process mapping and readiness assessment to support phasing plan. Clearly developed programme plan with resources to support implementation. Implementation of single integrated system. Develop and implement a communications strategy and plan that provides consistent and timely information to relevant stakeholders. Create effective governance and communications arrangements within each Council. Supporting Council transformation Ability of in-scope services to support both the corporate change priorities of each Council while also driving the transformation of shared support services. Managing trade union consultation. Development of project plans, enabling skills / capacity gaps to be addressed. Clear trade union consultation plan in line with transformation plans and Shared Service implementation. Customer relationships Managing change in service levels / managing customer expectations. Culture change (compliance). Establish core service level to be delivered through Shared Service. Create effective governance and communications arrangements within each Council. Use of leans systems approach to service re-design. Employees and skills Readiness of the current organisation. Competence of managers regarding employee performance management & development. Clear and collective communications process with senior support, with staff in HR and also the business and their representatives. Timing of HR in CVSSS transition to enable HR to support other functions through their transition to Shared Services. Industrial action. Consistent and transparent approach to transferring staff. Maintaining morale. Coping with different terms and conditions and grading structures. Transparent and clarity required to ensure people are not disadvantaged during redeployment process. Suppliers Similar suppliers but different contracts. Local versus national suppliers. Backfill jobs to resource HR to support the change to CVSSS. Consistent strategy and approach (timely, built into implementation approach) for Trade Union engagement. Clear plan for transition and change. Development of strategic procurement function for CVSSS to enable effective forward planning and supplier engagement. Version:

64 Table 31 ICT service risks Theme Key issues Potential Mitigating strategies Financial Ensuring that the ICT budget flexes with changing demand & is controlled. Ensuring that the transfer and ownership of assets is fair and transparent. Prior to the point of service transfer, each Council will need to confirm, with audit, the baseline budget and current demand. The steady state transactional payment mechanism to be used by the Shared Service must support changes in demand, such that Councils with reducing headcount and ICT needs pay a reduced charge. There will need to be an audit of the current IT estate to evaluate liabilities, contracts and assets. This audit will inform a strategy to agree whether ownership of the ICT estate is transferred, and how such a process would be accounted for, and funded if some Councils estate is in need of significant investment. The need for a simple and agreed service catalogue and pricing structure to encourage the right behaviours by both the client and Shared Service organisation. While the shared organisation will move towards a converged service catalogue and set of service level standards, this will not occur immediately. The Shared Service management team will need to engage with each Council s client function to plan and manage the transition process highlighting key risks. Customer service management Managing Council expectations as service standards are harmonised to provide a fit for purpose & cost effective service. Create effective governance and communications arrangements within each Council. As the process of service standard convergence occurs, the shared organisation and client function will need to work together to manage any major changes. Beyond end user support processes, it is unlikely that Councils will notice a major shift in service performance, with the aim of improving resilience/reliability. Use of leans systems approach to service redesign. Existing third party contracts or joint venture arrangements One of the participating Councils has ICT transferred to a Joint Venture Vehicle and one has a substantial third party managed service contract. If these cannot be effectively integrated with the Shared Service there is a risk that the assumed CVSSS ICT model cannot be achieved and benefits will be jeopardised. Detailed analysis, assessment of options and negotiation will be undertaken establish the best practical economic option for the CVSSS and the participating Councils. Council ICT infrastructure Some Councils internal ICT may not be a specification suitable to adopt the Shared Service requirements and lead to additional costs. The identification of a required minimum specification will be prepared over the summer and a gap analysis undertaken of participating Councils ICT arrangements. Version:

65 Table 32 - Customer Access service risks Theme Key issues Potential Mitigating strategies Financial Lack of detail in the business case. Hard to define the business case when it is based on vague or in principle models. Channel shift is critical but erodes the business case. Need comfort for Councils about who makes the investment in channel shift and who gets to keep the benefits (i.e. if CVSS invests then it should keep the benefits, and ditto if the Councils separately invest). Information & Communication Technology (ICT). Cost of change. Too expensive / poor return on investment (ROI). Some participating Councils may opt out of this functional area. Focus the business case on specific opportunities rather than total Customer Access function. Engage functional managers in review and planning. Map out current statuses and levels of maturity for the various Councils. Additionally, look at current versus target delivery models. Operational service performance Managing the inevitable temporary service dip after launch. Setting expectations with customers. Avoiding unsavoury timing (e.g. run-up to elections). Sharing customer-facing services represents a philosophical clash with tell us once style initiatives. Strategic incompatibility. Could lead to a service level dip. Risk to morale / staff retention if the message staff are given changes so dramatically. Keeping business-as-usual working. Staff productivity. Management bandwidth. Multi-agency working. Unintended consequences on wider working, e.g. relationships with Jobcentre Plus and Fire Service. Some participating Councils may opt out of this functional area. Focus on specific services. Lock down in-flight change to both systems and processes. Ensure capacity is available: o back-fill operational resource; o identify appropriate levels of change resource. Create effective governance and communications arrangements within each Council. Tools for Councils to re-use in their internal communications. Supporting Council transformation Structures and organisational changes currently ongoing in some Councils. Lack of stability. Different Councils are at different stages of transformation. Change fatigue. Will this be seen as a low priority? Some participating Councils may opt out of this functional area. Before progressing into implementation, overlaps in scope and scale of changes proposed or underway within the participating Councils will need to be tested against the proposed Shared Service model and any appropriate adjustments made. Customer relationships Losing local identity. Members might fear loss of individual identity and brand. Local accountability for service delivery and service levels. Perceived to be adding in another layer of bureaucracy between the citizen and the Council. Some participating Councils may opt out of this functional area. Set expectations Clarity about roles, access points and service levels Clarity about the future operating model (e.g. ways of working) Create effective governance and communications arrangements within each Council. Use of leans systems approach to service re-design. Employees and skills HR concerns. TUPE. Union liaison. Exit costs. Staff morale / buy-in. Communication and review to staff, services and business units within Councils and to customers. Lack of a shared transformation agenda and clear senior leadership. Needed to drive cultural change. Some participating Councils may opt out of this functional area. A detailed organisation design, employee transition and change management strategy, underpinned by detailed plans will need to be developed as part of the implementation. These will be supported by Equality Impact Assessments and considerations of skills / experience loss. Version:

66 Table 33 Revenues and Benefits service risks Theme Key issues Potential Mitigating strategies Government Reforms (Universal Credit etc) Housing Benefit will no longer exist and Council Tax Benefit will exist in some form, but we do not know the scheme and funding arrangements. Timescales of these reforms will be dependent upon the Shared Service timescales. Implications will impact the business case but impact is unknown at this stage. Councils will have to redeploy staff as opposed to follow compulsory redundancy procedures. Potential for local taxation reform. Financial Reductions in performance in service may cost the respective Councils additional monies. Risks to service continuity may be too great for some Local Councils approve such a transition into a Shared Service model. Operational service performance Supporting Council transformation Customer relationships The risk of missed payments and reductions in cash collection specifically. There may be a larger than expected investment required to integrate and combine these services. Differing service standards across all Local Councils may set different expectations of service performance Level of income could be impacted upon Scottish Water penalties do exist for poor performance. Council s income collection stream impacts Council budgets/budget setting based upon service standards. Different process standards which drives level of service performance. Some standardisation could reduce level of performance for certain organisations. Existing change initiatives within services may reduce its ability to share its services Members may want to retain the service to ensure they have a point of contact to raise any enquiries or complaints Members will want to understand how their control/experience of the service will have changed if any, before it is approved for sharing. Potential loss of local knowledge and relationships with customers as a result of Shared Service. Hand-offs are different between organisation and standardisation can potentially reduce service performance for some organisation resulting in the implementation issues and changes and investment implications required on other service areas. Decisions made within other workstreams will have an impact of the proposed Revenues and Benefits model as they are inter-connected. Costs of communicating the changes in the service to customers across all organisations will need to be factored into the implementation of the Shared Service (e.g. standardised stationary and telephone numbers). Assumed no savings in the financial model for Housing Benefits. Continue to review government plans for further impact on services being transferred to the CVSSS. Proactively engage with Government on planned changes to influence thinking. Clear identification of the performance levels that the CVSSS must achieve ( Golden Measures ) to ensure Councils revenues are not put at risk and continual monitoring and risk management activity within the CVSSS. Further detailed planning and costing of investment requirements and effective project management and control within the CVSSS during implementation. Setting clear service standards or Service Level Agreements between the Shared Service and the respective Councils will need to be agreed from the outset. Before progressing into implementation, overlaps in scope and scale of changes proposed or underway within the participating Councils will need to be tested against the proposed Shared Service model and any appropriate adjustments made. The strategic client function will operate as the first point of contact for members and will also act as the Councils interface with the CVSSS, ensuring member enquiries are dealt with effectively. Explanation of the Shared Service model, the controls and safe guards available to members and examples of where this model has been delivered before. Use of leans systems approach to service re-design. Version:

67 Theme Key issues Potential Mitigating strategies Employees and skills Location of the Shared Service will be critical to employing the right skills and expertise. Staff moral may be impacted through the changes brought about the Shared Service. Travel changes for staff depending upon the location of the Shared Service. Staff can potentially incur additional travel costs. Risk of losing local knowledge/insight which has added value to the current service arrangements. Recruiting and training new staff within the Shared Service may not deliver the same level of services expected. This will incur additional time and costs. Transferring staff from the respective Councils into the Shared Service may have grading implications (e.g. staff moving to a lower grade). Pay policies are different between organisations may have cost implications when transferring into the Shared Service. Suppliers Existing contracts and expiry dates are different for each organisation. Procurement issues related to buying on-behalf of other Councils. There will be costs incurred upon the respective Councils involved in collectively procuring and managing suppliers and setting performance. Implementation Separate rent collection arrangements retained within Councils outside Shared Service presents integration problems and cost implications. Impact of this could be an increase in the level of rent arrears. A detailed organisation design, employee transition and change management strategy, underpinned by detailed plans will need to be developed as part of the implementation. These will be supported by Equality Impact Assessments and considerations of skills / experience loss. A distributed location model will be adopted. Development of strategic procurement function for CVSSS to enable effective forward planning and supplier engagement. Dependencies with external processes need to fully appraised through the detailed design and build phase and solutions developed. Version:

