All organisations are reining in their expenditure and focusing on the bottom line. During the current economic climate, the public sector is particularly prone to hefty cutbacks and ambitious saving targets. The UK Government announced in the autumn of last year that the public sector needed to make £35bn of savings by 2011. This created a mammoth task for those organisations. How can public bodies, such as the NHS, deliver services, as well as meet their savings targets?
Shared services has been a streamlining strategy implemented by the private sector for some time. It is a relatively simple concept. Essentially, you take away non-core functions and wrap them up into a single specialist service. This service can then be used by a group of organisations, rather than each organisation having their own in-house team. The bodies involved can benefit from economies of scale, greater efficiency and cost savings. Many would agree that streamlining repetitive back office processes, such as invoice processing and purchase orders, in order to release funds for core activity, is a wise business strategy.
This strategy is now being put into effect within public sector organisations. The NHS, in particular, has wholly embraced the concept and as a result partnered with service provider, Steria, to form the NHS Shared Business Services. sourcingfocus.com spoke with John Nielsen, Managing Director of NHS Shared Business services (SBS), to get an idea of how the initiative works.
Mr Nielsen summarised the aim of the NHS SBS, “The NHS Shared Business Services is a unique 50-50 joint venture between Steria and the Department of Health and aims to deliver savings and value so that more can be invested into frontline services.”
A venture that aims to save money must come as welcome news after growing concern over the way the NHS seems to continuously leak vast sums of money. In fact, the NAO predicts that this shared services strategy will reap savings of £250 million over 11 years.
The NHS strategy focuses primarily on providing financial and accounting support and, more recently, payroll. These processes have been traditionally done in-house at each individual NHS trust, creating a vast duplication of roles throughout the organisation. The costs associated with training and maintaining each F&A team would have been extensive. By buying in a service, the various trusts would be benefiting from long-term cost savings and, as Mr Nielson points out, expertise and technology. “It is not just about direct [cash] savings; we are able to provide better technology and expertise. Over the last three years, we have had 86% of our clients recommend us. We process, on average, 4 million invoices a year and have handled over £26bn in payments on behalf of the NHS.”
So, not only are there cost savings associated with sharing services, but perhaps more importantly, there are real benefits to service. It appears that shared services could be the NHS’ savior; however, there have been some recent chinks in the shiny shared services armor within other areas of the public sector.
The Department for Transport was accused of “stupendous incompetence” by the House of Commons Public Accounts Committee (PAC) for its HR shared service centre in Swansea. The service centre was rushed through to completion in order to meet deadlines and, as a result, experienced severe systems failure. This systems failure led to huge delays in services, as the IT needed reworking, which resulted in a bill of £81m, £24m above the projected savings the centre would have brought in the first place.
What is the key ingredient that makes the NHS SBS successful and avoid catastrophes such as the one mentioned above? Mr Nielson puts a large proportion of the success down to the “high quality group of people” that make up the SBS board. Consisting of senior representatives from NHS Trusts, Department of Health, and Steria, the board obviously has a wealth of experience and knowledge, which has resulted in an effective entity. The NHS SBS also benefits from the “rigor of a commercial company” (it is set up as a standalone profit-making entity), which will also push those involved to ensure client recommendations and a high quality of service. As it has no financial support from the government, if NHS SBS does not provide adequate services then they wont be able to survive, the NHS Trusts will simply not use them.
So what next for shared services in the public sector? Mr Nielson believes that the NHS SBS model can be replicated over a variety of other public sector services, the police and councils to name a couple. Of course, with the massive duplication of roles throughout the public sector, it is easy to see why shared services strategies would be of benefit.
What lies ahead for the NHS SBS? Mr Nielson summarises, “We want to expand our service line, incorporating more back office processes and ultimately provide a bigger impact.” If the NHS SBS continues to be successful, expands its range of services and delivers substantial savings, as well as enhancing processes, then it would not be far-fetched to think that, in a few years, we will find private organisations purchasing services from NHS SBS or other public sector shared services providers.
