15 July 2010

Department of Premier and Cabinet

Blueprint for Corporate and Shared Services in the NSW Government

© State of New South Wales through the Department of Premier and Cabinet, 2010.

Department of Premier and Cabinet engaged Third Horizon and The Hackett Group to assist with the development of this Blueprint for Corporate and Shared Services in the NSW Government.

You may copy, distribute, display, download and otherwise freely deal with this work for any purpose, provided that you attribute the Department of Premier and Cabinet as the owner. However, you must obtain permission if you wish to (1) charge others for access to the work (other than at cost) or (2) include the work in advertising or a product for sale.

This document has been prepared by the Department of Premier and Cabinet of NSW for general information purposes. While every care has been taken in relation to its accuracy, no warranty is given or implied. Recipients should obtain their own independent advice before making any decisions that rely on this information.

Published May 2010

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1. Executive Summary

2. Introduction

3. Design Principlesi. Objectives and Design Principlesii. Operating modeliii. Ownership and governanceiv. Service Delivery Management v. Funding and Pricingvi. Benchmarking vii. Implementation Strategy

4. Functional Scopei. Guiding Principlesii. Corporate and Shared Services Functional Scopeiii. Accountabilities of Corporate and Shared Services by Functioniv. Exceptions where agencies remain accountable for certain

Corporate and Shared Service functions

5. Operating Model i. Guiding Principlesii. Functional Delivery Models - Corporate and Shared Services iii. Corporate Services Operating Modeliv. Shared Services Operating Model

6. Service Delivery Modeli. Guiding Principlesii. Governance and Ownershipiii. Customer Engagement Modeliv. Funding and Pricingv. Service Management

7. Implementation Strategyi. Guiding Principlesii. Whole of Government governanceiii. Implementation planningiv. Benefits Realisation Frameworkv. Implementation Management Structurevi. Critical Success Factors

8. Benchmarking and Best Practicei. Principles and Framework ii. Taxonomy/Functional Decompositioniii. Metrics, Targets and Best Practicesiv. Ongoing Benchmark Program

a. Methodology & approachb. Roles & responsibilitiesc. Location structured. Question setse. Tools and data sourcesf. Definitionsg. Assumptionsh. Validationi. Reporting

v. Implementation Consideration

9 Risk Assessmenti. Staff Change Managementii. Corporate Structure Complications iii. Capability of Workforce iv. Investment and Standardisation of Technology v. Department and agency Expectations of Service vi. Branding of Departments vii. Non Standard Approach viii.Rate of Changeix. Effects on Current Department and agency Initiatives

10 Appendix - Definition of Common Terms

CONTENT

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1. EXECUTIVE SUMMARY

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• In mid 2009, the NSW Government announced major improvements to the structure of Government, through amalgamating agencies into13 clusters. Clusters contain a Principal Department1 and usually also include agencies2 and a range of other bodies, such as tribunals or statutory bodies.

• The broader amalgamation reform program is designed so that NSW Government can deliver:– More integrated services– Stronger customer focus– More efficient provision of Corporate and Shared Services

• Fundamental to this reform is the need to consolidate the Corporate and Shared Services activities across the sector. Key outcomes sought in this reform include:– A more streamlined and standardised Corporate and Shared Services framework and service delivery– More efficient, low cost service and redirection of effort to front line services– A focus on customer service and improving the Corporate and Shared Service experience

• Corporate and Shared Services functions are currently provided in a fragmented way across the sector, with some provided internally and some externally to departments. There is a significant variation across the clusters in the maturity of expectations, understanding, delivery and usage of these types of services.

• A key part of this reform requires the building of a whole of sector Blueprint, plans and independent benchmarking as part of the Corporate and Shared Services Reform Implementation Project.

• The functions included within the scope3 of the Corporate and Shared Services Blueprint are:1. Finance2. Human Resources Management 3. Industrial Relations4. Occupational Health and Safety5. Information Technology and Communications6. Contracts and Procurement

INTRODUCTION AND BACKGROUND

1. Note: Principal Departments are those listed in schedule 1 part 1 of the Public Sector Employment and Management Act 2002

2. Note: Agencies are generally headed by a Chief Executive who reports to a Minister, and may be a part of a Principal Department or a stand alone body. The Police and Emergency Services cluster does not have a Principal Department, given the unique nature of theuniformed services

3. Note: Functions within scope will be addressed within the Blueprint but are not necessarily considered purely Corporate and Shared Services. Accountability may remain with the Department where appropriate – see details in Section 4: Functional Scope

7. Governance and Risk8. Executive Services9. Records and Knowledge Management10. Property, Facilities and Fleet Management11. Asset Management

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• There is significant opportunity to achieve benefits through the consolidation of Corporate and Shared Services in the NSW Government.

• There are numerous examples of public and private sector Shared Service operations delivering services to over 20,000 employees and achieving tangible benefits.

• The Corporate and Shared Services Blueprint provides a framework to facilitate the achievement of these benefits across all Departments while acknowledging the complexities of such a reform.

• Design Principles, developed in collaboration with representatives from each of the Principal Departments, guide all design decisions through the Blueprint and must be achieved by the final solution.

• The Blueprint contains an operating model where corporate functions are consolidated to the cluster level through a Principal Department and Shared Services are provided either through an in-house or multi-tenanted provider, depending on the cluster’s scale.

• The future state Corporate and Shared Service model includes five in-house Shared Services providers and one multi-tenanted provider, all supported by a single ICT Wholesale operator.

• To ensure the operating model is effective, a range of fundamental service delivery considerations including benchmarking will be implemented.

• Implementation of such a reform will be complex, with clustered Principal Departments at various levels of maturity in relation to Corporate and Shared Services. Accordingly, an implementation strategy has been developed including a centralised reform team and tiered approach to facilitate a sustainable reform program.

KEY MESSAGES

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There is significant opportunity to achieve benefits through the consolidation of Corporate and Shared Services in the NSW Government but investment will be required.

1. Source: Review completed in 2009 as part of the Hackett Group Shared Services Performance Study – including a mixture of 193 public and private organisations from US, EU and Asia pacific regions

CASE FOR CHANGE

• Industry studies suggest Shared Service reform delivers over 20%1

reduction in cost with improved levels of service and quality.

– 71% of Shared Services Operation plan to achieve over 20% reduction in costs

– 61% of Shared Services Operations have achieved over 20% in savings

• Reform of Corporate and Shared Services within the NSW Government offers a significant opportunity for improvements in consistency of customer service and efficiency benefits.

• Achieving these benefits requires significant change and the bringing together of similar capabilities and reengineering processes to leverage scale including:– Consolidating ICT platforms (fixed cost spread across greater user

base, higher utilisation of infrastructure, reduced maintenance/support per user)

– Amalgamation of workforce to service multiple clients (increased depth of skills, increased supervisor/agent ratio, increased utilisation, greater flexibility of workforce)

– Knowledge exchange (learn it once - not twice, supports standardisation and maintains vision)

– Location and facility alignment (e.g. consolidated office space, location based on skills availability)

No change4% 1-10%

8%

11-20%27%

21-40%29%

41-60%22%

>60%10%

1-10%5%

11-20%24%

21-40%42%

41-60%19%

>60%10%Planned Savings

Achieved Savings

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There are numerous examples of public and private sector Shared Service operations delivering services to over 20,000 customer employees and achieving tangible benefits.

1. Source QLD Government - QLD record_of_achievements_02-082. Source Australian Defence Force – Third Horizon Study3. Source UK Government – UK Cabinet Office

SHARED SERVICE EXAMPLES

Australian Defence Force (Federal)2

•Single service provider including Finance, HR, procurement and base and facilities management services to 100,000 FTE•Multi-billion dollar forecast cumulative savings over a ten year period

General Electric (US)5

• 240,000 payroll employees, $80bn AP, 80,000 AR, two million calls/month

• Single Shared service organisation• $480m in savings ($17/employee hour)

UK Government (International)3

• Six Shared Service providers servicing target of >20,000 and in excess of 100,000 FTE

• Department for Work and Pensions year one 15% savings and continuing to deliver efficiencies

• National Health Service delivered ~$500m in savings

Barclays (UK)6

• Established a Finance and Reporting Shared Service Centre• 148,000 FTE• 16% service level improvement 12% headcount reduction

Queensland Government (State)1

• Nearly 200,000 full time equivalent (FTE) supported by three Shared Services operations

• Single technology wholesale provider supporting the three operations• $100m in benefits achieved

Carrefour (France)4

• Consumer staples in France with 490,000 employees• Shared Services Provider delivering finance, procurement and ICT

services• Three year payback on initial $170m investment

Public Sector Private Sector

3. Source Carrefour – Accenture Study4. General Electric – CBI Study5. Barclays – SAP Study

It is realistic to expect the NSW Government could target three Shared Service providers servicing up to 100,000 FTE each. However, a preliminary target of 20,000 FTE has been determined to be a practical, implementable target to achieve initial critical mass/scale.

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• The primary purpose of the Corporate and Shared Services Blueprint is to provide a whole of government framework that will enable Principal Departments to achieve benefits from the consolidation of Corporate and Shared Services.

• In addition, the objectives of the Blueprint are to:− Provide sector wide consistency and standardisation within the areas

of Corporate and Shared Services while acknowledging the uniqueness and complexity of individual departments and the services they provide

− Establish parameters for departments to make decisions that are aligned to whole of government objectives

− Hardwire key decisions to minimise or prevent loss of potential benefits across Departments

• The Blueprint is also intended to recognise the complexity of implementing such a large scale reform including:− Provision of guidance for the Principal Departments’ planning,

implementation and transition− Reinforcement of the significant up front investment required to

achieve benefits and levels of services

• The development of the Blueprint was not intended to be a detailed diagnostic or assessment of each Principal Department.

• The Blueprint does not specify specific solutions or implementation plans for each Principal Department.

The Corporate and Shared Services Blueprint provides a framework to facilitate the achievement of benefits across all Departments while acknowledging the complexities of such a reform.

BLUEPRINT OBJECTIVES AND APPROACH

The Corporate and Shared Services Blueprint, has been developed using a collaborative approach combining consultation, with lessons learnt from the implementation of effective Corporate and Shared Services in other jurisdictions and industries.

• Understanding of the complexity of each Department and solicitation of views on Corporate and Shared Services solutions were achieved through high-level consultation with each Principal Department including:− A series of one on one meetings with key individuals and groups from

each of the Principal Departments− A series of one on one meetings with key individuals from the current

Shared Services Providers− A number of sector level meetings with DPC, DSTA and NSW Treasury

• Initial findings and recommendations were then tested and validated via a series of workshops with a cross sector Senior Officers Group:

• Design and Guiding Principles Workshop− Functional Scope and Operating Model Options Workshop− Shared Services Delivery Management Workshop

• A Blueprint Interim Report was then distributed to the Senior Officers Group and detailed feedback was received.

• A last workshop was conducted to review feedback and finalise outcomes for the Blueprint report.

• The Blueprint has been approved by the Directors General Executive Committee by the Government.

Objectives Approach

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Design Principles

• Take into account differences, between departments, yet encourage a consistency of approach across the NSW Government in the delivery and levels of service.

• In the end state:– provide improved levels of service (based against the current baseline service), whilst not degrading current service during transition– align user expectations of service (tangible and intangible) with agreed levels of service– have services delivered centrally from the point that maximises customer service outcomes– perform standardised delivery of service that also achieves balance with customer responsiveness and intimacy needs (standardised back office

and a customised front office)– rectify current areas of poor service

Align to NSW Government Objectives & Department

Strategy

Provide Benefits

Provide Appropriate

Levels of Service

The design and implementation of Corporate and Shared Services across NSW Government should . . .

• Be aligned to, the nature of, and medium/long term trends within, each Departments’ frontline services and operations.• Align to the strategic direction, current initiatives and critical whole government trends including:

– approved budget and financial targets – affordability and budget /funding direction for the next 4 years– Shared Services providing services to no fewer than 20,000 full time equivalent staff– the amalgamation and integration of departments and other bodies into 13 clusters

• Address sector wide mobility, development and career management of staff and balance the support of regional employment, taking into account overall sector efficiencies.

• Enable performance comparison based upon transparent and consistent metrics across Corporate and Shared Service operations.• Design in capability to drive efficiency and industry best practice, continuous innovation and renewal and transition from the present mode of operation

(PMO) to the future mode of operation (FMO) returning cost savings, service and investment benefits to users and clients.• Provide transparency and visibility of the services delivered and their cost relationship (including both operating and investment costs).• As a starting position, assume that all non front line and operational services are candidates for inclusion into Corporate and Shared Services.• Eliminate replicate shadow operations and duplicated functions outside of Corporate and Shared Services, once service levels have become

satisfactory.• Once an operating model has been selected, be mandated for an agreed term.

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• Eleven functions1 have been defined as in scope for this Corporate and Shared Services Blueprint.

• Within each in scope function, the Blueprint specifies where primary accountabilities lie for activities across Corporate and Shared Services and the departments2.

• Transactional activities (e.g. Accounts Payable) and basic advisory activities (e.g. advice on Management Accounts) will be provided through Shared Services. Policy and control and strategic activities are provided through Corporate Services.

• Accountability within a function may remain with a department, rather than be provided as a Corporate or Shared Services, where it:– Is unique and critical to department and agency; and– Provides no benefit in aggregation.

• Corporate Services will sit as a group reporting to the Director General and while some structural suggestions3 have been provided, the ultimate organisational design decisions for Corporate Services will sit with the Director General.

The Blueprint contains an operating model where corporate functions are consolidated to the Principal Department level and Shared Services are provided either through an in-house or a multi-tenanted provider.

1. Note: In scope functions are Finance, HR, IR, OH&S, ICT, Contracts & Procurement, Governance & Risk, Executive Services, Records & Knowledge Management, Property, Facilities and Fleet Management and Asset Management

OPERATING MODEL

• The fundamental decision point for the Shared Services operating model is the decision between a Departmental in-house or multi-tenanted provider (i.e. services provided to more than one Principal Department).

• To achieve benefits from Shared Services, critical mass/scale is required. To support an in-house model, a Principal Department must exceed 20,000 FTE.

• For those Principal Departments with less than 20,000 FTE, a multi-tenanted model will best achieve critical mass.

• Given the organisational separation of the provider and customer, a multi-tenanted model will have some additional requirements for effective operations when compared to an in-house model including:– More formal governance arrangements (e.g. skills based board)– Stronger customer engagement capabilities– More sophisticated pricing model (e.g. unit based prices vs. full cost

allocation)

• Despite these additional requirements, achieving critical mass is fundamental to achieving benefits in Shared Services, implemented in a balanced and practical manner. Where the benefits outweigh the increased costs.

• The approved operating model for an in-house operation is the Service Centre4 model for a multi-tenanted operation, the approved model is the Single Full Suite Provider4. Over time, both should move to the Wholesale ICT4 option.

Corporate and Shared Service Scope Shared Service Operating Models3

2. Note: For detailed allocation, see Section 4 Functional Scope3. Note: For detailed Operating Model, see Section 5 Operating Model 4. Note: For detailed explanation of the models, see Section 5, Part iii

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Future State Operating Model

1. Note: These whole of government services are provided by central departments such as the Department of Services, Technology and Administration2. Note: FTE numbers are approximate. Source: Work Force Profile collection June 2009.

NSW Public

FleetWhole of

Government Services

PropertyProcurement

Corporate CorporateCorporateCorporateCorporateCorporateCorporateCorporateCorporateCorporateCorporateCorporateCorporate

Health NSWEducation & Training

Human Services

Police & Emergency

Services

TransportNSW

Justice & Attorney General

Services Technology&

Admin.

Environment Climate

Change & Water

Industry & InvestmentTreasuryCommunitiesPremier &

CabinetPlanning

Frontline Service Delivery

Clusters

Principal Department Corporate

Shared Service Provider

ICT infrastructure

Multi-tenanted Shared Services Provider In-house Provider

In-house Provider Business Link In-house

Provider

Health Support Services

ICT Infrastructure

GCIO

94,700 FTE92,700 FTE18,700 FTE24,100 FTE3,200 FTE 12,600 FTE3,400 FTE5,700 FTE4,000 FTE2,800 FTE 25,100 FTE1,400 FTE2,400 FTE

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To ensure the operating model is effective, it is critical that a range of fundamental service delivery considerations be implemented, including benchmarking.

SERVICE DELIVERY COMPONENTS

Governance

• Governance provides the control framework for how the Shared Service will operate within existing Departmental and whole of government committees and groups.

• The five tier model clearly articulates the mandate, structure and roles required in each of the tiers and leverages the Directors General Executive Committee and as the top two tiers of control.

• The remaining three tiers provide control, customer engagement and operational management functions in both the in-house and multi-tenant operating models. Common structures have been used across both operating models for customer engagement and operational management, ensuring that both benefit from a robust governance structure regardless of size.

