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Fear not: The case for shared services in government
Wednesday - 4/16/2014, 12:50pm EDT
Commentary by Jeff Neal
Founder of ChiefHRO.com
& Senior Vice President, ICF International
This column was originally published on Jeff Neal's blog, ChiefHRO.com, and was republished here with permission from the author.
Photo courtesy of Jeff Neal
The federal government, much like any other organization, either provides for itself or buys a wide range of overhead services to support its operations. Overhead is not a derogatory term — it is just the term that is applied to services that are necessary to support the mission of an agency. Missions do not get accomplished without overhead services. While overhead services such as Human Resources, Financial Management or Contracting support follow laws and regulations that are remarkably consistent across agencies, most agencies have dedicated internal service providers. The result is a level of redundancy and cost that diverts scarce resources to overhead functions rather than agency missions. Faced with decreasing budgets and shocks such as sequestration, agencies can no longer afford to carry out business-as-usual with respect to common support services. Secretary of Defense Chuck Hagel challenged his department and its stakeholders to "challenge all past assumptions" and "put everything on the table."
"We need to challenge all past assumptions, and we need to put everything on the table. For example, it is already clear to me that any serious effort to reform and reshape our defense enterprise must confront the principal drivers of growth in the department's base budget — namely acquisitions, personnel costs and overhead."
— Secretary of Defense Chuck Hagel - April 3, 2013
One good example of overhead services that would be "on the table" is Human Resources/EEO. Looking only at the number of federal employees in those occupations, we see 2 percent of the federal workforce in the HR/EEO (41,929 employees) job series. Because both HR and EEO offices also employ people in other job series, such as IT, budget and administration, my experience is that as many as a quarter of the people in HR offices are not in HR series. That means another half percent of the federal workforce are HR in non-HR job series. The number may be higher. Assuming that conservative number, 2.5 percent of the federal workforce exists to provide HR services to the government.
|Federal Employees in HR/EEO Job Series|
|Job Series||# of Employees||Average Salary||Total Cost|
If we look only at the costs of the Human Resources/EEO workforce (in salary and fringe benefits cost of employees in the 201 (HR Specialist), 203 (HR Clerk and Assistant) and 260 (Equal Employment Opportunity) job series is more than $4 billion. HR/EEO organizations also employee people in other job series, such as budget, clerical and information technology, and the common "catch-all" 301 job series. Use of the 301 series for HR has increased in recent years as a way of reducing the apparent number of HR professionals, and to support grades that are often not as easily obtained in the more prescriptive 201, 203 and 260 job series. In addition to the non-HR/EEO job series, HR/EEO service organizations also purchase contract support. The number of dollars devoted to such services is difficult to identify, governmentwide it is certainly in the hundreds of millions and perhaps more. Because the costs of common services are buried in agency budgets, the number is rarely examined as a single cost. The time has come to begin that examination and find ways to reduce the cost to a more manageable level.
There are many side effects of failure to consolidate overhead services. Chief among them is the lack of money for training staff and modernizing systems and processes. An agency with redundant overhead organizations will cut costs by taking away everything but salary dollars and leaving the overhead functions with few resources to do anything other than pay their employees. It is rare to find an HR office that is adequately resourced, even when the agency is spending more on such services than would seem necessary. The agency wonders why it is not getting great support, the employees in the support organizations wonder why they cannot get training or adequate tools to do their work, and everyone wonders why it does not get better. An agency, its employees and its HR staff are far better off with one or two well-staffed, trained and resourced HR offices than they are with 10 marginally staffed and resourced organizations that struggle to provide good service.
I have heard people saying for years that services cannot be consolidated because their agency is unique. While it may make us feel better to say we are unique, the truth is most agencies are not. The plethora of different rules, processes and systems is the result of choice rather than absolute necessity. Although agencies tend to create their own operating policies and directives for HR services, those rules are usually created because they can be, not because of a compelling business argument. Not only that, attempts to consolidate HR/EEO services are typically met with fierce resistance. When the Department of Defense proposed consolidating HR services in the 1980s, one of the services responded with the objection that their civilian HR services were at the heart of their warfighting capabilities. When faced with that type of opposition, the proposal was dropped. Eventually, the DoD elected to "regionalize" its HR services in a way that protected most of the parochial interests that objected to the previous consolidation proposal. The result was a model that few DoD leaders and virtually no one in HR would consider to be effective or efficient.
When the Defense Logistics Agency proposed a real consolidation of HR services, Pentagon officials supported it as a means of seeing if consolidation could actually work. Studies of the DLA HR transformation have shown it was completely successful, reduced costs and dramatically improved the quality of services. The proposed transformation was not universally accepted in DLA. In fact, many affected managers, field Commanders and Senior Executives were vehemently opposed. One SES referred to it as "the most brutal proposal I've ever seen." Another said he would rather have bad service he controled than good service someone else controled. One General said it was doomed to failure and would generate no savings, even if it could be implemented, which he doubted. They were wrong. Not only did the consolidation work, it saved money and provided more resources for the consolidated offices to get their work done. Many of the savings came from elimination of redundant management structures. Rather than having seven HR offices, each with an HR director, staff directors and support teams for each, there were two HR offices. Rather than having seven sets of HR tools, we had one. Rather than having seven sets of operating procedures, we had one. DLA is not the only example of effective HR consolidation. Agencies as diverse as NASA and the departments of Commerce, Treasury and Interior have had similar successes. That kind of consolidation and cost reduction is not radical. It is not risky, and it is not new and different. It is a tried and proved approach to delivering services.
What was driving those objections, and what bold leaders in government will face today, is fear. Fear of loss of control. Fear of loss of influence. Fear of failure. Fear of services that are worse than before. Overcoming those fears is critical if government is going to transform itself today. If those fears drive debates about overhead services, imagine how people will respond when asked to do the same thing for mission services. How will any real consolidation of services, elimination of redundant missions and consolidation of agencies take place? We have proved in multiple agencies that support services can be effectively and efficiently consolidated, yet that knowledge has not been translated into governmentwide measures to dramatically transform support services. It is time to take that step.
MORE COMMENTARY FROM JEFF NEAL:
Copyright 2014 by Jeff Neal. All rights reserved.
Jeff Neal is founder of the blog, ChiefHRO.com, and a senior vice president for ICF International, where he leads the Organizational Research, Learning and Performance practice. Before coming to ICF, Neal was the chief human capital officer at the Department of Homeland Security and the chief human resources officer at the Defense Logistics Agency.