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education links Shared Services InitiativeA joint initiative of the University of South Australia and the Flinders University of South AustraliaExecutive summaryThis report draws on the ‘Shared Services Initiative Final Report’, which documents the consultancy undertaken by Deloitte Touche Tohmatsu to assist the two universities to consider the feasibility of and issues associated with adopting different models for administrative service delivery. It has been prepared to summarise the consultant’s findings and advice, for submission to DETYA and dissemination within the Higher Education Sector, as appropriate. In preparing this report, the two universities wished to provide as much information as possible to the sector. However, it should be noted that, with regard to cost savings, the consultant’s findings have not been verified, and further action to establish a shared services centre would be subject to a detailed business plan. In this context, therefore, the universities have received the recommendations as set out in this report for general consideration. At the time of preparing this report, the Steering Committee had reviewed the consultant’s report and provided advice to the two University Councils, including a recommendation that, subject to undertaking further investigations, there was value in proceeding to develop a business case with respect to certain selected administrative areas and functions. The Steering Committee’s advice remains under active consideration. Project overviewIn the current environment where universities are experiencing the impact of expensive new technologies, staff pay-rises, a widening gap between levels of Commonwealth Government funding and operating costs, and increasing competition nationally and internationally, it is imperative that they have a flexible and response administrative structure. Where practicable, they will need to consider options for streamlining their administrative operations to maximise the level and quality of administrative service, achieve cost savings, and look for ways of improving the quality of service in support of their teaching and learning, and research activities. The Shared Services Initiative has examined a range of options and opportunities for achieving these objectives, and has sought to identify a framework through which they can be realised, through a study of two South Australian universities: the University of South Australia and Flinders University. Although initially focused on the sharing of administrative services across these two universities, the initiative also provides a model for other universities that may wish to consider the benefits of adopting shared services arrangements. Deloitte Touche Tohmatsu was engaged to review eight administrative processes across a number of service delivery models. The objective was to identify those processes with the greatest potential to benefit from the implementation of shared services arrangements and to define the possible benefits to be achieved with respect to cost, quality and flexibility, potential risks, and ways of addressing them. The administrative processes reviewed were:
The approach taken was to interview and conduct joint working sessions with the respective directors and managers from the two universities. Findings from Deloitte global research and shared services implementation projects were also considered, to provide a broader and more balanced framework for evaluation. Findings and observationsAcross the two universities, almost 750 staff members are engaged in providing the eight administrative processes identified above, and the operating cost of the central units that provide these services approximates $80 million. In addition, the universities have devolved and decentralised some of the service delivery functions to the faculties and divisions. The number of staff involved in such a way cannot be easily determined, but it is estimated to be around 100 full-time equivalents (FTE). A Memorandum of Understanding (MOU) was established between the universities in July 2000, with the aim of facilitating arrangements for undertaking a variety of information sharing and collaboration initiatives involving the respective functional units within each university. Some collaborative activities had previously been undertaken between the two universities, and this was now given a structured form within more clearly defined parameters. The University of South Australia and Flinders University each have a distinctive focus, culture, and history, and this is reflected in their administrative structures and operations. The degree of devolvement/decentralisation of activities and staff associated with the administrative processes differs between the processes and between the two universities. Flinders University is primarily located on one campus (although more recently it has established sites in several regions including Port Lincoln, Darwin and Alice Springs). The University of South Australia has six campuses. This has contributed to the differences in operating cultures that have evolved. The University of South Australia has had to respond to multiple user groups and to balance their sometimes competing needs. Flinders, on the other hand, has generally been able to focus on providing service to local users through constant face-to-face contact. It was outside the scope of this project to evaluate the quality of the present services, or the level of satisfaction with these services and therefore the consultants did not attempt to comment on whether the devolved/decentralised processes have resulted in a higher or lower level of service satisfaction. Instead the consultancy focused on areas where issues of structure might lead to cost savings or greater efficiency, drawing on some general assumptions and comparative data derived from studies undertaken within other organisations. One assumption adopted by the consultants was that devolved/decentralised services represent a more costly process model than centralised services for the kind of services being considered. The consultants concluded that most of the services provided by the universities in the processes under review are the same (with local operational and policy variations), but are supported by a suite of computer systems and applications that are substantially different. Notwithstanding these system and application differences the technology deployment approaches for the universities are fundamentally the same and this provides opportunities to consider future systems rationalisation. The consultants argued that the service sharing approach providing greatest benefit across all processes would be the establishment of a shared services centre. On the basis of their analysis, they estimate that the majority of processes and sub-processes reviewed have potential to realise benefits from the implementation of shared services. The benefits vary between the processes but include all three objectives, namely cost reduction, service improvement and increased flexibility. The broad level analysis of potential benefits indicated that there were potential savings in the order of ten per cent, on the basis that all eight administrative services were delivered via a shared services centre. (The savings opportunities from joint procurement—a service sharing option—were not included in the projected ten per cent cost saving.) The consultants compared ‘consolidated’ staff numbers and transaction levels with global benchmarks before using a target approximating a midpoint between current performance levels and best practice. Consequently, it was argued that a ‘stretch goal’ may be greater, and further benefits may be realised over time assuming the shared services operations continue to improve. The consultants argued that service levels should not deteriorate if a shared services arrangement is implemented correctly, and in most instances services should improve as the shared service operation would be focused on developing redesigned customer focused processes (this would be their reason for being). Notwithstanding this view, some managers who were consulted during the project were concerned that service levels may be compromised under a shared services approach. Although the shared service centre was identified as the approach potentially offering the greatest benefit, it would also present the most significant challenges. These include, but are not limited to, funding for investment in technology, restructuring of staffing arrangements, and change management processes. These challenges would have associated costs for each institution. The universities requested the consultants to provide a broad analysis and assessment of the expected costs and benefits as part of a feasibility study, applying a number of general assumptions, and encompassing all of the eight administrative processes. The outcomes of those calculations as compared with cost savings indicated a positive net present value and an acceptable payback period. The consultants advised that the magnitude of these indicators would depend on the implementation strategy adopted and that a proper cost benefit analysis and business case would need to be conducted. Accordingly, the consultants recommended that if the universities wished to proceed further on the basis of the initial findings, they should take these steps before making any firm commitments. Key lessons learnedSeveral key lessons have been learned during the project that are expected to be of interest to other institutions or bodies participating in the Higher Education sector if they are considering whether to proceed with a similar initiative. These are outlined in Section 4 of the Report, and are summarised below.
Conclusions and recommendationsA number of significant insights and potential opportunities have been identified for the two universities through their participation in this initiative. The general approaches examined during this initiative appear to be more widely applicable, and the same kinds of opportunities and benefits are expected to exist for other organisations within the higher education sector. Most universities expect to continue to face significant pressures resulting from a relatively flat income stream, and they will need to look for new opportunities to maximise the value that can be obtained from existing resources. Shared services arrangements present a new opportunity in this area, and a migration into an era of both working collaboratively and also competing with the same organisations on a daily basis, may be regarded as a viable option in the present circumstances. This appears to reflect an emerging trend that is in evidence within the public sector and the private sector. The nature and timing of these interactions will vary as organisations strive to maintain independence for strategic and competitive advantages, but at the same time pursue collaboration for products and services that do not present a significant competitive differentiator. The processes that were reviewed during this Shared Services Initiative largely fall within the latter category. The consultants’ report to the universities identified the next steps if they decide to proceed to the second phase of the project. These are outlined in Section 5.1 of the Report. It addressed implementation planning in broad terms for each service area, including time lines and indicative costs. It also identified significant challenges that are likely to be faced during implementation (a general summary is provided in Section 3.4), potential responses to these challenges, and overall change management strategies to facilitate implementation. The change management processes identified to facilitate implementation are summarised in Section 5.1.
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