1. Driving High Performance in Government: Shared Services in the Public-Sector David A. Wilson Managing Director, Accenture State & Local Government

2. Discussion Topics Introduction: The Imperative to Change
Shared Services Defined
Shared Services Benefits
Key Challenges
Getting Started on Shared Services
Public Sector Shared Services Research
Conclusion

3. Government business processes and IT must transform to provide more value for citizens
Demand for High Performing Governments:
Growing fiscal pressures requiring governments to hold the line on expenses and taxes
Citizen expectations for improved services are rising
New technologies create an imperative to “keep up” with change
Major programs and traditional methods of service delivery are being challenged, often under the rubric of reform and consolidation
Responsibility and accountability for programs is fragmented across government boundaries
Transparency of information and accountability for performance is creating demand for measuring, comparing and documenting performance results
Demographic trends are requiring governments to do more with fewer employees
Change around the margins won’t suffice anymore – transformation of traditional operating models is required

4. Discussion Topics Introduction: The Imperative to Change
Shared Services Defined
Shared Services Benefits
Key Challenges
Getting Started on Shared Services
Public Sector Shared Services Research
Conclusion

5. Shared Services Defined
Consolidation of IT and administrative functions into a stand-alone support organization
Only mission is to provide IT and administrative functions efficiently and effectively
Requiring a dramatic redesign or transformation of the technology infrastructure, organizational structure and workforce
Shared Services elevates importance of IT and administrative tasks to highest management levels and takes on a front office perspective
High performance culture with a strong focus on service excellence (i.e customer service rather than just cost focus)
Provider and customer has clearly defined responsibilities via service level agreements and key performance indicators
Typically sited in a low-cost, high-skills area
Shared services can be WITHIN an enterprise or ACROSS jurisdictional boundaries
* Accenture report - Focus On Value: The Case for Shared Services in the Public Sector

6. Achieving Higher Performance
The objective of Shared Services is to optimize the delivery of cost-effective, flexible, reliable services to all clients
Achieving Higher Performance
Combines the best of both models:
Eliminates redundancy through process and technology standardization
Consolidates and redesigns non-core support functions into service centers
Redesigns the retained organization and responsibilities in the operating units
Drives shared responsibility for results using 2 way Service Level Agreements
Operates like a business with high focus on client service and cost management

7. – Admin Functions Operating Model Spectrum –
Shared Services creates a stand-alone support organization that performs as a utility to efficiently serve the specific needs of the enterprise
– Admin Functions Operating Model Spectrum –
Function Centralized
Balanced-Shared
Services
Fully Decentralized
Governor
Governor
Governor
MIS
HHS
Transp
HHS
State Police
Transp
HHS
Police
Transp
Shared
Services HR
FIN
other
State Police
Aging
Patrol
DMV
Aging
Patrol
DMV HR
Child
Supt
Invest.
Const
Child Supt
Invest.
Const
Each function serves all departments
Mental
Health
Dispatch
Aviation
FIN
Mental Health
Dispatch
Aviation HR HR HR IT
FIN
FIN
FIN
other
MIS
MIS
MIS
other
other
other

8. – Shared Services vs. Centralization –
Attribute
Traditional View of Centralization
Objectives of Shared Services
Customers Treated as…
End Users
Clients (can include departments, end customers, vendors, etc.)
Governance
Department Manager
Independent Unit -- Client Advisory Group (organizational construct varies with organizational objectives)
Location
Capital, Central Admin Office (typically)
High Skill, Low Cost Area
Primary Focus
Cost Control
Service Excellence, High Performance, Cost Control, Continuous Improvement (service and costs)
Service Responsibility
Central Administration
Shared between SSC (Shared Service Center) and Clients as stated in Service Level Agreements
Service Management
Optional
Service Level Agreements, Key Performance Indicators, Performance Reporting
Customer Contact Management
Ad Hoc
Multiple channels (voice, , web); Contact center staffed with customer service reps; Contact Management software;; Client relationship managers
Typical Management Processes
Recruiting, Workload Management, Cost Management
Performance Measurement, Continuous Improvement, Client Relationship Management, Communication, People Development

9. Centralization to Shared Services
Enterprize End-to-End Process
Visibility, Governance
Transition from Centralization to Full Value of Shared Services Many organizations stop here leaving value behind an decreasing the likelihood of sustainability and scalability
Service/Cost Transparency
Performance Mgmt.
Metrics, Targets, Scorecards
SLAs
Clear 2-way services agreed by clients
RANGE OF BENEFITS
Benefits of centralization recede due to lack of shared accountability for performance and increase in shadow cost over time
Continuous Improvement
Re-engineering
Simplified, standardized system/process
Lack of Clarity Services, Costs
Traditional Culture - Tenure, wages, back-office mentality
New Location
Wage and real estate arbitrage
Exceptions Increase
Consolidation
Re-organization and de-layering
Shadow Cost Increase
CENTRALIZATION
SHARED SERVICES

10. – Example Decision Matrix – Benefits Administration
Ideal processes for Shared Services have low strategic impact and significant economies of scale
– Example Decision Matrix –
ILLUSTRATIVE
Low
Accounts Payable
Cost Accounting
Benefits Administration
Minimal Risk: Easy to combine with minimal business risk
Moderate Risk: Low risk, but potential benefits are limited
Contract Writing
Cash Management IT
Help Desk
Strategic
Importance
at Dept Level
Order Management
Autonomous: Any change will be difficult and could put critical functions at risk
Employee Selection
Distribution
Risk Management
High Risk: High opportunity to centralize, risky if implementation is unsuccessful
Budget Formulation
High
Little
Economies of
Scale
Significant

11. Likely Candidates for Shared Services
Payroll Processing
Compensation
Records
Hire to Retire
Benefits Administration
Training & Education
Travel & Expense
Self Service
Human
Resources
General Ledger
Accounts Payable
T&E Processing
Accounts Receivable
Planning & Budgeting
Purchasing
Cash Management
Internal Audit
Finance
Information
Services
Standards
Technology/ Development
Desktop Support
Applications Development
Data Center Operations
Application Maintenance
Telecommunications
Hardware & Software Acquisition
Logistics/
Materials
Management
Strategic Sourcing
Asset Management
Warehousing
Inventory Management
Transportation
Customer
Service
Call Centers
Non-Emergency Service Calls
Credit & Collections
Order Management
Legal
Affairs
Litigation Support and Coordination
Communication Svcs
Risk Management
Insurance
Regulatory Compliance
Media Relations

12. – Shared Services Best Operating Practices –
Leading Shared Service centers focus on several, common design elements
– Shared Services Best Operating Practices –
High
Performance
Organization
Maximize economies of skill , utilize performance metrics, and develop knowledge capital for a world-class organization
Continuous
Improvement
Institute a culture and process review based on benchmarking and performance management where increased efficiencies lead to lower costs and higher quality
Greenfield
Site
Establish a new organization and culture from the ground up and capitalize on lower real estate/wage rate locations
Service
Level
Agreements
Ensure service partnerships between SSCs and users supported by objective performance measures
Efficient
Business
Processes
Business processes standardized and streamlined across enterprise competencies, consolidated to leverage economies of scale
Labor Saving
Technology
Invest in automation technology (ERP, workflow, imaging) to reduce dependence on manual labor, standardize systems across entities

13. Discussion Topics Introduction: The Imperative to Change
Shared Services Defined
Shared Services Benefits
Key Challenges
Getting Started on Shared Services
Public Sector Shared Services Research
Conclusion

14. Shared Services provides a variety of benefits
Centers of excellence allow for the development of specialized skills which can be leveraged across the organization
Responsiveness
Economy of Skill
Economy of
Scale
Flexibility
Standardization
Shared
Services
Benefits
A focused, specialized, service-oriented support unit ensures that operating department needs and issues are addressed in a timely manner
Consolidated functions and processes eliminate redundancies and minimize the cost of transaction processing activities
Standardized practices and compatible data provide a common language and feel to diverse operating units and facilitate analytical decision-making
A shared services utility acts as an organizational infrastructure to ease reorganization of operating departments

15. Economic Value will be realized by fundamentally changing the cost structure of the function
“As is” cost
structure
Structural changes
in cost base
“To be” cost
structure
Facilities
costs
Economic
Value/savings
realized
Co-location with other facilities
Switch to low-cost locations
Systems
costs
Systems rationalisation
Greater process automation
Investment in leading-edge IT capabilities
Maximum interfacing
Facilities
costs
Personnel
costs
Systems
costs
Switch to low-cost locations
Rationalize salary mix within finance staff
Better leverage of high performers within a larger team
Automation of core processes
Rationalization of services provided via definition of service level agreement
Continuous improvement / service culture
Personnel
costs

16. …and an additional 2-3% annual Continuous Improvement benefit
Where do Shared Services Benefits Come From?
Example Value Levers
Relative
Impact
Reengineering – Simplified, standard systems / processes
High
Consolidation, re-organization and de-layering
New location – wage and real estate savings
Med - High
Clear, two-way services agreed to by SSC and clients
Med
Performance driven organization (metrics, scorecards)
Enterprise, end-to-end process ownership / governance
Low
Reduced manual activity though enabling technologies
Medium
Multi-tier service request management
Typical Net Benefits:
15% - 30%
…and an additional 2-3% annual Continuous Improvement benefit

