Executive Summary
The value of shared services – beyond cost savings
Today’s shared service value proposition extends beyond cost reduction, the historical driver for shared services. Organizations, including other UN agencies, have achieved ‘proof of concept’ of shared services models. They are now seeking to maximize the value provided by their shared service models. These benefits extend beyond cost savings to provide increased quality, decreased risk and overall a more streamlined organization which is able to better focus on the strategy and mission.
Today’s shared service value proposition includes:
Umoja brings in United Nations an opportunity
I believe UN has a significant opportunity with its shared services proposition. Other UN agencies have successfully implemented shared service models and have continued to grow the centers, as the benefits to the organization and the mission have been clearly demonstrated. Based on the current scope of the centre, we believe approximately 30,000 UN employees stand to benefit from reduced time spent on low value transactions which can be redeployed to the mission and higher value add activities. Of these, approximately 2,500 are programme staff - belonging to organizations such as OCHA, UNEP and UNHABITAT who will be able to devote the freed up time on mission focused activities. A further few thousands are operations staff who can repurpose up to hundreds os thousand’s of their productive hours per year to higher value operational activities, such as Programme compliance, Peace keeping missions and operational excellence, rather than transactions.
Consolidating these activities within a shared service centre also helps UN to mitigate the risks of fraud, waste and abuse as the centre provides clear segregation of duties, specialization and efficiencies. A shared service centre can help UN better respond to and serve countries in emergency or conflict situations, by providing greater flexibility to ramp up capacity and by removing unnecessary activities, and staff, from high-risk security environments. Lastly, shared service centers are often a logical next step for organizations that have implemented a global ERP system, such as Umoja, as it provides clear opportunity to maximize the benefits of that investment through specialization of knowledge.
Summary of the Options Analysis
I took my experience & opportunity to evaluate the organizational position and accessed the shared service models – a scalable and agile framework based on the existing infrastructure and staffing and focussing on a multi-location model. The analysis included a cost-benefit analysis of the model, both from a financial and non-financial perspective, location analysis for candidate locations and costing purposes, and implementation considerations for such model. The Financial perspective is based on a certain amount of heuristics and assumption.
The analysis can be summarized as follows:
Location Analysis
United Nations and the Peacekeeping operations, in a way currently do have the service delivery model established and operational in one or more legacy systems. This island of automation can be utilized as the first step in the global delivery model. Just to quote, the Peacekeeping operation already have an established and serving service center in Entebbe, Uganda since 2010 and serving approximately 16,000 UN Personnel and 9 UN missions. It includes, Payroll, invoice processing, education grants and travel requests & claims. Same with HQ and HQ away from New York such as UNOG and ESCAP operating in a shared service center modes in certain areas to certain entities.
Transactional Cost Savings
Transactional Cost will be the cost per transaction based on some of the industry based benchmarks and may vary slightly with respect to the implementation within public sector model
For peacekeeping missions, I’ve calculated the total volume of transactions and converted this to a full time equivalent (FTE) calculation to understand the total amount of work that would be taken out of individual mission and performed by the SSC. This approach used global volume data for all offices, and validated activity times per transaction with a representative sample of approximately 10 other mission/offices.
Analysis of headquarter (HQ) transactional activities and volume used the same approach above for processes which are performed on a part time basis by a number of different individuals, such as invoice processing and payments. Other HQ processes were analyzed as ‘lift and shift’: these are processes, such as training and payroll, which are currently performed by a full time post in HQ. This post would be a one-for-one match to a post in the GSC i.e. it is lifted and shifted. HQ processes were assumed to be operating at an already efficient level, so no efficiency gains were applied and the total number of FTEs required for HQ currently would be the same as FTEs required in the GSC. Moving these posts to a low cost location allows for a considerable cost savings.
Cost Benefit Analysis
One off implementation costs consist of HR transition costs, IT investment costs, facilities and build out costs, and project costs to implement the SSC. For a comparable model of UNICEF, who were planning to implement a global service center model is predicted, taking a conservative approach, are estimated to be $29.2 million for a single GSC, and $32.5 million for a multi location model. This costing may be taken as a baseline to understand the benefit of this approach and the final agreement on the implementation will affect this estimate drastically.
The estimate of the annual operating costs include staff costs (transactional staff, management and administrative costs) and non-staff costs, such as IT operating costs and overheads (rent, maintenance, telecommunications, security). Total annual cost of running a centre is estimated to be $17.2 million per year for a single GSC and $21.3 million for a multi location model.
Since with this model, UN and Umoja will be using the existing service centers which will reduce and or eliminate the implementation costs and will be focussing on the capacity building at the existing locations. Also with the UMOJAs flexible service delivery approach combined with ‘lift and shift’ approach the operating cost can be managed effectively.
HR Transition
While most of the FTE worth of low value, transactional work is removed from offices through establishment of an SSC, this does not necessarily equate to the same number of employees to be separated from their posts.
United Nations will have to develop an HR Transition Plan to further describe the strategy and approach for supporting impacted staff and some of the key points related to this approach. In addition, UN will also need to consider the ‘retained organization’ – that is, those employees whose job responsibilities change as a result of the establishment of an SSC, through reduced transactional work (and therefore the ability to refocus on the mission and/or higher value operational activities).
Implementation
Implementation of an SSC is a large and complex initiative; successful implementations are more likely when there is executive sponsorship, strong project management, sufficient project budget, and a strong change management and communications plan.
The one of the key principle is the organizational maturity in understanding, absorbing and deploying the structure as it fits and improves the efficiency.
A typical SSC can take up to one year of preparation before the centre goes live. This preparation phase includes negotiations with governments, build out of facilities and technology, recruitment of staff and development of standard operating procedures and service level agreements. Post go-live, processes and functions are migrated over the to SSC on a risk based approach – with lower risk processes being migrated first, and more complex processes later. The overall timeframe for implementing a single GSC, including preparation, would be approximately 30 months based on the experience with the other similar organizations. This will be removed, if we utilize the existing infrastructure as a starting point and then later do the fine-tuning and adjustment as and when necessary.
Steady State Governance
Strong governance mechanisms are critical to the ongoing success of the SSC and the realization of intended service levels, quality and risk reduction. The organizational structure and setting of the Service centers will also directly reflect in the successful implementation and performance of them.
Moving forward
I have taken a conservative approach in my analysis – underestimating savings and over estimating costs where necessary. As part of shared services implementation, it is a recommended practice that the cost benefit and business case analysis be a ‘live’ analysis that is continuously updated and monitored by the project team in order to ensure that the project remains on track to deliver the intended benefits.
Changes to an organization’s service delivery model raise lots of questions, particularly around the impact on staff, implementation, and governance. It is not necessary to have answers to all these questions in order to make a decision to move forward – these are all common components of project planning and implementation. They require inputs from multiple stakeholders and, as such, should be given due time and consideration as part of the planning phase in order to arrive at appropriate solutions and decisions.
