Are “back office services” really better together?

There's a history of attempts to drive efficiency by sharing services - and precious little evidence of success. Helen Scott asks whether one more try will make a difference

Helen Scott is Executive Director of UHR and is a former HR Director with over 30 years working in the sector, and a Fellow of the CIPD.

We’ve been talking about sharing services and combining functions (particularly the so-called “back office”) for most of the 33 years I’ve worked in higher education.

So recent calls for greater efficiencies and economies of scale to address current financial challenges felt like déjà vu.

Back in 2013, Universities UK and Jisc set up Efficiency Exchange funded partly by HEFCE and the Leadership Foundation (predecessors of the OfS and Advance HE), in response to government calls for the sector to get its act together and achieve cost savings in ways other parts of public services had already been pursuing.

Money was ploughed into shared services concept studies and activities with relatively few lasting results. Why so little progress? I suspect it’s down to a combination of sector culture (institutional autonomy), insecurity and egos (which senior leader wants to be the junior partner in a coalition?), genuine doubts about achievable efficiencies (think NHS and other public sector attempts to design a shared service or a joint procurement that cost more than the planned savings; the NAO’s report on the Research Councils’ shared services project saw an implementation overspend of £60m and a shortfall on projected savings of £73m). Oh, and cultural differences – the “way we do things here”.

You are all special

The familiar cry that every provider is unique, whether in its quirky practices whose origins are lost in the mists of time, or what people value and prioritise, has some justification. If a university outsources provision of IT support for students, or payroll for staff, will that provide great customer service as well as being technically competent, and how will quality be monitored? Is the activity purely transactional or are there touch points with people whose engagement with and loyalty to the organisation could be badly damaged if it’s done badly? Who is in control in a partnership and where will our staff or students land in the pecking order when the service provider is overstretched? Trade unions are typically resistant to shared services and outsourcing because it often means job cuts and change. With low staff turnover, people may be resistant to change because they haven’t known things any other way and working with or for another organisation doesn’t appeal.

Many shared service and outsourcing projects go badly and over budget because those involved don’t start with process review and redesign (what really needs doing, how is it best done, and who needs to be involved in these decisions to avoid missing vital elements), and nobody “owns” the project. The digital and other upfront costs may be prohibitive for necessary systems redesign. Lots of “back office” activities may involve confidential information (let alone GDPR considerations) whether it’s staff and student data, or commercially sensitive material: is your potential collaborator also your competitor? Variations in terms and conditions, policies and procedures build in complexities, especially for HR.  Even where there are standard arrangements, (like the National Framework Agreement for the Modernisation of HE Pay Structures negotiated back in 2003) the legacy of local adaptations at implementation means that small but important differences exist.

And seller beware: providing a service to others is an entrepreneurial activity that needs due diligence and can distract from your own core purpose, even if the extra income from a “side hustle” comes in handy.

Is change really possible?

For universities currently trying to restructure to cut costs and become sustainable, can we believe change is possible after so long without enough notable success stories? Possibly, because the burning platform of the toughest financial challenges the sector has known means we have to push this harder while learning from past mistakes and failures elsewhere. We can build on successes like Unitemps,, and HERA, where either one university has rolled its own provision out to others for a fee, or where providers have worked jointly to design and provide a service for many.

Find, share and copy good bits from within and beyond the sector, whether it’s Teesside or Loughborough providing a payroll or HR service to another local employer, a shared Occupational Health service between the local NHS Trust and other universities, or shared appointments to hard-to-recruit professional services roles (such as a joint HR Director for St Georges University of London and its co-located hospital). And we’re going to need to look outside the sector to further education, and other places where they are already combining to procure and provide services (one example being. the Newcastle College Group).

Services should be provided in the way that is most efficient and effective, including offering value for money and quality of experience for the user.  So we should start by finding synergies and genuinely collaborating across departments and functions within a university, and – as people learn how to plan and trust – then maybe the habit will stick and it’ll make shared services or partner provision more culturally normal.

UHR exemplifies and promotes this approach as part of Professional HE Services (PHES Ltd), working closely with AUDE, BUFDG, CUBO, HESPA, CHIEA, HEPA, and AULP as a by-the-sector, for-the-sector collaboration to help HR, estates, finance, planning and other professional services staff in our member HEPs learn from each other. This way, we can work together to save us reinventing the wheel – or each being sold one we invented earlier by an expensive consultant.

8 responses to “Are “back office services” really better together?

  1. As the person who led the shared data centre initiative whilst at Jisc I think your summary for such initiatives is overly negative. The Shared DC had to be expanded due to uptake is still going strong both at Virtus and at AQL. ( A little more investigation into both the process and the principles around it’s creation would help to show how such services can be made to work, particularly the codevelopment of requirements with early customers, the professionalism of the procurement and legal structuring, and the management by both providers and Jisc.

    Despite this gripe at the limitations of your article, there is much I agree with, from the need for clarity and standardisation of processes to the need for an effective operating (and financial model). As ever I suspect the main challenge is the ego of some senior individuals and their willingness to let go, or to buy from others. Not every shared service can be my shared service.

  2. All very valid points here though it would be interesting to know whether other sectors made up of institutions in competition have as good a track record of collaboration.

    The big issue completely missing is VAT. If your main objective is to make savings then the business case has to show how you do that when the first 20% of savings will be offset by VAT charges. Note that the big outsource firms have not seen universities as a priority, and this is probably a major factor.

    1. VAT can be removed from the equation if you set up the shared service as a Cost Sharing Group. Made possible by Finance Act 2012.

      1. Yes absolutely but if you have ever tried to set one up you will know that while its possible in theory the rules make it impracticable to set one up.

          1. Part of a CSG I should have said. Appreciate it’s not easy and you need a lot of professional advice and ongoing monitoring to ensure you don’t fall foul of the rules, but it is doable

  3. Dan Perry is right and I worked a lot with him on the shared services intitiatives in the 2000s. And JANET (Dan’s employer at the time) is an example of where HE has excelled in shared services long before the phrase was coined. But another issue is that HE always talks about the wrong targets. Finance and HR systems in terms of size and cost for HE compared with the larger public sector is miniscule. The bigger systems are management of students and research. Tim Marshall identified this very early on and said we need a single student records system – perfectly feasible but HEIs don’t want to go there.

  4. The central argument here that the environment in HE is so challenging that previously dismissed interventions/strategies surface on the agenda has to be true (but doesn’t mean they will be adopted). However, looking into HE history for successful examples inevitably bears no fruit, as the sector has not had the inclination or service capability to pursue this. As noted, this is seen as ceding power/control and about egos rather than outcomes. Likewise, attempting to merge/share services that are not sophisticated, or designed to be scalable is also a recipe for disaster. That doesn’t mean this isn’t viable – but arguably, it needs a long term partnership, maybe joint ventures are better options than senior/junior partnerships. As a business improvement strategy this is proven in many (commercial) sectors – and dare I say typically features an acquisitive organisation that has set up its services to be scalable. There is a wider argument, that the current environment opens up more traditional commercial strategies – M&A, vertical and horizontal integration, to go with the portfolio optimisation many institutions are already doing. For “weaker” institutions, starting to examine what services are truly of strategic importance versus those that could be managed by a 3rd party is at least enabling future strategic choice, while for “stronger” institutions, building reliable and scalable services may well be a mechanism to take over/merge with other HEIs or at the least create new income streams.
    When we really get into the scenario of a HEI in terminal velocity, is there really a debate about retaining independence versus sacrificing control? Who is served by an organisation that fails, rather than one that has the foresight to seek a stronger partner to ensure long term sustainability?
    Feels to me there is some very rich material here for some business / strategy MBA/PhD activity.

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