68 APPENDICES Version:

69 APPENDIX 1 A Functional Sharing Arrangements: Finance The framework used to describe Finance and HR For both HR and Finance, a common framework has been used to categorise activities and responsibilities. These categories are Strategy (Level 3); Professional centres of expertise including business partners(level 2); and Transactional processing (Level 1). The activities that are most appropriate for sharing fall within the levels 1 and 2. This is summarised in the diagram below: Strategy relates to sovereign requirements of a client Council, having HR and Finance strategies that support their overarching corporate plans, culture and priorities; Business Partners are those HR and Finance professionals that have a sound knowledge of their particular client Council, support senior management and budget holders to plan and implement strategic polices and plans, offering high quality advice and commissioning support for new initiatives or programmes; Professional Centres of Expertise are professional staff that are aligned to a particular competency and skill set, to undertake both operational activity (such as management accounting within Finance or training and development within HR) and project activity (such as priority based budgeting within Finance or workforce planning within HR). These staff may also have a service specialism (such as children services, adult social care, etc) to ensure that they add value to their customers, bringing insight from across their client base and proactively support their clients to meet their strategic challenges; and Transactional Processing is undertaken by highly skilled, administrative staff processing transactions (such as invoices within Finance, or contract changes within HR), generate management information for the professional HR/Finance team and their clients, and seek to continuously improve the efficiency, quality and performance of processes. Self Service - While the Shared Service organisation would be responsible for providing systems and processes to cover the full suite of in-scope functional requirements, self-service activity occurs within the client Councils. Typical self-service activity would include raising purchase orders, approving expenses and accessing on-line budget information. Version:

70 Finance Service Definition Using the framework described above, the Finance Service has been defined as follows: Strategy Business Partner / Professional / Advisory / Centre of Expertise Strategy and Policy Development of the Councils Financial Strategy, annual financial plan & financial policy Strategic Council Management Team decision support Professional Decision support & business partners Interpretation and commentary on financial reports Management Accounting Financial Accounting Treasury Management Technical VAT Project Support Internal Audit Transactional Processing Invoice scanning & processing Accounts payable Accounts receivable Receipt of requests & raise invoices General ledger management Management of accounting calendar Posting of interfaces Reconcile sub-ledgers & bank/cash Addition/disposal/depreciate assets Maintenance of asset book Pcard / Credit Card admin Reporting (note that currently this activity may be undertaken by professional staff, but becomes transactional within a Shared Service operation supported by the core financial systems) Trial balance production Generation of financial & mgt a/c reports Standard reports Management of reporting universe Systems administration Master data admin, including users & access Administration of chart of accounts Procurement category code mapping Supplier & customer listing & account mgt Development & improvement Financial process improvement, financial system development, manager training / financial competency development, etc Helpdesk Self-service, Management Information, on-line guidance and advice Manager & employee support Supplier support Elements of Finance that should be retained Elements of professional finance that should remain as part of the strategic client function: Area Development of Council Financial Strategy, three year and annual financial plans & financial policy Comment & rationale This activity forms a key part of an organisation s strategic planning, based on the policy priorities of elected Members and business plans shaped by corporate management teams. This would involve the retention of the Chief Finance Officer role (Section 95) and a small number of senior finance roles (as determined by each Council). Version:

71 Elements of Finance that can be shared The following table summarises the elements of professional finance that can be shared: Area Comment & rationale Technical: e.g., VAT, Improve resilience, share workload and build capability. Project support: Internal Audit Decision support / Business Partners Management accounting Improve resilience and develop a pooled capability. Improve resilience and develop a pooled capability, while also reducing management costs. These roles require strong business knowledge (social care, highways, etc) to add value, and their transfer to a Shared Service could be perceived as increasing the Councils risk. However, Councils are exposed by single points of failure (individuals with specific service / technical depth). Sharing resources across Councils, building more service specialist teams could improve service resilience, improve the knowledge / depth of the team (working across Councils and gaining a better understanding of different operating models). There are some risk implications of sharing this function. Financial accounting However, with the use of a common system across the Councils and the close relationship between financial accounting and transactional data, there are efficiencies to be achieved from including within scope. A number of potential opportunities could exist: Improved resilience of staffing / expertise Savings in dealing with advisers Banking services savings Treasury Management Savings are considered to be potentially limited, but nevertheless worthwhile when coupled with improved service resilience. Key concern relates to both risk management (i.e., handing over responsibility for managing cash to a 3rd party) and potentially reduced flexibility. However, assuming that each Council defines their treasury policy (which could potentially be harmonised), it was unclear as to whether the risk profile or flexibility was really impacted. Potentially, the aggregation of investments / debt financing could achieve further value, although concerns regarding transparency could be an issue. The table below summarises the elements of transactional Finance that can be shared. Area Comment & rationale Processing Invoice scanning & processing Accounts payable Accounts receivable Receipt of requests & raise invoices General ledger management Management of accounting calendar Posting of interfaces Reconcile sub-ledgers & bank/cash Addition/disposal/depreciate assets Maintenance of asset book Purchase Card / Credit Card admin This is core, standard service scope for a transactional financial Shared Service centre. Assuming that the new service deploys: common systems / applications for all participating Councils; common processes to all in-scope Councils, with each Council ensuring compliance with the processes; clear hand-offs between the Councils and service centre; effective on-line self-service / automation to ensure rapid access to information and processes; assumes adoption of e-invoicing and invoicing scanning to reduce administration activity. Version:

72 Area Reporting Trial balance production Generation of financial & management accounting reports Standard reports Management of reporting universe Comment & rationale This is core, standard service scope for a transactional financial Shared Service centre. This role involves the production of information for finance professionals and budget holders, and the maintenance of the underlying data. Systems administration Master data admin, including users & access Administration of chart of accounts Procurement category code mapping Supplier & customer listing & account mgt Helpdesk Self-service, Management Information, online guidance and advice Manager & employee support Supplier support Continuous improvement of Finance Financial process improvement, financial system development, manager training / financial competency development, etc... This is core, standard service scope for a transactional financial Shared Service centre. This is core, standard service scope for a transactional financial Shared Service centre. It serves as the helpdesk for staff, manager and suppliers Core infrastructure component of a Shared Service model. Wrap around service for Finance to ensure that is able to flex with changing budget and customer service expectations. Version:

73 APPENDIX 1 B Functional Sharing Arrangements: Human Resources HR Service Definition Using the framework described for Finance above, the HR service has been defined as follows: Strategy Business Partner / Professional / Advisory / Centre of Expertise Strategic HR Organisation development strategy Strategic workforce planning Employee performance framework HR policy (including: T&Cs, pay/benefits, remuneration and benefits etc) Strategic CMT management decision support Business Partners Strategic decision implementation Change management implementation advice Detailed Workforce planning implementation Employee & union relations (to support an agreed process) High risk case management Carrying out HR Project Management Communicating and ensuring legislative compliance (on areas integral to practice but not undertaking an audit role) Performance improvement management (developing specific managers) Centres of Expertise Training & development (include case management coaching) Resourcing management (include redeployment, recruitment assessment, competency development and assessment, and undertaking job evaluation) Project and consultancy support: change management assistance; organisation redesign / restructuring; TUPE process management; redundancy Workforce planning (quality assurance of data, identify risks, review consistency) Advisory: (include Employment Law and Policy advice, Pensions Advice Remuneration and benefits (interpret data, generate options etc) Attendance management and employee welfare (inc occupational health) Employee Service Centre Helpdesk (employee service desk) Guidance on process / policy / systems Resolving queries regarding pay and other data issues Transactional processing Recruitment advertising Recruitment administration Employment checks / CRB /PVG admin Starters / leavers / contract changes Timesheets Payroll Expenses payments Salary sacrifice scheme administration Temporary placements / register Third party claims Training administration HR referrals data and admin management Management reporting Sickness absence Agency staff use Attrition rates / Overtime / Expenses Equalities, etc Systems & data management Master data admin: including users & access Pay elements / roles / positions Organisation design / hierarchy Records management and maintenance (including health and safety, job evaluation, and pensions) Continuous improvement of HR Business analysis, process improvement, application development Compliance and enforcement (with HR policies and procedures) Version:

74 Elements HR that should be retained Area HR Strategic & Policy Comment & rationale Retained as part of client function Organisation development strategy Strategic workforce planning Employee performance framework HR policy (including: T&Cs, pay/benefits, remuneration and benefits etc) Strategic Corporate Management decision support Strategic HR should be retained within the Councils. Strategic HR sets the policy and direction for resourcing and employee relations whilst all other HR roles would have responsibility to implement or to support the Council to implement a strategic decision or policy. Policy development should be a retained HR function, however Councils should work together to move towards more shared HR policies where appropriate. Although not all employee and union relations would be undertaken by a strategic HR function, any initiative that was significant in terms of size, scale, and impact on the Council, and those which required significant negotiation with unions and staff, should be retained by Councils. This is primarily to ensure that each Council had the necessary control and risk management practices to satisfy members. It is proposed that a single senior role (or small number of senior roles) will be retained (as determined by each Council). Elements of HR that can be shared The following table detailed the elements of strategic and professional HR that can be shared: Area Comment & rationale Shared following phased approach Business Partners and Professional HR Strategic decision implementation Change management implementation advice Workforce planning implementation Employee & union relations (to support an agreed process) High risk case management Carrying out HR Project Management Communicating and ensuring legislative compliance (on areas integral to practice but not undertaking an audit role) Performance improvement management (developing specific managers) Centres of Expertise / HR Consultancy for Specialist HR Projects Training & development (include case management coaching) Resourcing management (include redeployment, recruitment assessment, competency development and assessment, and undertaking job evaluation) Project and consultancy support: change management assistance; organisation redesign / restructuring; TUPE process management; redundancy Workforce planning (quality assurance of data, identify risks, review consistency) Advisory: (include Employment Law and Policy advice, Pensions Advice Remuneration and benefits (interpret data, generate options etc) Attendance management and employee welfare (inc occupational health The core distinction between these roles and the strategic one is that Business Partners and Professional HR roles are responsible for the delivery of HR strategy working with their client Councils, informing the decision making process, and interpreting policies to determine the implications on the business. Business Partners and Professional HR would require a good understanding of the business and its operations in addition to having a specific HR related skill-set. A critical factor in the phased sharing of these roles is the fact that there is significant reliance within the businesses on HR support; a factor that is characteristic of the culture of the Councils. Therefore, these roles can be shared but a significant cultural and change management programme would be required to support the Councils in the transition. Shared functions Separate teams would not be required to cover each of the areas of activity. This activity relies primarily on HR capability and competency as opposed to on detailed knowledge of the business, and therefore candidate activities for sharing. These roles could be shared from the outset of the Shared Service and / or before sharing Business Partners and Professional HR roles. Version:

75 All transactional HR and Payroll processes are proposed to be shared, as part of an Employee Service Centre. Employee Service Centre roles are administrative in nature, although they do require a depth of expertise, high quality processes and would need to foster a culture of accuracy, standardisation and service excellence. Further explanation regarding the component parts / responsibilities of each role is detailed in the following table: Area Helpdesk ( employee service desk ) Guidance on process / policy / systems Resolving queries regarding pay and other data issues Transactional processing Recruitment advertising Recruitment administration Employment checks / CRB /PVG admin Starters / leavers / contract changes Timesheets Payroll Expenses payments Salary sacrifice scheme administration Temporary placements / register Third party claims Training administration HR referrals data and admin management Management reporting Sickness absence Agency staff use Attrition rates / Overtime / Expenses Equalities, etc Systems & data management Master data admin: including users & access Pay elements / roles / positions Organisation design / hierarchy Records management and maintenance (including health and safety, job evaluation, and pensions) Continuous improvement of HR Business analysis, process improvement, application development Compliance and enforcement (with HR policies and procedures) Comment & rationale Core role to support managers and staff, with information provision and the resolution of queries. First line / point of contact (case management advice will be covered by advice and guidance). Core transactional functions. Core function of a Shared Service centre, providing information for analysis by HR business partners and managers within each Council. Core role, supporting the common system that will be used by the CVSSS and customer Councils. Core infrastructure component of a Shared Service model. Wrap around service for HR to ensure that is able to flex with changing budget and customer service expectations. Version:

76 APPENDIX 1 C Functional Sharing Arrangements: ICT Service definition Information and Communications Technology (ICT) should be described both in terms of the architecture (i.e., the assets and components that are deployed to meet the needs of the business), and the management capabilities that are used to deliver the architecture. It is possible to see these two elements as distinct, but highly related. The architecture is typically defined as including four key layers, as outlined below and in the diagram: User interaction platform Security platform Application platform Infrastructure platform At present, unsurprisingly, while the business needs of the respective Councils are effectively the same, undertaking the same activities with the same business objectives, the ICT architecture in place varies significantly, with a range of different technologies, applications and support arrangements. However, experience from other ICT Shared Service ventures in both the public and commercial sectors has demonstrated that the convergence of ICT architectures is not only possible, but is also a key enabler of wider business Shared Services. Fundamentally, to enable a Shared Service for HR, Finance, Revenues & Benefits, Customer Access to become a reality, the architecture needs to convergence for these business requirements. Version:

77 Regarding the management capabilities that describe ICT, we have used the following definition of 7 domains as a description of the total responsibilities of an ICT organisation with clear business relationships: These domains are described as follows: Domain Area Capability area Description Manage business & customer relationships Business relationship management Customer service management Provide a link back into Directorates to support issue resolution, requirements and also enforce corporate standards and policies. Work with the business to capture and translate business requirements for new and existing services to ensure there is sufficient IT resources to meet the current and future demands. Embed service management principles to provide flexible and tailored customer focused business services, supported by service levels and flexible processes that enable business change. ICT Strategy and business alignment Align ICT strategy with Council strategy. We face the customer with a single point of contact, and work effectively with the relevant internal functions to translate functional requirements into functional designs. Plan Investment portfolio management (IPM) By delivering effective IPM, allow ICT to prioritise its investments to maximise business value. Provide the oversight and control over the project portfolio. By developing robust IPM, assist in driving convergence between the ICT and business strategies. Architecture management Define enterprise ICT architecture which will support the Councils' long term needs. Create ICT architectural and quality standards, and make sure they are adhered to. Ensure that logical and physical security policies are defined and applied for each platform. Version:

78 Domain Area Capability area Description Build / Transition / Run Service portfolio management Proactively manage and prioritise investment across the service lifecycle, including those services in the concept, design and transition pipeline, as well as live services defined in the various service catalogues and retired services. Project portfolio control / assurance Govern build projects ensuring scope and quality standards are maintained. Build Programme and project management Manage and govern programmes or projects by applying the relevant knowledge, skills, tools and techniques to ensure delivery. Solution development Build / configure and unit / component test the solution, based on requirements and designs. Transition Service Transition Undertake an objective review to obtain evidence that the new / changed service supports the business requirements, including the agreed SLAs. Assess, review and approve all IT changes in a prompt manner to minimise the overall business risk. Assemble and implement new / changed services for live service, from operational planning through to early life support. Manage and administer all agreed configuration items and relationships to support service management activities. Run Service operation Manage our operations domains effectively and efficiently. Manage capacity and availability proactively and across all platforms to support current and future business. Manage incidents to restore service as quickly as possible & minimise adverse business impact. We investigate and proactively identify problems to eliminate recurring incidents and to minimise the impact of incidents that cannot be prevented. Review, assess and process valid requests, ensuring the appropriate authorisation is obtained and the customer is kept informed of progress. Workforce management Define and implement policies to manage and develop the workforce. Technology and Infrastructure management Define measures, set targets and consolidate reports to track and identify areas for service improvement. Manage service operations functions to ensure effective and efficient delivery. Manage & control Quality and assurance management Set the standard and monitor the quality of ICT services through continual audit to build quality excellence and ensure checks are efficient and effective. Financial management Forecast, monitor and allocate (where appropriate) the expenditure relating to ICT services. Sourcing and procurement management Continually research, analyse and appraise the supply market to select the appropriate suppliers and ensure robust contracts are in place. Manage supplier and vendor relationships Supplier relationship management Develop effective relationships with suppliers to help deliver business objectives whilst continuously assessing supplier partnership contribution and viability. Review, monitor and drive supplier performance to meet the agreed targets and instigate actions to eradicate poor performance. Version:

79 In evaluating which management capabilities should be shared or retained, the following ICT related design principles were used. The Shared Service will be accountable for delivery of the end-to-end ICT service to the participating Councils. The Shared Service will seek vendor value beyond just pricing. The participating Councils will retain a small intelligent client function. The Shared Service will continue to develop ICT people to partner with the participating organisations. The Shared Service will develop its ICT staff. The Shared Service will manage customer demand through a clear and simple customer engagement mechanism. The Shared Service will enable increased efficiencies to be visible for the participating Councils. The Shared Service will utilise industry best practice to shape its operating model and technology platforms. The Shared Service will aim to converge the existing ICT architecture through a longer term transformation programme supported by business cases for each component. Elements of ICT that should be retained For a shared ICT organisation to be viable, it must be empowered to take responsibility for the full delivery of ICT services; effectively all the capability domains referred to earlier. However, given that each Council remains sovereign and only support services are within the scope of the CVSSS Programme, it is important that each Council manages the interface with the shared ICT service. To this end, a small thin client function is proposed, comprising of a senior IT professional with some support, as part of the Strategic Client function referred to in Section 7.3. The key areas where the ICT organisation and a retained ICT client would work together are as follows: Domain Area Capability area Description The Shared Service should manage the relationship with the participating Councils. Manage business & customer relationships Business relationship management The engagement with Services and each Council s corporate management team should be mediated by the Strategic Client function that is responsible for prioritising requirements, interpreting strategic business requirements, and serving as the local point of contact regarding major ICT performance issues. Customer service management The Strategic Client function would be responsible for reviewing the performance of the shared organisation, in terms of performance indicators and cost, on behalf of their Council. Plan IT Strategy and Business Alignment The shared organisation will be responsible for shaping the ICT strategy and designing the target architecture to meet business requirements. However, the Strategic Client function will be responsible for prioritising and structuring their Council s changing strategic requirements so that the Shared Service can develop potential solutions. In this regard, the client role will be the gatekeeper for major change requests. In addition, the client will be responsible for highlighting the impact of changing ICT solutions on their Council, and negotiating with the Shared Service. The Shared Service will work within an budget to deliver the services that the Councils require. The Shared Service will need to be fully empowered to use this budget to maximise value for money. Manage & control Financial management However, as business requirements change, the Strategic Client function will be responsible to controlling variations in the baseline budget. Major change requests will need to be subject to business cases for review by Council management teams. Version:

80 Elements of ICT that can be shared All the core domains would be shared, subject to the Strategic Client function fulfilling its responsibilities as defined above. With this in mind, there is no differentiation made between a core or optional scope at this point. When the shared organisation is operational and has a mature service menu, it should be possible for it to offer specific services to Councils at a later date. However, the priority should be to gain control of ICT expenditure, optimise resources, adopt the most cost effective delivery models (for example, cloud-based solutions, etc). Version:

81 APPENDIX 1 D Functional Sharing Arrangements: Customer Access Service Definition The Customer Access service has been defined as follows: Interaction Channels Process Customer Access Applications for service Appealing Application for exemption Appointment booking Changing circumstances Complaining (note SPSO changes!) Entitlement/eligibility checking Renewing Repairing Replacing Reporting Status checking Booking venues, resources and courses Course booking Reserving a resource Venue/facility booking Collecting revenue Consultation Customer surveys Providing benefits and grants Providing information Regulation Issuing (licence, consent or permit) Notifying of incidents or instances Providing periodic returns Non-electronic Unstructured letters Agreed correspondence types Forms Outbound (leaflets, campaign) Other electronic media Kiosks Telephone Call centres Fax Voice Web site Information page Online form Face to face One Stop Shops Central Service Desk(s) Customer Access strategy/ policy Performance management / reporting Telephony / messaging infrastructure Website / static content management Switchboard Information provision (nonpersonalised) Information provision (personalised) Once-and-done transactions Service fulfilment & complex transactions Assessment and appraisal Range of Services provided across Customer Access services Animals Disclosure Benefits Elections Care Housing Allocations Ceremonies Tenancy Services Council Tax Land & Property Banking Parks & Open Spaces Birth Demonstrations & Parades Car parks Education Grants Civil Emergencies Schools Placement Community Environmental Information Countryside Freedom of Information Death Housing Repairs Disabled People Jobs Licences Older People Planning Pollution Control Recycling BMD Registration Vandalism Refuse Roads Version:

82 Challenges for sharing Customer Access When considering the potential for Shared Services in the area of Customer Access it was recognised that each Council is involved in significant service transformation activity involving the re-design of customer access. These service transformation plans aim to deliver significant efficiency savings within wider Council service areas and it is important therefore that the Shared Service adds value to this and does not impact negatively on these programmes. Therefore in considering which aspects of Customer Access activity that is appropriate for sharing and transferring to the Shared Service, account has been taken of a number of key issues: the preference for passing early responsibility for managing Customer Access activity to the CVSSS varies across the participating Councils, because of the transformation activity described above and the important shop front nature of the service; there is still significant variation across the participating Councils in the back office systems accessed by their Customer Access staff and the degree of integration with the core Customer Relationship Management (CRM) systems used. This limits the scope for productivity improvements arising from the consolidation of call centre activity, until such time as Councils have converged on more common platforms and adopted standard processes; face to face interactions will require to be delivered within each Council area, although over time this could make use of common, shared infrastructure; it is recognised that the Shared Service for Customer Access has significant dependencies on channel shift, primarily because the services that are most appropriate for sharing are also the ones most appropriate for self service; it is important that accountability for the multi-channel customer experience is clear: any service that is shared should be shared for all channels (rather than being, say, shared on the telephone channel but retained on the web channel); the capability of online service delivery technology is rapidly developing. For example, online service delivery now includes possibilities such as location-based smart phone services (reporting street scene and environmental incidents) whereas previously it was deemed to be only about web-based self-service transactions. This means that there is a deeper requirement for Customer Access strategy to align with ICT strategy within the Councils and the CVSSS model. Notwithstanding these issues and in the context that Councils are currently planning to shift non-mediated transactions onto self-service channels anyway, an evolutionary model for the development of the Customer Access aspect of the CVSSS could add significant value in a number of ways: it would provide a framework for co-ordinated service re-design activity in those areas of Council business that have not yet been subject to transformation activity, and where appropriate, develop a Clyde Valley standard approach which would lend itself to Shared Service operation from the start (as opposed to trying to bring together seven different approaches for those service areas currently within the remit of Council Customer Access functions); it would act as a catalyst for change, co-ordinating the channel shift process to make it happen more quickly than would be achievable if the Councils pursued it independently and, also provide a single interface with national developments such as that being undertaken by the Improvement Service; it would create critical mass by aggregating the contact volume of multiple Councils, which might not justify the investment in channel shift for any one Council alone. Version:

83 Enquiry line Clyde Valley Shared Support Services Elements of Customer Access that could be shared Four alternative models for shared Customer Access services were considered (models A to D in the diagram below): As Is A B C D Front office Front office Shared infrastructure Shared infrastructure Shared infrastructure Shared infrastructure Currently, given the issues highlighted in the previous page, Model A; Shared Infrastructure, would provide the most pragmatic and practical starting point for sharing. The following infrastructure functions were identified as candidates for sharing: transformation resources (specialist service re-design expertise in areas such as Lean Systems thinking, customer data analysis and segmentation etc); CRM development resources (specialist technical expertise); common operational resource (especially in areas where skills are in short supply): o management information and workforce scheduling; o telephone / IVR / call routing; o training / coaching; o business continuity capabilities. shared voice and data platform, enabling: o overflow between Councils and between CVSSS and Councils o disaster recovery o handling of peak events Shared Management In addition to these shared infrastructure elements listed above, the CVSSS could provide for the shared management of customer access staff where there is a preference to transfer responsibility for this function to the CVSSS. The staff would continue to provide locally based services for their original Council, but be managed by the CVSSS. For the reasons given on the previous page, the potential to create savings by moving to a single consolidated call centre arrangement within CVSSS will be very limited at the start, but over a longer time period, it would be possible for the CVSSS Customer Access arrangements to evolve from model A to D for services where there is convergence in the back office systems used and the more standardisation of policies and processes. The Revenues and Benefits Service described in the next section would provide the first opportunity to test this approach, as a component of the move of the service to CVSSS will be the adoption of a common system for the Clyde Valley. Version:

84 APPENDIX 1 E Functional Sharing Arrangements: Revenues & Benefits Service Definition The Revenues and Benefits service has been defined as follows: Revenue Benefits Support Services Initial Contact Provision of Information, Advice and Guidance Detailed Enquiries Council tax Banding changes Change of Circumstance Discounts and Exemptions Billing Collection Refunds Recovery Sundry Debt Attachment of benefits Billing of sundry debtors Notices (reminders, final notices, summary warrant notices) Disputes Court proceedings (incl. sequestrations) Sheriff Officers Recovery NDR Change of Circumstance Reliefs Billing Collection Refunds Investigation and Fraud Preliminary Investigation (random/spot checks on accounts) Detailed Investigation (site visits, interviews, surveillance) Initial Contact Provision of Information, Advice and Guidance Detailed Enquiries Council Tax and Housing Benefit New claim Change of Circumstance New claim (DWP) Change of Circumstances (DWP) Current claim Backdated claims Landlord enquiries (Stakeholder management) Renewals Rent Officer liaison Discretionary Housing Payment Re-Considerations and Appeals Interventions & Review Recovery Attachment of benefits Overpayments Notices (reminders, final notices, summary warrant notices) Disputes Court proceedings Sheriff Officers Investigation & Fraud Fraud Referrals Preliminary Investigation (random/spot checks on accounts) Detailed Investigation (site visits, interviews, surveillance) Quality & Performance Service Strategy and Policy Development (Maintenance and definition of service policy and service standards) Service performance monitoring (including claims checking) Budget monitoring Returns (Scottish Government, Scottish Water, etc) Subsidy Claims Valuation List from assessor (new properties and changes) IT Support/Maintenance (e.g. Releases, updates, testing) Running Jobs (e.g. Routine, ad-hoc jobs, follow-up payment runs, cheque runs, scans for DWP) FOI, Subject Access Requests Reconciliation and Accounting Maintenance of public documentation (e.g. Bills, notices, leaflets) Supplier Management (e.g. Contract management) Member Support Complaints Stakeholder Management Training IRRV training and other qualifications Systems training Procedures and policies training Legislation training Customer Services training Scanning & Indexing Scanning post Indexing post and s on systems Mailroom Receiving and sorting post Version:

