The shared services journey: although there is no template for shared services implementation success, those who have been through the process have experienced similar hurdles and successes. A variety of these experts recently met in Ottawa to discuss the important role shared services plays in the public sector today--and how best to manage the delicate development of this organizational model.

Shared services have become a critical strategic tool for government officials the world over in the past 10 years. The case for stand-alone organizations that manage administrative or service functions as a core competency, supporting a number of disparate departments, has only been strengthened by the success stories that now abound.

In November 2005, the Conference Board of Canada, in partnership with Accenture and sponsored by, among others, CMA Canada, did its part in encouraging further discussion of shared services with a conference in Ottawa specifically geared to the public sector's needs in this arena. The two day conference included a wide variety of speakers from Canada and abroad, sharing their experiences of the challenge of changing their practices to this model.

The first day of the program included a question and answer forum with three professionals well-versed in shared services development: Valerie Judge, an independent consultant, former CEO of Eastern Health Shared Services Ireland, and a veteran of two shared services implementations; Sharon Cohen, CEO of Ontario Shared Services; and Lynda Tarras, Assistant Deputy Minister for the B.C. Public Service Agency. All three members of the panel hit upon certain integral issues at the heart of any shared services model: good governance, strong communications practices, and the need for effective consolidation of services.

Centralization vs. consolidation

One of the first questions asked of the panelists was whether centralization or consolidation of services should be considered a key success factor. Cohen, who, during her tenure as CEO, led the geographic consolidation of Ontario's shared services operations from 36 communities to 6, was the first to address the question.

"It has been our experience that consolidation, not centralization, of similar work in as few locations as possible, is critical in a shared services implementation," she says. Cohen oversaw two consolidations, in 2002 and 2004-05, which led to the leaner, more efficient service delivery process Ontario now enjoys.

"If you have 2 people here, 2 people there, and 22 people at another location, you'll never get your costs down and service quality up," she insists. "We found that consolidating similar work in as few locations as possible does exactly what the literature says. It gives economies of scale, management oversight, and the ability to work through good times and bad, including blackouts and getting through SARS. I can't overplay the importance of consolidation, and we did it with very little job loss."

In the end, more than 20% of the workforce under Cohen moved with their jobs, and those who chose to remain were retrained, if they wished to be, for the roles that would be available in that community.

"It involved some risk for us but was also a very important critical risk factor in our relationship with the union," Cohen concludes.

Judge, in agreeing with Cohen, emphasized the importance of management oversight. "Virtual shared services doesn't really work in practice," she says. "You have to have people together to be managed, to give that feeling of being part of the shared services organization."

Tarras, who led the development and design of the B.C. Public Service Agency, which consolidated all HR services into one agency for the Province of British Columbia, cautions that any consolidation depends on the nature of the service.

"HR is a bit different from many other services," Tarras notes. "Where services are highly transactional, move that service to one place--I highly recommend it. It will achieve savings and streamline profits. Where services are more high touch, then you probably want to consolidate in more than one location. You need to examine what makes sense for the business."

Where to start

The challenge, of course, is where the limits of shared services stand. Is it possible to place the most strategic aspects of HR, for instance, within shared services? How much should remain siloed?

"To some extent it depends on the culture of the organization and the readiness to make change, but it's a very important decision, and I've seen organizations make different decisions," says Tarras. "I've seen organizations make the decision to leave some of the consulting services in the business units and just implement transactions in the business model. We couldn't have done that and still meet our goals. We did leave most strategic support services in the organizations--areas in which the people who perform those roles need to have a critical understanding of the business, to be close to the business, and have very strong relationships with senior management and line operators to be successful."

Cohen reiterated that most transactional services, those farthest from the mission of the division or ministry, are the easiest place to start. She suggested that the most strategic activities should be kept within ministries.

Judge, however, raised a note of caution on this last point. "When we use terms like 'strategic' and 'up the value chain,' we risk demeaning the staff we depend on to make shared services a success," she explains. "We risk making it a place that high achieving or ambitious managers don't want to go, and that can be a big mistake. We are increasingly focused on economies of scale and skill, and there are some areas where it makes sense to have a tight team of highly skilled people--procurement comes to mind. Senior managers in shared services need to be seen to have status within the wider organization."

Managing expectations

There are a number of post-consolidation challenges any shared service organization will experience. For instance, prioritizing and setting the criteria for how implementation will happen can be a challenge. However, strong governance should help with this process.

"If you have a reasonably small number of clients and a strong governance model, then you can get the clients to collectively make the decision," says Judge. "Some won't want to be first to implement certain processes, some will. It's best to get consensus from clients."

Managing expectations is a serious concern as well, as Lynda Tarras can attest to. Because her client base formerly had quite variable funding models for their HR services, the consolidation and standardization process integral to the development and implementation of an integrated talent management strategy meant that there were winners and losers in the end.

"We are now looking at the cost of delivering those services, the volumes and demands being placed on us, and how we customize this for our clients," explains Tarras. "But you don't get that on day one. What I think helped us is that we were very honest and said, 'you are not going to get customized services right away, you have to give us time to get stabilized and operational before we're in a position to deliver that.' There was variable acceptance of that but at least we were honest about it."

Communicating--essentials ... and limits

Communicating through the implementation of a shared services model is critical--from getting buy-in from clients to clarifying what clients can expect from the organization. The basic tools of change management have to be respected.

"You can never communicate too much," says Cohen. "It has been my experience that my clients will give me a lot of slack if I tell them what's gone wrong and what we are going to do to fix it. My recommendation is to try to communicate consistently, honestly and openly through everything." Cohen also recommends using all the channels available to you to do so--CRM, employee portals, etc.

Tarras agreed that, through the implementation phase, you can never communicate enough. "However, now that we're in the service delivery business, we seem to have this culture in HR that our clients need to understand everything we do at all times," she says. "Actually, they don't care. They simply want a service, (and to understand) how they go about getting it, who to talk to and what they can expect coming out the other end. They don't need to know every gritty detail about how we get that result. So we're now having to temper our view a little bit and limit our communications."

Service level agreements

Reaching the point at which a service level agreement (SLA) is in place and functioning to the benefit of both the shared service organization and the departments it serves is an important goal. But, as the panelists noted, the process of getting to that agreement is equally important.

"Gradually, over time, working through the SLA became a discussion of who owned what part of the process, and who was accountable for what," says Judge. "Even with an effective implementation, these issues often come up later. Now, to get these pieces defined and then to work your SLA back to being a reasonably-sized document (is the next step). It shouldn't be taken out at every client meeting but neither should it sit and collect dust. It should be something that has key measures and targets--that the relationship is such that you can work around it and at key intervals take it off the shelf to see if you should be changing your ambitions, changing your targets again."

When have you hit the mark? "You'll know you have the right SLA when you get to the point where the relationship is effective and the SLA isn't as important," Judge continues. "But I've seen organizations that have taken an SLA from another organization and said, 'this looks good'--it doesn't work like that, you have to do it the hard way."

Tarras concurs: "It's about the process, not about the document. My vision is that when the SLA is working, my client can tell me what's in it before they take it off the shelf. That's the simplicity we're working for."

The development of shared services is a journey that requires strong strategic management--effective corporate governance, effective change management practices, and an eye for what areas would benefit most from consolidation and streamlining. As Sharon Cohen stated early in the panel discussion, it requires perseverance--hitting key milestones, making sure investment decisions aren't delayed. As all three participants noted, when the investment is made and perseverance demonstrated, results will follow.

Robert Colman is editor-in-chief of CMA Management.