Presentation on theme: "A presentation for the Municipal Association Victoria Conference"— Presentation transcript:
1Shared Services – An alternative delivery model for local government ……or not ?? A presentation for the Municipal Association Victoria ConferenceMay 2014Donna Galvin, Executive Manager, WBC Strategic Alliance
2The national award winning Wellington Blayney & Cabonne Strategic Alliance was formed in 2003, with Central Tablelands Water County Council joining the Alliance in The Alliance is a voluntary cooperative model, formed in response to the local government reform agenda.Collectively the alliance covers an area of 11, 400 sqkm in central NSW, serving some 14, 500 rate payers and employing about 400 full time staff.Cabonne – 177 staff, revenue of $37m, Blayney 68 staff revenue of $15m, CTW – 19 staff revenue of $5.5m, Wellington – staff 132The Alliance has five key goals:Provision of better services to communitiesexpanding local employmentbuilding sustainability of the Councilsmeeting community expectationsgrowing profitabilityThe Key Priorities in the Management Plan included:Asset ManagementStrategic PlanningGISClimate Change and Environmental SustainabilityHR Strategies for the attraction, retention and development of staff within the AllianceIT Systems and InfrastructureStores and Procurement
3Our credentials to comment Successful Strategic Alliance in operation for 10 years achieving $5.2 m in savingsExperience in sharing staff and servicesCompleted over 55 joint projects or initiativesMajor research and development project since 2011 into Shared Service Models for Local Government (partner with ACELG)National LG Excellence Award winner 2009 for C.O.R.E Principles for CollaborationPersonally – implemented regional shared services in NSW Education Department (TAFE/Schools)
4What is shared services…. the provision of a service by one part of an organization or group where that service had previously been found in more than one part of the organization or group. Thus the funding and resourcing of the service is shared and the providing department effectively becomes an internal service provider. The key is the idea of 'sharing' within an organization or group.(wikepedia)Shared services means many things to many organisations. Traditionally we have seen it in state and federal government agencies as the “back room functions’ – corporate services such as finance, IT, payroll, HR, property management etc. It is also seen a lot in private enterprise but this is more likely to be an an outsourcing strategy – and in a lot of cases off shore to countries where salaries are so much cheaper (eg call centres, IT support etc) Whatever your definition the agreement on what this means for partner organisations who are going to “share” is critically important. What you share and how you do it is the first step on journey.
5In the future is done by ONE….. My definition…What is currently done BY many….In the future is done by ONE…..….FOR many…………
6Once a group of partners come together and have agreed to “share services” there is a lot of steps along the way. This map is something we developed to assist us plan – talk through each of the stages and explain where we are………..For this shared services project one of the Alliance Councils – Wellington – opted out. They are starting to work more with their western neighbours and the recommendations from the Independent Panel was that they are better aligned with the councils in OROC and their large regional council of Dubbo. However interestingly OROC is now actively engaged in exploring shared service models and arrangements for its members (12 councils with very large geographic challenges).
7Shared Services – Project Stages 1. MODELEntity – options and best fit for usGovernance arrangementsFundingLocationCEO – role & appointmentBoard – role & decision makingGM Advisory Group2. SERVICE SELECTION & BUSINESS CASEFuture state of operating model – vision/purpose, objectivesMethodology for service analysis and selectionHigh level analysis – first cutDetailed business case – ROI, Service Level agreements and cost of servicesSo we have been “working on” shared services for about 3 years. Our initial work was a lot of research into other sectors – both nationally and internationally. I completed a study tour of New Zealand in 2010 where there is quite a different model for local government – not the least being they are only two tiers of government! But their Council Controlled Organisations are quite an interesting model to consider. Our most recent work since mid last year has been two key bodies of work – one to research and develop the model for the entity – what will the legal entity be? How will it be governed, financed, staffed etc. This work was completed with the assistance of legal advice pro bono – one of our Councillors is a semi retired corporate lawyer who is very interested in progressing his council to sustainable future! The second body of work is to develop a robust methodology to assist in identifying the suitability of services that could be delivered through a separate shared entity. It was important to have a transparent and structured process for decision making – it was easy to fall into the trap of “gut feel” or pushing the “difficult” services off to another entity to deliver. In November last year we formed a partnership with KPMG to assist with this second body of work on service selection methodology. I will talk through each of these two stages ……
9Service Delivery Models (acknowledging the work of LG Professionals NSW and research undertaken by UNE)Voluntary (Alliances – non binding)Legal entityCorporationCooperativeCompany limited by guaranteeIncorporated AssociationsJoint ventureRegional organisations (ROCs)Joint production (eg rates processing)OutsourcingCouncil Controlled Organisations (New Zealand model)County councils* GRAB A COPY OF THE LGMA PAPER *There are a number of options for service delivery and there has been a great deal of research both industry driven as well as academic research. In the spirit of sharing I’ve brought a number of papers for you to take away – one of them is a great paper that was done in NSW last year as part of the Reform agenda. A working party was formed by industry representatives to identify the different operating models in local government and the final paper outlines the benefits and challenges of the different models. Our intial research work has led us to consider the following model.
10Shared Services Inc JV Alliance Members’ Agreement CabonneShireCouncilBlayneyCentralTablelandsWaterWellingtonNew MemberCouncil/RuralTHE ENTITY – NAME TO BE CONFIRMEDGuarantee of $10 per Member CouncilBoard of DirectorsChief Executive Officer (CEO)Shared Services Deliveryand ProcurementGeneral Managers’Advisory CouncilAppointed by MemberCouncils under JV AllianceMembers’ AgreementOne Director to be appointedby each Member Council,preferably Mayors.Ability to appoint up to 2independent, external directorsAppointed by the BoardThis is our current thinking on the model and how it would operate. We initially strongly supported using the county council model for delivery. We already had a CC as a member (CTW) and with some variation to the scope of their functions we believed that would be the best fit for us. However there is now some doubt about the future of county council models generally in the reform discussions (mind you there is a long way to go with those discussions). Wealso had an issue that one of the member councils of the county council – Weddin Council – do not want to be involved. We probably could have worked out a way to make it work but since then we have looked in more detail at using a Joint Venture arrangement via a company limited by guarantee. We have only gone as far at this stage of developing terms of agreement but not much detail on the operation of the model in a practical sense. This will be examined in more detail as part of the business case development that we are about to commence. We also wait the rewrite of the Act in NSW as it is currently not easy to establish a company structure – it required ministerial approval and whilst this isn’t impossible we do need to see what the new legislation might say and also how the proposed Joint Organisations will be managed and governed.
11Pro’s and Con’s…. Voluntary versus binding? Formal (legal) versus informal?Optimum number of partners?“Like” minded council partners?Depends on what you want to share and the level of relationship and trust that will carry the strategy forwardJohn asked me to comment on whether collaboration or sharing needs to be formalised or not and what the differences were between us and say Hunter Councils Inc or the now dissolved NESAC alliance…….or even us and say Regional Organisations of Councils which are in place across NSW. My response is that it really depends on why you are coming together to “share” – the purpose and outcomes you want to achieve will in some ways determine the model you adopt for sharing. I would say though that like any good marriage or partnership there needs to be a period of “courting” where trust is established and you develop your “shared vision”. These are critical to ongoing success of the partnership. Whether it needs to be a legally binding arrangement or a voluntary more informal relationship will depend on what you want to do together. If it involves money my suggestion is it needs to be formalised! We have been pursuing a legal entity arrangement for our future because we will be sharing staff and purchasing together and we can’t do that in our current structure.
12Project Stage – 2 SERVICE SELECTION METHODOLOGY & BUSINESS CASE
13Developing the Service Selection Methodology – what did we have to consider? Relevance of the service/function to the member organisations and other councilsFinancial and Efficiency gains to be achievedHuman Resources required to provide the service or function and any potential industrial implicationsRisk AnalysisCapacity improvement to the member councilsAsset consolidation/reduction (eg. shared IT & communications infrastructure)Community and geographic considerations.So before in determining the methodology for service selection we needed to give consideration to these following points. Using this as a base we then worked with the GM’s to determine the vision, purpose and strategic objectives for the shared service entity.
14CENTRAL TABLELANDS SHARED SERVICES INC?? VISION: Enhance the capability and capacity of participant organisationsto deliver efficient, effective public servicesPURPOSE: Deliver sustainable, cost effective, quality public and supportservices through a commercially focused cooperative business modelSTRATEGIC OBJECTIVES:Release operational efficiencies through formal collaboration on service deliveryRelease operational efficiencies by leveraging operational assets, fleet and machineryAttract, retain and develop employees to meet key skills areasRe-use operational efficiencies to meet identified gaps in service provisionThe current Alliance arrangement would transform into the new entity – name of which has not been determined. The vision, mission and strategic objectives for this new entity are outlined.
