Department of Finance secretary Rosemary Huxtable is confident that shared services can reduce administrative costs and support modernisation of the Australian Public Service, based on the lessons of past attempts by various governments, both successful and not-so-successful.
Moreover, she argued at a short IPAA seminar on the subject yesterday, the government can’t really afford not to make it work. No government anywhere is about to suddenly decide it wants to plow a whole lot of new public funding into back-office administration, she pointed out.
“We in the APS need to focus on delivering the priorities of government, and meeting community expectations in an environment of fiscal pressure and rapid change,” Huxtable said, encouraging APS staff to read the preface to this year’s Budget Paper Four. “It’s not as dry as you might think.”
Departmental running costs have been falling as a percentage of the federal budget for decades to about 7% for this year but on average, 20% of that still goes on corporate services, according to Huxtable. That’s $2 billion, excluding the Defence portfolio and ICT services.
Via the new Modernisation Fund, the APS is reinvesting some of the efficiency dividends scraped out of its past budgets into the re-booted project, as well as cash from other cost-cutting efforts. The hope now is that having six shared services hubs will allow agency choice and competition between contracted vendors while still creating the economies of scale that are the whole purpose of consolidating administrative support.
Huxtable recounted a question put on the table at a recent meeting of the Secretaries Board subcommittee focused on APS modernisation: “Are we fundamentally changing the way in which we operate, and in which we organise ourselves? Or are we trying to get by, by shoe-horning activities in without making really significant changes to our operating models?”
The hubs will start with basic corporate finance stuff – payroll, accounts payable and receivable, credit cards and ledgers – but most of the value is expected to come from later phases that aim to offer agencies better systems than they have now, as well as lowering overall costs.
Finance is looking to cloud-based software to replace both enterprise resource planning and record-keeping systems, for example, and hopes this will enable newer ways of working that have been theoretically possible for a long time but have often proved illusory.
“Shared services aims to allow a greater focus on the core priorities of government, rather than on delivering transactional corporate services; the ability to share and maintain new and emerging technologies, and better data, for informed decision-making,” Huxtable said.
Success is possible
Huxtable acknowledged that failed attempts to introduce shared services have “tended to dominate the media’s coverage” – perhaps, one might observe, because the idea seems so simple in theory that it is surprising it has been so hard for various governments to implement – but cleverly chose a British headline for example rather than one of the many published much closer to home.
Huxtable and other senior Finance executives fielded quite a few questions on the subject that were based on newspaper articles in this year’s post-budget round of Senate Estimates hearings.
“Shared services isn’t without risks and challenges, and I acknowledge that experiences with shared services haven’t been universally positive, though some of the headlines are point-in-time, rather than evaluation of the impact over the long term,” she said yesterday.
“Importantly, however, the approach that we’re adopting in Australia is informed by what we have learnt, and what we continue to learn through the relationships we have formed with our counterparts in other jurisdictions and overseas.”
Queensland experienced a major shared services shocker almost 15 years ago far worse than anything in the APS but the current government says it is now banking big savings from trying again.
“While they may not make headlines, there are success stories,” said Huxtable, praising the New South Wales government for its “gradual transition” to a centrally managed set of corporate services contracts. Rod Greenaway, the executive director of the Vendor Management Office in the NSW Department of Finance, Service and Innovation, was on a panel discussion that followed.
“The ACT is also collaborating with us. Although on a much smaller scale, the ACT shared services is now well established and leading innovation in the process,” Huxtable added.
The ACT government’s executive director of shared services, Graham Tanton, said agencies went though something like the “five stages of grieving” when they became clients of a central provider.
“That goes from denial to anger, bargaining, and bargaining’s about why you shouldn’t be part of shared services… through to depression, then through into acceptance,” he said, explaining that the provider had to recognise that client agencies were in various different stages.
Federal agencies are now “coming to the realisation that they can’t afford not to invest in shared services” according to the Finance secretary. “They are also realising that they must start a meaningful dialogue with their staff now, to lead and support them through the change,” she added.
She also flagged that the six APS shared services hubs are “likely” to merge into a smaller number in future, as they “explore their strengths and weaknesses and mature” or if some decide they aren’t viable as stand-alone operations. The head of Huxtable’s hub, Lucelle Veneros, and of the Department of Industry, Innovation and Science hub, Michael Schwager, completed the panel.
As usual with events hosted by the ACT branch Institute of Public Administration Australia, a full video of the panel discussion and Huxtable’s opening address has been provided, and the Finance secretary’s illustrations are available from the IPAA ACT website.
Video by contentgroup, top image by RLDI for IPAA ACT.