Shared services – opportunity or last resort?

In 2008 Browne Jacobson commissioned a survey of senior and middle public sector managers to gauge their views of shared services and other forms of partnership. Nearly three years later it repeated this exercise with senior local authority managers, and the results are striking, says Craig Elder.

Long before the severity of cuts in local government spending became a reality, many authorities were seeking efficiencies through various forms of joint working. If there had not been an economic downturn, pressure to work more efficiently is likely to have increased in any event in line with ever-rising demand for front line services.

But the recent cuts have transformed shared services and joint working from a good idea into something approaching a necessity, if local authorities are to manage reduced budgets and protect services.

Where now for shared services?

In 2008, a majority of public sector managers saw the opportunity for joint working in either front line services, back office functions, or both. Nearly three years on, the enthusiasm for shared services remains high with almost nine in ten local authorities actively engaged in sharing functions. Some might be surprised that one in ten authorities remain free of any joint working arrangements – but our latest research also shows that the number of authorities sharing services is set to increase further.

Around nine in ten local authorities say they are planning to share further functions (whether back office, front line, or both) over the next two years. Environmental services and social care are cited as the most likely areas for shared services arrangements.

This is perhaps not surprising. Government and European environmental targets remain in place, and greater efficiencies must be sought in order to achieve them. Even ignoring targets, waste collection and disposal services are often not best carried out by single authorities within the confines of their area. Demographic trends also mean that pressure on social care provision is only ever set to increase in the medium term.

But it is not just in areas such as waste collection, where the case for joint working was already clear even without financial pressures, that radical steps are being taken. For example, the ten local authorities within Greater Manchester are seeking to save £2bn by collaborating on a range of front-line and support services.

What are the barriers, and are they changing?

In 2008 lack of financial resources, workforce opposition and a lack of collaborative culture were identified by public sector organisations as significant obstacles. Interestingly, as the need to reduce costs has become more pressing, opposition from staff is being seen as less of a hurdle.

In 2010 political and public opposition was identified as the biggest barrier, with the previous concerns noted above regarded by fewer than 10% of local authority managers as the most significant issue.

This may show that, although the need for greater cooperation is becoming undeniable to those primarily tasked with service delivery, the public and politicians remain understandably concerned. Effective communication, transparency, and a clear business case showing the concrete benefits of the proposals will be key. As one of our respondents (who leads a successful shared service arrangement between public bodies) noted: “There is often a tension between the interests of a shared services partnership, and its individual members. To overcome this, it is important for strong and flexible relationships to exist between those who…support the overall benefits [of the partnership”.

It will perhaps be no surprise that political will, and flexible relationships between officers, are key factors in establishing a thriving shared service. However, given the numbers above (and indeed in 2008) it is clear many authorities, to some extent at least, have tackled these challenges and taken major steps towards joint working.

Private sector involvement, and the key risks

In our 2008 survey, most public sector managers preferred to partner only with other public sector bodies. As one might imagine, concerns about job security, reconciling the differing ethos of the private and public sectors, and loss of control featured high on the list of concerns.

But in this area we have seen one of the greatest step-changes. Unsurprisingly, the great majority of local authorities still prefer to partner with other public entities. But three-quarters (78%) are now prepared to consider modes of partnership that include private sector involvement.

More striking perhaps, is the willingness of some authorities to consider deeper partnerships with private providers. From outsourcing of some back office services to more radical moves to a “commissioning authority” approach, where a large proportion of services are outsourced to a private provider. The latter is at the extreme end of the spectrum, and will be unpalatable to many. Nevertheless, one in three senior managers now believe that their authority would consider some form of large scale outsourcing to cut costs.

This suggests that the greater pressure on local authorities is perhaps forcing them to consider a more enterprising approach – seeking to secure greater private sector investments or perhaps tap into the commercial experience of the private sector that might complement existing skills.

There is little doubt that partnering, and working with private sector entities, can drive efficiencies when well managed. It is equally clear that any public body considering this will have to address certain risks.

For example, the authority will of course be ultimately accountable to its electorate for defective services. It will therefore have to be certain where responsibilities lie under the arrangement (whether with private or public sector partners) and that it has a mechanism to secure proper service delivery from its partner or bring the service back in-house in extreme cases.

There is also a question of cultural fit where two or more services are to integrate. This may, all things being equal, be a larger concern where private and public sector bodies come together. But public to public partnerships also have to deal with this issue.

All of the inherent risks can be addressed. If not, it is clear that there can be a price to be paid for efficiencies.

Where now?

Local authorities were already attempting to drive efficiencies through shared services several years ago. It is likely this process would have continued and accelerated even without the pressure of budget cuts and need to make significant savings.

But our recent survey shows a change in attitudes – a move from a gradual process to a more sweeping change in the way local authorities do business; an increase in more innovative thinking and a greater preparedness to work with private sector partners in some circumstances.

This means shared services cannot be seen only as the last resort for local authorities under pressure – there were already compelling reasons to consider them in some cases. Equally, there is strong evidence that the economic climate is driving some to enter into more arrangements, and push further and faster, than they would otherwise have done. If the current trends continue, the landscape of local authority service provision is likely to be very different were this survey to be repeated three years from now.

Craig Elder is a partner in the shared services team at Browne Jacobson LLP. He can be contacted on 0115 976 6089 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..