Management

Shared services report reveals CFOs’ skepticism

In a new report, the Partnership for Public Service and Deloitte Consulting say the Obama administration needs to increase accountability and guidance if it wan...

Emily Kopp

March 12, 2015 6:00 pm

5 min read

While there’s been a lot of talk about shared services, relatively little has been done about it. In a new report, the Partnership for Public Service and Deloitte Consulting attempt to pick up the pace with new recommendations for the White House and agencies.

“Agencies more and more are under a lot of different constraints and are looking for ways to improve their operational efficiency and/or to reduce costs,” said Tim McManus, the Partnership’s vice president of education and outreach on a recent In Depth with Francis Rose. “Shared services are a way to do both of those things.”

Migrating common administrative tasks to shared services providers has been a key goal of successive administrations, under the premise that it saves agencies both time and money. President Barack Obama has defined it as a key cross-agency goal. President George W. Bush went so far as to hold a meeting on a payroll shared- services initiative with agency leaders, at which he threatened to fire those that lagged behind, unless they improved.

In one of its many recommendations, the report argues that the Office of Management and Budget should get tougher on agencies. OMB should set deadlines for migrating tasks to shared providers and hold high-level officials accountable for meeting them, the report said.

“Incorporating shared services migration into senior executives’ performance plans can help to strengthen agency-wide accountability for a transition, according to some CFOs,” the report said.

The authors based their conclusions on interviews with 18 high-level federal officials, most of them chief financial officers. The authors said they chose to focus on CFOs because of their unique vantage point into their organizations’ finances and performance.

CFOs describe a perilous path

Those interviewed share common complaints about leadership, money, data and managing the workforce through the changes that result from outsourcing a major function, like human resources, to a shared services provider. They worry about political cover, should mishaps occur. They doubt that political leaders will be at their agencies long enough to oversee the transitions, which can take many months or years.

“Many appointee positions in the current administration are vacant already, undermining some leaders’ willingness to tackle shared services, when they know they will not have political support in their agencies,” the report said.

The cost of migrating services to an outsider provider can be prohibitive, the CFOs said. But terminating a relationship with a failed shared service provider creates another bureaucratic headache. It may require hiring additional personnel, not to mention time-consuming research and negotiations.

Some CFOs reported being bruised from past experiences with providers that gave poor customer service, went out of business or unexpectedly raised their fees.

“You put your programs at risk if [providers] don’t have their ‘A game,'” said one CFO whose agency’s payroll provider unexpectedly announced a 17 percent increase in costs.

CFOs trying to move their agencies toward shared services reported having trouble finding reliable data to make their case. Some agencies do not know how much it costs them to provide, for example, good IT support in house.

Recognizing this, OMB and the General Services Administration estimated the cost to agencies of the administrative tasks most likely will be outsourced: acquisition, financial management, human resources, IT and property management activities, according to the report. But the CFOs said the initiative should also consider the quality of services.

“If it is cheap and really bad, I wouldn’t want it,” said one.

They complained about their own agencies as well. Despite the administration’s push, the interviewees doubted their colleagues are truly motivated to cede control of essential services to an outside provider.

“Mission people are the difficult ones,” one said. “It is a control issue because we have demonstrated failure in the past. I know that I’m getting [poor] service in-house, but at least I can control it.”

There is also a human component. Migrating services to an outside provider may mean laying off, retraining or even moving some employees.

“I think one of the major deterrents to moving to a shared services provider is the unanswered question of ‘What do you do with people that are left behind?'” said one person interviewed for the report.

“Several CFOs told us that transitioning displaced employees may be the costliest component of a shared services migration and the most difficult for the agency to handle,” the report said.

More recommendations for OMB and agencies

Citing the CFOs, the report recommended that agencies name a high-level official to serve as the point person for shared services and create a steering committee of officials from across the department. The report urged agencies to develop internal communication strategies. It recommended that the Office of Personnel Management publish a guide for leading the workforce through the change.

In addition to setting deadlines and accountability measures, OMB can help agencies by providing more guidance, such as templates for service agreements, which the CFOs said were critical to defining the parameters of their deals with providers. It also should assemble a team of experienced officials that it could deploy to agencies in need of risk assessments or other help. Finally, OMB should pay for pilot programs at some agencies so it can begin developing best practices, the report said.

The recommendations build upon ones the Partnership for Public Service released earlier this month, after convening a roundtable.

The report hailed progress at a few large agencies, such as the Housing and Urban Development Department. In what the report called “a trailblazing move,” the agency arranged for the Treasury Department to handle its financial management and human resources. It moved functions little by little, beginning in 2013.