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Running a jail poses a particular set of management challenges. For that reason, prison governors have traditionally enjoyed a high degree of autonomy in how their prison is run.

But prisons are not islands, and in the UK they are being encouraged to embrace standardised service delivery, key performance indicators and all the other ideas held dear by consultants and mandarins.

As well as swallowing the new jargon, prisons are adopting best practices from the broader public sector, including the shared service centre.

Newport in Wales is home to the new shared services centre for Her Majesty’s Prison Service (HMPS), which is responsible for the custody of 77,000 prisoners in 128 prisons in England and Wales.

The centre went live in May 2006 using Oracle software. The project is being implemented gradually but when fully operational, in April 2008, all the back-office functions for these jails will be performed by a team of 500 people in Newport.

In the past, each jail traditionally had its own human resources department, procurement manager and accounts payable clerks. Now, they are no longer needed. The shared service centre approach thus represents a huge and potentially traumatic change, both technologically and culturally.

“It’s not just a new IT system,” says Steve Hodgson, head of shared services at HMPS. “There is a whole new process and that has a big impact on the roles of people.”

Not least, the role of prison governor. “If you are a prison governor, you are used to having line managers in control of all your resources, so there is an issue about this perceived loss of control,” he says.

The big attraction of the shared service centre concept is, of course, economies of scale. By centralising back-office functions, HMPS hopes to reduce the cost of processing transactions by £17m a year. In addition, back office staff are no longer needed in the prisons, so HMPS is looking to slash its salary bill. Overall, HMPS hopes to achieve annual savings of £32m through reduced transaction costs, lower headcount and greater overall efficiency.

That is the theory, but how is the project working out in practice? Surprisingly well, according to Mr Hodgson. The potentially traumatic issue of headcount savings has been achieved through natural wastage rather than more “aggressive” polices.

“Most public sector organisations are quite paternalistic so three years ago we simply stopped recruiting admin people in the prisons,” he says. Prior to opting for a shared services centre, HMPS had already decided to upgrade its IT systems in three separate projects covering human resources, financials and procurement systems.

It made sense to combine these projects and consolidate the IT systems into a single data centre at Newport instead of running separate “instances” of the software in each prison, as was previously the case.

The first function to go live on the new system was financial management. “Finance is easier because there are fewer people involved and, besides, people who work in finance are used to doing things in a standardised way,” says Mr Hodgson.

Next, the procurement function was brought online. The idea is to encourage “self-service” procurement. This means procurement managers in the prisons would order standard items from an electronic catalogue of preferred suppliers.

Again, this represents a big cultural change for the prisons that were used to buying goods independently, typically from local suppliers they could call up on the phone.

Mr Hodgson argues these manual requisitions are not only inefficient to process but costly to the public purse because HMPS can negotiate better discounts through centralised buying. “The prison service buys some interesting items, such as security systems, which you cannot put into an electronic catalogue, but other things you can,” he says.

During the test phase of the procurement project, HMPS identified potential savings of £53,000 just on buying milk. Put in perspective, the savings on milk could pay the salaries of two prison officers.

Nevertheless, some prisons have struggled with the brave new world of e-procurement, which is less tolerant of errors than the previous system of manual requisitions.

“Our experience is patchy. Some jails are good at it, but others have yet to get the hang of it,” says Mr Hodgson.

Next October, the project will enter a new and delicate stage in which the shared service centre will take over human resource functions, such as payroll, that were previously handled locally. The aim is to halve the HR staff-to-employee ratio but at the same time improve the service delivered to the 48,000 prison staff.

The transition is being managed gradually so some staff already have their payroll handled centrally. So far, there have been no complaints about missing paycheques and Mr Hodgson says the step-by-step implementation that HMPS has adopted is designed to minimise the risks.

“If we have a problem, it will be a little problem and can be contained,” he says.

Copyright The Financial Times Limited 2017. All rights reserved.
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