Any business function needs to be justified to a range of stakeholders, and shared services is no different. Initially, such processes tended to focus on lowering costs and reducing employee numbers.
At Surrey County Council, this was a key issue. Debra Maxwell, head of shared services at the council, says shared services have been a core philosophy for the last 18 months. “All of our human resources, payroll and data management are handled through an SAP support centre.”
The council has 8,205 full-time employees and up to 10,000 more occasional and part-time workers. It fulfils diverse needs, and with an annual budget of over £1bn, financial control is major issue. In common with many large corporate bodies, Surrey uses financial software from business software maker SAP.
Benchmarking is seen as an obvious part of this, and while scorecards are used to assess overall performance, there is one area where Ms Maxwell can make an instant measurement of how the council is doing: headcount. “The reduction in the number of people deployed on a task, such as invoicing, can be quite dramatic,” she says.
While Surrey measures the SAP centre itself, Ms Maxwell believes that the very nature of a robust comprehensive financial software system creates visible metrics. “Prior to implementing the contract with SAP we had disparate products in use. Different ways of presenting data made it difficult to measure how different parts of the operation were doing.”
One centre tackling contract competition, invoice processing and cash collection means Surrey can see what is happening and react quickly to changing circumstances.
The whole shared services experiment at Surrey is part of a wider programme to implement savings of £49m over a decade. But by acquiring a tool to see what is happening, Ms Maxwell and her colleagues have passed the first hurdle in cutting costs in a hands-on business that even employs a goat as the most cost-effective way of keeping grass under control on some of its greener property. This economical employee points to a serious problem in the whole benchmarking challenge. Ms Maxwell notes that a lot of business software is developed for broad commercial application, and is not fine-tuned to the specific circumstances of a local authority.
This is a view that finds sympathy at SAP, where shared services tends to go together with a large number of local government clients. “We see the public sector as being different in terms of measuring return on investment,” says Simon Etherington, director of public services for UK and Ireland. He is familiar with the use of service level agreements (SLAs) and key performance indicators (KPIs) by customers such as Manchester’s Trafford Metropolitan Borough Council.
But the extra dimension in public sector benchmarking comes in the form of a political return on investment. How does service delivery measure up against the current political agenda? It is a side to benchmarking that many businesses focused on providing services to the commercial sector might not recognise.
For many private sector organisations, however, performance measurement has moved beyond employee numbers. According to Richard Plasek, a consultant at Capgemini, measures have evolved from a cost focus to measuring processing speed, economies of scale and lower labour rates. Increasingly, businesses are also tracking key indicators such as employee and customer satisfaction.
Tim Gregory, director for the insurance sector in northern Europe at CGI, a Canadian IT services company that supports BlackBerry personal devices, says that benchmarking and service deals go hand-in-hand. He describes measuring the value of a pooled service as “an art, not a science” and has some pointed observations to make about what can get overlooked.
“Effective benchmarking has to reflect the true cost of ownership of a service,” he explains. “So, you need to know what the alternative to sharing a service would be, such as the capital investment required for hardware over a given number of years.”
Micha Veen works for computer services giant CSC. His background is in running shared services for multinationals such as Gillette where SLAs provided the key benchmark. Mr Veen stresses that deciding how a service is working is not a static matter. “Benchmarks are part of a journey,” he says, “and this is an evolutionary process. You may change your targets as the early priorities are met.”
One of the main benchmarks on which he relies is a simple measure of how many full-time employees are required to make a particular service work. And despite high-profile outsourcing to overseas locations, Mr Veen thinks any customer of a shared service needs to remember one rule.
“A shared service centre only works when the decision-making for the business process is sited in the same place as the process itself,” he says. This is not a dig at overseas centres, but rather a plea for the best shared services to embrace key decisions for the customer. Getting that right should leave some positive results to be measured.