17. Transaction Processing Economies Typical Shared Services
Typical cost reductions for certain enterprise-wide processes range from 25-50%
Transaction Processing Economies
Typical Shared Services
% Cost Reductions
Fortune Shared
100 Service
Item Mean Mean
Journal Entry $1.10 $0.34
A/P Invoice $8.00 $4.44
T&E Report $20.00 $5.00
Payroll Check $6.00 $2.77
Fixed Assets Line Item $5.40 $3.75
A/R Invoice $16.00 $7.80
Productivity Improvements
35%
55%
45%
25% 0%
10%
20%
30%
40%
50%
60%
Payroll
General Accounting
Payables
Purchasing
Capital Budgeting
Receivables & Credit
Human Resources
Source: Accenture Experience
Source: Society of Management Accountants of Canada, 1999

18. Discussion Topics Introduction: The Imperative to Change
Shared Services Defined
Shared Services Benefits
Key Challenges
Getting Started on Shared Services
Public Sector Shared Services Research
Conclusion

19. Unique Public Sector Shared Services Challenges
Public Sector governance structures are fragmented (i.e. separately elected officials)
Statutory barriers
Political challenges related to workforce changes and project risks
Up-front investment requirements/payback versus election cycle
Inter-entity consolidation – giving up control and jurisdiction
Lack of visibility and awareness of the problem, lack of skills to implement/few US public sector examples

20. Discussion Topics Introduction: The Imperative to Change
Shared Services Defined
Shared Services Benefits
Key Challenges
Getting Started on Shared Services
Public Sector Shared Services Research
Conclusion

21. Shared Services Roadmap
Performing a benchmark, identifying the best opportunities for shared services, and building a quantitative business case are imperative.
10-12 Weeks
Assess
Design
Build
Deploy
3-5 Months
6-12+ Months
Define the Shared Services Vision and Strategic Objectives
Perform Data Collection and Benchmarking
Develop the Operating Model
Develop the Implementation Plan
Develop the Business Case
Design the Business Processes
Design the Organization
Design the Enabling Technology
Select Location and Real Estate
Develop Hiring Plan and Recruit Shared Services Leaders
Develop Communications Plan
Plan Workforce Transition
Develop Training Plan and Management Development Program
Design Facilities
Design Service Mgmt Framework
Develop Shared Service Mgmt Processes
Build Performance Support and Training Materials
Build-out Facility
Recruit Shared Services Personnel
Draft Service Level Agreements
Develop Key Performance Indicators
Develop / Deliver Build Communications
Build the Organization
Conduct Deployment Planning
Execute Deployment Plan
Confirm Service Level Agreements
Conduct Training and Work Shadowing
Develop / Deliver Deployment Communications
Test Shared Service Center Readiness
Execute Workforce Transition Plan

22. Hackett Public Sector Benchmarking Participants as of March 1, 2008
State
Benchmark
Status
Tennessee
FIN, HR, IT, PROC
Completed
Arizona
FIN
Delaware
FIN, PROC
Colorado
Massachusetts
Mississippi
Alaska HR
Georgia
FIN, IT
Alabama
FIN, IT, PROC
New Jersey
FN, HR, PROC
Active
Oklahoma FN
Ohio
FN, HR, IT, PROC
West Virginia
FN, HR, PRC
Other Public Sector
Nassau County, NY
King County, WA
Miami/Dade County, FL
City of Portland, OR
City of Glendale, AZ
City of Calgary, AB
Univ System of GA
Univ of N Carolina
Univ of VA
Univ of MA 22

23. Discussion Topics Introduction: The Imperative to Change
Shared Services Defined
Shared Services Benefits
Key Challenges
Getting Started on Shared Services
Public Sector Shared Services Research
Conclusion

24. Accenture’s Public Sector Shared Services Research Study Objectives
Research Objectives
Determine to what extent shared services is becoming an important delivery model for public sector organizations
To understand the meaning of shared services in the public sector context
To assess the extent to which governments are using shared services - and if so, what is the maturity of the shared services model
To identify the drivers, challenges, benefits and critical success factors for shared services initiatives
To understand how political, organizational, cultural, business process and technological factors can contribute to a successful shared service journey
To identify leading practices in Government and understand what governments can learn from each other in planning and implementing shared services.

25. Research Approach
Two distinct strands of research : Survey of 143 Senior Government Executives and 11 “deep dive” case studies
Total number of interviews conducted: 143
List of Case Studies
United States Postal Service (US)
Defence Finance and Accounting Service (US)
State of Massachusetts (US)
New York City
Queensland Government (Australia)
New South Wales Government (Australia)
Province of Alberta Government (Canada)
Ontario Shared Service Bureau (Canada)
State of Hessen (Germany)
Eastern Health Shared Service (Ireland)
Ministry of Defence (Singapore)

