Deloitte, the business advisory firm, has today launched a report which argues that the public sector is missing out on substantial savings as a result of not implementing shared services. Shared services is the consolidation and sharing of services by different units within an organisation.

John Binns, public sector consulting partner comments: “The case for shared services has long been argued, and has been documented in numerous government publications, including the Gershon Efficiency Review, and forms part of the Transformational Government strategy. However shared services have yet to take off in the public sector. The next Spending Review is just around the corner, with the budget belt undoubtedly set to tighten. Unless a shared services programme is initiated now, the ability to meet the next round of efficiencies will be severely jeopardised.

“The Government could save billions if it brought its total expenditure on finance and HR (2.5% of total expenditure) in line with organisations that use shared services (0.75% of total expenditure). There are some 1,300 public sector bodies (including local authorities, police forces and health trusts). Most have their own support services, not just finance and HR but also legal, customer service and so on. There is an opportunity to do this type of work differently, with one group of people providing shared services to multiple users – thereby doing them faster, better and cheaper.

“Deloitte’s analysis of the use of shared services in the private sector shows that European companies can achieve savings of 25-40%, with improved customer service levels. Our work with public sector  clients suggests that similar savings are also achievable. There are many differing estimates of the savings possible, but there is broad consensus that these are likely to be in the billions.

“The slow take up of shared services is a result of a lack of understanding and some scepticism and distrust by many public sector organisations. Common perceived barriers include:

• Risk-averse decision-making;
• Concern over loss of autonomy. After 15 years of devolving functions from the centre to the agencies, it can be perceived (wrongly) as asking people to reverse this trend;
• Consensus driven governance. How is it possible to get the leadership and commitment needed to drive through such a large scale transformation project, given the decision-making process?
• Government agencies may have political issues about sending processes offshore to low cost locations such as India, and they face high severance costs;
• A disconnect between the centre – fully behind the concept - and local bodies – not sure they can implement.

“None of these issues are insurmountable, and many are common to those encountered in the private sector, where head office are enthusiastic about shared services, while business units are unsure how to turn the concept into a workable idea.
 
“Case studies from the private sector and foreign public sector departments provide demonstrable examples of how shared services can work in practice. One such example is the Western Australian Government which are moving from 100 procurers of finance, HR and procurement to just one, with estimated savings of £21.2m per year.

“It’s time for the public sector to be bold. The case has been made – it is time for a detailed look into shared services, to determine which services might be appropriate to share and who to share them with. This is not a small task – shared services projects demand vision and commitment. However, they are capable of delivering substantial change, and perhaps most importantly, savings, which every public sector department will welcome.”

Ends

Notes to editors

About Deloitte

In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Known as an employer of choice for innovative human resources programmes, it is dedicated to helping its clients and people excel. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities.  Neither DTT nor any of its member firms has any liability for each other’s omissions.  Services are provided by member firms or their subsidiaries and not by DTT. 

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority. 

The information contained in this press release is correct at the time of going to press.