Business Cases: A Summary Of Strategic & Cost Effective Project Management

Transcription

1 Page 75 Agenda Item 10 Report to: Strategy and Resources Committee Date: 14 December 2015 Report title: Report from: Ward/Areas affected: Strategic Business Case for sharing HR services with Royal Borough of Kingston Gerald Almeroth, Strategic Director of Resources Borough Wide Chair of Committee/Lead Chair Cllr Ruth Dombey / Lead Cllr Richard Clifton Member: Author(s)/Contact Lucy Vaughan, Shared Service Project Manager Number(s): Corporate Plan Priorities: An Open Council A Green Council A Fair Council A Smart Council Open/Exempt: Open Signed: Date: 3 December Summary 1.1 This report follows on from the report received by the Committee on 28 September 2015, and contains further detail on the business case for sharing HR services with the Royal Borough of Kingston, as well as an update on the decoupling in both Sutton and Kingston. 1.2 As outlined in the previous report, there was originally a plan to develop a business case for a four borough HR Service between the Sutton and Merton service, and the Kingston and Richmond service. However in April 2015, Richmond gave notice to Kingston shortly followed by Merton giving notice to Sutton in May Sutton and Kingston already share ICT, Legal and Payroll services, and have recently agreed to implement a shared Environment Service. Further work is ongoing looking at other potential services between the two Councils that could provide benefits through sharing. A key enabler for ensuring the success of current and future shared services is by the alignment and sharing of HR Services. 1.4 The focus of the first part of the project has been to understand the implications of the decoupling of services in both Sutton and in Kingston. There has been good progress on this, which has involved an informal consultation period with staff in Sutton to ensure that staff were comfortable with the management analysis of their work prior to the formal consultation period. This included the opportunity for staff working across both Sutton and Merton, to put forward their views as to whether they should be part of the TUPE list to Merton, and if they worked

2 Agenda Item 10 Page 76 across both boroughs evenly whether they had a preference for moving. Staff will not be required to make any formal decisions or state preferences until later in the formal process. Staff will have more information and understanding on the form and function of the HR service in the future in both boroughs. 1.5 The decoupling arrangements between Kingston and Richmond have been concluded, with Richmond buying back a suite of services post the end of the collaboration agreement in April Sutton will remain the contract lead for the Agilisys I-Trent HR system / payroll contract and continue to Chair the I-Trent Governance Board for the four Borough partnership. The objective is to facilitate multi-borough working by ensuring that the arrangements are open for other partners to join. This could also be of future commercial benefit for the boroughs. 1.7 The report provides a business case for future options on the provision of HR services and recommends an operating model for an integrated shared service with Kingston, outlining its possible form and function; and asks for a decision to proceed with the consultation timeline as set out in the report. 1.8 It is acknowledged that the People Plan is an important initiative for Sutton, which is due to be delivered on 1 April This initiative needs not to be impacted by the changes in HR, with the timetable acknowledging that may need to be a phased implementation of any new arrangements to ensure important corporate programmes are delivered, so whilst the proposed new shared service aims at a 1 April 2016 implementation date depending on capacity to deliver other important work this may be re-phased to no later than 1 June Subject to agreement at this Committee to the strategic business case, there will be detailed engagement with staff in preparation for a new structure to be consulted on in line with the timetable set out. This process will follow the pre-consultation guidelines set out in the Council s HR Policies and Procedures. 2. Recommendations It is recommended that the Strategy and Resources Committee: 2.1 Agree the strategic business case and high level operating model for sharing the HR Service with Royal Borough of Kingston, which will deliver the benefits as outlined in Option 1 of the options appraisal (Section 4) 2.2 Agree the proposed timetable for implementation as set out in Section Note that there is a procurement options appraisal taking place on the itrent / Payroll arrangements, at the request of the partners of the contract and led by Sutton. 2.4 Delegate authority to the Strategic Director of Resources to develop further and agree proposals, subject to formal consultation with staff and trade unions.

