Shared Services – An alternative delivery model for local government ……or not ??

1. Shared Services –An alternative delivery model for local government……or not ?? A presentation for the Municipal Association Victoria Conference May 2014 Donna Galvin, Executive Manager, WBC Strategic Alliance

3. Our credentials to comment • Successful Strategic Alliance in operation for 10 years achieving $5.2 m in savings • Experience in sharing staff and services • Completed over 55 joint projects or initiatives • Major research and development project since 2011 into Shared Service Models for Local Government (partner with ACELG) • National LG Excellence Award winner 2009 for C.O.R.E Principles for Collaboration • Personally – implemented regional shared services in NSW Education Department (TAFE/Schools)

4. What is shared services…. • the provision of a service by one part of an organization or group where that service had previously been found in more than one part of the organization or group. Thus the funding and resourcing of the service is shared and the providing department effectively becomes an internal service provider. The key is the idea of 'sharing' within an organization or group.(wikepedia)

5. My definition… • What is currently done BY many…. • In the future is done by ONE….. • ….FOR many…………

7. Shared Services – Project Stages 1. MODEL • Entity – options and best fit for us • Governance arrangements • Funding • Location • CEO – role & appointment • Board – role & decision making • GM Advisory Group 2. SERVICE SELECTION & BUSINESS CASE • Future state of operating model – vision/purpose, objectives • Methodology for service analysis and selection • High level analysis – first cut • Detailed business case – ROI, Service Level agreements and cost of services

8. Project Stage - 1 What MODEL ?

9. Service Delivery Models(acknowledging the work of LG Professionals NSW and research undertaken by UNE) • Voluntary (Alliances – non binding) • Legal entity • Corporation • Cooperative • Company limited by guarantee • Incorporated Associations • Joint venture • Regional organisations (ROCs) • Joint production (eg rates processing) • Outsourcing • Council Controlled Organisations (New Zealand model) • County councils * GRAB A COPY OF THE LGMA PAPER *

10. Shared Services Inc JV Alliance Members’ Agreement Central Tablelands Water Cabonne Shire Council Blayney Shire Council Wellington Shire Council New Member Council/ Rural Council New Member Council/ Rural Council Guarantee of $10 per Member Council THE ENTITY – NAME TO BE CONFIRMED • One Director to be appointed • by each Member Council, • preferably Mayors. • Ability to appoint up to 2 • independent, external directors Appointed by Member Councils under JV Alliance Members’ Agreement Board of Directors General Managers’ Advisory Council Chief Executive Officer (CEO) Appointed by the Board Shared Services Delivery and Procurement

11. Pro’s and Con’s…. • Voluntary versus binding? • Formal (legal) versus informal? • Optimum number of partners? • “Like” minded council partners? Depends on what you want to share and the level of relationship and trust that will carry the strategy forward

12. Project Stage – 2 SERVICE SELECTION METHODOLOGY & BUSINESS CASE

13. Developing the Service Selection Methodology – what did we have to consider? • Relevance of the service/function to the member organisations and other councils • Financial and Efficiency gains to be achieved • Human Resources required to provide the service or function and any potential industrial implications • Risk Analysis • Capacity improvement to the member councils • Asset consolidation/reduction (eg. shared IT & communications infrastructure) • Community and geographic considerations.

14. CENTRAL TABLELANDS SHARED SERVICES INC?? VISION: Enhance the capability and capacity of participant organisations to deliver efficient, effective public services PURPOSE: Deliver sustainable, cost effective, quality public and support services through a commercially focused cooperative business model • STRATEGIC OBJECTIVES: • Release operational efficiencies through formal collaboration on service delivery • Release operational efficiencies by leveraging operational assets, fleet and machinery • Attract, retain and develop employees to meet key skills areas • Re-use operational efficiencies to meet identified gaps in service provision

15. The Design Principles – what we measure services against to determine suitability • Cost benefit analysis establishes case for change • Meets identified capability and capacity gaps • Enhances ability to attract and retain key skills • Utilises standard systems/process • Operations and benefits can leverage further through increased scale and scope • There are existing shared arrangements • There is limited consequential impact on other services • Preserves community employment in key areas • Service delivery is an established political priority

16. High level analysis and findings • Using the design principles we selected 20 functions in 3 service groups for analysis: • Strategic and support services (34.4 EFT) • Financial management, accounts payable/receivable, payroll, HR, ICT (support and infrastructure) asset and fleet management, contract and tender management • Specialist Services (8.2 EFT) • Development assessment, PCA, Public health and inspections and design • Direct Field Services- (70.7EFT) - water supply and water treatment, road construction and maintenance

17. What did we analyse • Current functional structure of 3 councils • FTE – position descriptions • Cost of FTE • Assets data, including utilisation, asset life, depreciation • Financial data – income and expenditure, debt exposure, LTFP • Performance data (hands up who has this??)

18. The findings and next steps…. • Efficiency savings were identified in the 3 service groups by centralising functions and having staff specialise. • The efficiencies come from specialisation and represent “part positions”. Therefore all the functions in a service group would have to “move” otherwise efficiencies won’t be achieved…..this is going to be our greatest challenge. One arm, one leg, ….. • Currently assessing the ROIfor the large change that would be required to make those efficiency savings • The estimated savings is in context of maintaining current EFT levels. There is additional opportunity if the strategy included reduction in EFT………BUT, is there an appetitefor this at the moment? And what impact would that have on service levels?

19. The findings and next steps…. • Does the Alliance group have the scale for Shared Services……OR do we need additional partners? • The next step is detailed business case – we have established the case for change. • We need much more detail on current cost of service delivery vs proposed model……….to be sure that service delivery costs will be lower through a shared service model. Councils seldom have a clear picture on how well they are performing prior to the proposed changes which means they cannot properly determine how change will effect their performance before and after the change (Brian Dollery – review of NESAC)

20. The challenges….. All of the following are achievable but require a high level of leadership , management and determination…….. • Industrial relations – moving staff to a company structure? Moving staff to a different location? • Governance arrangements of the new entity – need a binding commitment to “buy” services from the new entity for a period • Establishment and operating costs – the ROI may be 3 – 5 years - the councils need initial funding to manage the transition and fund the entity • The future model for regional cooperation ?Joint Organisations • Strong and sustained leadership and commitment from all partners

21. My take home tips…. On regional collaboration…………. • Embrace regional cooperation and do something with your neighbours or broader LG community • Pick your partners well • Work on trust and relationship first before tackling major change or transformation • Define your shared vision for collaboration • Resource it, drive it and get some early wins……..

22. My take home tips…. • On Shared Services……….. • Ensure all partners are clear on the what shared services means , what the potential benefits might be (start with the end in mind) • Base your decisions on a sound business case for change that MUST include your ROI and clearly identifies that service delivery will be more efficient and effective than it currently is • You will need strong sustained leadership and commitment – this is a longer term transformational change – it is not a soft option to avoid amalgamation • Provide the resources to make it happen and manage the change • Identify and manage enablers not necessarily in your control eg Industrial, the Act, legal status, technology platforms etc

23. …“nice” is not enough. A number of factors can limit the ambition of local government to realise the full savings potential of moving to a shared service model – the biggest obstacles are often political. (Deloittes 2010)

24. Some parting words of wisdom…….. from someone much wiser than me “Control your own destiny – or someone else will”……. and “Willingness to change is a strength- even if it means plunging part of the company into total confusion for a while” Jack Welch, (ex) CEO General Electric