Customer Engagement

• Customer engagement provides the flexible front end delivery of Shared Services, meeting expectations and providing accountability for demand planning, account management and customer engagement and delivery of supporting systems.

• All interfaces between purchaser and customer have been described, including key activities and timeframes.• The engagement model is consistent across both in-house and multi-tenant operating models.

Funding and Pricing

• Sustainable delivery of Shared Services requires effective funding that includes activity running costs, refresh costs and investment required to align to the customers' future need.

• Funding provides a control point to manage the quality and volume of service being delivered or used and has been considered as a critical behaviour driver.

• The funding and pricing strategy differs between in-house and multi-tenant models due to the inherent nature of Principal Departments' governance.– In-house:

o Business unit structure with recovery of costs through high level allocation of costs to service delivery functions within the Department – Multi-tenant:

o Sophisticated price model based on unit cost per service with commitment to achieve future cost savings o Investment funding consolidated from all customer Departments via the demand planning function based on a positive business case

Service Management Framework

• Effective service management is composed of a number of key functions that include a detailed description of the service being delivered, methods to measure and evaluate performance, detailed demand management processes and measures to ensure any disputes are managed consistently.

• Service management guidelines have been provided for each of the key functions and should be considered a vital part in establishing trust and collaboration between the purchaser and customer.

• Achieving best practice is of particular focus and is addressed in the whole of government benchmarking framework.

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• The NSW Government is committed to the reform of Corporate and Shared Services to deliver enhanced customer service and efficiencies to the NSW public.

• Creation of the Principal Departments has provided the opportunity for all 13 clusters to achieve significant benefit and reform through a well executed whole of government initiative.

• Implementation timeframes, resourcing and funding profiles, will vary between clustered Departments based on their characteristics, maturity of Corporate and Shared Service functions and their ability to deliver efficiencies.

• All clusters’ reform programs will be coordinated through a central reform program office that will be responsible for consolidating program plans, continuous monitoring of improvements and supporting the Departments through the program.

• Three implementation phases have been used to ensure that the reform is sustainable and addresses short term tactical objectives as well as maintaining focus on longer term large scale transformation:– Horizon 1: short term tactical realisation of benefits as well as business

as usual– Horizon 2: medium term planning and benefits realisation within the

financial year– Horizon 3: longer term and transformational, sees the transition to end

state Corporate and Shared Service Centres

• Perceived barriers to change (uniqueness of department and agency functions, audit and risk responsibilities etc) are important considerations to be addressed during the implementation planning process, but should not deter or prevent the future mode of operation being achieved.

Implementation of such a reform will be complex, so an implementation strategy has been developed including a centralised reform team and tiered approach, to facilitate a sustainable reform program.

IMPLEMENTATION STRATEGY

Horizon 1Short term (tactical

realisation)

Horizon 2Medium term (results

within 12 months)

Horizon 3 Longer term (transformational)

2010 2011 2012 onwards

Whole of Government (benchmarking, DGEC and DPC reform management)

Immediate benefits business as usual

Benefits to achieve further enhancement

Implementation Horizons

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2. INTRODUCTION

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• In mid 2009, the NSW Government announced major improvements to the structure of Government, through amalgamating agencies into13 clusters. Clusters contain a Principal Department1 and usually also include agencies2 and a range of other bodies, such as tribunals or statutory bodies.

• The broader amalgamation reform program is designed so that NSW Government can deliver:– More integrated services– Stronger customer focus– More efficient provision of Corporate and Shared Services

• Fundamental to this reform is the need to consolidate the Corporate and Shared Services activities across the sector. Key outcomes sought in this reform include:– A more streamlined and standardised Corporate and Shared Services framework and service delivery– More efficient, low cost service and redirection of effort to front line services– A focus on customer service and improving the Corporate and Shared Service experience

• Corporate and Shared Services functions are currently provided in a fragmented way across the sector, with some provided internally and some externally to departments. There is a significant variation across the clusters in the maturity of expectations, understanding, delivery and usage of these types of services.

• A key part of this reform requires the building of a whole of sector Blueprint, plans and independent benchmarking as part of the Corporate and Shared Services Reform Implementation Project.

• The outputs from this project provide guidance and a framework within which the Principal Departments can more efficiently build their Corporate and Shared Services solutions with considerable sector wide consistency and standardisation.

• This report provides the framework for the Principal Departments’ planning and transition.

1. Note: Principal Departments are those listed in schedule 1 part 1 of the Public Sector Employment and Management Act 2002

2. Note: Agencies are generally headed by a Chief Executive who reports to a Minister, and may be a part of a Principal Department or a stand alone body. The Police and Emergency Services cluster does not have a Principal Department, given the unique nature of theuniformed services

3. Note: Functions within scope will be addressed within the Blueprint but are not necessarily considered purely Corporate and Shared Services. Accountability may remain with the Department where appropriate – see details in Section 4: Functional Scope

The overall task is to develop a whole of government Blueprint that can be practically implemented by Principal Departments to support their Corporate and Shared Services Reforms.

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• The Department of Premier and Cabinet engaged Third Horizon and Hackett to provide expert advice in the development of this Corporate and Shared Services Blueprint.

• It established a cross-Government Reference Group of the leaders, of Corporate and Shared Services of the Principal Departments, to advise and make recommendation to Government.

• A collaborative has been adopted in approach the development of the Corporate and Shared Services Blueprint, combining consultation with lessons learnt from the implementation of effective Corporate and Shared Services in other jurisdictions and industries.

• Understanding of the complexity of each Department, and solicitation of views on Corporate and Shared Services solutions were achieved through high-level consultation with each Principal Department including:– A series of one on one meetings with key individuals and groups

from each of the Principal Departments– A series of one on one meetings with key individuals from current

Shared Services Providers– A number of sector level meetings with DPC, DSTA and NSW

Treasury

• Initial findings and recommendations were tested and validated via a series of workshops with Senior Officers Group (representing their respective Principal Departments) covering:– Design and Guiding Principles– Functional Scope and Operating Model Options– Shared Services Delivery Management

• A Blueprint Interim Report was then distributed to the Senior Officers Group and detailed feedback was received.

• A final workshop was conducted to review feedback and finalise outcomes for the Blueprint report.

A collaborative approach was taken to the development of the Blueprint, including consultation with all Principal Departmentsand workshops on all significant components of the Blueprint.

Blueprint Approach

APPROACH

Key Inputs

Primary Workshops

Feedback and Review

Principal Department Interviews

Shared Service Provider

Interviews

DPC, DSTA and Treasury

Interviews

Lesson Learnt (from previous

implementations)

Design and Guiding

Principles

Functional Scope and Operating Model Options

Services Delivery Management

Interim Report

Principal Department Formal Written Feedback

Senior Officers Group Feedback

Workshop

Final Report

Interim Report

Final Report

2

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DEPARTMENT CONSULTATION AND ENGAGEMENT

• One on One consultations– All Department sessions completed - December 2009

• 3 Primary Workshops– Design and Guiding Principles - 25th November 2009– Functional Scope and Operating Models – 8th December 2009– Service Delivery Management - 16th December 2009

• Interim Report– Distributed to all Departments for feedback – 23rd December 2009

• Feedback and Review– Individual feedback sessions with some departments – January 2010– Senior Officers Group Workshop – 20th January 2010

• Final Report– Final Review completed - 28th January 2009

2

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3. Design Principles

Content:

i. Objective and Design Principles

ii. Operating Model

iii. Ownership and Governance

iv. Service Delivery Management

v. Customer Engagement

vi. Funding and Pricing

vii. Benchmarking

viii. Implementation Strategy

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DESIGN PRINCIPLES - OVERVIEW

1. Note: See the Functional Decomposition slides in the Operating Model section of this report showing the functions split across Corporate Services, Shared Services and departments

Introduction:

Objectives:

Broad Definitions:1

• The definition of Corporate Services is considered to broadly include functions that are:– Strategic, policy and governance in nature and;– Unrelated to frontline and operational functions (e.g. HR, Finance

or IT).

• Shared Services are considered to broadly include functions that can be leveraged across multiple agencies or Departments and can be divided into two categories:– Business Shared Services (relating to operating or frontline

Shared Services) and;– Corporate Shared Services (relating to Shared Services within

corporate functions).

• The scope of this Corporate and Shared Service Blueprint covers only Corporate Shared Services.• The overall objective of the NSW Government and DPC is to move towards

sector wide Corporate and Shared Services. These objectives were followed by the need to build a sector wide Blueprint for Corporate and Shared Services that would further build synergies, improve efficiencies and drive as much standardisation as possible. DPC and its consultants Third Horizon and the Hackett group have worked closely with the Seniors Officers Group to develop and agree:

– The Critical Design Principles that must be delivered and optimised in the design and implementation of Corporate and Shared Services across NSW Government

– The Guiding Principles that should assist in governing and developing a consistent approach to Corporate and Shared Services for each critical element of the Blueprint

• Principal Departments will need to demonstrate that their proposed solutions adhere to the agreed principles.

• This section outlines the overall principles for the Blueprint for Corporate and Shared Services across all of the NSW Government.

• To a certain extent, the principles are intended to be option and solution agnostic – i.e. regardless of which model and option is selected it must adhere to these principles.

• This section reflects critical success factors and takes into account both:– Lessons learnt from the implementation of effective Corporate and

Shared Services in other jurisdictions and industries– The major issues and comments raised by Departments in their current

delivering and/or receiving of Shared Services

3(i)

20

CORPORATE AND SHARED SERVICES OBJECTIVES

Across Whole of NSW Government deliver:• More integrated services• Stronger customer focus• More efficient delivery of Corporate and Shared Services

Consolidation of Corporate and Shared Services to deliver:• A more streamlined and standardised Corporate and Shared Services framework

and service delivery• More efficient, low cost service and redirection of effort to front line services• A focus on customer service and improving the Corporate and Shared Service

experience

The development of Design and Guiding Principles is set in the context of the overall objectives for the sector

NSW Government Objectives

Blueprint Objectives

Blueprint Design Principles

Blueprint Guiding Principles

Critical Design Principles that must be delivered and optimised in the design and implementation of Corporate and Shared Services across NSW Government.

Guiding Principles that should assist in governing and developing a consistent approach to Corporate and Shared Services for each critical element of the Blueprint:

• Operating Model• Ownership and Governance• Service Delivery Management (including Customer Engagement)• Funding and Pricing• Benchmarking and Best Practices• Implementation Strategy

The overall objectives have been endorsed by the Directors General Executive Committee and the Government. These have been further articulated and enhanced through the Senior Officers Group and are captured in the Design Principles.

3(i)

21

• Be in the context of and aligned to, the nature and medium/long term trends of Departments' frontline services and operations.• Align to the strategic direction, current initiatives and critical trends of the Department and whole of government endorsing central direction already set

including:– Budget and financial targets– Affordability and budget/funding direction for the next four years– Shared Services providing services to no fewer than 20,000 FTE– The amalgamation and integration of agencies and bodies into clustered Principal Departments

• As a starting position, assume that all non front line and operational services are candidates for inclusion into Corporate and Shared Services.• Eliminate replicate shadow operations and duplicated functions outside of Corporate and Shared Services once service levels have become satisfactory.• Once an operating model has been selected, be mandated for an agreed term.• Take into account differences between departments, yet encourage a consistency of approach across NSW Government in delivery and levels of service.• Provide transparency and visibility of the services delivered and their cost relationship (including both operating and investment costs).• Enable performance comparison based upon transparent and consistent metrics across Corporate and Shared Service operations.• Design in capability to drive efficiency, industry best practice, continuous innovation and renewal and transition from the present mode of operation (PMO) to

the future mode of operation (FMO), returning cost savings, service and investment benefits to users and clients.• Address sector wide mobility, development and career management of staff and balance the support of regional employment, taking into account overall sector

efficiencies.• In the end state:

– Provide improved levels of service (benchmarked against the current baseline service), whilst not degrading current service during transition– Align user expectations of service (tangible and intangible) with agreed levels of service– Have services delivered centrally from the point that maximises customer service outcomes– Perform standardised delivery of service that also achieves balance with customer responsiveness and intimacy needs (standardised back office and a

customised front office)– Rectify current areas of poor service

The design and implementation of Corporate and Shared Services across NSW Government should . . .

CORPORATE AND SHARED SERVICES DESIGN PRINCIPLES

3(i)

22

• Ensure each Corporate and Shared Services function is considered individually from an end to end operating model perspective as well as its interfaces with other functions. (e.g. Finance and HR in areas such as Payroll and establishments).

• Premise the design of optimal Corporate Services operating models on all Corporate Services provided at Principal Department level, except where the function:– Is unique and critical to department and agency; and – Provides no benefit in aggregation.

• Ensure Shared Services operating models consider the impact of:– Scalability and leverage: the economy and potential dis-economy– Affordability of the integrated IT systems, processes and operations– Client business: compatibility of client base and client requirements– Service features: the specific nature of the service/function– The economic, capability or strategic benefit

• Allow resources providing Corporate and Shared Services to be physically located based upon:– The nature of the service provided and its ability to be leveraged– Client proximity requirements– A more remote model where services can be delivered to anybody, in any location from anywhere and still achieve direct customer service and

service intimacy outcomes (includes self service and automation)– Availability of local skilled labour– Ability to provide career paths

• Ensure Corporate and Shared Services are standardised as much as possible with a tailored front end and comprise:– Standardisation and consolidation of common functions and tasks– Clear service engagement model and contact points– Transparent service, performance and billing/pricing systems– Client facing relationship, planning and subject matter expert capability– Enable multi-skilling of resources to assist in the front-line as required

The design and implementation of the end state Corporate and Shared Services operating model should . . .

OPERATING MODEL – GUIDING PRINCIPLES

3(ii)

23

• Drive end to end client and provider accountability with:– Single point end to end process accountability– Client fulfilment driven success measures– Business line managers having clear information about patterns of usage and expenditure and the ability to use it to reduce costs– Proactive and continuous end to end process and service optimisation

• Support no conflict of interest or competition for resources:– Ensure roles and responsibilities do not contain inherent conflicts of interest– Ensure structural separation of resources and primary functions and accountabilities to ensure that they are not diverted to other parts of the business

as conditions change

• Ensure that roles and responsibilities for provider and client staff are clearly articulated including points of hand off and decision making.

The design and implementation of the end state Corporate and Shared Service operating model should . . .

OPERATING MODEL - GUIDING PRINCIPLES – (CONTINUED)

3(ii)

24

• Enable effective client representation and accountability in strategic decision making, service delivery influence and major issue management/resolution (in both the transition and end state periods).

• Enable Departments/agencies to access and interrogate their own data (data collected at back of house is critical for front of house operations).

• Enable effective commercially sound management of the Shared Service operations (e.g. capital and people management).

• Provide a level of independent representation in formal governance forums (whether formal Boards or Steering Committees).

• Enable seamless and effective integration of strategic planning of client Departments/agencies and the strategic planning of the Corporate and Shared Service operations.

• Provide the correct balance of transparency, accountability and responsiveness between purchaser, provider and central agency function.

• Support the objective of the corporate and Shared Service being commercially orientated and independent from the customers it serves.

• Align to the operating model option implemented. Where there is a greater degree of physical separation of Corporate and Shared Services from the business, a greater degree of formality in structure and engagement would be required.

• Include all layers of the organisational providing decision and issue resolution capabilities as close to the service as possible.

The ownership and governance model for the delivery of effective Corporate and Shared Services should . . .

OWNERSHIP AND GOVERNANCE - GUIDING PRINCIPLES

3(iii)

25

• Incorporate the discipline of a purchaser/provider model yet embrace a partnership culture and approach.

• Provide clear and effective services management for clients (departments and public) into the Corporate and Shared Service operations including clear contact channels and a focus on “getting it right the first time” by:– Having the right location, person and process first time– Standard proven technology model and support– End to end standard product choices and roadmap– Dynamic product and service development which is efficient and low cost

• Be steeped in a service excellence culture of client intimacy, understanding of client business, quality services and responsiveness to client need.

• Drive standardisation of processes, systems and service levels yet temper this with the impacts on clients.

• Explore where standardisation can be rolled up further to sector or across Principal Department levels.

• Ensure absolute clarity of roles for all parties with clear functional and service decomposition.

• Have clear mechanisms for recourse and consequence for underperformance by all parties.

• Ensure services are supported by skilled and capable resources with sector wide mobility and ongoing development and career paths.

• Enable Departments/agencies to manage their own businesses effectively through:– Transparency of underlying demand and cost drivers and the ability of Departments/agencies to influence and manage these– Direct access to timely, accurate and insightful data and information with the ability to interrogate information directly– Running a multi-year program

• Enable and support continual transformation and improvement of Corporate and Shared Services, through:– Aligning users with the agreed level of service– Achieving standard delivery of service balanced with customer intimacy

• Enable and support continuous improvement in the business through the contribution of the Corporate and Shared Services.

