Wednesday, 31 August 2011

Richard Kerley GMS interview on shared services

CSPP Board Member Richard Kerley was interviewed today on Good Morning Scotland (2:32:20 in). Responding to news that Councillors from West Dunbartonshire will vote to reject plans to set up a joint agency for back office functions, Professor Kerley said:

“It is curious that West Dunbartonshire Council, who actually led some of the scoping work, have appeared to pull back at the last moment. Yet, they are not the first to do so with South Lanarkshire already withdrawing from the process.”

“The fundamental factor underlying this is there are so many councils involved in complex and difficult discussions. Perhaps, it works better when fewer councils are involved in these deliberations.”

“Shared services have become one of the mantras of local government efficiencies and is a route strongly encouraged by the Scottish Government."

"However, it is not the only way forward and the projected savings of implementing the Clyde Valley plan are modest compared to overall council spend.”

Further information

1. The business case for shared services in Clyde Valley as well as the Arbuthnott Review can be accessed here

2. At our recent Big Event we had an excellent session on PSR that covered issues like shared services. Watch it now.


  1. I am surprised at Professor Kerley, because there is very little evidence to support shared services.

    The majority of the so-called evidence is generated from within the shared services industry (normally IT companies, private BPOs and consultancies). Some government reports were based upon flawed research. Or now thinktanks funded by shared services providers and those already sharing services (who wants to admit they are dishing-up a dead goose with taxpayer’s money?).

    Professor John Seddon, an expert in service organizations with extensive experience in public sector systems says that there are two arguments for sharing services. The ‘less of a common resource' argument and the ‘efficiency through industrialisation' argument.

    The former argument is ‘obvious': if you have fewer managers, IT systems, buildings etc; if you use less of some resource, it will reduce costs. But the reductions are often minor and one-off.

    The second argument is ‘efficiency through industrialisation’. This argument assumes that efficiencies follow from specialisation and standardisation – resulting in the creation of ‘front' and ‘back' offices. The typical method is to simplify, standardise and then centralise, using an IT ‘solution' as the means.
The problem with the industrial design is simple - it doesn't absorb variety in demand. Because of this, costs soar as the IT system has to be modified and customers ring back again and again because they can't get what they want.

    Worse still once shared, costs can be locked-in by contracts, SLA agreements and other un-evidence and poor management practice.

    Claims for savings can often push failure and costs into other budgets or other parts of the system or passed to the service users. Or the costs act like PFI slow accretions of failure over the years so the cost of failure is spread.

    The consequences of this flawed theory can be found everywhere. In HMRC or South West One shared services which predicted savings of $176 million over 7 years and actually recorded a pre-tax loss over its three financial years. Duplicate payments sitting at $772,000 and a struggle to manage $12.9m in outstanding debts.

    This year Western Australia followed Queensland in ending its shared services. It was claimed that it would save $58 million a year and instead cost $444 million dollars (no savings). It is estimated that it will cost taxpayers between $1 - $2 billion dollars to rectify.

  2. Howard, you make a number of fair points and also suggest some examples of overstated savings from various examples – some of which I know of, others not , so I’ll take your word for it.

    However, you’re criticising me for some things I don’t think I actually said – apologies if I did.

    My position is this, based on observing, researching and reviewing practice.

    ‘Shared services' is the current fashionable term for processes that have a long legacy in the public services – searching for efficiencies – and they have a fair wind behind them in terms of what decision makers and government[s] think will work and achieve that .

    Such changes may or may not achieve such efficiencies, and may do so through reviewing what the organisation actually does; how and why , and whether that can be done better in different [ maybe better ways].

    I also have to say that uncritical enthusiasm for the ideas promoted by John Seddon seems to me equally as mistaken as uncritical enthusiasm for advocating ‘shared services’; ‘ back office efficiencies’ etc .

    His ideas and work are interesting and provocative and in some aspects helpful. He also has a long trail of antecedents; if you set out to be a contrarian [ as he has ] then you can establish a market position [as he has ] that is as yet not fully proven .

    The main point I keep stressing is that of the value of any process that forces organisations to review and appraise what they do and how they do it ....almost constantly , and certainly regularly – or at least more frequently than is often the case now.

    Richard Kerley

  3. I didn't mean to criticise, more to highlight and I think that we broadly agree.

    You take a measured tone and you importantly highlight that the savings are likely to be small and call for constant evaluation.

    This is not something that many of those 'selling' sharing do. They offer up surveys, estimates, projections etc as fact. They are insistent, and have formed what I call an 'evidence factory' trying to create a raft of reports that somehow present the illusion of evidence.

    I think that my other worry is that there are organisations making claims for savings, and these add to the 'evidence factory'. Few of these claims had been independently verified to understand if costs have been displaced onto other parts of the system or service users and service has suffered.