3 Page 77 Agenda Item Background 3.1 A report came to the Strategy and Resources Committee on 28 September 2015 which sought agreement to explore in more detail a shared HR Service with Kingston. The report outlined that Sutton and Kingston were decoupling from their current shared service arrangements with Merton and Richmond, and as a result a project has been set up to look at the feasibility of a Kingston and Sutton shared service. This was to ensure resilience of both services, maintain the cost savings achieved so far and to support and enable the wider sharing of other services across the boroughs. 3.2 The report outlined the importance of understanding the implications of the decoupling first before being able to move to the design of a new service. Although not finalised in Sutton, there is now a better understanding of the implications and good progress has been made. In Kingston and Richmond, the decoupling arrangements have been concluded. 3.3 Sutton carried out an informal consultation exercise where staff were allocated to categories depending on whether they considered their work was assigned to Sutton business, Merton business, not assigned to either borough or their post was out of scope. A letter was then issued to staff and unions with lists of staff names and their indicative allocated categories. An inbox (both an version and physical box on the desk in Sutton and Merton) was also set up for staff to send in a form notifying us of whether they believed they were in the right category, and to submit any questions. 3.4 The lists were then updated, and the questions all responded to both individually and through an FAQ sheet. The formal consultation process for the decoupling with Merton will commence in January. 3.5 The Sutton service is likely to continue to provide some discrete services to Merton beyond April 2016, which will be predominantly HR contract management and disclosure and barring work for safeguarding purposes. The ongoing financial arrangements have yet to be agreed, and are subject to agreement at the Sutton / Merton governance board. It should be noted that since the last report to Committee, Merton will not be entering a shared service with Wandsworth and Richmond until Sutton, with its four partner boroughs in the I-Trent HR System and Payroll contract with Agilisys are also exploring procurement options for addressing the current restrictions in the contract with regard to access of I-Trent and payroll services by other organisations. The objective is to implement a legal change in the contract which will enable others to join. This leaves the door open for Wandsworth and Richmond to join in the future (Richmond are currently due to leave the partnership in 2016/2017). Merton have committed to stay with the current I-Trent / Payroll arrangements until 2018, however they ultimately wish to be on the same platform as Wandsworth and Richmond, therefore this could be a good solution for all partners.

4 Agenda Item 10 Page Business Case Development 4.1 This strategic business case has been put together for the HR service, the detail of which is summarised below. A detailed business case will be developed once the decision to proceed has been given by Members. Subsequently, the staff in scope of the new service, and customers will be engaged in identifying the benefits in more detail and will input into a new operating model as part of the consultation stage outlined in the Sutton re-organisation policy. Need for Change 4.2 Merton gave notice on the shared service with Sutton in May 2015, which puts the 787k savings already delivered from the shared service over the last five years at risk. This is because much of these savings have been able to be delivered due to the economies of scale and flexibility of having a shared service. 4.3 Sutton have significant savings targets to deliver from all services across the Council, which alongside the reduction in headcount expected over coming years, would mean that the HR would need to shrink further, which makes it less resilient. The Council need a sufficiently resourced HR service to enable them to make the transformational changes that are required, and support the People Plan and workforce strategies, but it must do this in a cost-effective way. The service remaining on its own would put it more at risk from budget reductions. 4.4 Sutton and Kingston are already sharing a number of services together and are assessing the viability of sharing more in the future. There is a Memorandum of Understanding between the boroughs which provides a commitment to closer collaboration. A shared HR service between the boroughs could provide a stable platform to support further change of this nature. Options Considered 4.5 In July 2014, a report commissioned from Inner Circle Consulting and Templetree consulting assessed the feasibility of a four-borough shared service between Sutton, Merton, Kingston and Richmond. The options appraisal explored a number of different delivery models and concluded that an in-house shared service model between boroughs was the best option in terms of cost effectiveness and maintaining quality. 4.6 This feasibility study, alongside the strategic direction of the Council, have formed the basis of the assessment options for HR. Please see a summary of the options appraisal below:

5 Page 79 Agenda Item 10 Option Option 1 - two-borough shared service (Sutton and Kingston) Option 2 - do nothing, provide a single service in Sutton Assessment The shared service option would deliver the following benefits: It would be a key enabler for other shared services between Sutton and Kingston, which builds on the already integrated ICT shared service; Provides the ability to redefine reporting and performance indicators to assist Sutton and Kingston in people management relating to shared service arrangements; Enables increased commercial opportunities to sell services, the service would be selling services to schools across 3 boroughs (Kingston, Richmond and Sutton, and in some instances Merton); Maintain the delivery of current savings initially ( 787k), and deliver further savings as processes and systems are aligned; Ensures greater resilience and flexibility in the light of both services decoupling; both boroughs have made significant savings from their current arrangements, with more to deliver. Provides the opportunity to streamline business operations and processes; Provides more career opportunities for staff; and, The service will have greater influence in the HR market, including working with external providers. If the service were to remain on its own it would have the following benefits: There is the opportunity to make efficiencies in-house first, before considering a shared service; The service could be re-focused on Sutton only business The dis-benefits are the reverse of all the benefits listed above. Option 3 - four-borough shared service No longer an option, due to Merton and Richmond exiting their respective shared service. The options appraisal undertaken concluded that: A four-borough HR shared service would be more effective and efficient and that a four-borough partnership best facilitates each borough s strategic requirements to support the transformation of their businesses, to develop a shared back-office function, and to generate income through wider trading.

6 Agenda Item 10 Page 80 Option 4 - outsourcing Option 5 - HR traded service (eg. Mutual company, Local Authority Trading company) Full market testing for the option of an outsourced HR shared service has not been undertaken in the context of this project. However, the four-borough feasibility study of July 2014 found although an outsourced arrangement could be cost-effective and efficient, it was overall a less viable option than all of the other delivery models analysed (including a two-borough shared service, a four-borough shared service, a establishment of a mutual company). Relevant functions could still be commissioned from the market in a new in-house model if this makes sense. The option of selling a local authority HR service to other public sector organisations has not been analysed in detail. However, the four-borough feasibility recommended the establishment of a mutual company as a viable option, second only to a fourborough partnership. The option of putting shared services into a local authority owned company vehicle that would enable wider trading could be explored in the future. Conclusions 4.7 This report recommends the establishment of a two-borough (Sutton and Kingston) shared service option 1. The two key reasons why this option has been recommended are as follows: It would protect Sutton from the dis-economies of scale that would result from disbanding the existing shared service without establishing a new shared service arrangement. This would put a large proportion of the 787k already delivered through the shared service with Merton at risk; The creation of a shared service between Sutton and Kingston could be a key enabler for other shared service arrangements in future. This is appropriate given the strategic direction in which both Councils are moving. 4.8 The model recommended for the shared service is an in-house service with one employing authority. The employing authority model is the best option for the HR service currently in terms of expediency in the light of the decoupling of the two services in particular. However once the service is shared it can move into whatever shared service model the authorities may choose for other services and corporate support functions (as mentioned in the options appraisal above). 4.9 The model does not mean one Council or the other is taking over or making decisions for the other. The model used for both ICT and Legal Services is that all parties have to be in agreement for any decisions to be made about the future direction and leadership of the service. Ultimately it is the customer who has the power to demand and vary what it requires within the budget allocated and this will be built into the governance for this.

7 Page 81 Agenda Item Kingston are proposed as the employing authority. They currently have a more flexible generic service, which is a model that provides more cost effectiveness and resilience, but also protects key expertise. It also causes slightly less complexity for the future service delivery model of a Sutton and Kingston shared HR service if Kingston are the host authority in terms of Achieving for Children (AFC), which is a Teckal company, and reverse Teckal could apply. This would mean that Sutton would need to become a shareholder of the company if it were to be the host of the shared HR service. Therefore the timeline going forward for implementation of the shared service is based on the TUPE of Sutton staff to Kingston. 5. Principles and outline of the new shared service 5.1 To support the strategic business case, a variety of informal stakeholder engagement exercises were carried through out during October to gather customer insight into priorities for the new HR shared service. These activities included: Interviews with Strategic Directors in Sutton HR Customer Journey Workshop held at Sutton (with frontline and senior managers nominated by the Sutton CMT) - See Appendix A for detail Drop in sessions for all Council staff to validate the findings from the workshop and give any additional feedback; A shared service workshop with HR managers across Sutton and Kingston 5.2 The engagement above builds on the informal engagement activities that took place earlier in the strategic business case development which included: All staff workshops held for the Sutton / Merton service and the Kingston / Richmond service A HR Manager meeting across Kingston and Sutton 5.3 It is proposed that schools will be surveyed in both boroughs as part of the customer feedback process before Christmas. This will help build the commercial offer of the new shared service. 5.4 There have also been informal staff briefings in both Boroughs as a way of updating them on the progress of the project, and to provide an opportunity for any questions to be asked. Informal briefings with Union representatives have also happened. 5.5 As a result of the various informal engagement activities with customers and managers, the principles contained in the previous Member report have been validated and/or amended accordingly. The following are therefore the proposed principles for the new shared service: Have externally commissioned elements where it makes sense; Look and feel shared joint governance, management and decision making; Fit local needs, and be adaptable and flexible across locations. Customers have said that visibility is important for relationship management/change roles; Have dedicated OD / change leadership for both Sutton and Kingston, to ensure the needs of both boroughs are met equally;