• Ensure the existence of a robust customer engagement model that includes capability development, account management and service management infrastructure.

The management of service delivery for effective Corporate and Shared Services should . . .

SERVICE DELIVERY MANAGEMENT - GUIDING PRINCIPLES

3(iv)

26

• Be tailored to the operating model option implemented with a greater degree of separation of Shared Services requiring a greater degree of formality in the funding and pricing model.

• Create a healthy tension between demand and supply that will drive continuous improvement.

• Provide, through visibility and value added service, an understanding to the client of the cost for services and the relationship to the services provided.

• Encompass a level of independent validation and open book transparency in the setting of recovery rates and disclosed pricing.

• Provide confidence to the client of the comparison to fair market value for the services provided (e.g. independent development and conduct of client satisfaction measures and benchmarking).

• Directly reflect the type and amount of service received with no considerable cross subsidisation between customers and services.

• Support medium to long term planning, capital funding and ability to continue to positively transform the service operation.

• Enable the alignment of department and agency funding operations to meet whole of government and Department specific long term efficiency targets (e.g. cost and budget reductions).

• Be transparent (open book) to enable a confidence and trust between centres and clients to be attained.

• Include flexibility that considers the implications of cost at different phases of maturity (consolidate, standardise, transform, steady state etc).

The funding and pricing model for the effective delivery of Corporate and Shared Services should . . .

FUNDING AND PRICING - GUIDING PRINCIPLES

3(v)

27

• Be based upon a precise common language to define activity consistently across the NSW Government.

• Ensure data captured is consistent and comparable across all government entities.

• Facilitate a consistent Central Agency data collection approach to avoid duplication and rework, whilst supporting the needs of all information users.

• Encompass metrics that are aligned with the objectives of the NSW Government and the departments within it.

• Be underpinned by a bottom up approach for data collection in order to enable early identification of improvement initiatives and greater visibility of performance.

• Recognise that challenges exist for many departments around data collection and enable a transitional approach to embedding performance measurement capability.

• Ensure that external targets selected are:– Relevant and achievable for the NSW Government and focused on the ‘vital few’ for each in-scope function– Defined based on a whole of government perspective and are re-based/adjusted for application to individual Departments/agencies according to their

own context and drivers– Adjusted over time as the external environment changes and the NSW Governments’ performance progresses

• Enable the departments to gain visibility of performance and service levels against the agreed metrics and understand how to use them to better educate end users and lower Corporate and Shared Services costs.

• Provide the central agencies with the ability to gauge relative performance between the departments against the agreed metrics.

• Embrace benchmarking so provider and clients can leverage data and drive continuous improvement across the business and centres.

• Ensure captured data is protected and compliant with the Privacy Act and other legislative regulations.

The benchmarking methodology for Corporate and Shared Services should . . .

BENCHMARKING AND BEST PRACTICES – GUIDING PRINCIPLES

3(vi)

28

• Ensure the speed of transition is aligned to the Department’s readiness for change and that greater effort is focussed on mature departments. Transitions should be faster in departments that already have mature Corporate and Shared Services operations.

• Be premised on earned credibility by delivering the promise (value for money) and growing the scope of services organically.

• Be dependent upon the state of and requirement for, the underlying people, process and technology to effectively deliver the services.

• Contain substantial change management planning, including:– Workforce planning for uplifting skill sets– Communication plans explaining to staff where and when the impacts will occur – Handling all aspects of anticipated Industrial Relation issues through consultative arrangements with relevant stakeholders – Allocating accountabilities across the stages of implementation, transition and end state– Training for clients to understanding how best to use Corporate and Shared Services

• Include transition modes of operation with careful staging and sequencing, rather than a big bang approach.

• Take advantage of opportunities during the transition period to further drive standardisation and simplification to reduce cost and complexity in the end state.

• Be underpinned by a strong implementation governance framework with clear central agency and Department roles and responsibilities.

• Incorporate a clear benefits realisation framework aligned to the ultimate objectives and guiding principles of the reform.

• Set expectations at department and agency levels that:– The full benefits from the end state may not be available during the transition period– The transition will not be easy but it is achievable– There is a sector wide sense of urgency in moving to Corporate and Shared Services

• Ensure the planning phase addresses funding and resourcing issues during the transition phase.

The implementation strategy for the rollout of Corporate and Shared Services should . . .

IMPLEMENTATION STRATEGY – GUIDING PRINCIPLES

3(vii)

29

4. FUNCTIONAL SCOPE

Content

i Guiding Principles

ii Corporate and Shared Services Functional Scope

iii Accountabilities of Corporate and Shared Services by Function

iv Exceptions where Departments/agencies remain accountable for certain Corporate and Shared Services functions

30

Objectives:

• Define the functions considered within the scope of Corporate and Shared Services.

• Allocate accountabilities within each function across Corporate or Shared Services.

• Identify ‘grey’ areas where accountabilities could sit with either Corporate or Shared Services and provide recommendations for these.

• Identify the circumstances under which accountability for Corporate or Shared functions would be required to remain within the department and agency.

Introduction:

The Functional Scope section defines which functions are considered within the scope of Corporate and Shared Services. It then broadly outlines for each function in scope, where primary accountabilities lie across Corporate and Shared Services and Departments/agencies.

FUNCTIONAL SCOPE - OVERVIEW4

31

• Ensure each Corporate and Shared Service function is considered individually from an end to end operating model perspective as well as their interfaces with other functions (e.g. Finance and HR in areas such as Payroll and establishments).

• Premise the design of optimal Corporate Services operating models on all Corporate Services provided at Principal Department level, except where the function:

– Is unique and critical to a particular department and agency within the Principal Department

– Provides no benefit in aggregation

• Be consistent with the definitions for Corporate and Shared Services:

– The definition of Corporate Services is considered to broadly include functions that are:

• Strategic, policy and governance in nature and;

• Not related to frontline and operational functions (e.g. HR, Finance or IT).

– Shared Services are considered to broadly include functions that can be leveraged across multiple agencies or Departments and can be divided into two categories:

• Business Shared Services (relating to operating or frontline Shared Services) and;

• Corporate Shared Services (relating to Shared Services within corporate functions).

– The scope of this Corporate and Shared Service Blueprint covers only Corporate Shared Services

The design and implementation of the end state Corporate and Shared Service operating model should . . .

FUNCTIONAL SCOPE - GUIDING PRINCIPLES

4(i)

32

Through the consultation process, the functional scope was refined and determined as in scope for the Corporate and Shared Services blueprint and reform.

The functions agreed as in scope are:1. Finance2. Human Resources Management 3. Industrial Relations4. Occupational Health and Safety5. Information Technology and Communications6. Contracts and Procurement7. Governance and Risk8. Executive Services9. Records and Knowledge Management10.Property, Facilities and Fleet Management11.Asset Management (Operational Assets)1

Note: Legal Services was taken out of scope of the Government Blueprint, as it was determined that the individual requirements of each department were sufficiently different that a Blueprint approach was not appropriate.

There are 11 functional areas in scope for the Corporate and Shared Services Reform and Government Blueprint. The functions of IR, OH&S, Governance & Risk and Asset Management will in most cases structurally sit outside of Corporate Services and be placed direct to the Director General.

Blueprint Scope

1. Note: It is acknowledged that Asset Management (of operational assets) is not a Corporate function but can in some instances be aggregated to the Principal Department level and so is included for the purposes of the Blueprint.

BLUEPRINT FUNCTIONAL SCOPE

Corporate Functions

“Running the business”

e.g. Finance and Human Resource Management

Business Functions

“Doing the business”

e.g. Front line service delivery – Nurses and

Policemen

Separation of Functions

Corporate Services

Policy and Control – e.g. Accounting standards

Strategy – e.g. Strategic Workforce Planning

Shared Services

Business Shared Services

e.g. Grant Process

Corporate Shared Services

e.g. Accounts Payable

Advisory & Value Add –e.g. recruitmentTransaction – e.g. payroll, accounts management

Note: Departments will consider, as part their own reform programs, business functions, particularly the middle office, and determine any collaboration or efficiencies at a Department level.

4(ii)

33

As a starting position, transactional and basic advisory activities should be provided through Shared Services; policy, control and strategic activities should be provided through Corporate Services.

ACTIVITY CATEGORIES

1. Transactional

2. Advisory &Value Add

3. Policy &Control

4. Strategy

Description

Shared Services

Corporate Services

• Relatively simple and repeatable• High volumes• Leverage economies of scale

• Advisory services• Applying professional judgement • Interpretation of policy• Issue management

• Leverage economies of scale• Leverage economies of skill• Enable Corporate Services to focus

on strategy and governance

• Policy and standards setting• Development of controls• Measurement of compliance

• Development of overall strategic objectives

• High-level, long term planning

• Critical functions for managing risk and driving the business

Examples

• Accounts Payable• Payroll• Procurement Processing

• Tendering advice and support (contract expertise)

• Recruitment profiling and screening

• Enterprise risk management• Expense policy and delegations• Contract risk assurance

• Strategic workforce planning• Financial and investment strategy

(financing, capital management)

4(ii)

34

Shar

ed S

ervi

ce

High-level mapping allocates Finance accountabilities across Corporate and Shared Services and the department/agency although all three would be involved in some aspect of the detailed end-to-end process.

FINANCE

1. Note: Delivered through out-posted model within the department/agency but owned by either the Corporate or Shared Services2. Note: This is assuming an end state where all funding comes through the Principal Department3. Note: Any ratio of government to revenue funding could exist and a case-by-case approach is needed to determine the extent of finance capability required in

the department/agency to manage the revenue streams

• Accounts and Program Payables

• Travel and expense management

• Tracking and resolution of supplier queries

• Accounts Receivable

• Collections• Customer billing

• External report generation

• Management report generation

• Tax processing • Banking and cash management

• Upload and maintenance of budgets

• General ledger accounting

• Cost and asset accounting

• Interpretation and advice on management reports1

• Budget processing

• Expense policy and delegations

• Debtors policy • External reporting responsibility

• Tax policy and management

• Treasury policy and management2

• Budget approval• Financial and

investment strategy (financing, capital management)

• Planning and performance management

• Financial policy and controls framework

• Financial compliance and management

• External reporting responsibility where required (e.g. PTE or Statutory Authority)

• IPART and ICAC pricing determination applications

• Financial and investment strategy for PTEs and semi-self funded agencies3

• Sponsorship and external funding management

Accounts Payable Accounts Receivable

General Accounting Tax Management Treasury

Management

Planning & Performance Management

Management Accounting &

Analysis

Management & Administration

Proc

ess

Tran

sact

iona

lC

orpo

rate

Ser

vice

Dep

artm

ent/

Agen

cyAd

viso

ry &

Va

lue

Add

4(ii)

35

Shar

ed S

ervi

ces

High-level mapping allocates HR, IR and OH&S accountabilities across Corporate and Shared Services and the Department/agency although all three would be involved in some aspect of the detailed end-to-end process.

HUMAN RESOURCES MANAGEMENT

1. Note: Industrial Relations is a significant function within NSW Government Departments and may sit outside of the typical Human Resources function2. Note: OH&S and Operational Safety are not typically considered Human Resource functions in NSW Government Departments but have been included here for

ease of demonstration3. Note: Human Resources advice will sit with the Corporate function in a multi-tenanted model

• Recruitment processing

• Position administration

• eRecruitment

• Generic and management training and development services

• Total rewards administration

• Payroll processing• Personnel

administration services

• Data management, reporting and compliance

• Case and personnel issue administration

• Selection Screening • Case and personnel issue advice3

• Strategic workforce planning

• Position and salary analysis

• Training and development strategy and planning

• Benefits policy and strategy

• Rewards analysis and planning

• Personnel data security and privacy policy

• Case and personnel issue strategy and management

• HR lifecycle strategy and policy (including culture)

• Specialist recruitment (e.g. volunteers, magistrates, senior executives)

• Operational training and development

Proc

ess

Tran

sact

iona

lC

orpo

rate

Ser

vice

Dep

artm

ent/

agen

cyAd

viso

ry &

Va

lue

Add

Recruitment & Sourcing Training & Development

Benefits & Rewards

Management

Employee Relations

Management & Administration

Payroll & Employee Services

• IR strategy and planning

• Discipline and protected disclosures

• Statutory and mandatory reporting

• PSW and reform management

• OHS planning and policy

• Industrial relations management, advice and support

• Policy for statutory requirements

• Policy where self-insurer

• Operational Safety

Industrial Relations1

OH&S & Operational

Safety2

4(ii)

36

Shar

ed S

ervi

ces

High-level mapping allocates ICT accountabilities across Corporate and Shared Services and the department /agency although all three would be involved in some aspect of the detailed end-to-end process.

INFORMATION TECHNOLOGY AND COMMUNICATIONS

1. Note: In a multi-tenanted model Enterprise Architecture will initially be owned by Corporate Services of the customer Principal Department and may transition to the Shared Services provider over time

2. Note: The CIOG is responsible for the broader NSW Government ICT strategy

• Service support (end to end)

• Infrastructure management

• Service support (end to end)

• Application maintenance

• Enterprise architecture planning1

• Emerging technologies research and advice

• Project Management• Requirements gathering• Application development

and implementation• Infrastructure

development

• Disaster recovery planning and execution

• ICT Strategy2

• ICT investment prioritisation

• Quality assurance and risk management

• ICT standards and policy

• Membership of sector wide CIO forum

• Specialist operational applications (development, maintenance and support)

Proc

ess

Tran

sact

iona

lC

orpo

rate

Ser

vice

Dep

artm

ent/

agen

cyAd

viso

ry &

Va

lue

Add

Planning & Strategy Application Management

Technology Infrastructure IT Risk ManagementProject Delivery Management &

Administration

4(ii)

37

Shar

ed S

ervi

ces

High-level mapping allocates Contracts and Procurements accountabilities across Corporate and Shared Services and the department/agency although all three would be involved in some aspect of the end-to-end process.

CONTRACTS AND PROCUREMENT1

1. Note: The State Contracts Control Board is the provider of contracts and procurement services to NSW Government

• PO processing • Supplier data management

• Catalogue maintenance and management

• Sourcing advice and support

• Tendering advice and support – contract expertise

• Performance management and reporting

• Strategic sourcing (Department wide, market analysis and sourcing strategy)

• Contract risk assurance • Procurement and contracting policy and conditions

• Department/agency specific sourcing strategy

• Requisitioning• Goods receipting

• Tendering

Proc

ess

Tran

sact

iona

lC

orpo

rate

Ser

vice

Dep

artm

ent/

agen

cyAd

viso

ry &

Va

lue

Add

Demand Identification & Sourcing Strategy

Selection & Order Processing

Supplier Relationship Management Contract Management Management &

Administration

4(ii)

38

Shar

ed S

ervi

ces

Broad high-level mapping allocates accountabilities across Corporate and Shared Services and the department/agency.

GOVERNANCE AND RISK, EXECUTIVE SERVICES AND RECORDS AND KNOWLEDGE MANAGEMENT

• Library• Records and document

management services

• Corporate governance• Quality management• Enterprise risk management• Environmental health and safety• Internal Audit

• Government affairs and ministerial correspondence

• Media and public relations• Internal communications• Corporate and business planning• GIPA Act management and

response

• Knowledge and information management strategy

• Risk management and internal audit as required by statutory obligations or concentration of risk

• Business planning for PTE and brands

• Ministerial correspondence where reporting directly to minister

Proc

ess

Tran

sact

iona

lC

orpo

rate

Ser

vice

Dep

artm

ent/

agen

cyAd

viso

ry &

Va

lue

Add

Governance & Risk Executive Services Records & Knowledge Management

4(ii)

39

Shar

ed S

ervi

ces

Broad high-level mapping allocates accountabilities across Corporate and Shared Services and the department/agency although all three would be involved in some aspect of the detailed end-to-end process.

PROPERTY AND FACILITIES AND FLEET MANAGEMENT1

1. Note: NSW State Fleet and the State Property Authority are the Shared Services Providers to NSW Government

• Property fit-outs and relocations

• Building maintenance and cleaning

• Security• Cafeteria and catering

services• Mail service

• Strategic sourcing and purchase

• Fleet management

• Property portfolio strategy (e.g. buy vs. lease)

• Property, facilities and fleet policy

• Usage analysis and administration

Proc

ess

Tran

sact

iona

lC

orpo

rate

Ser

vice

Dep

artm

ent/

agen

cyAd

viso

ry &

Va

lue

Add

Planning & Demand Management

Acquisition & Replacement Project Delivery Management &

AdministrationMaintenance &

Monitoring

4(ii)

40

Shar

ed S

ervi

ces

Broad high-level mapping allocates Asset Management accountabilities across the Principal Department, Shared Services and the department/agency.

