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Shared Services document


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Shared Services document

  2. 2. CONTENTS Pages Foreword 3 Executive Summary 4-5A Introduction 6-7B Background 8C Research Context 9 - 10D Definitions of Shared Services and Related Forms or Structures 11 - 20E Scope of Possible Shared Services Activity 21 - 23F Barriers 24 - 31G Critical Success Factors 32H Review of LSC Collaboration Fund projects 33 – 36J Shared Services Development and Implementation Requirements 37 – 39K Risk Analysis 40L Conclusions 41 – 44M Recommendations and Next Steps 45 – 46N Postscript 51 Appendices Appendix 1 Semi-structured questionnaire 47 Appendix 2 Letter to HMRC 48 – 50 Postscript 51 Appendix 3 Stakeholder Groups 52 - 53 Appendix 4 Emerging Models Delegate Exercise 54 - 55 Appendix 5 Business Case Starting Point 56 - 58 Appendix 6 Models – Plus and Minus Exercise 61 - 63 Appendix 7 References 64 - 65 2
  3. 3. FOREWORDShared Services is an exciting concept. It holds out the possibility of savings for theFurther Education sector, but we must avoid the dangers of not having the resourceand commitment to drive this. Neither should we duplicate Shared Servicesprojects. This would create waste and limit, rather than maximise, the efficiencieswe all seek.Angela O’DonoghuePrincipal and Chief ExecutiveCity of Sunderland College 3
  4. 4. EXECUTIVE SUMMARYPurposeTo identify the support required by the Further Education sector to take forward SharedServices.MethodologySecondary research of existing developments and semi structured interviews withsignificant Shared Services stakeholders.DefinitionA support service carried out by one organisation on behalf of one or more clientorganisations or on behalf of different parts of the same organisation.Findings• Much and increasing levels of interest dating back several years• Several projects supported by the Learning and Skills Council (LSC) with the main focus on procurement• Likely that big savings could be made on procurement and IT especiallyBarriers to further developments include:• Perceived threat to independence which prevents necessary collaboration• Lack of money for capital and revenue investment (or paying back large loans on new college builds)• Imposition of VAT which reduces savings• Competition legislation• TUPE arrangements• Change managementRisks• Not delivering on savings through too many Shared Services projects being started, meaning further duplication and economies of scale not being realisedConclusions• Time is right to develop Shared Services as Colleges need to make savings• Colleges cannot afford set up costs even though potential for savings is great• Organisational arrangements must not threaten independence of Colleges. Therefore, best undertaken by a separate Private Limited Company that is also a registered charity• Should cover HR, IT, Finance and Procurement• Savings best realised by a large organisation that can achieve economies of scale• Critical success factors include; o Reduction in cost of at least 10-20%; o an improvement in service standards in all areas; o flexibility to provide the required data to the front line in a timely manner; 4
  5. 5. o flexibility to respond quickly to changes in requirements from the college or funders; o the removal of the overhead required in the management of support staff; o release of space to provide opportunities for teaching and possible growth.Recommendations• External funding should be secured for a broad based Shared Services project incorporating HR, Finance, Procurement, MIS.• Project established where costs are lowest, but where there is a likelihood of being able to recruit appropriately skilled staff• Initially number of colleges limited to 5 or 6• Colleges to provide accurate baseline of current costs of potential shared services• Shared Services Project to work with Colleges to: o Map key processes in procurement, human resources and finance, as well as I.T. including Management Information Services o Develop supporting software, including an overarching relational database that would link processes o Identify other projects, such as the joint procurement of human resources advertising, with which collaboration would produce savings and give a high priority to such collaboration o Roll out the project across participating colleges• Invite other colleges to contract and thereby grow sub-regional to a regional service• Have this project develop an MIS system to be offered at cost to the entire sector 5
  6. 6. A INTRODUCTIONA.1 Purpose The purpose of this research is to identify the support required by the Further Education sector to take forward a Shared Services model (or models) and to identify gaps in current support arrangements.A.2 Objectives The specific objectives of this research were agreed with Ray Poxon, then with the Learning Skills Council, in January 2010. These objectives were agreed:  To describe possible Shared Services organisational models that will include scope in relation to work streams, sector and geographical locations  To describe what is currently happening in the further and higher education sector in relation to Shared Services  Summarise the current Shared Services plans and ambitions of stakeholders active, specifically in the further education sector, and describe the key issues and solutions  Review the project reports from the Learning and Skills Council Collaboration Fund Projects and describe the successes/barriers  To provide recommendations about the support required by the further education sector in the short (March 2011) and longer terms (next 3 years) for the implementation of Shared Services The fieldwork and secondary research was conducted from 25 February 2010 to 31 March 2010. Writing up was completed in time for a conference to be held in Sheffield on 21 April 2010.A.3 Research Scope Resource availability limits all research. To make this particular project manageable in the tight timeframe adopted, it was agreed that the scope and coverage of this FE focused research would be: • The collation of views of a selection of key Government stakeholders, senior management of two colleges in North East England and interviews with members of the Collaboration Fund Initiative sponsored by the Learning and Skills Council (LSC). • A description of relevant collaborative projects in England and Northern Ireland. • Description and analysis of Shared Services in Further Education, whilst also touching upon higher education. • Description and analysis of various collaborative models The research would therefore cover a period from the inception of the National Advisory Group for Shared Services in 2006 through to developments up to the spring of 2010. 6
  7. 7. Key stakeholders known to be active in Shared Services in the Further and Higher education sectors and therefore included in the scope of this research are: • The Learning and Skills Network (LSN) • The Joint Information Systems Committee (JISC) • The Department for Business Innovation and Skills (BIS) • The Department for Children Schools and Families (DCSF) • The Association of Colleges (AoC) • The 157 Group • The Association of Northern Ireland Colleges (ANIC) • South Eastern Regional College (Northern Ireland) • FE Sussex • The Association of Colleges in the Eastern Region (ACER) • The Higher Education Funding Council for England (HEFCE) • Shared Service Architects • The Learning and Skills Improvement Service (LSIS) • The Lakes College (small GFE) • Leicester College (very large GFE) • Cardinal Newman College (small 6th Form)A.4 Research Methodology The approach taken in carrying out this research has been to: a) Carry out in-depth, semi structured interviews with key stakeholders. (Appendix 1) b) Undertake desktop research in particular in relation to the Learning and Skills Council Collaboration Fund Projects as well as a range of other available information c) Look in particular at a case study of two further education colleges working collaboratively to try and take a Shared Services model forward The author of this report has also been involved in further work that has in effect become action based research. This has centred on work that has been carried out between City of Sunderland College and South Tyneside College in relation to developing a business case for Shared Services between the two colleges, but which could quickly be scaled up to a sub-regional and or even possibly regional level. 7
  8. 8. B BACKGROUNDB.1 In part this work stems from and attempts to build on work undertaken by the Learning and Skills Shared Services programme during 2006 to 2007. An advisory group developed a vision for a model of Shared Services and a strategic business case. They also provided advice on a proposed Shared Services Capability that would deliver transactional, administrative and advisory services to colleges and providers across the Learning and Skills sector.B.2 This model for Shared Services in the Learning and Skills sector was intended to provide a basis for discussion with key stakeholders. Several key challenges emerged from the meetings of the National Advisory Group. VAT implications, Information Technology platforms and Governance were major issues together with the proposed size of an ideal Shared Services business solution. The Cabinet Office representative of the Advisory Group said that there would need to be 20,000 staff to begin to establish a Shared Services capability and over 50,000 staff before the realisation of significant cost reductions. They based this judgement on other Shared Services projects that they had led on in Australia.B.3 The strategic business case indicated that there was around an annual £100m of in-scope (Finance, HRM, MIS) activity that could be transferred to a Shared Services project.B.4 Post 2007, neither the Shared Services Blueprint, nor the Strategic Business Case, was taken forward. No reasons have been provided for this. All involved in steering the project have since moved on. The project may have been too ambitious. The aspiration of 25% of the sector being involved initially and quickly rising to 100%, may have been unrealistic particularly when bearing in mind the considerable issues mentioned in B.2 above. Another possibility was that the efficiencies that Shared Services could bring did not get high enough up the agenda of individuals and organisations. It may also have been the case that collaboration between colleges was simply too complex and difficult for such a project to be successfully implemented, given that colleges guard their independence jealously. Whatever the reason the initiative failed to reach the implementation phase and therefore never tested the considerable challenges that would have been encountered therein. 8
  9. 9. C RESEARCH CONTEXTC.1 In trying to understand the breadth and scope of opportunity that exists for the deployment of models of Shared Services, it is necessary to understand the range of college sizes and numbers of colleges that fall within each category. Table A provides a breakdown of the current (2010) total number of colleges in England according to the National Audit Office (2006) categorisation: Table A NATIONAL AUDIT OFFICE CATEGORIES Very Large Turnover more than £35m 37 Colleges 10% of the sector Large Turnover between £25m - £35m 60 Colleges 17% of the sector Medium Turnover between £15m - £25m 96 Colleges 27% of the sector Small Turnover less than £15m 165 Colleges 46% of the sectorC.2 Almost three quarters of the sector is categorised as small to medium. There are 165 colleges, including 6th form colleges, which have a turnover less than £15m (LSC college accounts 2007-2008).C.3 Government cuts in funding for Further Education could be in the region of 20 per cent over the next three years and this may turn out to be a causal factor in reducing the number of colleges, especially in the small to medium sized categories. A report produced by KPMG for the LSC stated that around 50 general further education (GFE) colleges are “currently designated as struggling”, and a further 50 colleges were classed as “breaking even” but are “financially vulnerable” over the next three years. The report goes on to say that 100 GFE colleges are described as “sound”, a further 45 categorised as being good or outstanding. Of the 45 in this classification, 15 had significant cash reserves and a “predatory” vision when looking at weaker providers.C.4 In a report commissioned by the 157 Group, ‘Preparing Colleges for the Future’, Eversheds LLP (an international law firm) envisage that collaborations by way of joint ventures, cost-sharing vehicles, outsourcing and the like will become common features of the sector.C.5 The report also states that FE colleges need to prepare for the future in radical new ways to ensure sustainability and continued excellence of the vital services provided to employers, local communities and students (Frank McLoughlin, Chairman 157 Group). 9
  10. 10. C.6 This research is also carried out against a backdrop of a widespread belief that the public sector in general can make huge efficiency savings without impacting frontline services. The Institute of Directors reinforced their belief in this respect when they issued a report (March 2010) criticising public sector spend asserting that at least £25bn of annual efficiencies can be made in the public sector within three years through a radical restructuring of public sector procurement (£15bn saving) and greater use of Shared Services and outsourcing (£10bn saving). The report, ‘Towards Tesco – improving public sector procurement’ has much in common with other articles on the same subject matter. It is something of a surprise that the paper uses banks as examples of operational efficiency but the author’s point that many functions being designed over and over again by public sector organisations largely carrying out the same job is an important one. Such duplication in systems development is undoubtedly costly. Policies have to be written, processes mapped and procedures, guidance and work instructions drafted. Supporting IT systems then need to be put in place. To do this over and over again across the country and in different colleges does seem wasteful in the extreme. Whether or not this would happen in the private sector is, in some ways, irrelevant. The fact remains that it is an example of an inefficiency and one that models of Shared Services would set out to address to a greater or lesser degree depending on the size of the project.C.7 This paper will go on to explore how further education colleges can collaborate to make efficiencies and, as important, be sustainable and retain their independence so that they can continue to do what the Chair of the 157 Group stated in paragraph C.5 of this paper. 10
  11. 11. D DEFINITIONS OF SHARED SERVICES AND RELATED FORMS OR STRUCTURESD.1 The term ‘Shared Services’ has become widely used in the public sector during the past 12 to 18 months. Numerous Government circulars, White Papers as well as press reports mention Shared Services possibilities. For example, Delivering 14-19 Reform talks about a ten year programme that aims to transform the services and the pooling of resources and facilities to deliver a more responsive service and economies of scale over time (DCSF, 2009).D.2 The Head of the Government’s education technology body, BECTA, reported to The Times Educational Supplement that there are few examples of FE colleges and providers working to share services, but formally there is very little readily available evidence of Shared Services in FE.D.3 There would therefore appear to be opportunities here and, whilst there may be barriers to overcome, the current funding constraints in the FE sector mean that it is essential that a way forward can be found if the contribution of savings from Shared Services is not to be lost.D.4 Colin Cram, a public sector procurement specialist, has said that the case for Shared Services is self-evident. There is widespread support for the view that a Shared Services solution would bring huge savings, and yet only a small proportion of front and back office services are delivered this way. Before going on to examine why this is the case it is essential that a working definition of the term ‘Shared Services’ should be arrived at, one that is wide enough in scope to allow all models to be included.D.5 The Joint Information Systems Committee (JISC) commissioned Duke & Jordan to carry out a Study of Shared Services in UK Further and Higher Education, which was published during 2008. JISC’s understanding of the term Shared Services was summarised as “institutions co-operating in the development and delivery of services, so sharing skills and knowledge, perhaps with commercial participation”.D.6 PricewaterhouseCoopers define Shared Services as “The concentration of company resources performing like activities, typically spread across the organisation, in order to service multiple internal partners at lower cost and with higher service levels, with the common goal of delighting external customers and enhancing corporate value”.D.7 The National Advisory Group put forward the definition, “Shared Services is a business model whereby multiple organisations converge and streamline some of their business functions in order to deliver services as effectively and efficiently as possible. It often involves creating a stand-alone organisation whose sole objective is to process the high volumes of administrative ‘back office’ transactions that are common to each organisation” (LSC, 2006). 11
  12. 12. D.8 However, definitions of Shared Services vary and it is perhaps useful to see the various models placed along a continuum of collaboration. BuyIT Best Practice Network began to identify types of shared service arrangements that have been adapted by early adopters of Shared Services in Government. The Shared Services Advisory Group identified several basic forms or structures that can be applied to shared service operations in the public sector: • “Unitary – a single organisation consolidating and centralising a business service. • Lead department – an organisation consolidating and centralising a business service that will be shared by other organisations. • Joint Initiative (internal) – an agreement between two or more organisations to set up and operate Shared Services. • Strategic partnership (external) – contractual arrangement with a third party provider for a range of services which may include Shared Services. • Joint venture – joint venture legal entity between ‘Authority’ and third party provider. • Outsourcing – third party provider takes full responsibility for managing and operating the service.”D.9 There are three further structures that could be applicable to the further education sector that need to be added, namely: • Merger – this is where one organisation acquires another organisation (also referred to as a ‘take over’). • Federation – this is where member organisations unite forming a central governance, but each member organisation still retaining control of its own internal affairs. • Commissioning – this is the joint procurement of services (and goods) based on a shared strategy.D.10 These structures have been put on a continuum (see Chart A) that shows possible levels of collaboration together with issues of control and risk/barriers. Collaboration will be most apparent with the Lead Department, Joint Initiative, Commissioning, Strategic Partner, Federation and less likely with Unitary, Merger and Outsource: 12
  13. 13. Chart A Continuum of Collaboration and Control Significantly less control more risk/barrier Third party provider takes full responsibility for Outsource managing and operating services. Member organisations operate within a shared governance Federal Structure umbrella. Each organisation retains independent legal status, but are fully accountable via local boards to federal governance structures. A contractual arrangement with a third party provider to Strategic partner provide Shared Services (eg, College A and a Private Company) Joint procurement of services based on a shared strategy and harmonised business processes and designed to provide shared Commissioning service provisions to its members (eg, the LSC Collaboration Fund projects were mainly focused on this model) An agreement between two or more organisations to set up Joint Initiative and operate Shared Services (eg, College A and College B establish a separate Shared Services department) Centralising a business service that will be shared by other Lead Department organisations (eg, College A shares Finance with College B; College B shares HRM with College A) Merger The acquisition of one college by another (eg, Newcastle CollegeGreater control less acquiring Skelmersdale College)risk/barrier A single organisation centralising business services (157 Group Unitary Colleges would generally do this) 13
  14. 14. D.11 This continuum illustrates the degree of control a college would have over a type of shared service operation and the degree of risk and/or barrier in relation to VAT implications, competitions legislation, TUPE and pensions.D.12 Most of the definitions put forward for Shared Services have tended to focus on the aim. For the purposes of this work the definition of Shared Services will be very simple but will encompass a description, aim and characteristics, as is shown below: Shared Service definition A support service carried out by one organisation on behalf of one or more client organisations or on behalf of the various parts of a single organisation. The aim of Shared Services is: To improve service quality and to reduce costs. Characteristics of Shared Services initiatives can include: Shared technological platforms Shared and common processes Routine, though not necessarily simple, tasks Tasks carried out remotely High degree of automation Shared need for service from all partner organisations Variable transactional volume from each member organisation but high transactional volume overall Capable of being replicated Greater or lesser degrees of collaborationD.13 Each of the 8 structures outlined in Chart A will be sketched out more fully below and some of the advantages and disadvantages explored.• UNITARY MODELD.14 The Unitary model is a single organisation that centralises its back office services. There are numerous examples of this model in both the private and public sectors. The model is much more likely to be adopted in larger and/or geographically more dispersed organisations. There are examples of the Unitary model in the 157 Group of colleges. Newcastle College which has formulated a ‘Group’ entity comprising Newcastle College, Skelmersdale College and Carter and Carter, has a specific unit in their City Centre Campus called ‘Shared Services’ which centralises the College’s Group finances and HRM functions. City of Sunderland College has 5 centres across the four quarters of the City with each centre separated by several miles. Services such as HRM, MIS (students), Finance and Estates are centralised at one of the major campuses. 14
  15. 15. This model looks to avoid duplication. Obviously, the organisations retain complete independence and thus avoids issues such as VAT, TUPE and competitions law because it is one single organisation that has moved to a centralised model. The major disadvantage with this model is the ‘corporate take it or leave it’ mentality towards the business unit partners that can develop as they are, in effect, captive customers. It is fairly common practice in these types of organisations for corporate management to insist that business unit management use the shared service. Business unit managers can feel powerless to influence the quality of services provided especially where the organisation is geographically widely distributed. The scale of operation when applied to the further education sector is likely to be limited in relation to generating efficiencies.• MERGERSD.15 Mergers occur when one organisation acquires another. Again, there are numerous examples of mergers (also referred to as take-overs) in both the private and public sectors. An example in the public sector is Hull College acquiring Harrogate College. This model operates under a single governance or group structure. It offers the opportunity to reduce the potential for duplication and avoids complex issues such as VAT and competitions law, just as in the Unitary Model described above. Independence of the acquired organisation is normally ‘subsumed’ over a period of time into the parent organisation. The merging of organisational structures and processes is fairly straightforward with such a model. However, the culture changes can take many years and will be very complex, especially where the mergers are between more than two organisations. An example of this is the merger of 16 colleges down to 6 in Northern Ireland, a process which began in 2007. One of the colleges involved and which was visited by the author of this report in both 2007 and 2010 (North Ards and Downs) had merged with Bangor College and Lisbon College. The 3 colleges were re-named ‘South Eastern Regional College’. However, each of the 3 colleges are still ‘known’ by their original name. The 16 College Principals and strategic management for Finance, HRM and IT rationalised down to 6. Opportunities for further rationalisation do not appear to have been taken despite all being moved onto the same technological platform. Mergers tend to happen between two or three organisations and can be very complex and time consuming to manage especially if the organisations are geographically dispersed. Whilst there are efficiencies to be gained, they are likely to be fairly small scale. 15
  16. 16. • LEAD DEPARTMENTD.16 The Lead Department is where one college may specialise in, for example, finance, and this is then shared by other colleges. Unsurprisingly, there are not many examples of this model in the public sector as there is an immediate VAT levy, not to mention a loss of ‘control’ from the receiving organisations perspective. There are also issues of the providing organisation’s personnel having a natural bias and affinity in favour of their employers. Other issues arise in relation to memorandum of understanding, charges and exit arrangements. It does mean that each organisation can retain its independence. The scale of operation is likely to be small, perhaps involving only a handful of colleges, and therefore efficiencies and associated savings limited.• JOINT INITIATIVESD.17 Joint initiatives are where an agreement between two or more organisations is established to set up and operate Shared Services. This is what City of Sunderland College and South Tyneside College are attempting to establish. Again, the author has found few examples of this type of arrangement in the further education sector primarily because of VAT implications, but perhaps also because of the competitive nature of further education colleges. This model also requires a greater degree of collaboration between organisations and trust must be established, but it does mean that each organisation retains full independence. Issues of governance, memoranda of understanding, charges and exit arrangements also need to be addressed. It may be easier to begin to formulate this agreement when the respective organisations are geographically closer to each other. As with other models, this is not likely to realise significant efficiencies until a critical mass is established.• COMMISSIONINGD.18 Commissioning, as in the joint procurement of services, is something that featured strongly in section H in the research carried out on the LSC Collaboration Fund Projects. There are numerous highly successful collaboration arrangements across the country that have benefited from the project funding. The majority of projects focused on the ‘joint’ appointment of a procurement professional who worked for several colleges in a geographical area. Each ‘bidding’ organisation directly employed the procurement manager who then works ‘across’ each of the collaboration organisations. Obviously, all organisations in this collaborative model retain their independence. Whilst under the project specification, there are no VAT implications because the funding has gone to one nominated college. Once the funding is exhausted, each organisation will be expected to pay a proportion of the procurement manager salary and if the contract of employment is retained by the ‘host’ organisation then VAT levies will apply. There is a further option whereby the appointment is ‘shared’ though this could result in significant bureaucracy and difficulties with ‘accountability/performance management’. 16
  17. 17. A further proposition is being ‘tested’ out in connection with providing the services through ‘membership’ fees through a charitable organisation such as ACER. This model does seem appropriate to be scaled up to sub-regional, regional and even supra-regional levels and, therefore, greater efficiencies can be realised.• STRATEGIC PARTNERD.19 Strategic partner can be illustrated by the National Health Services (NHS) model for Shared Services in finance and payroll. This is where there is a public/private partnership for the delivery of Shared Services. The partnership can be equal (50/50) or some other permutation of this. The NHS model was first established by the Department of Health (DoH) to try and persuade Trusts to share services, though with modest success. The DoH decided that a public/private partnership would encourage more Trusts to join and therefore went through EJEU to secure private investment in a 50/50 joint venture. It has taken several years to firstly get more Trusts to join the scheme and secondly make a financial return. In the case of the NHS, VAT on business services can be recovered in certain instances and this scheme is a case in point. Being able to recover the VAT has certainly helped this scheme.• FEDERATIOND.20 The Federation model is where member organisations operate within a shared governance umbrella. The Federation of Education Business Link Consortia is an example where the responsibility for providing strategic coherence across an area in the support of links between schools/colleges and local employers rests with the 47 Education Business Links Consortia. Organisations retain independent legal status and local discretion on business opportunities, but are accountable via local boards to federal governance structures. This model may offer greatest appeal to those organisations that are small to medium in size. An example could be the Cumbrian Colleges that have established collaborative examples such as the Limited Company that they formed as a Joint Venture several years ago for employer engagement provision. Perhaps more importantly the colleges are a similar size and geographically far enough away from each other for them not to be in direct competition, but close enough, to share services. Nevertheless, the total income of the four Cumbrian Colleges at circa £35m is not likely to realise significant efficiencies in absolute terms, unless other colleges can be persuaded to take part. In addition, whilst each College will retain operational independence, there may be tensions with strategic direction being derived from the federation board. Decision making at board level could also prove problematic with Principals not being able to agree strategy. As with the other models, the memorandum of understanding, VAT levy, TUPE/pensions, entry and exit arrangements will be issues that have to be dealt with. 17
  18. 18. • OUTSOURCINGD.21 Outsourcing to a third party provider who takes full responsibility for the management and operation of services. There are many private and public examples of outsourcing. Across England, there are a significant number of colleges who have outsourced payroll, refectories, cleaning, security and information technology. It would appear that to date, no college has outsourced management information of students, finance, human resources, estates or health and safety management. Though outside the scope of this research, the author has come across some evidence of using outsourcing to ‘offload’ staff that are thought of as being problematic. However, outsourcing does not necessarily fit with Shared Services needs. The sharing of technological platforms and processes necessary for Shared Services is not an integral feature of outsourcing and, therefore, will not be explored in any further detail for the purposes of this report. There are numerous Shared Services definitions available, but typically they all seem to point to models of providing services that share the same technological interface and processes for identified work streams. Outwith Unitary and Merger, the rest of the models all have the same issues and barriers to address in the form of Constitution, VAT levy, TUPE/pensions, entry and exit arrangements. It is important to take account of developmental and transitional change, which is a necessary part of Shared Services implementation. Each of the Shared Services model structures offers a different approach. In deciding on the best model, the desired level of control and collaboration have to be determined.D.22 A seminar event was held in April 2010 to disseminate the findings of this report to the stakeholders identified in Section A.3 (page 7).D.23 Delegates at the event were asked to work in groups to discuss the collaboration and control models described in Section D and to complete a scoring table to rank each of the models in relation to critical success factors (see page 32 for definition of critical success factors) such as low risk, high level of control, ease of collaboration, low cost, high quality and flexibility. The higher the score for each of the models in accordance with critical success factors, the more desirable the Shared Services model. (Appendix 4). 18
  19. 19. D.24 Total scores were collected from each group and placed in the following table in ascending order: Table B GROUP GROUP B GROUP C TOTAL A SCORE UNITARY 49 50 49 148 MERGER 50 50 45 145 JOINT INITIATIVE 42 43 45 130 STRATEGIC PARTNER 49 38 41 128 COMMISSIONING 42 33 39 121 LEAD DEPARTMENT 45 21 48 114 OUTSOURCE 49 29 26 104 FEDERAL 11 47 35 93D.25 The above results were presented to the seminar for general discussion. Unitary, Merger and Joint Initiative, came out with the highest scores. The last three models (Lead Department, Outsource, Federal) had widely varying scores between the groups. One of the explanations provided for this was in relation to interpretation. For example, the Outsource model for Group A where the score was very high assumed good contract specification with flexibility and lead people that would manage the process. The other groups did not make these assumptions.D.26 Delegates were asked how easy they found the exercise. Most people found the definitions too narrow in supporting their ability to complete the scoring template and also confusing in relation to the titles (eg, Joint Initiative internal and Strategic Partner external). As a result of this, the ‘internal’ and ‘external’ tags have been removed to eliminate confusion.D.27 To further build on this exercise, delegates were asked to focus on the plus and minus factors of each of the models and to use post-it slips on flipcharts to provide qualitative input (Appendix 6)D.28 Interestingly, whilst delegates reported that they found the definitions too narrow in relation to the scoring exercise, it would appear from the qualitative exercise that followed and the results in Appendix 6 that they have a good understanding of the potential plus and minus points for each respective model.D.29 Where the Unitary, Merger and Joint Initiative models scored highly in the quantitative exercise, the qualitative statements clearly identify them as least ‘threatening’ and minimal efficiency returns. The Commissioning model also seemed to be a more ‘acceptable’ way forward. 19
  20. 20. D.30 Lead Department, Outsource and Federal seemed to be the least popular both in terms of quantitative and qualitative outcomes.D.31 Whilst Strategic Partner ranked in the middle of the scoring exercise, the qualitative statements reveal interesting points such as “innovation, increase capacity of technological knowledge, whole greater than sum of parts”. When this work on preferred models is cross-tabulated with the work on critical success factors (see page 32), the Joint Initiative model is probably the highest ranking. This model seemed to have the highest preference rating coupled with a high probability of delivery savings. 20
  21. 21. E SCOPE OF POSSIBLE SHARED SERVICE ACTIVITYE.1 During November 2009, a workshop was held between a private Shared Services organisation, a change management organisation and the City of Sunderland College to identify and scope the areas that would be most appropriate for a Shared Services solution. The starting point for the scoping exercise was to identify the attributes that make a process a good candidate to transfer. The three main attributes that the workshop arrived at were: • Is it repeatable? • Can it be rules based and automated? • Can it be done remotely?E.2 The areas of service provision that were identified that had a ‘best fit’ with these attributes were: Human Resource Management Finance Student Services (Educational Maintenance Allowance processes) Safeguard (Trip Management processes) Safeguarding Checks and Data ManagementE.3 The areas of service provision that could be considered in the future were thought to be: Parts of Academic Registry Continuous Professional Development Data Unit Quality Assurance Administration Reprographics procurement Archiving (Electronic Document Management) Examinations Governance Customer Relationship ManagementE.4 In carrying out this research the areas identified above have been linked to the specific processes. Table C shows major work streams and shows some of the processes that could be in a Shared Services model: 21
  22. 22. Table C – Possible work streams and processesFINANCE HUMAN RESOURCES INFORMATION PROCUREMENT TECHNOLOGY Accounts Payable Recruitment  Server Support  Single procurement Accounts Receivable Administration:  Desktop Support system Sales Invoicing  Candidate Applications  Network Support  Preferred supplier list General Ledger  Interviews  Application Support  E-procurement Accounting and  Offers  Project Management  Tendering framework Financial Reporting  CRB agreements dev and Fixed Assets/Asset  Acceptances Examinations operation Accounting Administration:  P card administration Tax Training Administration:  Registrations  Efficiency Treasury  Course offers  Timetables Measurement Model Management  Delegate attendance  Candidate notifications monitoring Financial Planning  (examination dates and (budget setting, Exits: results) monitoring) Voluntary  Results data input Internal Audit Involuntary Management of Finance Team Payroll and Benefits: IT Operations  Payslips  Employee records  Updates  Benefits and  Pension Admin  Pay Reviews Employee Relations:  Maternity/Paternity  Disciplinary  Grievance  Domestic relocation  Expatriation /  Repatriation  General HR  Advisory Absence Performance Management and Appraisal: Reporting and Analysis IT Operations System HR Vendor Management and Procurement 22
  23. 23. E.5 There is generally a feeling amongst those participating in this research that: • Each of the major work streams within a Shared Services project need to have a strong professional in each field providing leadership and direction to the people charged with delivering the processes. • The processes themselves need to be ‘world class’ and the culture one of continuous improvement. • Clear accountabilities need to be drawn up together with service level agreements for each participating organisation. • There needs to be regular contact and accountability meetings between deliverer and service user to help ensure the highest quality service provision at all times. Output from these meetings should include improvement actions that need to be taken. • Colleges need to retain high level strategic leadership and expertise within each of the work streams.E.6 Again, in relation to adding further validity to the findings in this research, delegates at the Seminar event in April 2010 were asked to individually list what they would include in the scope for shared services. The same kind of generic areas such as HR, Finance, Procurement, ICT. One respondent wrote, “anything/ everything”. Another included, “Defined software that all use 1 finance system, invoice processing, management accounts, recruitment, HR advice/Legal advice/ marketing support/Project Management – bulk buying – fewer suppliers! Across sector – paper is paper”. 23
  24. 24. F BARRIERSF.1 Very similar issues and barriers emerged from a wide range of respondents in relation to Shared Services plans and aspirations. The main areas highlighted from respondents were VAT, TUPE/Pensions, Competitions Law, Management of Information Systems (MIS), Transition-Related Human Resources management and collaboration. The findings are summarised as follows:• VATF.2 All respondents said that the imposition of VAT would be a major barrier, if not a project killer. One Government respondent reported that he had thought the issue was resolved during 2007 when, new to his position, he had been asked to take up the issue of VAT with Her Majesty’s Revenue and Customs (HMRC) who had then taken the matter to Treasury. However, the Treasury stated that VAT would apply to Shared Services in both Higher and Further Education.F.3 The Association of Colleges in the Eastern Region (ACER) believe that there is a solution to the VAT imposition in relation to the way the Company is formulated (eg, Charitable, non-profit making organisation). Whilst this would perhaps help meet the requirements of competition law, it is not clear how this would meet VAT requirements. ACER have commissioned a VAT expert who has suggested that a way to avoid the VAT levy would be to offer Shared Services through membership fees. It is not clear why this would work. Clubs pay VAT if they cross the threshold. This needs to be tested and clarified with HMRC.F.4 Both the Learning and Skills Network (LSN) and the 157 Group reported that Eversheds had been commissioned to explore the VAT and competitions law issues. The 157 Group report, Preparing Colleges for the Future (January 2010) talks of collaborative models for further education colleges, short of merger as referenced in the Department for Innovation, Universities and Skills (2008) document, Further Education Colleges – Models for Success. However, it would appear that there is limited evidence that this has been widely adopted or that VAT can be avoided in this way.F.5 The 157 Group report goes on to talk about section 166 Education and Inspections Act 2006 whereby colleges have the power to delegate parts of their core functions to a joint committee with another institution. There are examples, albeit on a small scale, developed by the establishment of both the ACER and FE Sussex who have focused on procurement of goods and services. Section H (below) also talks about Collaboration Projects illustrating how colleges have worked together that have been financially supported by the LSC.F.6 In relation to VAT, the report goes on to specify that the current tax rules do not help the further education sector when considering either outsourcing or sharing of services; both create an irrecoverable VAT cost to the recipient of the service. It goes on to give an example in the NHS sector and the barriers experienced resulted in the creation of “contracted out services provisions to allow for VAT recovery on certain defined outsourced services traditionally performed in-house”. Section 6.2.4 of the report goes on to state that, “As regards the sharing of services in isolation, the European VAT Directive provides for exemption in respect of service sharing at cost between entities carrying VAT exempt activities”, but this seems to be a ‘what ought’ to happen. This, therefore, still leaves the VAT issue unresolved. However, Eversheds believe that they have a 24
  25. 25. strong case to present to HMRC in relation to the European VAT Directive and the outcome of this work is awaited with interest.F.7 LSN did not feel able to share their findings due to commercial constraints.F.8 From both desktop research and interviews into the inhibitors of Shared Services, it would appear that funding bodies and Government officials have made extensive representations to both HMRC and the Treasury about the issue of a VAT levy for joint venture shared service business solutions over a timescale spanning several years. The conclusion appears to be that there will be no concessions and that VAT will be levied. KPMG have also tested out this proposition specifically for this project and their findings are: KPMG Findings on VAT “Under UK VAT legislation and HMRC’s current interpretation of European VAT legislation, the structure (ie, a new entity providing ‘Shared Services’ to the Colleges in relation to Finance, HR, IT and MIS) would create additional VAT costs for the Colleges. The supplies of these Shared Services to the Colleges would be subject to VAT, which would be largely irrecoverable. Currently these services are operated in house, and therefore, the taxable supply from the new entity is generating additional irrecoverable VAT for the Colleges which would obviously diminish any cost savings to be derived from sharing these costs. KPMG has been in discussions with HMRC and the Treasury in relation to the potential for VAT exemption to be applied to cost sharing arrangements, as scope exists within EU law for certain cost-sharing activities between not-for-profit bodies to be treated as exempt. In last week’s budget the Government made the following announcement confirming that it will work with charities and other affected sectors to consider the potential for introducing such an exemption into UK law: “The Government recognises the efficiencies that can be achieved by organisations such as charities sharing services and the potential VAT barrier that exists. The Government will work with charities and other affected sectors to consider options for implementing the EU cost sharing exemption.”F.9 The Higher Education Funding Council, together with KPMG, have been looking at ways to remove the VAT burden so as to facilitate a move to a Shared Services solution. Examples have been provided of Universities and Colleges working together by forming regional purchasing consortia to help drive down procurement costs across a range of expenditure categories including stationery, catering goods and computing. A recent announcement in Revenue and Customs Brief 09/10 HMRC has revised its policy on the VAT treatment of companies owned or 25
  26. 26. controlled by universities that are engaged in the delivery of university level education leading to a qualification. The policy change is being introduced as, “A review of the VAT treatments of supplies of university level education delivered by companies owned or controlled by universities has highlighted inconsistencies between previous policy and VAT case law. This policy change is being introduced to address this, and to ensure that similar supplies are treated in the same way by all universities”.F.10 The following is a case study of a University and College collaborating from 2001. It demonstrates the importance of not entering into agreements until VAT implications, Exit arrangements and other important factors have been thought through: During 2001, a meeting was held between a very large North East further education College and a nearby University to explore opportunities for collaboration which would be of mutual benefit of both organisations. Strategically, the University needed to respond to its recently publicised financial difficulties which involved the potential redundancy of over 100 staff and the possibility of a ‘middle ground’ community education delivery in an (undefined) partnership was explored. Progress was not likely to be made, however, until the University’s new strategic direction had been determined. In the short term, the emphasis was on direct collaboration where either duplication of facilities or specialist expertise resided within the institutions. Initial possibilities and the first areas for exploration of potential mutual benefit were as follows: 1. Reprographics – savings in premises, equipment and delivery costs appear possible 2. Staff/student surveys – availability of a contracted University service in the short term. 3. Refectory management – availability of a contracted University service. 4. IT procurement, consultancy and network provision – access to University services to reduce costs 5. Blue Square Recruitment – University interest in the provision of agency staff. 6. Conference/seminar facilities – availability of alternative off-site facilities at University. 7. Advice, guidance, counselling, careers – exploration of video links to specialist services. The reprographics proposal was taken forward. The College and University consolidated reprographics on an industrial estate within geographical proximity of each organisation. A lease agreement was taken out by the University. Equipment was rationalised. During 2006 the University decided to terminate the agreement. It would appear that neither party “did not know what they did not know”, entering into a collaborative arrangement without, it seems, going through due diligence in relation to competitions law, VAT and exit arrangements. Part way through the partnership, the College sought the advice of KPMG in relation to VAT charges for reprographics. It appears that the University had not charged the College appropriate VAT leading to an accumulated cost in excess of six figures. The University decided to terminate the partnership and take the reprographics back in-house. There does not appear to26 any available rationale for this decision. be
  27. 27. F.11 One of the options looked at in relation to overcoming the issue of VAT was in relation to secondment of staff to a Shared Services model. A senior LSC Director reported that secondments made from LSC to outside organisations incurred a VAT levy. This was further tested out by a further education college secondment to the LSC with the Finance Department confirming that VAT was applicable. Furthermore, there would have been added complexities with a secondment model in relation to employee conditions of service varying across organisations.F.12 What became very clear as a result of researching the VAT issue, was that there are several leading legal organisations that have been commissioned by different public and private organisations to look at this major barrier. Indeed, it would appear that one leading legal firm has been commissioned by several organisations to look at the self same subject.F.13 There is one remaining option to be tested in relation to VAT. It may be that where a club is formed and membership fees and subscriptions are charged that there could be VAT exemption. Professional advice is being commissioned to test this proposition out formally with HMRC, but it would seem that there are few grounds for optimism on the part of those seeking exemption. (Appendix 2)F.14 For the purposes of this paper the assumption is that VAT will continue to be levied for any form of Shared Services outside of mergers and certain types of federations.F.15 Outsourcing and Shared Services organisations such as NHS/Steria will state that anything between 25% and 35% can be realised as efficiency savings. The Treasury Operational Efficiency Programme Report (2009) has indicated cost savings between 25% and 30% by process re-engineering back office transactional activity into a Shared Services unit. Colin Cram has stated that having created and managed several Shared Services operations that he can confirm that cost savings of at least 20-30% are not unreasonable. If we extrapolate these figures, on the worst case scenario of VAT being uplifted to 20% in the next 12 months, this will mean that organisations can still hope to achieve between zero and 10% through a Shared Services model. As public sector cuts begin to roll out in the next few years, these savings could prove to be much more attractive in the medium to longer term. It will be essential though to ensure that achieved savings are at the higher end of the spectrum.• TUPE/PensionsF.16 Perhaps the biggest issue for colleges to consider when looking to make efficiencies in transactional operations and consolidate support activities will be the laws surrounding employees. The majority of Shared Services research indicates that there should be the opportunity to TUPE staff into the new Shared Services organisations.F.17 Colleges may not want to negotiate the complexities of TUPE. Even so, some are looking at ways to mitigate against existing generous terms and conditions of employment which are very different in the private sector. Regulations such as the Financial Reporting Standard 17 Retirement Benefits (FR17) are very complex. Standard FR17 is based on the principle that organisations should account for retirement benefits when it is committed to give them, even if the actual giving will be many years into the future. This standard covers support staff 27
  28. 28. contributions to the Local Government Pension Scheme (LGPS). It does not apply to the Teachers’ Pension Scheme (Accounts Direction Handbook 2008-09).F.18 A respondent reported that one way of mitigating against the VAT levy was to eventually have back office staff moved to private sector type contracts and conditions of service that would reduce costs in the medium term to long term.• Competitions LawF.19 It would appear that both ACER and FE Sussex have models that can be emulated in other areas of England in relation to meeting the requirements of competitions law. Both organisations are managed through a Board of Principals that direct the Chief Executive and management of each organisation.F.20 Principles have been established by the European Court of Justice (ECJ) as demonstrated by the “Teckal” exemption. The Teckal exemption was set out by the European Court of Justice in 1999 in the case Teckal SrL v Cornune di Viano and Azienda Gas – Acqua Consorziale di Reggio Emilia (C107/98). The exemption provides that where two conditions are met the procurement can be treated as in-house and therefore the procurement rules do not apply. These conditions are as follows: i. The contracting authority exercises over the entity supplying it a control which is similar to that which it exercises over its own departments; and ii. That entity carries out the essential part of its activities with the controlling contracting authority or authorities.F.21 Both of these requirements appear to be met by ACER and FE Sussex. The Government has been actively encouraging the public sector to explore collaborations and partnerships to deliver services more efficiently and effectively following the Gershon efficiency review (2004). However, legal advice needs to be taken to ensure that organisations like ACER and FE Sussex meet the full requirements of the ‘Teckal’ principles.F.22 In Guidance for Collaborative Options Evaluation and Appraisal of Service Delivery Models (2008), they concluded that it is very important to take account and act upon the new developments which have taken place in the public procurement environment. Assumptions which may have been made in the past about the necessity to submit particular opportunities to advertisement need to be challenged and tested with legal advisers.F.23 The Learning and Skills Network (LSN) described a model of Shared Services that appeared to be a subsidiary arm of LSN as a “not for profit” organisation delivering Shared Services initially focusing on a cluster in London/South East and then extending geographically further. It was not clear if the intention was to be regional or national though one respondent did say that they thought that some aspects of Shared Services could be better delivered regionally and some nationally, but no work stream was specifically mentioned for each of the geographical/size criteria. It was not clear from the discussion that the formulation of the ‘not for profit’ organisation would pass the ‘Teckal’ principles. 28
  29. 29. F.24 Several respondents seemed to confuse the competitions law issues with VAT believing that they were intrinsically one and the same. Where they thought the competitions law issue was resolved, they immediately assumed a resolution of the VAT issue.• Information TechnologyF.25 In relation to any model of Shared Services, it is essential to have good information technology systems. For Shared Services in FE, two requirements were highlighted by participants in the research. Firstly there is a need for the shared service itself to have a well-developed Management Information System so that it can robustly manage its own activities. Secondly, there is a need to ensure that the services provided into colleges are supported by Management Information Systems from within the colleges themselves.F.26 There are approximately four leading management information for students software houses in England (namely, Aggresso, Tribal, Compass and Capita). A similar picture emerges for software houses in relation to Human Resource Management and Finance. The research showed that the likelihood of colleges who wish to come together in a Shared Services model, even at a sub-regional level, having the same software licences for the major work streams is remote. Moving colleges to the same information technology platform would involve a significant management of change and take some time depending on the software licence agreement terms entered into by each organisation.F.27 Notwithstanding this, it is the case that there are initiatives that are underway and which seek to improve information technology in the FE sector. The Learning and Skills Network (LSN) reported that they have got a team of 6 dedicated staff driving processes and technological developments and that the business case they had developed for a Shared Services project necessitated there being 5 colleges willing to be part of a Shared Services business solution with 10 colleges beginning to realise benefits.F.28 JISC are not certain as to whether they will continue to be funded post July 2010. In the meantime, the focus of JISC Shared Services seems to be in congruence with their definition of Shared Services (quoted in Section D2) and they have held events to look at collaboration in higher education in the procurement of a virtual learning environment (VLE) that will also have a commercial return. However, at the event in February 2010, JISC reported that all project bids had been ‘frozen’ for the immediate future due to constraints placed on funds.F.29 The ACER are formulating a business case to enable its member colleges to have a Shared Services business solution for human resources. Research carried out by ACER indicates that half of their member colleges are on the same HR software with the other half on a variety of different software solutions. However, whilst this meets the competitions law requirements as mentioned above, it is not clear that this model meets the requirements of VAT exemption.F.30 The DCSF have led on a Shared Schools Recruitment Project for the delivery of e-recruitment into the 24,000 schools in England. The project cost £350,000 to set up. DCSF have linked in with ACER to replicate this approach and encourage a wider take up so that it can be used Nationally by any further education college. 29
  30. 30. F.31 During the early part of 2007, a small working party made up from the National Advisory Group for Shared Services membership visited Northern Ireland. Since this visit took place 16 further education colleges in Northern Ireland have reduced to 6. The lead organisations for this change were the Department for Education and Learning (DEL) and the Association of Northern Ireland Colleges (ANIC).F.32 The ANIC project management team developed the Northern Ireland College Systems Project (NICIS) during 2002. This project was established to replace the then College Information System in each of the 16 further education colleges. The scope of the project included student management, human resources, payroll and estates management. The finance system was implemented in August 2006.F.33 Student management software and human resources/payroll was provided by Distinction Systems Limited based in Swansea and the contract was managed locally by British Telecom. This was a significant procurement exercise for ANIC/ DEL. It was decided that a single central database would provide centrally held data to both colleges and DEL in real time, together with unlimited flexibility in the content and format of what users said. The NICIS project team developed reporting systems for student and personnel management that fully addressed all statutory returns required by DEL for funding and monitoring purposes.F.34 The visit to Northern Ireland included seeing the development of the management of student data from the user’s perspective. North Down and Ards Institute of Further and Higher Education College showed us the bespoke reporting developments that a team of 5 software technical staff working with both students and College staff had developed. This was very impressive, showcasing some excellent reporting tools that had been developed through Sharepoint and pivot tables that enabled students, staff and management to easily extract data to support decision making processes.F.35 Some three years on, delegates from BIS, LSC, City of Sunderland College and South Tyneside College visited Northern Ireland during the early part of 2010 to see the progress that had been made since the first visit.F.36 The first part of the visit was to explore with ANIC the NICIS project from its inception in 2002. Specific questions centred on the funding of the project and the selection of software licences. ANIC reported that DEL had fully funded the first 5 years of the project (both capital and revenue costs). The NICIS project management and small team of 5 software and hardware specialists were from ANIC. From around 2007, the project became a joint venture between DEL and ANIC both contributing 50% funding.F.37 It was decided during the time of merger (16 colleges becoming 6) that NICIS would be a managed service and that pay and conditions of service would be centralised for the 6 colleges.F.38 As part of the efficiency drive, ANIC are being asked by their member colleges to explore Shared Services, particularly for legal services (ANIC respondents referred to the FE Sussex model). They were also interested in the findings of this report particularly in relation to management of information of students procurement and associated costs (ANIC are currently using Aggresso software licence for student management). ANIC reported that they currently pay around £81,000 per college for student software (approximately £486,000 for the 6 colleges). Other related costs included data centre and support costs of £212,000 per year and additional software licence costs for finance. When questioned as 30
  31. 31. to the reason for going with an ‘off the shelf’ software licence solution, the project manager responded that he did not know although he felt it made sense to have thought of developing a fully integrated management information system and that the current software solution was not fully interoperable.F.39 There does not appear to be a comprehensive spend analysis to be able to accurately interrogate the costs of software licences in England, though the Northern Ireland costs do seem similar to both City of Sunderland and South Tyneside Colleges payments. If we extrapolate the figures in F.38 above and apply them to the 358 English colleges, the costs for student management software licences would be around £29m per annum.F.40 The idea of the sector developing a fully interoperable management information system specific to its needs has been explored with most of the stakeholders listed in Section A above. Several respondents suggested approaching the existing software companies to take forward this idea. However, this would place a provider in a monopoly position and such a solution is, therefore, unlikely to maximise savings.F.41 Obviously, this is a suggestion only in response to paying for a product that does not fully deliver the required outcomes and is also very costly, both from a non- pay software licence perspective and staff costs in relation to software specialists to try and get the software to do what is required. One respondent said, “whenever you ask the software licence company to effect a change, it costs £70k and how many times do we have to do this in response to funding changes?”• Transition-Related Human Resources ManagementF.42 Change management and cultural effects were only raised by two respondents when discussing the issues and barriers. However, during the reviews of the Collaboration Fund Projects (in Section ‘I’), college culture figured prominently during discussions on barriers to the projects.• CollaborationF.43 Reference has already been made to the way in which colleges guard their independence and to the way in which some colleges behave in a very bullish way, seeking to take-over those they perceive as being financially weaker.• Quality and PerformanceF.44 The view was expressed that there was an absence of a wide-ranging, consistent and reliable database from which performance indicators could be developed or results for existing indicators drawn easily. This meant that comparisons were compromised. If a Shared Services solution could help rectify this then it should. 31
  32. 32. G CRITICAL SUCCESS FACTORSG.1 At various times throughout the carrying out of the research respondents were asked what they felt the critical success factors would be from their organisational perspective in relation to a Shared Services solution. The vast majority of respondents cited cash savings and high quality as being critical success factors. One of the more detailed and well thought out responses came from a Principal who commented that they included: Critical Success Factors • “Reduction in cost of at least 10-20%; • an improvement in service standards in all areas; • flexibility to provide the required data to the front line in a timely manner; • flexibility to respond quickly to changes in requirements from the college or funders; • the removal of the overhead required in the management of support staff; • release of space to provide opportunities for teaching and possible growth”.G.2 Perhaps it is most important to note a theme that seems to run through much of the thinking on Shared Services critical success factors. This is that costs should be reduced and savings made through the elimination of waste and reduced bureaucracy.G.3 No one mentioned any further critical success factors. The need to deliver these has to be kept in mind. They will guide base line information requirements and performance monitoring.G.4 Delegates at the Seminar event in Sheffield were asked to individually describe the critical success factors from both their own and particular organisations perspective. Responses to add to those mentioned above were “less duplication; transformation of how things are done; responsiveness; impartiality; documented and benchmarked so that improvements can be monitored/managed; shared services becomes the ‘norm’ way of working (embedded); reduce bureaucracy; dependency and control not an issue; enables front-line staff to focus on delivery (ie, Teaching)”. All of these factors add further value to the initial responses in G.1 above to inform the base line information requirements and performance monitoring. 32
  33. 33. H REVIEW OF LSC COLLABORATION FUND PROJECTSH.1 This section reviews the project reports from the Learning and Skills Council Collaboration Fund Projects and describes the successes and barriers from each project leads perspective.H.2 The Collaboration and Sharing Fund was established by the LSC to help colleges to develop and test collaboration practices. The funding set out to support projects that: • Prove the concept of collaboration and sharing • Demonstrate the value of collaboration and sharing to the sector • Define collaboration and sharing potential in the context of college operations • Develop knowledge and expertise in collaboration and sharing, producing reusable tools and techniques.H.3 A total of ten projects were supported mostly centred on a shared procurement service between colleges in a close geographical area (sub-regional or regional) to each other.H.4 One project set out to establish regional procurement services. The Project Lead reported several key successes such as the development and implementation of a Regional Procurement Strategy; the delivery of procurement officers training; raising awareness of OGC frameworks and consortium purchasing; the implementation of Government purchasing cards (p.card) to member colleges; consolidated supplier list; member colleges’ commitment to sustaining the Procurement Manager’s salary funded through the project monies. The critical success factor referred to by the respondent was the need to save money. In particular, reference was made to the work done by the Procurement Manager with one of the member colleges that may result in significant cashable savings. The major barriers experienced were in relation to colleges continuing to fund the Procurement Manager salary post collaboration fund project. Whilst colleges have been extremely positive about the services provided, the respondent reported that there is some reluctance to pay.H.5 The same organisation had another project supported by LSC for the provision of HR and Financial services. This is where a senior manager of an independent charity limited by guarantee is seconded to member colleges of the organisation. The role was to share HR resources and policies starting with four member colleges. This has extended and now includes 7 member colleges. Colleges pay for the HR services through ‘membership’ fees. A similar scenario was provided for the financial services whereby 2 member colleges were working collaboratively. Clearly this ties into Section F.3 in relation to testing out the VAT issue concerning membership fees. Again, the same kinds of issues emerge when exploring the barriers and that is the member colleges’ willingness to pay for the services once the project funding finishes. 33
  34. 34. H.6 The Pan-Sussex Joint Procurement collaboration engaged Exor (Exor is a software tool that enables non-pay spend to be captured and categorised). Respondents who have used the system liken it to a ‘Thomsons Directory’. It would be relatively simple to roll this out to other colleges This information has enabled the Pan-Sussex group to tackle the major spend areas (examinations, telecommunications, insurances) and have joint procurement negotiations. This has already had a direct positive outcome in connection with examination fees already saving more than £250,000 and as reported by the Chief Executive Officer in the Times Educational Supplement, “… we are ahead of our target for a 10% reduction by the end of 2011” (April 2010). It would appear that the Sussex model is at the forefront of improving value for money from examination fees and work with awarding bodies. The joint procurement of HR/Payroll and Health and Safety is still being implemented. However, the respondent said there were barriers. There seemed to be a college culture that prevailed described as “we know best”. Issues such as college staff being overworked, relying on good will to provide information and inertia were some of the problems experienced by the respondent, together with translation of strategic leadership into operational management.H.7 There are nine colleges in the Leicestershire county boundary, six General Further Education and three 6th Form Colleges. The Vice Principal for Finance was involved in the National Advisory Group for Shared Services in further education in 2007 with the major work stream for finance and would be a keen advocate, but for the issues of VAT and Competitions Law requirements. Before the start of the Shared Procurement Services Project, a Steering Group of mainly finance people from each of the nine colleges was formed that subsequently sought agreement from all Principals to put forward the bid to the Collaboration Fund. Leicestershire College then took the lead in relation to appointing a professional Procurement Manager and getting the right person with the required skill mix proved to be challenging. EXOR was used initially to profile the spend in each of the nine colleges. However, this proved difficult to implement because of categorisation of data issues. The newly appointed Procurement Manager, therefore, developed a procurement register to capture the relevant data for analysis. There are several projects that the Procurement Manager is working on, namely, IT Hardware, Examination Board Cost Reductions, Insurance, Recruitment Advertising, Temporary Staff Recruitment, Legal Services, Human Resources Services and Finance Systems. One of the major barriers in getting the group (of nine colleges) to work together was a perception that “Leicester College is taking over”. One way round this has been for the Procurement Manager to take a lead on, for example, Examination Board Cost Reductions, work up the business case and then bring the Steering Group of colleges together to present the findings. However, it was felt that just over a year down the line the other partner colleges still behave with suspicion in relation to Leicester College. This may be because Leicester is much larger than the other eight colleges, but also because the Procurement Manager is on the Leicester College payroll. It will be interesting to see how the Procurement Manager role evolves when all nine colleges are responsible for paying the salary and how the contract of employment and VAT issues will be tackled. 34
  35. 35. H.8 The Cumbrian Colleges Collaborative Procurement Project is very similar to the ones discussed above. However, it would seem that integration of the Procurement Manager’s role was much smoother. This may be because the Cumbrian Colleges formulated a Joint Venture entity several years ago and had well established collaborative groups each focusing on key areas of work such as human resources, quality and finance and were used to sharing practices. The Procurement Manager has been in post for just over a year and reported that his biggest challenge was ‘winning hearts and minds’. All four Cumbrian Colleges now use the procurement services and, though the Procurement Manager is on the Lakes College payroll, he is based at one of the other colleges and works with budget holders in each of the colleges. The Procurement Manager has analysed non-pay spend for each of the colleges and reported that £1.2m is spent on examinations between all four Cumbrian colleges. He has also demonstrated the high volume of low-level transactions resulting in copious invoices and now three of the four Cumbrian colleges use the Government’s Purchasing Card (p.card) thereby streamlining the whole process. The Finance Director reported that the colleges are using the Efficiency Measurement Model (EMM), but only for procurement. Work is under way to begin to capture EMM non-pay and capital efficiencies. The Procurement Manager reported that the biggest success of the collaboration fund project has been the relationship building which has been very productive developed over a period of time. Again, it remains to be seen when the project ends how the four Cumbrian colleges will address funding the Procurement Manager role.H.9 The project between Cardinal Newman College and Blackpool Sixth Form College is an example where two similar sized sixth form colleges have worked together to look at short term collaboration around areas of procurement. The respondent said that both colleges are extremely keen to look at shared services in the longer term, but said that there not ‘examples out there’. In the early days of the project it became apparent that an understanding of collaboration was not very well developed. Therefore, a ‘Collaboration’ Work Day event was held with senior managers starting with a presentation of aims and goals of what collaboration is in terms of procurement and the perceived potential drawbacks. The outcome of the event was an action plan for both short and long term goals. One of the barriers experienced whilst working through the short term goals was the two colleges getting to ‘contract alignment’. Most contracts tend to be on three year timescales and the respondent reported that to achieve standardisation would be costly and take several years to achieve. The use of Exor was reported as being an invaluable and very insightful process to go through. The respondent said that all colleges found it easy to pull together the data to analyse which is a stark contrast to the Leicester College experience. Collaboration between the two sixth form colleges departments was reported as being widely different. The respondent said that the 2 Estates Managers had a “fantastic working relationship that was leading to fantastic outcomes and really was demonstrating more for less”. Joint Continuous Professional Development (CPD) for Manual Handling courses had halved the costs. The Estates Departments are also looking to reduce revenue by looking at more sustainable measures to reduce energy requirements. 35
  36. 36. The respondent reported that although both Colleges have identified a number ofkey functions that could be organised between Finance, MIS, Library and HR, oneof the major challenges encountered is how they could legally demonstrate theirability to deliver in accordance with the Instrument and Articles of Governance. Overview of LSC Collaboration Fund Projects The overall emphasis has been on procurement, though not exclusively so. All projects have demonstrated significant successes in efficiencies. Most respondents reported a lack of trust, suspicion and operational difficulties experienced at the outset of the projects. Over a period of time the dynamics changed as a result of building up relationships and demonstrating procurement successes. The National Audit Office (2006) published Improving Procurement in Further Education Colleges in England and stated that, “Whilst colleges’ procurement systems are largely well established in terms of internal controls, most colleges’ systems, processes and procedures have not kept up with modern procurement practice. Savings are clearly achievable”. The LSC projects would seem to confirm this. The Collaboration Fund initiative has undoubtedly impacted in a positive way on some of the more proactive colleges, but there are still a considerable number within the sector that have not begun the journey. Colin Cram has asserted that, “The structure of public sector procurement remains too much the legacy of past fragmentation and the independence from the ‘Crown’ of much of the public sector, eg, local authorities (whose procurement spend is £40bn pa), NHS trusts, higher and further education institutions and the myriad of ‘non-departmental public bodies’. Arguably there are several thousand public sector procurement organisations and 40,000 procurement points. There are 40 buying agencies/consortia, some regional, others national or semi-national; some co-exist, others compete. There is a great deal of product overlap”. The Collaboration Fund has enabled, albeit on a very small scale, colleges to group together non-pay costs and items such as I.T. hardware, staff development, examinations and software licences and to collectively procure. In so doing they have been able to make substantial savings. 36
  37. 37. J SHARED SERVICES DEVELOPMENT AND IMPLEMENTATION REQUIREMEMTSJ.1 This section will describe the support requirements of the Further Education Sector if the implementation of Shared Services is to be a success.J.2 These recommendations are based on knowledge and experience built up by the author in carrying out the research, starting from the time when the Government published Sir Peter Gershon’s Review of Public Sector Efficiency (2004) and the Transformational Government Strategy (2005). The strategy had three key transformations, one of which cited Government moving to a Shared Services culture. Since then, and believing that Shared Services had a great deal to offer the FE sector, the author has been involved in work aimed at trying to move forward this agenda. The following case study illustrates this and points up some of the support that would be required.J.3 CASE STUDY: Shared Services in Sunderland and South Tyneside Colleges The City of Sunderland College and South Tyneside College agreed to explore the feasibility of establishing a Shared Services solution. The 2 colleges had previously collaborated on the procurement of financial software licence resulting in a cashable saving of over 40% of single licence agreements. Senior managers agreed on the scope of work to be considered for Shared Services (Finance, HRM, MIS and the associated processes under these major work streams) developing the business case for each respective college. The Chartered Institute of Public Finance and Accountancy (CIPFA), Sharing the Gain (2010), business case templates were used to capture this information (Appendix 3). However, having arrived at a position statement, other external events took over. As a result of significant income reductions affecting most of the further education sector, both City of Sunderland College and South Tyneside College needed to review their respective organisational structures. This has temporarily slowed the development process and the building of a strong business case. Nonetheless, it is clear that a Shared Services solution may offer several efficiencies, such creating a secure, managed data centre that could be scaled up to bring in other local colleges who have not benefited from capital grants. This would further support the movement of transactional type activities into such an environment. Both colleges are now on the same financial software platform and have been working together to develop joint processes. IT software compatibility is not yet in place for the other major work streams. Senior management teams in both colleges have a real desire to collaborate in relation to a Shared Services solution. Both colleges had applied and been unsuccessful in their bids for capital grants and had incurred considerable expenditure in project management and architect fees. In the meantime, minor refurbishments and works on the IT infrastructure were kept to a minimum. This will be fairly common picture for those colleges that were unsuccessful in their capital grant bids. 37