8 Agenda Item 10 Page 82 Have sufficient resources to support strategic leadership and business needs, where it is particularly important to maintain sufficient change and relationship management capacity; It will be cost effective, with efficient processes and systems. Self-service is important in helping to deliver this; It will deliver effective HR initiatives to develop organisational capability, productivity and flexibility; It will be a new shared service created together, which keeps the doors open for others to join; It will use technology to facilitate change and support improved business processes; It will be designed with a view on the future of corporate services across the two boroughs, and; It will take a commercial and customer focused approach, particularly in developing relationships with external organisations (e.g. schools). Proposed Outline Operating Model 5.6 Sutton and Kingston HR services operate models with the similar services in scope. There is a strong focus on Business Partners building relationships with service management teams to support them in strategic HR matters, alongside transactional HR activities (such as dealing with employment contractual changes, recruitment and clearance activities, and processing starters, movers and leavers) being undertaken by a grouping of customer-facing HR/payroll-trained staff. Both HR services also deliver Health and Safety and Occupational Health, although Occupational Health is externalised in Sutton. Kingston have a more flexible and integrated service that is less expensive, but provides a reasonable level of resilience. 5.7 The outline operating model (which is not a structure) is based on the principles as set out above. It promotes maximum flexibility across the service, and involves integration of the services unless otherwise specified by customers in either boroughs. As highlighted by customers, the new model would have a particular focus on Organisational Development and Strategic HR advice and business support. 5.8 The diagram below should be read in conjunction with Appendix B, which provides more details of the functions within the outline operating model:

9 Page 83 Agenda Item The above outline model (alongside Appendix B), and associated role profiles will be created in preparation for the formal decoupling consultation process with Merton. This will aim to provide the staff who work across both boroughs in Sutton with adequate information to make a decision on whether they wish to be part of a Sutton and Kingston shared service The proposal is that the I-Trent Client Team which services the Agilisys contract will also TUPE to Kingston and form part of the shared service. This will ensure a streamlined operation across transactional services. The aim will be to build on the success of this partnership and develop the commercial proposition for this to expand in the future. The contract will still remain led by Sutton and not be novated to Kingston although this may be a possibility in the future if this was beneficial to the wider partnership. There will be review of how all Sutton contracts are managed in the new shared service as part of the design phase. Governance of Shared Service 5.11 The proposed governance for the shared service is also shaped around the principles outlined in 5.5, and promotes joint decision making:

10 Agenda Item 10 Page It is recommended that customers feedback is core to the continuous improvement and development of the service. Therefore there will be a customer board that will feed into the shared service governance There will be more detail on the governance arrangements contained in the collaboration agreement between Sutton and Kingston, which will commence in earnest pending agreement of this report. The collaboration agreement will ensure appropriate escalation procedures and exit provisions. 6. Implementation 6.1 It is proposed that there is a phased implementation of the service instead of full integration by April/May The outline timescales would be as follows: January April/May 2016: To decouple from Merton, and to create a shared Sutton / Kingston Management Team, who will take a lead on delivering the next phase of integration. April/May October 2016: To integrate the services further, by aligning working practices and systems which will enable staff to work flexibly across the two boroughs. This will deliver further efficiency savings and deliver the full benefits of integration. 6.2 The reasons for a phased approach are as follows: 1) To ensure the impact on staff is reduced in January through to April 2016, particularly in light of the formal decoupling consultation required in Sutton; 2) To ensure that the Sutton and Kingston service have adequate resource to be able to deliver on key Corporate Projects and Programmes such as the Sutton People Plan;

11 Page 85 Agenda Item 10 3) To ensure that key systems and processes can be aligned prior to further integration. 6.3 The timetable involves a number of different consultations, some relating to the TUPE of staff, and others relating to consultation in regards to a restructure/reorganisation. The diagram below shows the timetable for the various consultations: 6.4 The timetable is still subject to final agreement with Merton, as the end of the collaboration agreement for the Sutton and Merton shared service is officially the 31 May The aim is to complete the TUPE processes by 1 April, however this needs to be reviewed in terms of other high priority work for the Councils and therefore there is a risk that the staff may not TUPE out of Merton until 31 May. It is expected that formal agreement on the implementation date will be made before the start of the TUPE consultation in January. 7. Impacts and Implications Financial 7.1 All costs listed below relate to the project costs for both Sutton and Kingston. They are therefore shared and are funded from the DCLG Transformation Challenge Fund grant awarded to SW London boroughs earlier in 2015.

12 Agenda Item 10 Page To date there has been approximately 20k spent on independent legal advice through Trowers and Hamlins. There is likely to be further independent advice required on setting up the future arrangements between Kingston and Sutton, although the work will be led from the shared service partnership and only reviewed by Trowers and Hamlins. The project will also be securing independent HR support, which will minimalise the need to use Trowers. 7.3 There have been external project management costs of approximately 45k (May - November). This support will be required until April All other project support is being sourced internally from Strategic Business in Kingston and Sutton. 7.4 The staffing implications relating to the decoupling of services are not yet possible to fully clarify. The collaboration agreement between Sutton and Merton states that redeployment across the two boroughs is the first option for any surplus staff in either boroughs (after staff subject to TUPE has been agreed). There is also a responsibility to share any redundancy costs should they occur, but both Council s will work hard to minimise this. It is impossible to say how many redundancies there may be at this stage, but it is likely to be small in number given current levels of agency staff and the need to provide services in the future (albeit in a different model). 7.5 The current net HR budget for all functions in Sutton is 2.6 million after taking into income and costs shared with other organisations. There are existing savings in Sutton of 140k in 2015/16, which have been delivered by reducing agency staff and retaining all current permanent staff. There are further savings of 170k in 2016/17, for which plans are being worked through. It is likely that the HR service, as with all other corporate services, will have to look for further savings in later years too. The services decoupling, puts at risk the 787K that has already been delivered from a shared service model with Merton. Legal 7.6 Trowers and Hamlins have assured both boroughs that correct processes are being followed in regards to the decoupling and consultation on future arrangements. Sutton are doing more than is required legally by carrying out an informal consultation process on the decoupling first, and giving staff whose work is not assigned to one borough or another (who legally would not have the right to TUPE to Merton), to state a preference if they wish to. 7.7 The Shared Legal Partnership are confident that an outline collaboration agreement can be drawn up relatively easily given the examples the boroughs have from the shared ICT and Environment Service. However, Trowers will review it to ensure exit provisions are robust following learning from previous agreements and the decoupling that has needed to take place as part of this project. 7.8 The Shared Legal Partnership are also advising on any contractual changes (relating to the Agilisys contract or the Collaboration Agreement) that will need to be made in regards to the proposed TUPE of the itrent Client Team to Kingston and these will be resolved in due course.

13 Page 87 Agenda Item 10 Equalities Implications 7.9 A full Integrated Impact Assessment is underway. It will completed, alongside the full business case when the potential structure of the future Sutton and Kingston service is prepared in more detail Actions have already been taken to mitigate adverse impact on staff, by undertaking an informal consultation exercise and offering opportunities for staff to state their preferences with regard to future arrangements. It should be noted that, in this regard, many staff have been given more opportunities than would be legally required under TUPE regulations There is also a redeployment protocol being drawn up with Merton which will ensure that redundancies are minimised. This will be shared with the Unions in due course. Staff have also been given the opportunity to apply for voluntary redundancy throughout November. 8. Appendices and Background Documents Appendix letter A B Title Customer Consultation Feedback Functional Model Background documents HR Shared Service report for Strategy and Resources Committee, 28 September 2015 Audit Trail Version Final Date: 3 December 2015 Consultation with other officers Finance Yes Gerald Almeroth Legal Yes Trowers and Hamlins Other Officers: Yes Tom Alexander

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