85 Rationale for Sharing In defining the scope of the service in more detail, consideration was given to how the public currently interacts with the service, either through a face to face interaction or through a back office interaction. Face to Face: the activity is triggered by a face-to-face interaction the service has with a member of public. Back Office: the key activity is triggered by a remote interaction (i.e. telephone, , web-forms and post) with a member of public. In addition to this initial interaction, back office activities include transactional processing, records management, performance reporting, training, etc. Key activities which have been classified as outgoing are those which are triggered by the service themselves as well as the public. The purpose of defining the scope in this way is to identify which aspects could fall within the Shared Service and which are out of scope. Revenues Service Function Key Activity Face to Face Initial Contact Council Tax Recovery (incl. Sundry debtors, NDR) (Is also an outgoing) Back Office Provision of Information, Advice and Guidance Detailed Enquiries Banding changes Change of Circumstance Discounts and Exemptions Billing Collection Refunds Attachment of benefits Billing of sundry debtors Notices (reminders, final notices, summary warrant notices) Disputes Court proceedings (incl. sequestrations) (outgoing) Sheriff Officers NDR Change of Circumstance Reliefs Billing Collection Refunds Investigation & Fraud Preliminary Investigation (random/spot checks on accounts) (outgoing) Detailed Investigation (site visits, interviews, surveillance) (outgoing) Version:

86 Benefits Service Function Key Activity Face to Face Initial Contact Council Tax and Housing Benefit Recovery Investigation & Fraud Back Office Provision of Information, Advice and Guidance Detailed Enquiries New claim Change of Circumstance New claim (DWP) Change of Circumstances (DWP) Current claim Backdated claims Landlord enquiries (Stakeholder management) Renewals Rent Officer liaison Discretionary Housing Payment Re-Considerations and Appeals Interventions & Review Attachment of benefits Overpayments Notices (reminders, final notices, summary warrant notices) Disputes Court proceedings Sheriff Officers (outgoing) (outgoing) Fraud Referrals Preliminary Investigation (random/spot checks on accounts) Detailed Investigation (site visits, interviews, surveillance) (outgoing) (outgoing) Support Service Function Key Activity Face to Face Quality & Performance Service Strategy and Policy Development (Maintenance and definition of service policy and service standards) Service performance monitoring (including claims checking) Budget monitoring Returns (Scottish Government, Scottish Water, etc) Subsidy Claims Valuation List from assessor (new properties and changes) IT Support/Maintenance (e.g. Releases, updates, testing) Running Jobs (e.g. Routine, ad-hoc jobs, follow-up payment runs, cheque runs, scans for DWP) Back Office FOI, Subject Access Requests Reconciliation and Accounting Maintenance of public documentation (e.g. Bills, notices, leaflets) Supplier Management (e.g. Contract management) Member Support Version:

87 Function Key Activity Face to Face Training Scanning & Indexing Mailroom Back Office Complaints Stakeholder Management IRRV training and other qualifications Systems training Procedures and policies training Legislation training Customer Services training Scanning post Indexing post and s on systems Receiving and sorting post Options for Sharing The two potential Shared Service options considered are shown below. Option 1 Shared Back Office Administration Option 2 Full Service Integration Shared operation can potentially fulfil all enquiries through phone, / eforms and Post. Not location specific can be delivered anywhere, however, requires robust infrastructure (e.g. ICT) Front of house operations would be retained within the respective Councils, as part of their integrated customer access arrangements. Revenues and/or Benefits service completely shared with minimal responsibilities retained within the respective Councils. Policy and service levels are set within the respective Councils and the new organisation becomes a delivery vehicle on behalf of the Council. The Business Case financial model currently assumes that Option 2 will be adopted for the CVSSS. In a number of the participating Councils the front office activity for Revenues and Benefits is fully undertaken by their Customer Access service. Option 2 will mean that instead of handing off activity between the Customer Access function and Revenues and Benefits back office function in the same Council as currently happens, the hand off will be to a shared back office function within the CVSSS. Further refinement of the options will be required once the participation of Councils has been finalised. This will allow any differences in preference for retaining the customer contact activity arising from Revenues and Benefits within Councils Customer Access functions, to be reflected in the final arrangements. It should be noted that the service redesign activity that will be undertaken by the CVSSS using a lean systems thinking methodology will seek to minimise handoffs and ensure as much of the customer needs can be managed on a one and done basis. This should result in an increase in activity taking place at the point of customer contact (whether managed by the CVSSS, or by a Council s retained Customer Access function) and the removal of barriers that get in the way of delivering a responsive service to the customer. The move to a common Revenues and Benefits system and the standardisation of processes will also make it easier to operate shared Revenues and Benefits front office activities as the problem associated with accessing multiple back office systems highlighted in the previous Section will be removed. Version:

88 Appendix 2 A Assessment of Delivery Vehicle Options This appendix captures the results of an assessment of the different delivery vehicle options for the Clyde Valley shared support service. A Red Amber Green (RAG) status colour code is used to provide a visual indication of the differences between the options and assessment criteria, supported by a narrative text. Version: