Shared back-of-house services A guide for the community sector

Objectives of the workshop Inform: Present information on shared services in the NFP sector Share: Draw on the group’s experience to understand: Why organisations undertake shared services What does and doesn’t work How to test if shared services are right for you How to undertake the transition Brainstorm: Identify opportunities to overcome barriers to implementing shared services

Your objectives for the workshop Horizontal axis: how experienced is your organisation with shared services. Vertical axis: how prepared are you to undertake the change. The Two Way Axis diagram: On the horizontal axis (left to right): how experienced is your organisation with shared services. To the left no experience, to the right a great deal of experience and knowledge. On the vertical axis (front to back of the room): how prepared are you to undertake the change. To the front if they are unprepared to undertake the change and unsure of how to go about it, to the back if they are prepared to undertake the change.

Agenda Part 1 Session 1: Information session (30 mins) Different models and advantages & disadvantages of shared services Session 2: Working session (60 mins) Why consider shared services BREAK Part 2 Session 3: Working session (45 mins) How to assess the feasibility of shared services Session 4: Working session (45 mins) How to implement shared services

What are shared services? Shared services involves two or more organisations working together to jointly manage and/or deliver services. Benefits can include greater efficiencies in back-of-house services through economies of scale, making better use of skilled and physical resources or reducing risk. Back-of-house services include any service that does not directly support clients – for example, human resources, finance, payroll, information and communications technology (ICT), marketing, procurement, legal advice, etc.

The shared services test How do we know if a arrangement is shared services? What matters is the intent of the arrangement and/or the existence of a joint governance arrangement. If the arrangement is shared services, your response should be yes to at least two of the following questions: Is the intent of the arrangement to create mutual benefits for two or more organisations? Will the benefits (or problems) of the shared services arrangement be shared between organisations? Does shared governance arrangements allow clients or staff who receive the services to influence or control the design, management or delivery the back-of-house services?

Types of shared services There is a continuum of shared service governance arrangements. You need to match the formality of governance arrangements with the importance of the service being shared.…BUT this may not be the case with all arrangements – trust and relationships play a factor. Informal governance arrangements Formal governance arrangements Simple Outsource implementation Implementation steps Complex Model 1: Advice and support network Model 2: Shared personnel, asset or facilities service Model 3: Traditional provider/ supplier (within existing organisation) Model 4: Managed Service Organisation Continuum of shared services diagram: from left to right. Model 1: Advice and support network. Simple implementation. Model 2: Shared personnel, asset or facilities service. Complex implementation. Model 3: Traditional provider/supplier. Complex implementation. Model 4: Managed Service Organisation. Outsource implementation. An arrow moving from left to right signifies formality of governance arrangements required. Model 1 requires informal governance arrangements whilst model 2,3 & 4 require increasingly formal governance arrangements depending on the importance of the service being shared.

Motivations for considering shared services

Working session: what are the challenges and barriers to shared services? Instructions: Individually, on A4 sheets of paper, write down the top two barriers you think organisations face to implement shared services. In table groups, share your barriers to shared services. The goal is for each table to identify three common challenges. As a group, discuss the challenges and barriers. As a group, discuss possible mitigation strategies.

Common lessons Challenges and mitigation strategies: It takes time to implement change and it won't happen overnight Change often brings anxieties and resistance from staff. Careful change management is necessary from the outset. Not all organisations have the trust and relationship networks that are necessary for shared services. Collaboration does raise the potential for conflict. It needs to be set up for success with clear governance.

Next steps and break Shared services offer a lot of promise for the NFP sector. Implementing a new back-of-house service delivery model will require investment and careful consideration of the benefits. After the break we will be discussing: a. how to assess the feasibility of shared services b. how to implement shared services.

Assess the value and feasibility of shared services There are two threshold questions to determine the benefits of shared services for each organisation. The first is will there be any tangible value from transitioning to shared services? If there will be value in shared services the second hurdle is does your organisation and your potential partner(s) have sufficient resources and motivation to make the transition feasible?

1. Will shared services offer value? Use self-evaluation form to assess your organisation’s: Efficiency and effectiveness of existing services? Operating environment changing? (e.g. NDIS) Could increasing scale increase the expertise of your team? (e.g. employing a highly skilled HR manager is difficult only 1-2 days per week) After reflecting individually for 5 minutes, discuss in table groups for 5 minutes.

2. Are shared services feasible? Use self-evaluation form to determine: Do you have strong working relationships with organisations you can partner with? Do you have the expertise to manage the transition? Are your management committed to the change? After reflecting individually for 5 minutes, discuss in table groups for 5 minutes.