ASSET MANAGEMENT1 - OPERATIONAL ASSETS

1. Note: It is acknowledged that Asset Management (of operational assets) is not a Corporate function but can in some instances be aggregated to the Principal Department level and so is included for the purposes of the Blueprint

• Project Planning (including business cases)

• Project Management

• Strategic asset management

• Capital Investment prioritisation

• Asset standards and policy

• Engineering Authority• Design

• Asset operations and maintenance

Proc

ess

Tran

sact

iona

lPr

inci

pal D

epar

tmen

tD

epar

tmen

t/ag

ency

Advi

sory

&

Valu

e Ad

d

Asset Planning Acquisition & Build Maintenance & Monitoring

Management & Administration

4(ii)

41

Content:

i. Guiding Principles

ii. Corporate and Shared Services Functional Delivery Models

iii. Corporate Services Operating Models

iv. Shared Services Operating Models

5. OPERATING MODEL - OVERVIEW

42

OPERATING MODEL - OVERVIEW

Objectives:

• Define a set of operating models for both Corporate and Shared Services.

• Articulate benefits and considerations of each model and make recommendations incorporating feedback from consultations.

• Identify in what situations each model would be most appropriate given the differing characteristics of each Principal Department.

• Define the functional delivery models to be used within Corporate and Shared Services and articulate benefits and considerations of each.

Introduction:

The Operating Model is the overall business schematic consisting of operational constructs that make up the major operating units for Corporate and Shared Services. It also defines the relationship between these units and their customers.

The Corporate and Shared Services operating models are highly related but have been addressed as separate components to facilitate a building block approach to the final detailed design considering the possibilities of either in-house or multi-tenanted Shared Services designs.

5

43

• Ensure optimal Shared Services operating models by considering the impact of:– Scalability and leverage: the economy and potential dis-economy– Affordability of the integrated IT systems for HR and Finance– Client business: the compatibility of client base and client requirement– Service features: the specific nature of the service/function– The economic, capability or strategic benefit

• Physically locate resources providing Corporate and Shared Services based upon:– The nature of the service provided and its ability to be leveraged– The local proximity requirements of the client– A more remote model where services can be delivered to anybody, in any location from anywhere and still achieve direct customer service and

service intimacy outcomes (includes self service and automation)– Availability of local skilled labour– Ability to provide career paths

• Ensure Corporate and Shared Services are standardised as much as possible with a tailored front end and comprise:– Standardisation and consolidation of common functions and tasks– Clear service engagement model and contact points– Transparent service, performance and billing/pricing systems– Client facing relationship, planning and subject matter expert capability– Enable multi-skilling of resources to assist in the front-line as required

The design and implementation of the end state Corporate and Shared Services operating model should . . .

OPERATING MODEL - GUIDING PRINCIPLES

5(i)

44

• Drive end to end client and provider accountability with:– Single point end to end process accountability– Client fulfilment driven success measures– Business line managers having clear information about patterns of usage and expenditure and the ability to use it to reduce costs– Proactive and continuous end to end process and service optimisation

• Prevent conflict of interest and competition for resources by:– Ensuring roles and responsibilities do not contain inherent conflicts of interest– Facilitating structural separation of resources, primary functions and accountabilities to ensure that they are not diverted to other parts of the business

as conditions change

• Ensure that roles and responsibilities for provider and client staff are clearly articulated including points of hand off and decision making.

The design and implementation of the end state Corporate and Shared Services operating model should . . .

OPERATING MODEL - GUIDING PRINCIPLES

5(i)

45

There are a number of different Corporate and Shared Services functional delivery models which can be applied.

FUNCTIONAL DELIVERY MODELS

‘OUTPOSTED’ ‘CENTRALISED’

‘DECENTRALISED’ ‘CO-LOCATED’

Geographical Aggregation

Reporting Structure

Aggregation

Single

Multiple

Multiple Single

‘Centres of Excellence’ and ‘Communities of

Practice’ may apply to

geographically disaggregated

models

• There are four main delivery models ranging from fully centralised (which offers the greatest efficiency opportunities) to fully decentralised (which comes with a cost premium).

• The four models are each represented in one of the quadrants of the two by two matrix to the left, with axis's of:– Reporting Structure Aggregation– Geographical Aggregation

• Reporting Structure Aggregation describes the number of reporting lines a particular function is divided into, for example: – Where all of finance reports through to the CFO, the reporting structure

aggregation is single– Where finance roles report directly into a department or agency the

reporting structure aggregation would be multiple

• Geographical Aggregation describes the number of physical locations a function is positioned in.

• Increasing both Reporting Structure Aggregation and Geographical Aggregation enables increased of economies of scale.

• There are two sub models that are geographically dispersed and have a matrix reporting structure where the primary reporting line is not related to the specific function:– ‘Centres of Excellence’ – ‘Communities of Practice’

5(ii)

46

A combination of the Out posted, Centralised and Centre of Excellence models enables greatest benefits for economies of scale whilst balancing customer needs.

APPLICATION OF MODELS

Model Definition Advantages and Considerations When to use

Outposted• Report to single central point• Geographically/organisationally

devolved

• Maintains high levels of customer intimacy

• Leverages skill base synergies across geographically dispersed functions

• Typically this model is used for advisory type services including management accountants/business advisory and HR personnel issues advice

Centralised

• Report to single central point• Geographically and

organisationally centralised

• Enables greatest benefit from economies of scale

• Appropriate for corporate functions that provide:- Direction, guidance and strategic focus- Overarching, group level activities- Enterprise wide applicable strategies

• This model is also appropriate for transactional functions such as Accounts Payable and Payroll

Co-located

• No single central reporting point• Geographically and

organisationally centralised

• Enables some benefit from economies of scale (e.g. office space)

• Project based functions such as IT project delivery

Decentralised

• No single central reporting point• Geographically/organisationally

devolved

• Limited/no opportunities to leverage economies of scale

• Premium cost option

• This model is not aligned to the core design principles of cost and should be avoided unless:

- The function is entirely unique to an agency, or;- There is no opportunity for synergy.

Centre of Excellence

• Cross-functional groups that focus on specialist areas without a specific organisational structure

• Managed in a formal manner (e.g. performance metrics, training)

• Captures skill rather than scale synergy• Drives standardisation and competency

without formal reporting line structure

• For high expertise functions where synergy is available but needs to be retained by the organisation e.g. Knowledge Management

5(ii)

47

• The scope of functions and the relevant accountabilities within each function where defined within the Functional Scope section of the Blueprint (with options around a number of ‘grey’ areas such as advice/interpretation of management reports).

• A range of structural/reporting options have been defined for each Corporate function and while these options are primarily mutually exclusive, some options have implications for other functions.

• Three sample Corporate structures have been developed as a starting point for detailed design for each Principal Department:– Typical Principal Department Corporate Structure– Finance, HR or ICT Heavy Corporate Structure– Asset Heavy Corporate Structure

The functional building blocks and accountabilities have been defined, and structural options provided, to facilitate the design of a Principal Department's Corporate Services.

CORPORATE SERVICES OPERATING MODEL

5(iii)

48

Principal Department Corporate Services will have the following accountabilities within each of the defined Corporate functions.

CORPORATE ACCOUNTABILITIES

Finance

• Financial policy and controls framework

• Financial and investment strategy (financing, capital management)

• Planning and performance management

• Budgeting process

• Financial compliance and management

• Treasury and tax policy and management

• External reporting responsibility

HR

• HR lifecycle strategy and policy (including culture)

• Strategic workforce planning

• Case and personnel issue strategy and management

• Personnel data security and privacy policy

• Total rewards planning

• Training and development strategy and planning

• Strategic workforce planning

IR

• Industrial Relations strategy and planning

• Discipline and protected disclosures

• Statutory and mandatory reporting

• PSW and reform management

OH&S

• OH&S planning and policy

ICT

• ICT strategy

• ICT investment prioritisation

• ICT standards and policy

• Quality assurance and risk management

Contracts & Procurement

• Strategic sourcing (Department wide, market analysis and sourcing strategy)

• Procurement and contracting policy and conditions

• Contract risk assurance

Principal Department Corporate Services

5(iii)

49

Principal Department Corporate Services will have the following accountabilities within each of the defined Corporate functions.

CORPORATE ACCOUNTABILITIES

Governance & Control

• Corporate governance

• Quality management

• Enterprise risk management

• Environmental health and safety

• Internal Audit

Executive Services

• Government affairs and ministerial correspondence

• Media and public relations

• Internal communications

• Corporate and business planning

• GIPA Act management and response

Property & Facilities Mgmt

• Property portfolio strategy (e.g. buy vs lease)

• Property, facilities and fleet policy

Operational Asset Management

• Strategic asset management

• Capital Investment prioritisation

• Asset standards and policy

Records & Knowledge

• Knowledge and information management strategy

Principal Department Corporate Services

5(iii)

50

A range of reporting options have been defined for each Corporate function and while primarily mutually exclusive some options have implications for others.

CORPORATE FUNCTIONS AND STRUCTURE

Function Organisational Structural Options and Rationale

Corporate Services

1. Reports to DG: role exists based on the spans of control of the DG and typically oversees most of the Corporate Services (andShared Services in an in-house service centre or functionally aligned model)

Finance1. Reports direct to DG: where the Corporate finance function is of particular importance to the Principal Department or DG2. Reports to Corporate Services: a critical function requiring leadership at this level (at a minimum)

Human Resources Management

1. Reports direct to DG: where the HR management function is of particular importance to the Principal Department or DG2. Reports to Corporate Services: a critical function requiring leadership at this level

Industrial Relations

1. Reports direct to DG: in large Principal Departments 2. Reports to Corporate Services: in smaller Principal Departments the Industrial Relations function would report to Corporate

Services, potentially operating as a single function with HR

OH&S1. Reports to Governance and Risk: aligned with the role and accountabilities of the Governance and Risk function

ICT1. Reports direct to DG: where the ICT function is of particular importance to the Principal Department or DG2. Reports to Corporate Services: a critical function requiring leadership at this level

Governance and Risk

1. Reports to DG: mandated for some areas of Governance and Risk e.g. Internal Audit, Reporting and Compliance

5(iii)

51

A range of reporting options have been defined for each Corporate function and while primarily mutually exclusive some options have implications for others.

CORPORATE FUNCTIONS AND STRUCTURE

Function Organisational Structural Options and Rationale

Executive Services

1. Reports to DG: enables direct access and responsiveness of function to DG2. Reports to Corporate Services: provides an option to reduce direct reports to the DG managing spans of control3. Reports to Service Delivery/Strategy: large proportion of effort (e.g. ministerial communications and media) relates to the front line

services rather than Corporate so this option fosters that relationship

Contracts and Procurement

1. Reports to Finance: skill set synergies around the financial skills for contract and procurement analysis. May be required from a spans and layers perspective for Corporate Services

2. Reports to Corporate Services: as part of Corporate Services

Records and Knowledge

Management

1. Reports to CIO group: to facilitate alignment with overall information and technology roadmap but risks tending to a IT only focus2. Reports to Corporate Services: as part of Corporate Services3. Reports to Executive Services: an option to facilitate greater alignment with Departments/agencies where Executive Services

reports to Service Delivery/Strategy

Property and Facilities

Management

1. Reports to Asset Management: significant skill set synergies and potential overlap of responsibilities2. Reports to Corporate Services: as part of Corporate Services

Asset Management

1. Reports to DG: where a Principal Department has a substantial asset base or requires particular focus on asset management2. Remains with the department or agency (individually or centre of excellence): enables leverage of existing skills set

5(iii)

52

For a typical Principal Department, this sample structure is a starting point for the development of a Corporate structure.

SAMPLE STRUCTURE – TYPICAL PRINCIPAL DEPARTMENT

1. Note: Front-line Service Delivery is out of scope for this Blueprint and the structure represented here is for demonstration purposes only – these functions could be structured in any number of ways e.g. by service line or region

HRFinance ICT

DG

Service Delivery 2

Service Delivery 11

Service Delivery 3

Corporate Services

Executive Services

Contracts & Procurement

Records & Knowledge

Property & Facilities

Asset Management

Governance & Risk

Asset Management

Asset Management

IR

OH&S

Asset Management

Principal Department/agencyCorporate ServiceAggregated Non-Corporate

5(iii)

53

In the case that a Principal Department has a particular requirement for either Finance, HR or ICT to be elevated from the Corporate Services group, this sample structure provides a starting point.

SAMPLE STRUCTURE – STRONG FUNCTIONAL REQUIREMENT

1. Note: Front-line Service Delivery is out of scope for this Blueprint and the structure represented here is for demonstration purposes only – these functions could be structured in any number of ways e.g. by service line or region

HR

Finance

ICT

DG

Corporate Services

Contracts & Procurement

Records & Knowledge

Asset Management

Governance & Risk

Asset Management

Asset Management

IR

OH&S

Asset Management

• In cases where either Finance, HR or ICT are of particular importance to the Principal Department or Director General there are two structural options to address this need:

1. Elevate the function to report directly to the DG and sit separately from Corporate Services

2. Elevate the function lead into a shared role as Head of Corporate Services and Head of the function (e.g. the CFO is also theHead of Corporate Services)

Executive Services

Property & Facilities

Service Delivery 2

Service Delivery 11

Service Delivery 3

Principal Department/agencyCorporate ServiceAggregated Non-Corporate

5(iii)

54

Where a Principal Department has a large asset base or asset management is of particular importance, this sample structure is a starting point for the development of the Corporate structure.

SAMPLE STRUCTURE – LARGE ASSET BASE

1. Note: Front-line Service Delivery is out of scope for this Blueprint and the structure represented here is for demonstration purposes only – these functions could be structured in any number of ways e.g. by service line or region

HRFinance ICT

DG

Corporate Services

Records & Knowledge

Property & Facilities

Governance & Risk IR

OH&S

Asset Management

Executive Services

Property & Facilities

Service Delivery 2

Service Delivery 11

Service Delivery 3

Principal Department/agencyCorporate ServiceAggregated Non-Corporate

5(iii)

55

• A decision tree has been developed to assist Principal Departments identify the most appropriate Shared Services operating model.

• The decision tree covers all the main options in relation to a Shared Services operating model (however many variations or combinations are possible).

• Through the consultation process with each of the Principal Departments, the full list of options has been narrowed to two preferred approaches.

• The preferred model for an in-house Shared Services operation is:– Model 1: Service Centre model1 supported by a move to Model 6: Wholesale ICT Model1

• The preferred model for the multi-tenanted2 Shared Services Provider are:– Model 5: Single Full Suite Service Provider1 supported by a move to Model 6: Wholesale ICT Model1

• The fundamental decision point for the operating model is the choice between Principal Department in-house or multi-tenanted and is driven by scale/critical mass and considering uniqueness and risk.

• In the case of an in-house model, the next key decision point revolves around separation of duties between strategy/policy and service delivery (of Corporate and Shared Services).

• In the case of a multi-tenanted model, the key decision relates to the operating structure of the external Shared Services operation(s) i.e. single full suite service provider with the option of a wholesale ICT extension through to specialised provider per service.

A range of Shared Services operating models have been identified and then narrowed down through the consultation period to a number of preferred models.

SHARED SERVICES OPERATING MODEL

1. Note: Models defined later within this section2. Note: A multi-tenanted Shared Services provider is one that provides services to more than one Principal Department

5(iv)

56

The decision tree, covering all the main options in relation to a Shared Services operating model, has been developed to assist Principal Departments identify the most appropriate operating model.

SHARED SERVICES DECISION TREE

Should a Principal Department have an in house Shared Services

operation? Considerations:• Scale/critical mass• Skill sets• Uniqueness• Risk

Should Shared Services delivery be separated

from policy and strategy?

Should all Shared Services be delivered by

a single entity?

Should all Shared Services be delivered

centrally?