26. Key strategic or operational challenges facing governments today
Survey respondents said meeting efficiency targets, citizen demands for improved services, and pressure to reduce costs are their top operational challenges
Key strategic or operational challenges facing governments today
Low priority
High priority
All of this is reflected in our survey results. If we look at slide 8, we can see that our survey respondents rated meeting government efficiency targets as their no 1. challenge, closely followed by meeting citizen demands for service improvements and pressure to control costs.
N=143
Note: Respondents asked to rate a range of challenges on a three point scale, where 1= low priority, 2 = medium priority and 3= high priority

27. Four Key Findings Four key findings emerged from our research:
Governments regard shared services as a vital tool for meeting their challenges:
More and more government agencies are gravitating toward shared services for their administrative processes.
A higher number of organizations than we expected responded that shared services was already on their agenda.
66 percent of the government executives we surveyed reported that they had already implemented, or were in the process of implementing, shared services.
Most governments in-source their own shared services centers
In-sourcing is by far the most popular sourcing choice for government agencies implementing shared services
Governments are uncomfortable going it completely alone when it comes to implementation
The unique nature of governments sets up some very specific challenges to shared services
Moving to shared services means committing to transformation – while the benefits are striking, the changes can be wrenching.
A fundamental lack of awareness and the necessary managerial skills to tackle a transformational change program is the main issue for many.
Few have achieved the full potential of their shared services
Many governments have started to implement some key components of a true shared services operating model, but few have implemented them all. Thus, few have achieved the full potential of their shared services.
Government organizations are at different stages on the journey to demonstrating leading-practice shared services delivery.

28. Shared Services is seen as an important tool that can help governments address their key challenges
How important do you rate shared services as a way of helping you to address your key strategic and operational challenges
63% of our survey respondents rate shared services as ‘extremely’ or ‘very’ important as a tool for addressing their current businesses challenges
Only 15% of respondents viewed shared services as relatively unimportant as a business tool
N=143

29. 66% of respondents said they either have implemented shared services, or are implementing now
Does your organisation currently use a shared services model for any internal processes or functions, or are you considering using shared services?
Surprisingly, a large proportion (66%) of the government executives we spoke to as part of this survey responded that they had already implemented, or were in the process of implementing, shared services.
A further 28% said that they are considering, or would consider, implementing shared services in the future.
Only 9 respondents (6%) said that they would not consider shared services, though 3 had already considered and rejected it. Reasons given for not considering:
Bureaucratic inertia and skepticism of senior executives
Decision outside control of individual organization, though in one case it was being discussed at state govt level
Service delivery already thought to be at optimum level
Concept simply not understood within government (French respondent)
Did not fit with internal culture
Moving towards decentralisation of corporate services
Sheer size and complexity of government would make it very difficult to implement
N=143
Note: We defined ‘shared services’, as the consolidation of administrative or support functions (such as HR, Finance, IT, Procurement) into a single, standalone organizational entity whose only mission is to provide services as efficiently and effectively as possible

30. IT, Finance, HR and Supply Chain are among the services most-commonly delivered by shared services centers
Which processes/functions currently fall within the scope of your shared services arrangement
N=94

31. Shared Services organizations most typically serve multiple agencies within a government, though other models are also used
Which organizational model best describes your shared services arrangement
N=94

32. Most Shared Services centers are staffed with internal government employees
Which statement best describes the sourcing arrangement you
have adopted/are adopting
N=94

33. Early Results of the Innovators
Despite the numerous challenges, some leaders have already begun achieving significant benefits through their shared services operations:
We found that many had already made considerable savings with their shared services
The United States Postal Service has saved US$71.4 million and reduced the cost of its finance function by 16 – 18 percent
Queensland, Australia, whole-of-government shared services saved Aus$10 million, despite the fact that no savings were even expected in the first y ear.
In Ireland, Eastern Health Shared Services took 15 percent out of operating costs between 2002 and 2003
We found that shared services leaders are also achieving other, more strategic returns
The Commonwealth of Massachusetts human resources shared services reduced FTE requirements by approximately 100, significantly reduced hiring times (which increased client satisfaction), reduced duplication of training curricula and automated processes, reducing the need for staff intervention.

34. Discussion Topics Introduction: The Imperative to Change
Shared Services Defined
Shared Services Benefits
Key Challenges
Getting Started on Shared Services
Public Sector Shared Services Research
Conclusion

35. Conclusion
Many governments have already recognized that shared services can be a strategic tool for meeting their technology infrastructure and administrative services challenges
While shared services is a proven model in the private sector, and is increasing common in the public sector, the unique nature of governments sets up some very specific challenges to shared services
Shared services’ time has come in the public sector – it is no longer a matter of “should we”, but rather “how and when”?

36. For more information:
Shared Services Whitepapers:
Focus on Value: The Case for Shared Services in the Public Sector
Driving High Performance in Government: Maximizing the Value of Public Sector-Shared Services
Public Sector Shared Services: Focus on Governance
Creating Public Sector Value in a Rapidly Aging World
David A. Wilson contact information
Telephone: