Inconvenient truth about shared services

18 Aug 2011

It doesn’t surprise me that government’s Efficiency and Reform Group (EFG) is going to outline estimates and projections in support of shared services (Efficiency and Reform Group to benchmark shared services).

Why? Because there isn’t any real evidence to support the assertion that shared services save money and boost efficiency.

What flimsy evidence there is comes from within the shared services industry, which obviously has a vested interest.

Professor John Seddon says that there are two arguments for sharing services: the “less of a common resource” argument and the “efficiency through industrialisation” argument.

The first argument is obvious: if you have fewer managers, IT systems, buildings etc, your costs will be reduced. But the reductions are often minor and one-off.

The second argument assumes that efficiencies follow from specialisation and standardisation that results in the creation of front and back offices. The typical method is to simplify, standardise and then centralise, using an IT “solution” as the means.

The problem with the industrial design is simple – it doesn’t absorb variety in demand. Because of this, costs soar as the IT system has to be modified and customers ring back again and again because they can’t get what they want.

Howard Clark

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Reader comments

Shared Services Can Work - If Public/Public

In response to the letter "Inconvenient truth about shared services", I can from experience say that the public/public shared service I am involved in, namely; Xentrall Shared Services, is a resounding success. Significant savings and service improvements for both Councils involved. Savings which in other forms of partnership will have been no doubt contributed towards profits.

Posted by: Ian  19 Aug 2011

Xentrill Shared Services

Ian's comments below - typify the no evidence approach promoted by those selling shared services.

Just more estimates, projections, surveys.

The work Xentrill are carrying out in Stockton On Tees and Darlington they confess is predicated upon Transactional services - basically the 'efficiency through industrialization' mentioned above.

Turning services into transactions pushes waste and failure into other parts of the system (and into other budgets) whilst showing a reduction in the budget in focus.

Any study of the system would show that this is the case.

Posted by: Howard Clark  20 Aug 2011