Yes Yes

No

Service Centre Model

Functional Alignment Model

‘Stand-alone’ Operation Model

Best in Class Delivery Model

Yes

No

Yes

No

Considerations:• Seamless engagement with

function (Corporate Services (CS) and Shared Services (SS) as one)

• Separation of duties• Conflict of interests• Scale and overheads

In-house

Multi-TenantedCorporate Services primary relationship

manager

Shared Services Provider

Principal Department

No

Single Full Suite Service Provider

Wholesale ICT Model

Best in Class Delivery Model

“Consider a group of departments”

Considerations:• Resource balancing and

optimisation• Functional expertise

overlap (advisory vs. CS)

FinanceICT HR

DG

CS Agency 2

Agency 1

Agency 3

Service Centre

Business Corporate Services Shared Services

FinanceICT HR

DG

Agency 2

Agency 1

Agency 3

FinanceICT HR

CS

FinanceICT HR

DG

Agency 2

Agency 1

Agency 3

Shared Services CS

FinanceICT HR

DG

CS

SS 2SS 1 SS 3

Agency 2

Agency 1

Agency 3

FinanceICT HR

DG

CS Agency 2

Agency 1

Agency 3

Service Centre

Wholesale ICT Inf rastructure

Multi-tenanted Service Delivery

Department Department

In-house Service

Delivery 1

Department

In-house Service

Delivery 1

Department

Multi-tenanted Full Suite Shared Service Operation

Department DepartmentDepartment Department

Considerations:• Core expertise of agencies

1

2

3

4

5

6

7

Model

Best In Class

Service 1

DepartmentDepartmentDepartmentDepartment

Best In Class

Service 2

Best In Class

Service 3

Best In Class

Service 4

5(iv)

57

The fundamental decision point for the operating model is the decision between Departmental in-house and multi-tenanted services and is driven by a range of factors such as scale/critical mass and uniqueness.

IN-HOUSE OR MULTI-TENANTED

In-house Multi-tenanted

>20,000 FTE <20,000 FTE

Key Considerations

1. Does the Principal Department have the scale/critical mass to achieve benefits from a Single Shared Services operation?

2. Does the Principal Department have the skill sets to achieve benefits from a single shared service operation?

3. Are the identified Shared Service functions performed within the Principal Department fundamentally different to those performed by other Principal Departments?

4. Will an externally provided Shared Services present an unacceptable increase to risk associated with delivering front line services within the Principal Department?

Yes No

Yes No

Yes No

For a Principal Department to select an in-house Shared Service model, it must meet the primary scale/critical mass criteria as a minimum.

5(iv)

58

• UK Government is in the process of deploying a broad shared and Corporate Services reform following the Gershon Review in 2004.

• The efficiency review highlighted the need for large scale change with up to £20bn of savings available across 1,300 Departments grouped into nine sectors.

• Smaller agencies are required to receive service from larger agencies to reduce duplication of functionality and associated cost to maintain and run services.

• 20,000 has been set as the minimum FTE requirement to deploy an independent Shared Service with 50,000 being the optimum.

• The Ministry of Defence’s Shared Service reform is expected to save £300m over 10 years.

It is widely accepted within industry that economies of scale can be leveraged for Shared Services and the benefits increase where critical mass is achieved.

1. UK Cabinet Office http://www.cabinetoffice.gov.uk/2. Note: It is acknowledged that FTE as a proxy for scale relates most accurately to functions such as HR or ICT desktop support and may not be the most relevant

scale metric in all cases. However as the Shared Services operations will not be split by functional type, number of FTE will be used as the overall guiding metric for scale

3. Source: Macquarie Group led consortium for Wales and West Gas business UK

SCALE/CRITICAL MASS

UK Shared Services Experience1

• Typical common cost components of an ERP implementation; software, consulting, hardware, people, training.

• Leveraging the same platforms, people and processes will:– Reduce overall implementation cost

(software, hardware and consulting) – Increase the adoption of standard

process and supporting training materials

– Reduce ongoing infrastructure operation costs

– Simplify future improvement initiatives

• Department specific configuration/customisation requirements are critical to project success but should be considered in balance with efficiency objectives.

Deployment Fixed and Variable Costs

A decision has been made to set the guideline in relation to scale/critical mass based on a Principal Department's number of FTEs being more than 20,000.2

• Research across a range of industries clearly demonstrates a correlation between support costs and company size.

• The analysis included 18 companies from the Australian and US Gas Distribution industry and 22 UK Water Companies.

• The analysis used a number of proxies for scale including revenue, total operating costs and number of customers. All demonstrated the correlation between support costs and company size.

Shared Service Economies of Scale3

Support Costs vs. Operating Costs3

R² = 0.635

R² = 0.5483

-

0.1

0.2

0.3

0.4

0.5

0.6

0.7

-

10

20

30

40

50

60

- 200 400 600 800 1,000 1,200 1,400 Supp

ort C

ost p

er $

1m O

pera

ting

Cos

t ($

m)

Supp

ort C

osts

($m

)

Total Operating Costs ($m)

Support Costs Support Costs per $m Operating Cost

5(iv)

59

The preferred option for in-house Shared Services is the Service Centre model, balancing single accountability for Shared and Corporate Services with the partial separation of control and service delivery.

Model Structure

MODEL 1: SERVICE CENTRE

Advantages:

• Provides single point of accountability for all Corporate and Shared Services, while maintaining some separation between policy and delivery.

• Facilitates the creation of a seamless interface for business/agencies into functions rather then a two way relationship with both Corporate and Shared Services.

• Enables ability to leverage resources and Shared Service management skills within the service centre across multiple functions.

Challenges:

• Corporate Services dual hatted relationship to the business as a controller and service provider.

• Difficult to remove cost across the Shared Service functions.

FinanceICT HR

DG

CS Agency 2Agency 1 Agency 3

Service Centre

Description/features:

• Head of Corporate Services oversees both Corporate and Shared Services Service Centres.

• Shared Services are provided through a ‘service centre’ which sits separately from the Corporate Services.

• Typically the head of each Corporate Service will have dotted line responsibility to the relevant function within the service centre while the head of the service centre has these functions as direct reports.

5(iv)

60

The primary benefit of the functional alignment model is the seamless interface into each Corporate/Shared function however it limits the Department's ability to leverage economies of scale across the Shared Services.

Model Structure

MODEL 2: FUNCTIONAL ALIGNMENT

FinanceICT HR

DG

Agency 2Agency 1 Agency 3

FinanceICT HR

CS

Advantages:

• Provides single point of accountability for all Corporate and Shared Services.

• Provides a seamless interface for business/agencies into functions rather then a two way relationship with both Corporate and Shared Services.

• Generates functional depth of experience in resources.

• Leverages functional expertise and management knowledge.

Challenges:

• Functional heads wear two ‘hats’, being responsibly for policy as well as service delivery which can lead to conflicts of interests.

• Provides limited ability to leverage resources and management skills across functions for transactional and basic advisory functions.

• Tendency for urgent operational issues to take priority over less urgent but important strategic work.

Description/features:

• Head of Corporate Services oversees both Corporate and Shared Services.

• Corporate and Shared Service are functionally aligned, e.g. financial policy and strategy as well as transactional service delivery will sit under the Head of Finance.

• This model may also be considered as a transitional step before further consolidation of Shared Services.

5(iv)

61

Stand-alone Shared Services provides a clear separation of duties between policy and service delivery but a major drawback is the three-way relationship created between Corporate, Shared Services and Department/agency.

Model Structure

MODEL 3: STAND-ALONE OPERATION MODEL

FinanceICT HR

DG

Agency 2Agency 1 Agency 3Shared Services CS

Advantages:

• Provides a clear and distinct differentiation and separation of duties between the policy and delivery aspects of each function.

• Enables ability to leverage resources and Shared Service management skills within the Shared Service operation across multiple functions.

Challenges:

• Decreases the ability of Corporate Services to ensure strategy and policy is implemented, as the main formal relationship exists between the customer and the Shared Services Provider, independent of Corporate Services.

• Potential to create ambiguity around accountability for end-to-end functions and outcomes across Corporate and Shared Services business.

• Agencies/business are required to maintain two relationships and may lack clarity of who is responsible between Shared and Corporate Centres.

• Creates an additional report for the DG.

• Creates greater potential for escalation of issues between Shared and Corporate Service centres to DG.

Description/features:

• Shared Services group exists separately from Corporate Services and the heads of each report directly to the DG.

5(iv)

62

The Best in Class Delivery Model is not used in isolation for all Shared Services but provides an option for specific functions that could be provided most efficiently and effectively through Department/agency.

Model Structure

MODEL 4: BEST IN CLASS DELIVERY MODEL

FinanceICT HR

DG

CS

SS 2SS 1 SS 3

Agency 2Agency 1 Agency 3

Advantages:

• Leverages existing skills and resources.

Challenges:• Agencies wear two ‘hats’, being responsibly for front line services as well

as service delivery which can lead to conflicts of interests (e.g. quality of Shared Service provision will deteriorate if front line services need additional attention).

• Creates additional overheads in relation to service delivery management (e.g. pricing and costing, service agreements etc need to be created in each case).

• Provides limited ability to leverage resources and management skills across functions for transactional and basic advisory functions.

• Agencies have multiple relationships to manage with multiple Shared Service providers.

Description/features:

• Head of Corporate Services reports directly to the DG.

• Shared Services are delivered from within the Department or agency that is best suited to deliver the service. That is the Department/agency has:

• The right/best skill sets and resources

• Invested in and developed the infrastructure

• Appropriate geographical location

• Typically this model is not used in isolation but in combination with any of the other in-house models.

• This model may also be used as a transitional step before further consolidation of Shared Services.

5(iv)

63

For a Principal Department that receives its services from an external service provider, the primary relationship with the provider will be managed through Corporate Services.

Model Structure – Corporate Interface

1. Note: A multi-tenanted Shared Service provider is one that provides services to more than one Principal Department

MULTI-TENANTED1 SHARED SERVICE MODEL

• In a multi-tenanted model, Shared Services are provided to agencies in more than one Principal Department.

• The multi-tenanted option enables the aggregation of Principal Departments to create large enough volumes that economies of scale can be leveraged within the Shared Services provided.

• It is essential that the Pricing/Funding of such a model channels these benefits back to the Principal Departments through reductions in pricing/costing.

• Where a multi-tenanted model is implemented, the key decision options relate to the structure of the external Shared Service operation.

• The options for the Shared Service provider in the multi-tenanted model are:– Model 5: Single Full Suite Service Provider– Model 6: Wholesale ICT Model– Model 7: Best in Class Delivery Model

• From a Principal Department's point of view the primary consideration between the models is the number of relationships to be maintained, with multiple relationships and service delivery frameworks required for the Best in Class Delivery Model.

• The preferred models for the multi-tenanted Shared Services Provider are:– Model 5: Single Full Suite Service Provider – Model 6: Wholesale ICT Model (as an extension of Model 5)

FinanceICT HR

DG

CS Agency 2Agency 1 Agency 3

ServiceCentre

Description/features:

• Corporate Services manages the primary relationship with the external service provider.

• Corporate functional heads (e.g. CFO, CIO) maintain service specific relationships with service leads in the Shared Service operation.

• The Shared Services centre provides service directly to end users within the Department/agency.

Services provided by external Department

5(iv)

64

The Single Full Service Suite option enables the leveraging of resources and Shared Service management skills within the Shared Service operation across multiple functions and customers.

Model Structure

MODEL 5: SINGLE PROVIDER

Multi-tenanted Full Suite Shared Service Operation

Department DepartmentDepartment Department

Advantages:

• Maximises economies of scale and resource fluidity.

• Enables ability to leverages resources and Shared Service management skills across multiple functions and customers.

• Provides ability to address demand fluctuations through resource levelling across customers and cross skilling across functions.

• Infrastructure investments are reduced on a per customer basis enabling improved refresh rates and better quality.

• Cross cultivation of best practice and lessons learned across customers.

Challenges:

• Ability to maintain an intimate, responsive relationship between provider and customer.

• Requirement of more formal Service Delivery Framework and associated recourses to manage relationship including:– Service catalogue and detailed end to end process accountability – Service level agreements– Transparent and agreed pricing and funding model– Meaningful best practices and reporting– Demand planning to ensure alignment with customers– Issue management

Description/features:

• Multi-tenanted Shared Services are provided by a single, full suite service provider to a range of Principal Departments.

5(iv)

65

The Wholesale ICT Infrastructure model enables use of a single ICT infrastructure across the multi-tenanted and in-house Shared Service providers, leveraging the large capital investment.

Model Structure

MODEL 6: WHOLESALE ICT INFRASTRUCTURE

Wholesale ICT Infrastructure

Multi-tenanted Service Delivery

Department Department

In-house Service

Delivery 1

Department

In-house Service

Delivery 2

Department

Advantages:

• Creates greater leverage of ICT infrastructure (which is a significant proportion of Shared Services costs) across multiple Principal Departments and Shared Services delivery operations.

• Infrastructure investments are reduced on a per customer basis enabling improved refresh rates and better quality.

• Enables ability to leverage resources and Shared Service management skills within the Shared Service operation across multiple functions and clients.

• Can be developed over time as an extension of Model 5: Single Full Service Suite Provider.

Challenges:

• Management of additional hand-offs and relationships between wholesale ICT provider, service delivery and final customer.

• Similar set of challenges as experienced in the ‘Multi-tenanted’ provider model including intimacy of the relationship and need for a formal Service Delivery Framework.

Description/features:

• Wholesale ICT infrastructure is provided to a number of Shared Service delivery operations (either in-house or multi-tenanted) by a single provider.

• Services are then delivered by the respective providers either in-house or to multiple customers.

• The Wholesale ICT provider may or may not be the same operation as the multi-tenanted service delivery operation.

5(iv)

66

A Best in Class Delivery Model while potentially providing better service through specialisation, adds significant complexity and overhead in the management of customer/provider relationships.

Model Structure

MODEL 7: SPECIALIST PROVIDER

Best in Class

Service 1

DepartmentDepartmentDepartmentDepartment

Best in Class

Service 2

Best in Class

Service 3

Best in Class

Service 4

Advantages:

• Leverages existing skills and resources (where delivered through a Principal Department).

Challenges:

• Fragments accountability for Shared Services and management of additional hand-offs and relationships for Principal Departments.

• Not typically aligned to Principal Department core business.

• Similar set of challenges as experienced in the ‘Multi-tenanted’ provider model including intimacy of the relationship and Service Delivery Framework on multiple fronts.

Description/features:

• Shared Services are delivered by specialist providers, either by a specific Shared Service operation or a Principal Department with the appropriate skills and resources.

• Model is relevant at a Departmental level (e.g. different business units/agencies providing services to other groups within their Principal Department) and at a Government level (e.g. different Principal Departments providing services that are aligned to their core business to all other Principal Departments).

5(iv)

67

The preferred operating model for an in-house operation is the Service Centre model and for a multi-tenanted operation is the Single Full Suite Provider, both transitioning to the Wholesale ICT option.

SUMMARY

Set Up Preferred approach Description

In-House

• The preferred approach for in-house Shared Services is the Service Centre model.

• This model could be combined with a Wholesale ICT model over time.

Multi-tenanted

• The preferred approach for multi-tenanted is the Single Full Service Suite provider with the option of transitioning to a Wholesale ICT Infrastructure model.

Exceptions

(Where service not offered by

Shared Service provider)

• Where a particular service is not offered by the Shared Service provider, the Functional Alignment model is preferred.

FinanceICT HR

DG

CS Agency 2

Agency 1

Agency 3

Service Centre

Model 1: Service Centre

Model 5: Single Full Service Suite Provider

Multi-tenanted Full Suite Shared Service Operation

Department DepartmentDepartment Department

Model 6: Wholesale ICT Infrastructure

FinanceICT HR

DG

Agency 2

Agency 1

Agency 3

FinanceICT HR

CS

Model 2: Functional Alignment

Wholesale ICT Inf rastructure

Multi-tenanted Service Delivery

Department Department

In-house Service

Delivery 1

Department

In-house Service

Delivery 2

Department

5(iv)

68

6. SERVICE DELIVERY MODEL

i. Guiding Principles

ii. Governance and Ownership within the different operating model constructs.

iii. Funding and Pricing for the delivery of value adding sustainable service.

iv. Customer Engagement Model to ensure that the customers’ needs are met and the providers’ strategy remains aligned to the business it is supporting.

v. Service Management critical success factors for:

a. Service definition

b. Performance and reporting

c. Demand management

d. Issue and dispute management

CONTENT

69

The Corporate and Shared Services Service Delivery Model is a set of specialised delivery capabilities that are used to define, measure, control and maintain the most appropriate level of service.

SERVICE DELIVERY MODEL - OVERVIEW

Objectives:

• Define the governance structure that should be used in relation to the operating model.

• Highlight the need for effective customer engagement and the functions that need to exist for successful Shared Service operations.

• Select a pricing and funding structure that supports the need for accuracy and transparency when balanced against administrative overhead.

• Consider critical success factors for the delivery of service management functions within the future mode of operation.

Introduction:

The Corporate and Shared Services Service Delivery Model provides the framework for the effective delivery of service and maintaining constant state of improvement. The structure defines the different engagement points and responsibilities between provider and client from defining business strategy through to providing online payroll services to front line staff.

6

70

• Enable effective client representation and accountability in strategic decision making, service delivery influence and major issue management/resolution (in both the transition and end state periods).

• Enable Department/agency to access and interrogate their own data (data collected at back of house is critical for operations of front of house).

