Sharing - evolution or legislative revolution?

 Mark Lawrie (LGC 7 January) thinks the problems that are holding back the growth of shared services are political consensus and cultural resistance. The greater stumbling-block, however, is the fact that they fail to deliver much and often create greater costs.

Sharing back-office services is a plausible idea; it is to believe that there are economies in scale.

While it is true that we might achieve efficiencies by reducing the number of managers or consolidating accommodation, far greater efficiencies are always achieved through re-designing, rather than sharing services.

Stockport MBC provides an example: Re-designing the IT help desk led to a massive improvement in service (it now helps!), many more customer problems are resolved at the first point of transaction and a 17% reduction in operating costs, with further efficiencies anticipated.

Despite being exemplary according to conventional HR benchmarking, redesigning the HR service also led to a significant improvement in productivity. Both results would have been obviated if Stockport had followed the sharing mantra.

Worse, adopters of shared back-offices have discovered that it is not as simple as it sounds; variations in HR or finance practice, for example, cannot be simply forced into standardised processes.

Yet this - standardisation - is one of the key features of the shared services dogma. Couple that with splitting the services into front-offices (where customers make contact) and back-offices (where the service work can now be done without the ‘interference’ of the customer), and it is of little surprise that shared service centres experience high levels of failure demand. It is a direct consequence of fragmenting the work.

The idea of back-offices began in the private sector. By de-coupling customers from service provision, it was argued, the resources consumed in providing the services can be optimised (unions would say the labour could be sweated).

But this de-coupling creates an important problem: do the people in the front-office take the same view as to what is required from and for the customer as the people in the back office?

The problem only being compounded by the inevitable more general expertise in the ‘front’ against the (detached) but ‘expert’ view in the ‘back’. (I put expert in inverted commas as this person is not in front of the customer, potentially missing important information)

The back-office protagonists think this can be solved through standardisation, but that only further compounds the problem.

Stockport MBC, like others who have taken a different route, has learned that standardisation is not the route to effective low-cost, high-quality services. Services have to be designed according to customer demand, which inevitably shows variety.

To absorb that variety, people with the necessary expertise are provided where customers access the service. Not only does this lead to much lower operating costs, the services are personalised and, hence, customers are massively impressed.

Only people can absorb variety. In the typical IT-led front-office/back-office design peoples’ ingenuity is stifled by the requirement to meet activity targets, focusing the service away from its purpose.

It is to realise two counter-intuitive truths: that people need to be in control, not controlled and cost (and with that economy) is in flow, not activity.

This should be warning to local authority managers considering what to do: Many claims for efficiency are based on transaction costs. While it may be true that these new service factories deal with transactions (phone calls and ‘folders’) more cheaply, the volume of transactions typically goes up, inflated by the design.

Legislating for back-offices would be to legislate for higher costs and more misery for public-sector workers. We ought not to do that.