15The Design Principles – what we measure services against to determine suitability Cost benefit analysis establishes case for changeMeets identified capability and capacity gapsEnhances ability to attract and retain key skillsUtilises standard systems/processOperations and benefits can leverage further through increased scale and scopeThere are existing shared arrangementsThere is limited consequential impact on other servicesPreserves community employment in key areasService delivery is an established political priorityThere has to be a positive financial outcome2 and 3 - Most rural councils struggle to attract and then professional staff which impacts on the service levels and provision – in some cases we can’t provide the service at all and it is one of the aims that we can provide services that we have to contract in now through this entity – like a centre of excellence arrangement. (eg specialist professional services such as design, Health and building, DA’s etc)4.
16High level analysis and findings Using the design principles we selected 20 functions in 3 service groups for analysis:Strategic and support services (34.4 EFT)Financial management, accounts payable/receivable, payroll, HR, ICT (support and infrastructure) asset and fleet management, contract and tender managementSpecialist Services (8.2 EFT)Development assessment, PCA, Public health and inspections and designDirect Field Services- (70.7EFT)- water supply and water treatment, road construction and maintenanceOnce we had agreed on the service selection methodology we applied this across all functions of council to select 20 functions to be included in the first high level analysis. They were in 3 key service groups.
17What did we analyse Current functional structure of 3 councils FTE – position descriptionsCost of FTEAssets data, including utilisation, asset life, depreciationFinancial data – income and expenditure, debt exposure, LTFPPerformance data (hands up who has this??)
18The findings and next steps…. Efficiency savings were identified in the 3 service groups by centralising functions and having staff specialise.The efficiencies come from specialisation and represent “part positions”. Therefore all the functions in a service group would have to “move” otherwise efficiencies won’t be achieved…..this is going to be our greatest challenge. One arm, one leg, …..Currently assessing the ROI for the large change that would be required to make those efficiency savingsThe estimated savings is in context of maintaining current EFT levels. There is additional opportunity if the strategy included reduction in EFT………BUT, is there an appetite for this at the moment? And what impact would that have on service levels?Reduction in EFT is always seen as the way to “save money”. But the impact on service delivery has to be measured. Since the Victorian amalgamations in the mid 90s there has actually been an increase in EFT across the sector of something like 11%
19The findings and next steps…. Does the Alliance group have the scale for Shared Services……OR do we need additional partners?The next step is detailed business case – we have established the case for change.We need much more detail on current cost of service delivery vs proposed model……….to be sure that service delivery costs will be lower through a shared service model.Councils seldom have a clear picture on how well they are performing prior to the proposed changes which means they cannot properly determine how change will effect their performance before and after the change(Brian Dollery – review of NESAC)
20The challenges…..All of the following are achievable but require a high level of leadership , management and determination……..Industrial relations – moving staff to a company structure? Moving staff to a different location?Governance arrangements of the new entity – need a binding commitment to “buy” services from the new entity for a periodEstablishment and operating costs – the ROI may be 3 – 5 years - the councils need initial funding to manage the transition and fund the entityThe future model for regional cooperation ?Joint OrganisationsStrong and sustained leadership and commitment from all partners
21My take home tips….On regional collaboration………….Embrace regional cooperation and do something with your neighbours or broader LG communityPick your partners wellWork on trust and relationship first before tackling major change or transformationDefine your shared vision for collaborationResource it, drive it and get some early wins……..
22My take home tips…. On Shared Services……….. Ensure all partners are clear on the what shared services means , what the potential benefits might be (start with the end in mind)Base your decisions on a sound business case for change that MUST include your ROI and clearly identifies that service delivery will be more efficient and effective than it currently isYou will need strong sustained leadership and commitment – this is a longer term transformational change – it is not a soft option to avoid amalgamationProvide the resources to make it happen and manage the changeIdentify and manage enablers not necessarily in your control eg Industrial, the Act, legal status, technology platforms etc
23…“nice” is not enough.A number of factors can limit theambition of local government to realisethe full savings potential of movingto a shared service model –the biggest obstacles are often political.(Deloittes 2010)
24“Control your own destiny – or someone else will”……. Some parting words of wisdom……..from someone much wiser than me“Control your own destiny – or someone else will”…….and“Willingness to change is a strength-even if it means plungingpart of the companyinto total confusion for a while”Jack Welch, (ex) CEO General Electric