Leadership Foundation

Shared Services in the Public Sector and Higher Education

Shared Services in the Public Sector

More recently, the shared services approach has become common in the public sector and services are increasingly being shared not just between departments but across different organisations (for example different local authorities sharing payroll or waste services). A survey in 2011 found that 89% of English local authority organisations now share back office functions, front line services or a combination of the two with other local authorities or public bodies. Where services are shared between public sector organisations, there are a number of options in terms of how the shared services can be delivered, and who by. For example, organisations could simply collaborate to share parts of a particular service such as procurement; one of the organisations could take on responsibility for the services of another; services could be jointly managed between organisations; or a new and separate organisation could be created to take full responsibility for the delivery of services.

Implementation and leadership of shared services in the public sector brings a number of challenges. It is noted in particular that major saving are unlikely in the first year or so, process and service re-design are essential in the new service to gain the most from the new approach and that ’winning the hearts and minds of those directly affected’ is a key concern and challenge. Strong leadership and management are instrumental in helping move successfully to a shared services model.

Shared Services in Higher Education

There are already a number of examples of shared services operating across higher education in the UK. Large scale examples include the shared admissions facility (the Universities and Colleges Admissions Service), the JANET education and research services network, the M25 Consortium of Academic Libraries and there are additional examples of regional sharing of (non-strategic) services between institutions. Examples of shared services in higher education usually fit into one of two categories. Firstly, those aiming to improve efficiency (following on from the Gershon Review and Cabinet Office papers) which focus on economies of scale and purchasing power. Secondly, those which aim to address the ‘critical mass’ issue - universities often cannot afford a large team in certain very specialist areas but a small team faces challenges if one of the few individuals is absent or the institution needs a wide breadth of expertise (ie for internal auditing, experts in specific ICT systems, experts in certain HR procedures).

The benefits of sharing specific services between institutions in the UK, or between institutions and private sector organisations, are the subject of ongoing debate as the sector faces increasing costs and growing expectations from students – alongside sharp cuts in public funding. A KPMG report commissioned by Hefce (2006) predicted that costs in public sector organisations could be reduced by 20-30% by adopting shared services models. A 2008 study by JISC found that between a quarter and a third of higher education institutions had at least one shared service already in place – but that these were generally small in scale, in non-critical areas and mostly between institutions located in the same region. Many are suggesting that institutions could go much further down the shared services route and that they could reap significant cost savings from sharing far more sensitive services like finance, human resources or student records.

There are recognised pitfalls to increasing the amount and scope of shared services in higher education. There exists widespread concern about sensitive information being stored outside the home institution; many perceive problems in relation to competition between institutions and loss of control; and the human resource implications are significant. The adoption of this model would also represent a significant culture change for many institutions. An additional perceived barrier to increased take up of shared services is the fact that higher education institutions cannot reclaim the tax they are required to pay on services bought through a shared services unit. There have been calls for tax reforms to be introduced to solve this issue – but as Cobb (forthcoming) argues, this issue is not as straightforward as it seems and in fact EU legislation does already exist and simply needs to be implemented in UK law. He also points out that VAT must be paid on non staff costs whether services are shared or not, and that pay increases in recent years have meant that staff in HE are now paid more than the broader UK economy. In many cases the VAT issue is arguably not as significant a barrier as many perceive.

For more information about the Knowledge Resouces contact:

Eleni Stamou, Research Manager