• Enable effective, commercially sound management of the Shared Service operations (e.g. capital and people management).

• Provide a level of independent representation in formal governance forums (whether formal Boards or Steering Committees).

• Enable seamless and effective integration of strategic planning of client Department/agency and the strategic planning of the Corporate and Shared Service operations.

• Provide the correct balance of transparency, accountability and responsiveness between purchaser, provider and central agency function.

• Support the objective of the Corporate and Shared Service being commercially orientated and independent from the customers it serves.

• Aligned to the operating model option implemented, where there is a greater degree of physical separation of Corporate and Shared Services from the business, a greater degree of formality in structure and engagement would be required.

• Include all levels of the organisational layers, providing decision and issue resolution capabilities as close to the service as possible.

• Provide rotating attendance of members to maintain varied perspectives and maintain a healthy level of tension between provider and purchaser.

The ownership and governance model for the delivery of effective Corporate and Shared Services should …

GOVERNANCE AND OWNERSHIP MODEL – GUIDING PRINCIPLES

6(i)

71

The choice of legal structure for the Shared Service provider will affect the operational capability components and the provider’s ability to deliver a sustainable service for the customer.

GOVERNANCE AND OWNERSHIP

• The legal structure of the Shared Service provider will fundamentally affect many of the operational aspects of the Shared Service operation with a significant impact to financial management and risk.

• The different models should be fully investigated and decisions made based on the structure’s:– Ability to meet customers needs– Affordability of service delivery– Flexibility to accommodate machinery of Government changes– Support for workforce requirements– Governance and control mechanisms

• The legal structure section is intended to:– Provide a high-level overview of the corporate structures

available– Make recommendations for the Shared Services provider within

the different operating model structures

Operational Considerations

Legal Structure Considerations

Customer

Shared Service Provider

• Workforce flexibility• Capital funds

management (investment)

• Regulatory • Governance

• Customer relationship

• Service Delivery• Cost/funding

6(ii)

72

Clear governance is critical to managing relationships effectively whilst maintaining service alignment to the customer need.

• The governance body will direct and monitor the delivery of Shared Services within NSW Government.

• The governance function is intended to:– Provide an effective framework for making decisions and issue

management.– Establish an effective level of oversight across the end to end

processes and maintain their alignment to agreed strategy– Review, approve, prioritise and monitor ongoing operational

improvements.– Effectively manage risks associated with the delivery of service and

provider operation.– Actively affirm, communicate and manage process standards at all

levels.– Maintain effective relationships through well informed, evidence

based, communication between purchaser and provider.– Encourage accountability and responsibility at all levels of the

operation.

• The framework provides stakeholders with confidence that there are processes in place to ensure business functions are aligned to customers needs and have the appropriate balance between efficiency, effectiveness and customer satisfaction.

• Each governance body should be designed to operate within the scope of an agreed terms of reference that will include the following: members/composition, rationale, responsibilities, objectives, schedule, standard agenda, quorum and communication requirements.

Customers Customer Engagement Operations

DG / CE

Executives

Staf f / Users

Customer Service & Account

Management

Service 1

Service 2

Service 3

Shared Service Provider

Governance

• Service Def inition• Performance Management &

Reporting• Demand management• Issue & Dispute

management.

Service Delivery

• Governance Board• Customer Board• Service Committee

CapabilityDevelopment

Service Management

Platform

Funding & Pricing

6(ii)

73

Different governance structures were considered for each operating model to balance the need for control and the administrative overhead requirements.

GOVERNANCE STRUCTURE OPTIONS

Function Option Features and Considerations In-house Multi-Tenant

Control and Direction

Line management • Single point of control and decision making Preferred

Mixed provider, customer and independent skills board

• Management by committee • Delayed decision making and responsiveness

Independent skills based board (no customers)

• Commercial like arrangement allowing provider to operate with balanced control and action

Preferred

Full commercial board (no customers)

• Large overhead with a focus on efficiency targets – only applicable if company formed

(if required) (if required)

Customer and Operational Alignment

1:1 relationship • Intimate relationship• Efficiency targets hard to achieve due to increased likelihood of drift

from standardisation

Limited seats with rotating membership (+ independents)

• Encouraged as it drives a collaborative agenda, wide view of objectives• Effective way of managing large customer base

Preferred

Full membership with hierarchy of groups

• Customer are engaged and part of the process• Establishes accountability of all parties for effective demand planning

Preferred

Operational Performance Management

and Improvement

Functional aligned (multiple customers)

• Drives function improvement discussions and standardisation Preferred Preferred

Customer aligned (multiple functions)

• Overlap of functionality with customer board• Lack ability to discuss functional detail leading to standard variations• Maybe applicable for remote customer

Customer and functionally aligned

• Applicable during transition stages

Model

6(ii)

74

The governance functions have specific roles and responsibilities in establishing the strategic direction, maintaining a responsive customer relationship and resolving service issues.

GOVERNANCE MODEL MANDATE AND SCHEDULE

Level Terms of Reference Meets Success Factors

Control and Direction

• Setting the long term direction of the Shared Service operation including: Core customer values, Strategic plan, Investment (infrastructure, people and systems)

• Approves new and updated business plans• Approves prioritisation of initiatives• Reviews operational performance metrics• Maintains and aligns governance structure to customer need

Quarterly • Active and effective attendance from all nominated members

• Only critical multi-customer issues discussed in this forum

• Stability in the prioritisation and implementation agenda

Customer Engagement and

Collaboration

• Formally representing the collective customer view on standardisation of requirements, service catalogue and service levels, investment program and business improvement

• Maintaining an effective prioritisation of all business plans and functions for board approval

• Resolution of major performance issues and disputes (whole function and multi-customer effecting)

• Review operational performance metrics• Review significant root cause analysis investigations• Provide forum for knowledge exchange (content related

presentations)

Monthly • Rotation of members on a 18 month basis• On time completion of actions • Issues resolved without need for escalation

Service Committee

• Agree, deliver and maintain business plans for each function to the customer committee

• Review and assess business cases/need for change• Operational performance review and target maintenance• Resolution of issues and disputes

Monthly • Remove the need for customers to want non-standard solutions

• Understand the customers’ needs and their drivers that affect demand

6(ii)

75

Mandate• Agree, deliver and maintain business plans for each function to the customer

committee• Review and assess business cases/need for change• Operational performance review and target maintenance• Resolution of issues and disputes

Operational Management

Customer and Operation Alignment

The mandate, structure and composition of the governance model will establish a sustainable framework that will ensure the provider delivers the services required and remains aligned to customers’ future need.

1. Note: Audit and risk functionality has not been included. If a corporate risk and audit is required for regulatory reasons this group should be established independently with a skills based composition

GOVERNANCE MODEL OVERVIEW – STEADY STATE

• This governance model refers to the governance of the ongoing Shared Service operation, not the governance of the implementation program.

• The approach has three governance groups each with a specific mandate ensuring the customer and provider objectives remain aligned, decisions are made at an appropriate level and issues resolved in a timely manner.

• The governance structure between the in-house and multi-tenant operating models will be the same for all but the top tier of Governance. This will ensure that regardless of Department, or operating model, the roles and functions at the non-executive layer will be consistent.

• The specific compositions of each group (roles, skills, experience etc) have been provided in the following pages for guidance and should be considered during the governance design stage.

• The formality of the governance arrangement will vary for each Department, however, documentation drafted to clearly articulate the mandate of each governance group, roles, escalation paths etc will be an important reference point to monitor future improvements and provide guidance during the planning and funding discussions1.

• During design of the final governance structure, there should be a clear mandate to prevent the over use of committee structures and leverage structures that already exist. The two areas where this may occur are within the:– Top tier of governance, where the suggested composition would be a

sub-set of the Departments’ Chief Executive Group/Committee.– Operational management groups, as many of the functions will be part

of the customer engagement function discussed in the next section.

Mandate• Setting the long term direction of the Shared Service operation including: Core

customer values, Strategic plan, Investment (infrastructure, people and systems)

• Approves new and updated business plans• Approves prioritisation of initiatives• Reviews operational performance metrics• Maintains and aligns governance structure to customer need

Mandate•Formally representing the collective customer view on standardisation of requirements, service catalogue and service levels, investment program and business improvement•Maintaining an effective prioritisation of all business plans and functions for board approval•Resolution of major performance issues and disputes (whole function and multi-customer effecting)•Review operational performance metrics•Review significant root cause analysis investigations•Provide forum for knowledge exchange (content related presentations)

Control and Direction1

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The governance model provides a consistent set of responsibilities within the in-house and multi-tenant model structures.

GOVERNANCE STRUCTURE• Leverages established governance structures.

• Establishes common structures and responsibilities across whole of government.

• The only variation between operating models (in-house/multi-tenant) is the use of a provider board, compared to a business unit head, in the multi-tenant model.

• Directors General Executive Committee is responsible for evaluating whole of government benchmarking and identifying areas of improvement.

Cabinet Committee

Directors General Executive Committee

Provider Board• Skills based composition• Independent

Customer Committee• Head of Corporate Services

for customer Departments

Operational Committee(s)• Aligned to functional service

delivery functions e.g. finance

In-House Multi-Tenant

Head of SSO• Report to the Department’s

Executive Group

Customer Committee• CE representation from

Agencies and Service Provider

Operational Committee(s)• Aligned to functional service

delivery functions e.g. finance

Control & Direction

Customer & Operation alignment

Operational Management

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Governance within the in-house operating model does not require a formal skills based board and is run as a business unit within the Principal Departments existing governance structure.

MODEL 1: IN-HOUSE MODEL

Description:

• The Shared Service operation functions within customer Department as a business unit.

Features:

• The in-house governance structure leverages the Department’s existing control and management systems.

• The Shared Service operation will be run as a business unit with a single person responsible for meeting customers’ needs and efficiency targets.

• The role of the governing body within this construct has the opportunity to be less formal, reducing management overhead and streamlining the determination of decisions.– A more formal construct (see multi-tenant) should be considered if there are multiple

agencies within the cluster that operate as SOCs or do not have direct line responsibility to the Director General.

• A customer committee should be established, including service delivery Chief Executives and the Head of the Shared Service:– The primary role of the customer committee is to formally represent the collective

customer view on standardisation of requirements, service catalogue and service levels, investment program and business improvement.

– Differences of opinion need to be resolved in this forum or escalated to the Executive Committee for decision.

– Where more than 10 Chief Executives require (or request) participation in the governing board structure, sub-customer committee structures should be created.

– Determination of members of the sub-customer committee should not be based on their size, rather their similarity in service delivery.

• Operational committee memberships should be aligned to functional services and be led by the functional leads within the Shared Service operations with representation from all of the customers.

Cabinet Committee

Directors General Executive Committee

Head of SSO• Reports to the Department’s

Executive Group

Customer Committee• CE representation from

Agencies

Operational Committee(s)• Aligned to functional service

delivery functions e.g. finance

Control & Direction

Customer & Operation alignment

Operational Management

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Governance within the multi-tenant operating model establishes a more formal structure with a skills based provider board.

MODEL 2: MULTI-TENANT MODEL

Description:

• The Shared Service function is run independently from the customer Department.

Features:

• The multi-tenant governance model provides an effective governance structure for any of the Shared Services to be delivered by a host Principal Department.

• The provider board will be skilled based with independent members who have capabilities and skills in the effective delivery of complex Shared Service operations.

• The customer committee, as with the in-house model, is responsible for establishing, maintaining and reprioritising business plans that can are reviewed and approved by the Governing Board. This group will have representation from the multi-tenant customer’s director of Corporate Services:– The primary role of the customer committee is to formally represent the collective

customer view on standardisation of requirements, service catalogue and service levels, investment program and business improvement.

– Differences of opinion need to be resolved in this forum or escalated to the Director General of the Shared Services operation for discussion with the customer Director Generals.

– The Director of Corporate Services for the Customer Department is responsible for aggregating all feedback and information from their Department.

– During specific periods, with the approval of the committee members, occasional members can join the customer committee to provide different perspectives.

• Operational committee functions should be aligned to functional groups enabling them to have focus groups investigating and optimising the efficiencies of particular sub-functions. This will ensure that a broad range of viewpoints can be considered as part of the business planning function.

Cabinet Committee

Directors General Executive Committee

Provider Board• Skills based composition• Independent

Customer Committee• CE representation from

Agencies

Operational Committee(s)• Aligned to functional service

delivery functions e.g. finance

Control & Direction

Customer & Operation alignment

Operational Management

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The governance structure is underpinned by agreements that first establish the principles of the engagement and complemented with detailed service specification.

TWO TIER AGREEMENT STRUCTURE

Type Purpose Contains Aligned to Comment

Heads of Agreement

Establishes the objectives, principles and benefits of service delivery.

• Terms and conditions for the engagement and governance structure for the provision of service between the 2 parties

• Defines the framework for the delivery of the service, including the timeframe of commencement and duration

• Establishes principles as a basis for engagement between provider and purchaser that are non service specific

• Defines the roles and responsibilities of all parties during the delivery of service and functions that should be provided in both organisations

• Creates the framework for best practices and reporting, including the definition of critical service levels and dispute resolution processes

• Pricing and funding of services, their steady state cost and process for recovery of transition and enhancement costs

• Terms for termination or expiry of service

• Customer Committee

• Single agreement for government

Service Partnership Agreement

Provides detailed, functional service specific objectives, controls and measures.

• Terms and conditions for the delivery of each service including the obligations of the provider and purchaser

• The structure and charging for each of the functions being provided• Metrics and measures that will be used to evaluate the service (efficiency,

effectiveness, quality, timeliness)• Establishes principles for service delivery processes including demand

planning, detailed service definition and business request• Categorisation and escalation processes for issue and dispute management• Reporting and measurement requirements, including format and structure of

reports, frequency, availability and process to access data

• Operational Management

• Specific per provider

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There are different entity structures that can be used in the delivery of effective Corporate and Shared Services.

BENEFITS AND RISKSOrientation Description Example Benefits Risks Guidance

Internal

Single organisation structure that consolidates Shared Service functions within the same Department

Education • Existing line of command• Reduce administrative burden for

extensive pricing and charging requirements

• Limited external control to whole of government strategy

• Rate of change may not deliver required benefits

Best option for in-house operating model Departments and all Corporate Services

Internal -Specialist

Department or Government

Trading Entity

Service provided by a specialist Department, or group, within Government that provides the functions as a service

DSTA • Ability for smaller Departments to achieve leveraged scale

• Transition of workforce is within sector and should drive immediate change in behaviour

• Services are provided based on a business case basis

• Consolidated area of expertise provides extended career paths for existing workforce

• Transitioned workforce can maintain existing award structures

• Failure in delivery effects all customers of service (multiple-Departments)

• Dysfunctional behaviour of Departments who do not transition services

Best option for multi-tenant solutions

State Owned Corporation

(SOC)

Creation of a statutory body (e.g. trust) to operate as an independent commercial entity and provide services to Government Departments

State Water Corporation

• Arms length governance structure provides some degree of autonomy to operate

• Defined scope and responsibility enforces accountability for outcomes

• Balance of consideration is towards financial outcomes

• Additional administrative central Government overhead required

Commercial

Supplier takes responsibility for the provision of service. (this includes the involvement of Government with an external corporation e.g. AC3)

United facility management within Police

• Private sector best practice expertise can be used to deliver services

• Comprehensive contractual arrangements will provide clearer guidance on estimated budget requirements

• Requirement for new contract and service management type skills

• Loss of ‘control’ for provision of service

Considered as part of the service delivery function within a specialised Department following market testing and evaluation

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The legal structure has impact on the governance, financing and workforce management considerations in the provision of Shared Services.

LEGAL STRUCTURES

Legal Structure Organisation Head

Method of Control Funding Public

Workforce Guidance

Department (Principal Department) DG or Secretary Line management

Central Government and other sources (e.g. use of asset, revenue etc.)

Yes Branch within a Principal Department is the recommended structure for in-house models

Specialised Department (Principal Department)

DG or Secretary Line Management/ skills based board

Central Government and other sources (e.g. use of asset, revenue etc.)

Yes Multi-tenant provider could be established as a specialised Department

Government Trading Entity (Trust, Commission, Declared Authority, Board, Institute, Regulator)

CEO, Commissioner, DG

Skills based board

Central Government and other sources (e.g. use of asset, revenue etc.)

Yes Adoption of a declared trading structure would provide a level of independence from the host Department and is recommended for the multi-tenant provider

State Owned Corporation (Trust, Institute, Board, Regulator, Authority, Corporation, Commission)

CEO, Commissioner, Administrator, DG

Skills based board

Central Government and other sources (e.g. use of asset, revenue etc.)

Yes Not recommended for the delivery of Shared Services

Corporation CEO Skills based board

Market No Outsourcing or establishing a Government commercial structure would require further market evaluation and testingCo-operative Committee Committee Market No

Association Management Committee

Management Committee

Typically charity No

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The design of the customer engagement model for Corporate and Shared Services should . . .

CUSTOMER ENGAGEMENT MODEL PRINCIPLES

• Incorporate the discipline of a purchaser/provider model, yet embrace a partnership culture and approach.

• Be steeped in a service excellence culture of client intimacy, understanding of their business, quality services and responsiveness to their needs.

• Explore where standardisation can be rolled up further to sector or across Principal Department levels.

• Ensure the services are supported by skilled and capable resources with sector wide mobility and ongoing development and career paths.

• Enable and support continuous improvement in the business through the contribution of the Corporate and Shared Services.

• Provide clear and effective services management for clients (Department/agency and public) into the Corporate and Shared Service operations. In doing so, clients will know who and how to contact within the Corporate and Shared Services operations to follow through and complete their enquiry, by:– Getting it right the first time– Having the right location, person and process first time– Standard proven technology model and support– End to end standard product choices and roadmap– Dynamic product and service development which is efficient and low cost

• Drive standardisation of processes, systems and service levels yet temper this with the impacts on clients.

• Ensure absolute clarity of roles for all parties with clear functional and service decomposition.

• Have clear mechanisms for recourse and consequence for underperformance by all parties.

• Enable Departments/agencies to manage their own businesses effectively through:– Transparency of underlying demand and cost drivers and the ability of Departments/agencies to influence and manage these– Direct access to timely, accurate and insightful data and information with the ability to interrogate information directly– Running a multi-year program

• Enable and support continual transformation and improvement of Corporate and Shared Services through:– Aligning users with the agreed level of service– Achieving standard delivery of service balanced with customer intimacy

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The customer engagement model defines how the Corporate and Shared Service functions interface throughout the customer’s organisation.

CUSTOMER ENGAGEMENT MODEL

• The customer engagement model defines the key interface between the customer and the Shared Service operation.

• It is the ‘customisable’ front end interfacing with the leveraged and standardised back end operation.

• The customer engagement model should provide:– Customer intimacy and knowledge of the customers business through

development of long term relationships– Transparency and access to both customer and performance/cost data– Responsibility and ownership of key customer issues– Responsiveness to urgent issues and queries

• The customer engagement functions should provide an objective, fact based perspective on service relationships and be clearly differentiated from service line responsibilities for operational service delivery.

• The engagement model recommendations are consistent for both in-house and multi-tenant, with greater efficiencies within the multi-tenant options as the customer service and service management platforms can be leveraged more effectively.

• There are three key functions within the customer engagement model, all of which need to be addressed in the design of a Shared Services Provider (however these do not necessarily relate directly to a organisational structure):– Capability Development– Customer Service and Account Management– Service Management Systems and Platforms

Service Delivery Agency

Corporate and Shared

Service

Customer Service and Account Management

CapabilityDevelopment

Service Management Platform

• Service Delivery and Definition• Performance Management• Issue and Dispute Management

• Demand Planning and Management

• Strategy and business alignment• Critical performance evaluation

• Automated service delivery and workflow

• Self service portals and platforms

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The customer engagement model contains three key functions covering Capability Development, Customer Service and Account Management and Systems/Platforms.

PRIMARY FUNCTIONSFunction Description Key Responsibilities

Capability Developmen

t

Builds and manages long term relationship with senior customers facilitating joint strategy development

• Demand Planning, Strategic Planning and Transition Strategy including:- Developing understanding of customers business (medium term need)- Integration with existing business planning processes - Facilitating customer strategic discussions and joint planning- Gaining agreement on FMO with customer and engaging Operations to roadmap and drive change from PMO to

FMO - Involvement in governance forums as appropriate

• Evolving the service catalogue• Solution development:

- Solutioning and transitioning new clients- Re-solutioning and expansion of service for existing clients- Investment and project planning

• Investment, funding and pricing strategy• Research and development and identification of innovations for long term improvement and performance

Customer Service and

Account Management

Focuses on customer satisfaction and service compliance over the medium term

• Account management:- Per customer account management- Strategic account management including proactive performance management, demand management, etc- Operational account management including ownership of escalated service enquiries

• Service Centre:- Contact centre for enquiry and issue management- Resolution of day-to-day service requests and queries- Escalation and appropriate routing of complex requests or issues- Communication of updates or status on logged requests

Service Management

Technology enablers for customer interactions

• Provide entire service management infrastructure required to deliver the right information to the right person and the right time for their business tasks to be performed effectively

• Transparent view of all important customer information, history, transactions, reports and trends• Logging and tracking of service requests or issues• Enables customer self service including:

- Access to customer data and reporting tools- Status updates for logged service requests or issues- Access to service performance reporting

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Customer engagement within the in-house model has three main service delivery points with the Department’s Corporate and Service Delivery functions.

CUSTOMER ENGAGEMENT MODEL - IN-HOUSE

1. Capability Development– Chief Executives and Heads of Corporate Services within the

Principal Department are responsible for consolidating demand for their areas, understanding the broader goals established by the Department and working with the Shared Service providers executive to align future capability and cost targets.

– The service provider facilitates and drives this activity through its Capability Development function.

2. Customer Service and Account Management– Account management functions will be provided to the service

delivery functions within the Department with senior functional leads from the Shared Service operations and corporate heads from the service delivery functions (agencies).

– Customer service is an everyday service channel providing the end customer (employees in the case of payroll) access to the Shared Service operation to manage a variation or exception to their normal requirements (e.g. long service arrangements).

3. Service Management Platform– Delivered by the Shared Service provider to empower the business

through provision of comprehensive service management infrastructure.

– Automated platforms and services to complement the customer service function.

– Online services (payroll queries, training delivery), automated approval processes (AP, AR) and proactive incident management through ICT monitoring will reduce the time for end users to complete activities, reduce manual handling steps and deliver the service more efficiently.

Service Delivery 2

Service Delivery 2

Service Delivery 2

Service Delivery 2

Service Delivery 2

Service Delivery 2

Service Delivery 1

Shared Service Operations

2

3

Customer Service & Account

Management

Service Management

Platform

Description:

• Customer engagement platforms and relationships established across the Principal Department

CapabilityDevelopment

Department Corporate1

Shared Service ProviderCustomer Department

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CapabilityDevelopment

Service Delivery 2

Service Delivery 2

Service Delivery 2

Service Delivery 2

Service Delivery 2

Service Delivery 2

Customer Engagement within the multi-tenant model has a single account management interface per customer Department to the Head of Corporate Services.

CUSTOMER ENGAGEMENT MODEL - MULTI-TENANT

1. Capability Development:• Heads of Corporate Services within the Principal Department are

responsible for consolidating demand of their areas, understanding the broader goals established by the Department and working with the Head of the Shared Service Provider to align future capability and cost targets.

• The Service Provider facilitates and drives this activity through its Capability Development function.

2. Account Management:• Account management functions should be provided to Corporate

Services function within the Principal Departments with functional lead and Shared Service provider leadership.

• Ensure transparency of operations is available (provider and customer) to identify further areas of service improvement.

3. Customer Service:• Aligned to the service delivery functions and end customers day a to day

service enragement and escalation processes.• Provide transparency of business costs and operations.

4. Service Management Platform:• Delivered by the Shared Service provider to empower the business

through provision of comprehensive service management infrastructure.• Automated platforms and services to complement the customer service

function. • Online services (payroll queries, training delivery), automated approval

processes (AP, AR) and proactive incident management through ICT monitoring will reduce the time for end users to complete activities, reduce manual handling steps and deliver the service more efficiently.

Service Delivery 1

Department Corporate

Shared Service Operations

1

4

Customer Service & Account

Management

Service Management

Platform

Shared Service ProviderCustomer Department

Description:

• Customer engagement platforms and relationships between provider and purchaser.

2

3

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The funding and pricing model for the effective delivery of Corporate and Shared Services should . . .

FUNDING AND PRICING MODEL - PRINCIPLES

• Be tailored to the operating model option implemented with the greater degree of separation of Shared Services requiring a greater degree of formality in the funding and pricing model.

• Create a healthy tension between demand and supply that will drive continuous improvement.

• Provide, through visibility and value added service, an understanding to the client of the cost for services and the relationship to the services provided.

• Encompass a level of independent validation and open book transparency, in the setting of recovery rates and disclosed pricing.

• Provide confidence to the client of the comparison to fair market value for the services provided (e.g. independent development and conduct of client satisfaction measures and benchmarking).

• Directly reflect the type and amount of service received with no considerable cross subsidisation between customers and services.

• Support medium to long term planning, capital funding and ability to continue to positively transform the service operation.

• Enable the alignment of the funding of agencies operations to meet Department and whole of government specific long term efficiency targets (e.g. cost and budget reductions).

• Be transparent (open book) to enable a confidence and trust between centres and clients to be attained.

• Include flexibility that considers the implications of cost at different phases of maturity (consolidate, standardise, transform, steady state etc).

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Components of Cost

• The funding and pricing model is traditionally the most contentious aspect in the delivery of services as the purchaser does not have direct organisation control of the service being provided.

• The pricing and funding model should provide a balance between the need to provide highly detailed accurate pricing (large admin overhead) versus high level metrics for outcomes (low admin overhead).

• The pricing and funding model is intended to:– provide a realistic degree of transparency to the customer to

support an intimate and trustworthy relationship– prove that the customer is receiving value for money and that

the actual cost to serve is reducing– describe how the flow of funds will occur for each of the cost

components of service– identify areas where the administrative burden could be

reduced whilst still maintaining pressure on the supply side

• There are three components of funding and pricing that should be considered when designing the charging and cost capabilities:– Pricing and Recovery of Shared Services Costs options– Pricing and recovery options– Model features and methods of implementation

Investment

Refresh Capital

Operating Costs

• The “growth” investment required to transform the Shared Service operations and drive significant, sustainable benefits through the operation.

• The investment required to maintain service levels and performance

• Including ICT upgrades and minor enhancements.

• Those recurrent running costs involved in delivering the Shared Service operation.

• Including resources, work activities, management overhead, servicing costs.

The funding model will address each of the cost structures to ensure the Shared Services operation is sustainable.

FUNDING AND PRICING INTRODUCTION

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CHARGEBACK AND PRICING MODELS

Model Options

Zero RecoveryNo charging. SSO directly funded with no recovery

Cost RecoverySSO directly funded and charges out costs (direct and overhead) based on

agreed drivers

Fixed PriceAgreed fixed amount paid for term period based on

bundle of services

Usage PricingAgree price/unit and pay based on actual

consumption

Funding direct to Customer (PRICING) Transaction Based

Resource Based (Time and Material)

1

2

3

4

5

Funding Direct to SSO(RECOVERY)

The range of pricing models available within a Government construct should be used to achieve the financial discipline and minimise overhead requirement.

The decision tree should be used to select the most appropriate model for each component of cost: investment, refresh and operating costs.

It is possible to have multiple pricing methods depending upon the nature of the service being provided. For example, fixed price for project management and usage based pricing for business as usual activity such as payroll transactions.

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The charging and pricing model features should be considered on a per service and function basis as the maturity of service delivery and need for financial pressure will vary.

1. Note: Regardless of price structure or corporate entity structure selected, the cost of the service should be shared with the customer in an open book arrangement to ensure transparency and the development of trust

CHARGEBACK AND PRICING MODEL - DETAILPrice Structure1 Typical Example Benefits Challenges GuidanceZero Recovery Corporate Services

within most agencies• No administration requirements• Removes price and associated barriers

from operational discussions

• No discipline for driving efficiency in line with customer needs

• Poor control levers to control demand

Recommended for all Corporate Service functions and large scale technology investment requirements

Cost Recovery Shared Services within Department

• Provides some granularity for comparison of service cost to be delivered

• Relatively low administrative burden as costs tend to be associated with high level metrics

• Customers do not control the spend and creates a sense of risk

• Does not enforce discipline with requests and demand for service

Preferred option for transactional services within the in-house model

Fixed Price Shared Services within Cluster

• Customer has more stable budget requirements

• Simplified structure for customers• Provides opportunity for affordability

based costing (subsidised for small agencies)

• Accuracy of agreed price can lead to profit in provider or additional recoup to customers within a Government context.

• Requires the provider to have a stable catalogue, effective demand planning and historical data to support price

• Large deviations from agreed cost can impact relationship and partnering ethos

Should only be considered if the service being provided is well understood and demand is known

Transaction Based

Shared Service customer contact points

• More accurate true costing• Demand and supply drivers reflected in

the cost• More credible with customers if costs are

in line with market prices

• Can create dysfunctional usage behaviour that affects sector business performance

Recommended within the multi-tenant model

Resource Based Shared Service advisory services

• Provides flexibility to support the delivery of advisory, policy and control and strategic work pages for the customers

• Reduces the emphasis on the need for system and tool investment

• Supplier remains a FTE based organisation

• Resource scheduling systems required to flatten demand requirements

Preferred option for advisory, policy and control and Strategy related functions

1

2

3

4

5

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The costs associated within running the business will be funded via unit pricing in the case of multi-tenant and through an allocated recovery model for in-house operating models.

Cost and Pricing

RUNNING COST CONSIDERATIONS

• Operational costs are estimated as part of the standard budget process with detailed specification of:– Service description– Quality– Cost– Demand

• Multi-Tenant – $/unit price is established for the first period with agreed reductions

over the following periods based on planned operational and transformational improvements e.g. 5% reduction in price for the following period(s).

– A comprehensive price book should be established and shared at whole of government level and it should be transparent to the customer and independently benchmarked against industry.

– The provider is at risk of having to provide these services at or below the agreed price.

• In-House– The cost of the service being delivered can be apportioned based on

higher level metrics than those in the multi-tenant model, e.g. FTE, number of desktop PC’s etc.

– The provider is not under the same financial pressure compared to the multi-tenant model and relies on the inherent governance of a single Department/Principal Department and DG structure to ensure the right outcomes are achieved.

Multi-tenant In-House

$/unit $/cust.

Investment

Refresh Capital

Operating Costs

1 2

1. Provider risk as price is fixed returning agreed efficiencies to the customers.

2. Operating costs reduced and savings returned to the customer.

y1 y2 y1 y2

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Different charging and pricing models will be used to fund the costs associated with running the business and investment to fund transformational change.

INVESTMENT CONSIDERATIONS

• The total cost of operating a successful and sustainable Shared Service operation relies on effective flow of funding to support the current customer demand effectively and on-going investment to ensure that future needs are met.

• The required large scale investment in people and infrastructure to support transformational change is inconsistent throughout a given year, adding complexity to estimating the price and recoup mechanism over the medium term.

• Within both the in-house and multi-tenant operating models, the required investment cycle is unlikely to perfectly align with all customers’ priorities and timetables. Decisions will need to be made in the best interests of the whole not individual clients.

• The efficiency returns from the investment program will be returned to the customers through committed reductions in operational price and recoups.

• Option 2 is the preferred model for both in-house and multi-tenant operating models as:– Accountability for delivering improvements is included in the business

case and held by the provider.– Migration to the new systems and functions can be scheduled without

the first client being responsible for all of the fixed investment costs.– Transparency of costs shared with clients during the business case

process with a commitment for price/unit reduction.

Option 1: Price

Option 2:Business Case

Investment

Refresh Capital

Operating Costs

Added to service cost

Independent business case for capital funding

• Option 1: Recovery through pricing– Unit price to include a component of investment costs.– Self funding option can apply the investment cost unevenly across the

customers due to the breadth and depth of service catalogue varying.

• Option 2: Business Case– Separation from pricing structure allows for clearer demarcation between

funds used to improve the service and those to run the service.– Balanced tension between the customers’ obligations to construct a

collective customer view on the investment plan and the service providers’ obligation to own the investment funding and deliver the benefits.

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Service Delivery n

Service Delivery 5

Service Delivery 4

Service Delivery 3

Service Delivery 2

Investment costs for Departments with in-house Shared Service providers will be funded via the existing Departmental business case process to receive capital funds.

INVESTMENT CONSIDERATIONS – BUSINESS CASE IN-HOUSE

• All investment decisions should be based on a detailed business case that clearly identifies the benefits, how they will be realised and achieved.

• Within the in-house model the Shared Service provider functions as a business unit and raises business cases as part of the standard Departmental capital allocation processes.

• The Departmental Executive (including the CFO) reviews and assesses the business case against customer demand and efficiency targets.

• Benefits are realised through reduction in cost to serve, therefore, reducing the recoup with the service delivery functions.

• The progress of benefit delivery should be tracked as part of the account management and governance control function to ensure that efficiency returns are identified and achieved.

