The Pendulum of Government Efficiency

Government attempts to improve services to the public and to internal customers are often viewed with sketicism. Past efforts have often fallen short of their objectives for a number of reasons, primarily due to taking an overly simplified approach. A prime example of this is seen in the provision of internal support for government in the Human Resource and Finance functions.

Over the past 30 plus years, there has been a dynamic in government whereby the pendulum has swung from centralization to decentralization (also called distributed operations) and back and forth again, every 5 or so years. The reason is a good one; how can we make government more efficient and effective? Unfortunately, and obviously (because of the repetition), moving people from around the company to a central location failed to accomplish what it set out to do, which is to improve performance and save costs. In fact, centralization often reduced efficiency because the central organization failed to appreciate that organizations have some unique characteristics that need to be supported. And just co-locating people without considering how to improve operations never has the intended savings.

I call shared services the sweet spot between central control and distributed operations. Shared Services consolidates, but most importantly, redesigns back office functions and processes onto a consolidated technology platform. By doing so, you can achieve very significant savings and improve operations. While people are “lifted and shifted” into a common service center, the processes put in place should be standard for 80-90% of the HR and Finance transactional work; the remaining 10-20% will be implemented (and costed) for specific agency requirements.

I know how this works first-hand. I spent the past decade working on the vision for shared services, the design and roadmap for implementation, and the launch and operations of a shared services center at the Metropolitan Transportation Authority in New York City. I would compare the size and complexity of the MTA to one of the larger states in the country.  The Business Service Center includes HR, Finance and IT functions, previously owned by 8 separate operating agencies. The BSC is considered one of the premier examples of government efficiency and cost savings. Oracle now sends public sector clients from around the world to visit and discuss the MTA’s operations.

Through my work with the IBM Center, I seek to bring this experience to shared services initiatives at the Federal level and for other governments. Under the Federal Shared Services initiative -- housed at GSA and supported by OMB -- the plan is to move all federal agencies from a siloed world where HR and Finance are housed at each of the dozens of agencies, to a more streamlined and standard operation housed at a to- be -determined number of providers, public and private. This is a truly transformative effort that is so far operating below the public radar, but which will change how services are supported and provided across the country.

Here’s something else I’ve thought about relating to government transformation, there is a science to shared services, and an art. The science is the design and plan of how to process using new technology, the art is the people, the culture and the organization leadership. Change is hard and the transition to a new operating model is more work in the short run. Sensitivity to the impact on staff is critical to a smooth transition to shared services. This will require a serious conversation with labor about the future of work and the need for more flexible work rules.

Finally, shared services is about shared operations. I can pay an invoice only if the manager receipts for the goods and services, and there is an active purchase order. Likewise, I can post, advertise and screen for a new hire position, but the agency interviews and selects candidates.  The very nature of shared services is a shared resresponsibility. For that reason, we want to be open and transparent about the way a service center works with its customers/partners.