Q&A David McElhinney, Executive Director for HR, Liverpool Direct Limited
David McElhinney tells about the implementation of shared services at Liverpool Direct and gives his views on some broader issues.
Q1 Can you tell us briefly about your role as lead for HR, Liverpool Direct Limited?
The whole HR and Payroll function was migrated to Liverpool Direct Limited in November 2001. As part of the service is the traditional 'strategic HR' role. LDL keeps the City Council abreast of emerging issues, legal changes and their consequences. We then develop 'policy' and outline procedures for the City to consider and agree / amend. Our role is then to implement.
Q2 In creating Liverpool Direct Limited, you have adopted a 'third way', and spoken of co-sourcing, rather than outsourcing. Can you explain to us what you mean by 'co-sourcing' and the difference between co-sourcing and outsourcing?
The problems experienced historically by public sector organisations that had opted for an outsourcing solution are well documented. Around 1999, Liverpool City Council identified requirements for significant business improvements and substantial financial investment in order to make the radical transformation to its business. The knowledge and experience of others organisations that had gone through an outsourcing arrangement was taken on board. For Sir David Henshaw - the then Chief Executive of Liverpool City Council - it was not a matter of 'outsourcing a problem' but more a case of 'co-sourcing a solution'. With a traditional client/contractor arrangement, there were cases were the contracts had failed as a result of poor performance and other factors that manifested in high costs when the contract was exited. A view could be taken that the private sector, in some cases, is unable to manage and work within the complexity of local government. With this knowledge and other factors in mind, at the point Liverpool City Council was seeking a cosourcing solution, it was important to ensure that the partner could share Liverpool's 'vision' to achieve radical transformation change within challenging timescales, demonstrate flexibility and develop a structure whereby the knowledge and expertise that exists in local government could be exploited through a dynamic catalyst for change. Cosourcing requires true partnership working; it's easy within a traditional and formal client/contractor to simply monitor performance against service levels/performance outcomes. It's more of a challenge to work collaboratively to achieve a win-win for all. This requires innovation, creativity, ability to challenge and manage risk in order to drive change to ultimately transform the business, drive down cost, strip out duplication and waste to an environment that generates cost effective and maximum output. Outsourcing can been seen as a way of offloading a problem to someone else and if/when it fails, then to suggest 'it's someone else's fault'. Co-sourcing ensures accountability and a degree of ownership still remains within each of the organisations sharing the service.
In addition, the secondment agreement (enabling staff to be seconded to the joint venture rather than TUPE transferred) enabled staff to retain existing pension rights and T&Cs, which mitigated and minimised any potential staff unrest and allayed many of the fears that were initially emanating when the JV approach was initially muted. Effective communication through the contract negotiations and involvement by senior TU reps in a review of the formal secondment agreement defused any initial fears.
Q3 What are the organisational and procurement issues have you had to overcome?
The establishment of LDL was procured through the standard OJEC route. Once the contract was secured organisationally we had to consolidate many business units (eg. 12 ICT services, 11 HR&P Services) into single operating units. Each with its own operating procedures, processes and supplier relationships. Supplier management was a major piece of work early on.
Q4 How have you solved cultural and political issues which are bound to come up during the implementation of shared services?
Establishment of a secondment agreement (rather than TUPE) minimised any potential TU unrest/conflict. Also Joint TU representatives were involved in a line-by-line review of the secondment agreement during contract negotiations, and any issues raised by the TU's were fed back to the negotiation team for consideration.
Given the establishment of a shared service/joint venture approach was supported by both the Chief Executive and Leader of the Council, there was officer/member accord and I'm not aware of any political issues that were raised at the time LDL was established.
Culturally the ability to join services/share knowledge presented a challenge to the organisation. This was managed through a corporate change management process, in the main delivered through the 'Liverpool Way', supported by an effective 360 degree communication strategy, e.g. 'In the Know', Council People, Just Ask, team briefings/keeping in touch (KIT), 1-2-1 meetings. In order to maintain momentum, recognition initiatives for all staff have been introduced, i.e. Be Proud, Learning & Development and other annual awards ceremonies. In addition, LCC and LDL actively participates in external benchmarking and award submissions which help to raise the profile of successful shared services.
Q5 Do you think the different roles of the public sector organisations and the number of stakeholders involved imposes limits on the extent to which shared services can be an effective route for releasing resources?
Not really. The major issue appears to be the organisational will to 'let go' and embrace new methods which do require a degree of 'give and take'.
David McElhinney is speaking at IQPC's 3rd Annual Shared Services for the Public Sector 2006, Driving Efficiencies, Economies of Scale and Cultural Harmony Through Shared Services and Partnerships. Which takes place on 27th & 28th June 2006, with workshops on 26th June in Nottingham.
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