Assess the potential value of shared services
There are three main ways in which shared services might offer your organisation value. They include:
- Efficiency and effectiveness – Improving the efficiency and effectiveness of your back-of-house services (i.e. reducing cost, improving quality or decreasing risk)
- Workforce recruitment, retainment and development – Enabling staff recruitment, development and retainment
- Strategic shift – Enabling increase in the scale or complexity of your back-of-house services required to meet expected changes in your operating environment.
Each is discussed in turn in the section below.
Efficiency and effectiveness of back-of-house services
Improving the efficiency and effectiveness of back-of-house services is an important driver for establishing shared services. Most NFP organisations enter into shared services arrangements to reduce the cost of their back-of-house services. Improving the quality and reliability of a back-of-house service is also an important factor.
Several questions are provided below to help you consider if this is the case. While many NFPs do not have a comprehensive understanding of the efficiency and effectiveness of their back-of-house services, a good place to start is to talk with your staff and your peers.
For each back-of-house service you think might be worth sharing rate your organisation against the following questions:
Some organisations may need to scale up or improve their back-of-house services to respond to changes in their operating environment. These challenges should be documented in your organisation’s strategic plan or identified during your strategic planning process. The implementation of a National Disability Insurance Scheme (NDIS) is one such change that many disability service organisations are facing. Another example is outlined below.
Example – increased reporting requirements in the health sector
Several health organisations were facing new demands on their activity reporting. Their IT network was unreliable and whilst it made reporting inefficient (due to service drop-outs etc.) it was still possible to complete their reporting requirements. With the expected increase in reporting, the organisations knew that they had to improve the reliability of IT services or it would jeopardise their funding revenue. It was just not possible to meet the requirements on the ‘old system’. They established a new organisation, which led to savings in IT purchasing and enabled investment in IT infrastructure, as well as the establishment of an IT Help Desk.
Increasing scale and improving the effectiveness of back-of-houses can be done internally. The key question is whether or not your organisation can achieve this effectively ‘in-house’ or whether other options, such as shared services, offer the potential to leverage the expertise of an organisation who is already an expert or to spread the required investment to ‘scale up’ across multiple organisations.
For each of back-of-house services (HR, ICT, payroll, etc) ask the following questions:
- Do your need to transform or significantly enhance any of your back-of-house services in the next few years due to changes in your external operating environment or your strategic direction?
- Are other organisations in your sector in a similar situation and also need to transform their back-of-house services?
Workforce recruitment, retainment and development
NFPs can find it difficult to recruit and retain quality staff to support their back-of-house functions, especially those in rural areas. Shared services can provide an opportunity to resolve these issues through sharing of staff or skills. It also provides an opportunity to build staff capability.
1. Recruitment and retainment
Many NFPs only require a part-time staff member in back-of-house services (e.g. a part-time finance manager), which could limit the number of potential applicants and the retainment of good corporate staff. Under a shared services arrangements it is possible to provide a full-time role by sharing one staff member across two or more organisations. This might also lead to improvements in the efficiency and effectiveness of back-of-house services through, for examples, the streamlining of HR processes.
NFPs often have a limited professional development budget.
For each service consider the following:
- Does the scale of your back-of-house operations limit the quality and availability of people applying for back-of-house services roles?
- Do you have difficulty retaining quality back-of-house services staff?
- Do your staff have trouble keeping up with good practice developments, maintaining or enhancing their professional skills in important areas?