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Improving Corporate Functions Using Shared Services

Shared service centres in the NHS and HM Prison Service are on course to deliver substantial financial savings. But a report out today by the National Audit Office found that central government was initially slow to adopt shared services. While the momentum has picked up it is not clear that the shared services initiative is yet on a scale sufficient to deliver the level of savings that is possible.

Shared services are about combining corporate service activities across different parts of an organization, or across different organizations, to bring efficiency savings and to improve service. Shared services do not represent an end in themselves, but they provide one possible means of achieving greater efficiency and effectiveness. Today’s report looked at government’s achievements so far, and how it can get more from the shared services initiative.

The Cabinet Office estimates that departments could save £1.4 billion a year on finance and human resource functions by implementing shared services. However, the report found there has been limited progress in measuring the performance of corporate services to date or demonstrating how it can be improved through shared services.

The report found that,although shared service programmes are progressing across government, savings reported so far are relatively small. At March 2007, departments had reported annual savings across all corporate service functions of £1 billion, £315 million of which related to finance and human resources. It is not possible to determine how much of this is related to shared services, but it is clear that there is substantial opportunity for securing further savings through shared services and other means.

The report also found that the Cabinet Office has promoted shared services, and assisted in tackling barriers to their creation, but lacks a clear overview of the benefits being secured by departments. It does not have powers to force departments to adopt shared services and it has not prescribed any particular models to help departments implement shared services successfully.

Both the NHS Shared Business Service and the Prison Service Shared Service, reviewed in detail by the NAO for this study, are on course to deliver savings, demonstrating that both are more efficient than the arrangements they have replaced. Although neither of the bodies are currently performing to levels of efficiency achieved in leading practice private sector organisations, they are both pursuing improvements.

Customers of the NHS and Prison Service centres expressed early dissatisfaction with the quality of the service being provided. But the NAO found that customer satisfaction levels had risen over time. Both centres continue to address customer concerns and evidence of decreasing complaints and increasing compliments suggest that customer satisfaction is improving as the service matures.

Shared services have also brought wider benefits. Better management information, faster paperless transaction processing and substantial savings in procurement were all mentioned by customers of NHS Shared Business Services that had seen improvements over the arrangements they had used before.

The NAO concludes that there needs to be an improvement in the overall management of corporate services. Public bodies should streamline their corporate service processes in line with best practice, improve how they analyse the performance of their corporate services and review regularly whether there are more cost effective ways to obtain their corporate services.

The NAO also recommends that to improve the take-up of shared services the Cabinet Office should work to encourage newly formed departments to adopt shared services. Every department within the central government sector of small departments should carry out a business case evaluation for buying corporate services from one of the two designated sellers. And central government should examine whether existing incentives to sell shared services are sufficient.

"Central government needs to get much better at managing its corporate services. Shared services have the potential to deliver significant efficiency savings but it is not yet clear that the £1.4 billion of savings estimated by the Cabinet Office will be achieved."

Sir John Bourn, head of the National Audit Office

Notes for Editors

  1. Corporate services provide vital support to the delivery of effective and efficient public services that meet citizen’s needs. They include activities such as finance and accounting, human resources, procurement, IT, facilities management and estates management.
  2. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
  3. The Comptroller and Auditor General, Sir John Bourn, is the head of the National Audit Office which employs some 850 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

PN: 55/07