How to strengthen the feasibility of shared services – suggested steps Relationships and trust Build relationships with NFPs with similar vision, mission Start small and build trust through collaboration Have upfront discussion about strategic need to partner Access to expertise Undertake market scan to identify relevant expertise Develop cost benefit analysis for skilled advisers to implement shared services Management commitment Develop business case and risk management plan Demonstrate alignment of shared services to strategic plan Undertake market scan to identify how similar organisations are sharing services How to strengthen the feasibility of shared services – suggested steps Relationships and Trust Strengthen relationships with NFPs who have a similar vision, mission and appetite for risk Start small with the aim to build trust and rapport around the mutual benefits of collaboration Have upfront discussion around the current funding environment and the strategic need to develop partnerships and develop an innovative approach to back-of-house services. Access to expertise Undertake a market scan to identify potential expertise relevant to your organisation’s needs. This will include large NFPs that have developed expertise in shared services, service specific organisations for outsourcing and learnings available in the NFP sector Develop a high level cost benefit analysis for potential skilled advisers that will be required to implement shared services. This will demonstrate the long-term benefit of an experienced project manager with shared services expertise relative to the short term outlay. Management Commitment Develop an exploratory business case to demonstrate to management the potential benefits from sharing services. Areas to cover include the financial savings from increased cost efficiency and improved service delivery that would be attained with economies of scale Develop a business case and risk management plan Demonstrate how shared services will align with your strategic plan and continual improvement in client services Undertake a market scan to identify how similar organisations are structuring their back-of-house services.

Implementation planning Careful planning will be critical to the success. The basic steps are: Key points: Implementation steps will differ depending on the model of shared services. Governance arrangements should manage the risks associated with the services being shared. Change management needs to start early and be delivered throughout. 1. Scope options 2. Develop business case 3. Implement Change management Steps to implement shared services diagram: Three circles from left to right. 1. Scope options 2. Develop Business Case 3. Implement Arrow running from left to right below circles indicating change management needs to be delivered throughout each stage.

Step One: Scope options for shared services 2. Develop business case 3. Implement The key questions to answer in this stage are: Why shared services? Confirm your mutual understanding and drivers. What services will be shared? What activities are in and out of scope? What is the level of service required? What do you want to change/improve about existing services?

Step Two: Develop business case for establishing shared services 1. Scope options 2. Develop business case 3. Implement The key steps in developing a business case are: Identify the benefits of the project Identify the implementation and ongoing costs Determine success factors and risks Confirm the governance arrangements Develop a project plan with detailed accountabilities

Step Three: Implement shared servies 1. Scope options 2. Develop business case 3. Implement The key to successful implementation is: Clearly defined roles, including project management and allocated activities Schedule milestones and develop a monitoring and reporting schedule Set performance targets Develop a communication strategy Identify and manage risk factors

Change management process Set direction Make it stick Build and mobilise Engage for action Build awareness Define where we are going and why Deepen understanding Equip and activate leaders to drive change Create buy-in Use leverage and engagement at scale to build critical mass Take action Embed and sustain the change Involvement and ownership Elapsed time Change Management process diagram: Vertical axis: Represents the level of involvement and ownership from low to high Horizontal axis: Represents elapsed time from low to high Lowest point on x and y axis. Set direction stage. Need to build awareness, define where we are going and why. Higher on x and y axis. Engage for action stage. Need to deepen understanding, equip and activate leaders to drive change. Higher on x and y axis. Build and mobilise stage. Need to create buy-in, use leverage and engagement at scale to build critical mass. Highest on x and y axis. Make it stick. Need to take action, embed and sustain the change. The time frame required to manage change will increase as the complexity of the shared service arrangements increase

Next steps and available resources http://www.dhs.vic.gov.au/for-business-and-community/not-for-profit- organisations/publications-for-community-organisations: Get a copy of the Shared Services Guide and access a range of other resources for community organisations. www.nfpcompliance.vic.gov.au: The Not for Profit Compliance Support Centre is an online information resource for Victorian not for profit organisations to assist them to comply with their regulatory requirements. http://sspproject.wikispaces.com/: Online resource developed by Adult Community Education Sector in Victoria in response to the Skills Victoria reforms. This website includes guidance on undertaking shared services projects, lessons learnt and project templates. www.nfpbenchmarking.com.au: A three year study by thirteen not-for-profit organisations in Victoria to benchmark the cost and quality of six back of house services.