075251 49611 AGENDA Y What Are Shared Services? Y Csdicase Studies Y Lessons Y Choosing the Right Model Y Rules of Thumb for Success SHARED SERVICES?

Colin Cram Marc1 Ltd [email protected] Tel: 01457 868107 Mobile: 075251 49611 www.marc1ltd.com AGENDA y What Are Shared Services? y CSdiCase Studies y Lessons y Choosing the Right Model y Rules of Thumb for Success SHARED SERVICES?

• Benchmarking

• Collaboration/Consortia

• Joint Service Delivery

• OtOutsourci ng t o a C ommon P rovid er

NOT A MAGIC FORMULA CASE STUDIES

• WtClltiWaste Collection – NthWtAthitiNorth West Authorities

• Legal Services – London Boroughs’ Legal Alliance

• Consortium – North Western Universities’ Purchasing Consortium

• Joint Procurement – Research Councils WASTE COLLECTION

Cost of waste collection per household in NW 2005-6 £70 £60

£50

£40

£30

£20 £10 £0 Bury City City

Eden Port Wyre Fylde

Wirral Royal Crewe Wigan Bolton Sefton Hlton

Valley Ribble Pendle Salford

Helens

Burnley

Chorley Preston Oldham Trafford Furness Allerdale Liverpool ‐ Rochdale Knowsley Stockport Copeland Lakeland Hyndburn St Blackpool Lancaster Tameside Blackburn

Congleton Vale in Warrington Lancashire Manchester ‐ Rossendale Carlisle

Chester Macclesfield South Ribble llesmere st outh ow EE ee rr SS W Bar WASTE COLLECTION Shared Service Reduced costs through - Efficient use of depots - Efficient use of vehicles - Greater purchasing power for equipment - Reduced management costs - Management by best managers? -Singggle method of collection and sorting

Overall Savings 10%+ LONDON BOROUGHS’ LEGAL ALLIANCE

y Harrow y Hounslow y Hammersmith and Fulham y Kensington and Chelsea y Camden BUSINESS CASE y Generic Advice Provided Once on Behalf of All y Generic Externally Provided Advice Once on Behalf of All y Reduced Usage of External Lawyers y Reduced Cost of External Lawyers through Joint Procurement

Potential Savings: Loose Collaboration: £2m pa (10%) Potential Savinggp(%)s: Joint Service: £6m pa (25%) ISSUES

y Protectionism from Certain Councils y Questionable Commitment y Trust y Cost of Current Operations y Costs and Volumes of Types of Workloads y Sharing Data SOLUTION y DtildADetailed Ana lys is: Avo idance o fDf Dou blCble Coun ting y Very Conservative Estimate of Potential Savings y Adopt a Sub-Optimal Model, but one with which People could live y Get Written Commitment from CXs to the Alliance y Fundinggy as a Catalyst, even thou gh it wasn’t needed y Result: Membership up from 5-10 in 10 months NORTH WESTERN UNIVERSITIES PURCHASING CONSORTIUM ISSUES y Little Commitment to Purchasing Agreements y High Fees: Collaboration was Expensive y Finance Directors on Board interested in Minimising Fees, not P urchasing Sav ings y Little Benefit to Major Institutions y Institutions Failed to Deliver on Promises of Support y 5 Largest Institutions on Brink of Leaving SOLUTION y Create Procurement Board of Key Procurement People y Appoint Most Influential HOP to Honorary Position y Service Level Statement y Code of Conduct y Pre-Commitment y Persuade Suppliers to Provide Rebates y New (but cheap) Offices y Create Limited Company y New Logo y Different Institutions to Lead on Different Procurements y Procurement Spend Analysis - Data OUTCOME

y Spend from £5m - £50m in 2 years y Membership from 13-22 in 2 years y Suppliers Delighted y Strong Membership Support y Savings 10% Overall BUT IT WAS NOT ALL PLAIN SAILING INITIALLY y Much Opposition to Rebates y Finance Directors Appointed Me Because Consortium Failing –but objected to change! y Heads of Procurement Fearful of a Successful CtiConsortium y Fear of Pre-Commitment y AtitLiitdCArguments against Limited Company y Communications Strategy Needed y PlAb!Personal Abuse! y Huge Amount of Work for Director and Team IT’SAMISSION!IT’S A MISSION! RESEARCH COUNCILS Where We Were in 2000 y Loose procurement collaboration between 5 councils and some research institutions

Where We Got to in 2003 y Savings of £17m in Year 1 y Running Cost Savings of 15% y Workload Increase of 15% y PfPerformance M easurement y Costs Known y Service Defined y Full Transparency and Accountability y Respect from Industry – Lower Costs y Model for Central Government Procurement? HOW AND WHY? y Collaboration Expensive y Little Commitment y Little Benefit y Review of Way Forward – Very Detailed Analysis y Model Options y RdtiRecommendation – JitOJoint Organi sati on ISSUES y Cost of Current Operations – Base-lining y Work Volume of Current Operations y Staff Concerned About Efficiencies y Some Staff Not up the Job y Directors of Procurement Unhappy y Different Cultures y Differen t Pay an d Con ditions y Different Procedures, Processes, Finance Systems SOLUTION VERY QUICK IMPLEMENTATION! y Appppoint Director y Change Line Management – 2 months y 1 Year to Create Coherent Operation y No Start-Up Funding y Staff Could Stay with Existing Councils (but not in the same work) y Service Level Agreements – responsibilities on both sides y SilitCtSpecialist Category Managemen t y Everyone responsible for Customer Relations y Communications Strategy LESSONS COLLABORATION BENEFITS through • Aggregation • Commonality of Specifications • Commonality of Procedures • DiDoing Things Once

BUT • Often Difficult to Agree • Time Consuming - the Effort can be Expensive • Day Job Takes Precedence • Limited Benefits JOINT SERVICE DELIVERY ORGANISATION

• Identifies and Highlights Costs of Current Activities • Often the Catalyst to Introduce Major Change • Defined Service Levels • Service Level Agreements • Performance Measurement • Accountability

Can Be Done Quickly

However, there may be some management and change costs. CHOOSING THE RIGHT MODEL: Decide Objectives

• Access to Expertise/Higher Standards for All? • Eliminate Duplication of Advice • Eliminate D uplication • Opportunities to Generate Income • Processing Costs • RdReduce dCd Cos t/Ets/Econom ies o fSf Sca le • IT • Staffing • Licenses • Buildi ngs /Cons truc tion • Procurement • Energy • Running Costs • Equipment CHOOSING THE RIGHT MODEL

COLLAB- JOINT OBJECTIVES NO CHANGE B/MARKING OUTSOURCING ORATION ORG

LOWER COSTS

BETTER SERVICES

ACCESS TO EXPERTISE

INNOVATION

INCOME

JOB CREATION ISSUES AND RISKS

NO COLLAB- JOINT B/MARKING OUTSOURCING CHANGE ORATION ORG

COSTS AND TIME

PEOPLE

ORGANISA- TIONS

COMPROMISE

SLOWER PROGRESS CIRCUM- STANCES CAN CHANGE RULES OF THUMB FOR SUCCESS y Clear and Realistic Objectives y Clear Business Plan y Strong Project Team y Business Case y Select Right Model – Be Realistic y Consider Constitution Set of ‘Club’ Rules y Right Governance y Clarity Over who is Responsible at a Higher Level y Strong Support from the Top RULES OF THUMB FOR SUCCESS y Good Quality Analysis y Clear Understanding of Costs y Performance Measurement y Suitable Agreement/Contract y Flexibility - Government Policies - Government Funding y Comppgatible Standing Orders y Don’t Start Unless Determined to see it through y Do Not Avoid Issues y Use Proven Documents RULES OF THUMB FOR SUCCESS y Choose the Right Partners - Only Collaborate With Those Fit To Collaborate - Only Collaborate With Those Who Wish To Collaborate y Apply Due Diligence y Realism y NO START UP FUNDING! y IMPLEMENT QUICKLY! y CAUTION ABOUT SIGNIFICANT INVESTMENT IN IT! - Use ‘quick’ and cheap fixes initially. -Invest fro m rea li sed savin gs. - Be very cautious about investing from anticipated savings Colin M Cram Marc1 Ltd Tel: 01457 868107 Mobile: 075251 49611 [email protected] www. marc1ltd. com