Sharing services – an introduction

Because without sharing neither of us would be able to cross the chasm

Eric Pickles and Grant Shapps are fond of responding to Local Government leaders complaining about Local Government cuts with three responses:

  1. Local Authorities should not complain when they pay their Chief Executive more than the amount paid to the Prime Minister
  2. Local Government would be fine if it simply abolished non-jobs (Grant Shapps claimed Manchester Council should not cut 2,000 jobs but instead get rid of their ‘twitter tsar’)
  3. Local Government could make substantial savings if it did a better job of sharing ‘back office services’

We’ve addressed the first issue before and the second issue is obvious baloney so does not bear discussion (well, maybe if you’re lucky we’ll give it a run in a few weeks).

The third issue, that of shared services, is of real interest to local government and to those of us who work within it.

There are SO many aspects of shared services that need addressing and hopefully over the coming weeks we’ll manage to comment on such issues as:

  1. Effect on local accountability
  2. How sharing costs can be accomplished in a fair but un-bureaucratic way
  3. Effect on the staff members who find themselves working in a different environment
  4. All the IT issues
  5. The length of time it takes to implement

Etc etc

However, today I just wanted to address the underlying principle. I thought I’d create a little scenario to help demonstrate the central premise.

Authority x has 10 members of staff. At their maximum capacity each staff member could produce 10 things per day. However, because demand fluctuates they only process 8 things (i.e. housing benefit claims) per day. Authority x is able to operate at 80% efficiency. The authority could reduce its staffing by 2 members of staff but at times of high demand the authority would underperform and this might have a dangerous knock on effect.

Authority y is the same size. Between the two authorities they need to process 160 things per day. By merging the service with Authority y it is easier to manage extra demand and therefore reduce the amount of downtime. Theoretically we can increase productivity to, say, 90% allowing the work to be done by just 18 members of staff; two less than if both had operated separately.

In addition, we can reduce the management; perhaps one manager can manage the whole merged service or perhaps there were two in each authority and we can get by with one manager and one deputy within the new shared service.

So, by merging the service from two authorities, we are able to reduce staffing by two and possibly save a manager or two as well. Being optimistic that works out at a reduction of 4 staff from a total of 24 or a 17% reduction. In addition, there may be savings from the production of policies or economies of scale from computer systems etc.

And there is your 20%… In theory!

But in order to get there I’ve assumed productivity gains and a reduction in management. The former might be doable in the context of one authority if they worked differently and the latter is definitely achievable within one. The establishment of the shared service will also have set up costs and redundancy costs.

A few consultants I know (in unguarded moments) have noted that the shared service business cases don’t deliver the savings that the Government have suggested and that the set up costs could be spent separately in each authority for the same return.

There are a lot of good things to be said for shared services and the potential savings are substantial but right now they are not the lone solution to our problems.

More to follow…

Explore posts in the same categories: The future of Local Govt, We love the Council

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4 Comments on “Sharing services – an introduction”

  1. […] Sharing services – the way forward? Leave a Comment Posted by benlowndes on 05/02/2011 This blog post from We Love Local Government looks at the well publicised idea of sharing services between councils to improve efficiency and reduce duplication. This is an issue that will (or should) be familiar to public sector communicators, with their teams often mooted as possible merger potential. I will blog on this topic at some point. For now, though, I have some work to do. But this blog is worth a look. Eric Pickles and Grant Shapps are fond of responding to Local Government leaders complaining about Local Government cuts with three responses: Local Authorities should not complain when they pay their Chief Executive more than the amount paid to the Prime Minister Local Government would be fine if … Read More […]

  2. Tom Roche Says:

    I absolutely agree with you that shared services are not the sole solution to the problems of local government. But most local authorities – and even central government really – simply do not have much experience of it, which is why there’s a real nervousness about engaging with the shared service agenda. I go into a bit of a rant here, if you’re interested:

  3. […] We’ve spoken about shared services before and suggested that whilst they are a good thing they are not a panacea for all of local government’s cost cutting needs. […]

  4. […] a little more local.  Some things scale well, but others will sit better in smaller doses.  Yes, some services may be able to be provided efficiently over a number of geographical areas, but at what point do […]

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