Shared Service Operator

Department

Service Delivery 1

Government

1 5

3 4

Flow of Funds

1. Shared Service provider follows Department business case process for large scale reform or transformation.

2. Department assesses business justification and evaluates benefits in balance with other capital requests.

3. Department bids for funds or reprioritises existing capital allocation Funds received with commitment to meet benefits.

4. Funds distributed with appropriate benefits realisation tracking and monitoring.

5. Reduced recovery to service delivery business units.

2

6

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DepartmentDepartment

Shared Service Operator

Department (customer)

The multi-tenant provider is responsible for consolidating the demand and refresh needs from customers and creating a single business case to be submitted for Government consideration.

INVESTMENT CONSIDERATIONS – BUSINESS CASE MULTI-TENANT

• All investment decisions should be based on a detailed business case that clearly identifies the benefits, how they will be realised and achieved.

• The demand for transformational change, or reform, will be driven through the customer committees who are responsible for establishing the demand planning and performance expectations of the Shared Service provider.

• The Shared Service provider is responsible for the consolidation of demand and the creation of a single business case for capital funding. This approach provides the following advantages:– Reduces duplication of business case creation, maintenance and

tracking.– Ensures that costs/savings are based on a single source of truth.– Reduces administrative overhead within customer Departments.– Creates pressure on the provider side to deliver savings through price

reduction.

1

6

1. Demand for service and efficiency targets are captured from customer groups through capability and the customer committee.

2. Shared Service provider consolidates demand and investment requirement, establishes single business case for approval.

3. Capital allocation requested from Government.

4. Funds received with commitment to meet benefits.

5. Transformational and large scale reform commences with comprehensive benefit tracking.

6. Reduced $/unit following transformation to return efficiency savings to Department.

Department (Host)

Government

2 5

3 4

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The management of service delivery for effective Corporate and Shared Services should . . .

SERVICE MANAGEMENT - PRINCIPLES

• Provide clear and effective services management for clients (Department/agency and public) into the Corporate and Shared Service providers by:– Getting it right the first time– Having the right location, person and process first time– Standard proven technology model and support– End to end standard product choices and roadmap– Dynamic product and service development which is efficient and low cost

• Drive standardisation of processes, systems and service levels yet temper this with the impacts on clients.

• Ensure absolute clarity of roles for all parties with clear functional and service decomposition.

• Have clear mechanisms for recourse and consequence for underperformance by all parties.

• Enable the Departments/agencies to manage their own businesses effectively through:– Transparency of underlying demand and cost drivers and the ability of Departments/agencies to influence and manage these– Direct access to timely, accurate and insightful data and information with the ability to interrogate information directly– Running a multi-year program

• Enable and support continual transformation and improvement of Corporate and Shared Services through:– Aligning users with the agreed level of service– Achieving standard delivery of service balanced with customer intimacy

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Service management’s primary objective is to ensure that the services being delivered are aligned to the customer's needs.

• Service management’s primary objective is to ensure that the services being delivered are aligned to the customers’ needs and actively support them.

• The service management framework summarises the processes and capabilities that are required to specify, monitor, manage and maintain the service offering.

• The service management framework is intended to:– Support the customer engagement and governance structures with

rigorous and consistent delivery of service– Establish clear accountabilities of the customer and provider in the

delivery of service– Describe the various service and cost drivers that can be used to

increase the performance of the service– Enforce the need for effective medium and long term demand

planning functions– Define the issue and dispute management process

• Service management should incorporate the need for continuous change from the outset with appropriate controls to ensure that the delivery remains aligned to customer needs and does not ‘drift’ to provider based objectives.

• Service Definition• Performance Management and Reporting• Demand Management• Issue and Dispute Management.

Customers Customer Engagement Operations

DG / CE

Executives

Staf f / Users

Customer Service & Account

Management

Service 1

Service 2

Service 3

Shared Service Provider

Governance

Service Delivery

CapabilityDevelopment

Service Management

Platform

Funding & Pricing

Service Management Framework

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Service definition is used to specify the desired outcomes that the customer needs and how the provider will achieve those objectives.

SERVICE DEFINITION

Aspect Consideration

Definition • Define a comprehensive description of the service being provided including: name; description; input requirements; outputs requirements; criticality to business; performance measures; target; critical threshold and functional owner.

Accountabilities • Define the end to end process for each individual service, clarifying the role and accountabilities of both the purchaser and provider, including the obligations of each.

Standardised

• Design the right balance between complete standardisation and required customisation of service provided:– The primary objective is to drive variation out of the process and services to ensure comparable service levels and optimise the

economy of scale.– It is recognised that there will be genuine unique needs that differ from the standard service that must be considered. There must

be a clear process for the identification and evaluation of these to ensure they are genuine. The financial model should reflect the impact of customised services.

Quality• Ensure that the service being offered addresses the business requirement and need.• Customer experience measurements should be identified to provide a feedback loop from the users of the service.• Define possible sources of error that exist within the service.

Cost • Communicate all of the cost levers that are available to the purchaser to control the cost associated with the delivery of the service.

Sustainability • Validate that the service is sustainable (effectiveness and cost) and will continue to meet customers’ needs over an extended period.

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Performance reporting is used to project the future performance of the service by establishing a fact base that can be used to make evidence based decisions.

PERFORMANCE REPORTING

Aspect Consideration

Performance Reporting

• Effective and agreed reporting framework should cascade from high level balanced scorecard through to deeper transaction reporting.• Performance reports should be formalised and routine with a combination of statistical data and valuable/insightful commentary

provided on a monthly, quarterly and yearly basis.• The reporting should cover all aspects of performance including cost and service.

Benchmarking• Regular benchmarking should be undertaken and articulated of the Shared Service performance against industry and best practice

peer groups, including an agreed mix of transaction cost and service level metrics.• This would include independent validation.

Customer Surveying

• Customer satisfaction surveying should be completed on a routine basis.

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Demand management is used to balance the allocation of resourcing and funding to support and meet customers needs in a timely manner at the right quality.

DEMAND MANAGEMENT

Aspect Consideration

Strategic Demand Management

• Establish regular business planning functions between the provider and customer base. Typically these sessions will occur on a quarterly basis to validate the alignment of the service to the business need and feed into the Corporate and Business planning processes within the relevant Departments.

• Enforce a disciplined demand management process (identify, business case, respond, implement, monitor) that can be tailored to meet the needs of the customer as part of the provider customer engagement model.

• Create a teaming partnership with the affected customer, ensuring they are well informed and part of the decision and approval process.

• Create an understanding with the customer that the service cannot be provided in a timely manner without the necessary data, inputs, time and authority from the customer.

• DG is responsible for the effective completion of these activities and should hold the direct reports (CES) responsible for ensuring the demand planning process is successful.

Operational Demand

Management

• Capability to profile accurately the demand for services across the customer portfolio.• Capacity for Shared Service provider to handle demand surges.• Provide clear education and levers for customers to manage their demand optimally.• Articulate clearly the relationship between demand management and pricing.• Responsibility for effective workforce planning, career management, skills development and work placement strategies and centres of

excellence.

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Issue and dispute management is necessary when other processes and capabilities have failed to meet the required outcome.

ISSUE AND DISPUTE MANAGEMENT

Aspect Consideration

Process

• Implement an effective communication plan as many issues and disputes can be prevented or mitigated.• Design a clear end to end issue and dispute management process including:

– Profiling of categories– Triage and escalation points– Decision making and resolution framework

• Clearly identify roles and accountabilities across the customer engagement and governance models.

Collaborative Approach

• Manage issues and disputes with an evidence based approach and avoid personal opinions. Where there is no or inconclusive evidence, a diagnostic phase should be established to better understand the issue prior to further discussion.

• Responsibility of issue resolution is not solely that of the provider. The customer should play an active role, engaged through the customer engagement model, in ensuring that data, insight and their perspective is provided in a timely manner throughout theprocess.

Identification• Leverage all of the delivery channels and controls in the customer engagement model to identify and categorise issues early. Tight

linkage should be made between the provider and customer, as part of the customer engagement model, to work collaboratively in the issue management process.

Decision

• Plan for the issue to be resolved as close to occurrence as possible. Many of the issues encountered will be repetitive in nature.• Issues can occur in a number of areas but are usually allocated to one of the following categories: commercial; irregular process;

fulfilment; or operational. As such, standard processes should be developed for handling these issues effectively at lower levels of the governance structure.

Root Cause Analysis

• Analyse issues and disputes thoroughly and complete root cause analysis (trend analysis) as a matter of cause. Inclusion of outcomes from root cause analysis should be included within the standard provider service reports.

• Implementation of remedial actions to ensure no reoccurrence of problems, resolution of root causes and active tracking and management of known causes.

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7. IMPLEMENTATION STRATEGY

i. Guiding Principles

ii. Whole of Government Governance

iii. Implementation Planning

iv. Benefits Realisation Framework

v. Implementation Management Structure

vi. Critical Success Factors

Contents

102

There are many competing initiatives that Principal Departments need to take into account as they prepare their Corporate and Shared Services transition plans.

IMPLEMENTATION STRATEGY - OVERVIEW

Introduction:

Objectives:

• NSW Government is committed to the reform of Corporate and Shared Services for all departments.• The Blueprint has outlined the future mode of operation for all departments’ Corporate and Shared Service functions.• The reform will be implemented as one of the concurrent customer service and efficiency programs that include:

– Better Services and Value Taskforce reviews (including ICT Review)– savings targets (resulting in multiple Department/agency level initiatives)

• Describe the implementation phases for all departments.

• Identify how the funding and investment of the reform program will be structured and outline expectations that will be placed on the Department.

• Design how the team responsible for the reform will be structured, their mandate and capability requirements.

• Identify perceived barriers of change and provide guidance on how to address them.

• Provide a toolkit to support implementation teams in the effective delivery of the reform.

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• Ensure the speed of transition is aligned to the readiness of change and greater effort focussed on the mature Departments – transitions should be faster in Departments that already have mature Corporate and Shared Services operations.

• Be premised on earning credibility by delivering the promise (value for money) and growing the scope of services organically.

• Be dependent upon the state of and requirement for, the underlying people, process and technology to effectively deliver the services.

• Contain substantial change management planning, including:– Workforce planning for uplifting skill sets– Communication plans explaining to staff where and when the impacts will occur – Consultative arrangements with relevant stakeholders – Allocating accountabilities across the stages of implementation, transition and end state– Training for clients to understanding how best to use Corporate and Shared Services

• Include transition modes of operation with careful staging and sequencing, rather than a big bang approach.

• Take advantage of opportunities during the transition period to further drive standardisation and simplification to reduce cost and complexity in the end state.

• Be underpinned by a strong implementation governance framework with clear central Agency and Department roles and responsibilities.

• Incorporate a clear benefits realisation framework aligned to the ultimate objectives and guiding principles of the reform.

• Set expectations at Department/agency levels that:– The full benefits from the end state may not be available during the transition period– The transition will not be easy but it is achievable– There is a sector wide sense of urgency in moving to Corporate and Shared Services

• Ensure the planning phase addresses funding and resourcing issues during the transition phase.

The implementation strategy for the rollout of Corporate and Shared Services should . . .

GUIDING PRINCIPLES – IMPLEMENTATION STRATEGY

7(i)

104

7(ii)Corporate and Shared Services Reform Program Governance

105

7(ii)

Governance Arrangements for Reform Program

Cabinet Committee to approve and oversee the implementation of the ReformProgram.

Expenditure Review to oversee (in conjunction with the Cabinet Committee theimplementation of the Reform Program with particular focus on related expenditureand tracking benefits realisation.

Directors’ General Executive Committee (DGEC) to:• provide advice and manage the delivery of the Reform Program on departments

and across the sector; • set sector wide benchmark targets based on industry standard measures for

Corporate and Shared Services;• provide periodic reports to the Cabinet Committee on the result of benchmarks and

benefits realisation.

Better Services and Value Taskforce to:• consider the outcomes of the Reform Program;• ensure alignment between the Corporate and Shared Services Reform and other

Taskforce programs, particularly the whole of government Information and Communication Technology (ICT) Expenditure Review;

• oversee the tracking of benefits realisation across all savings areas to ensure that savings are achieved and are not double counted.

Corporate and Shared Services Steering Committee to:• provide advice and direction for the overall co-ordination of Departmental reform

programs across the sector;• directly govern the delivery of central reform programs, managed through the DPC

Corporate and Shared Service Government Reform Office.

Corporate and Shared Services Reform Program Governance

106

The DPC Corporate and Shared Services Government Reform Office (DPC GRO) will:• manage the implementation of the Whole of Government Corporate and Shared Services

Reform Program; • oversight benefits realisation across the sector; • implement the four sector wide core reform programs (see below);• report on risk mitigation strategies.

The DPC GRO – Project Management Office will:• provide central coordination of Departments’ corporate and shared services reforms;• undertake sector wide monitoring;• report Departments’ program delivery against schedule, costs and benefits realisation;• undertake program management for the four core reform programs (see below).

Each Principal Department will establish its own project office, supported by local governancearrangements that will be overseen by the relevant Director General, agency CEs and other C-Level officers (Chief Information Officer, Chief Financial Officer, Corporate ServicesHead, etc).

DPC/Central Agency Led Reform Programs

DPC (in conjunction with NSW Treasury and DGEC) will deliver the following sector wide core reform programs:

1. Whole of Government program implementation: including central coordination; co-ordinated communication and change management; and common reform implementation management strategies, governance, programming and budget management (including budget management of centrally controlled reform funding; and provision of guidelines, frameworks and requirements for reform related budget management across the sector).

2. Sector wide benchmarking and best practices program: including implementation of a whole of government framework; delivery of sector wide benchmarking; and integration of central agency data collection and benchmarking programs including workforce profile, overheads review and ICT review benchmarking and metrics.

3. Sector wide standards and capability development program: to deliver a ‘gold standards’ and certification program to ensure implementation of standard processes, technologies and best practices across Government; establish a learning and development centre to raise capability, skills and knowledge of government employees on best practices and standards.

4. Implementation support for clusters: to govern, manage and deploy corporate and shared services related resources and expertise to support Departments in implementing the Blueprint in the clusters; including sourcing and coordinating specialist resources such as process reengineering and black belt specialists, technology architecture and engineering specialists, infrastructure and commercial specialists etc.

7(ii)Corporate and Shared Services Reform Program Governance

107

There are three horizons of implementation activity required for the transition to Corporate and Shared Services across the sector based on timing and ease of implementation.

IMPLEMENTATION PHASING

• Horizon 1 is short term tactical realisation of benefits as well as business as usual– Quick wins identified during initial diagnostic phases– Departments should address as many short term efficiency wins as

possible and establish these activities as business as usual

• Horizon 2 is more medium term and fits into the coming financial year with planning for and realising benefits within the financial year– Identify, design and implement programs that have a return within the

12 month period

• Horizon 3 is longer term and transformational which sees the transition to end state Corporate and Shared Services centres– Commence detailed business cases and transition plans to move to

the future mode of operation, including: • Readiness assessment with stakeholder analysis• Current state and future state analysis• Communication and change management plans• Timescales and costs• Cost benefit analysis• Benchmark measures to be affected

Horizon 1Short Term (tactical

realisation)

Horizon 2Medium Term (results

within 12 months)

Horizon 3 Longer Term (Transformational)

2010 2011 2012 onwards

Whole of Government (Benchmarking, DGEC and DPC reform management)

Immediate benefits business as usual

Benefits to achieve further enhancement

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BENEFITS REALISATION FRAMEWORK

• A benefits realisation framework needs to be adopted to ensure:– The ‘as is’ metrics are captured and a baseline established to correctly measure progress and establish a factual basis for assessing the

effectiveness of any changes.– The cost/benefits in the business case are being achieved in the timeframes anticipated.– Comprehensive visibility at Principal Department and sector levels providing a quantifiable basis to determine priorities, modify objectives or

redefine desired outcomes should the need arise.– State funds are being used wisely.– Accountability for actions are assigned and monitored.– End users are receiving services as promised and there is ongoing measurement of customer service.– Principal Departments funds are being freed up from Corporate and Shared Service activities for better use in frontline services.– The identification of performance improvement levers from the provider side to identify how to drive down costs.– The establishment of an ongoing continuous improvement culture post arriving at the end state.

• More specifically the framework needs to: – Capture the total benefits as a result of people, processes and system changes (ensure no double counting).– Define the key drivers for cost savings and avoidance and monitor progress against these.– Provide goals for Principal Department corporate and transition teams to meet, measure progress against and take corrective action if required.– Capture the aggregate benefits by time period as a result of people, processes and system changes at Principal Department and sector level.

Monitoring benefit realisation is important due to the considerable degree of change and investment involved in the transition.

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Scorecards similar to the examples below, should be constructed to measure how the transition has progressed against the key reform expectations built into the initial Principal Department business cases.

SAMPLE REPORT CARDS

Inter-Agency Dashboard

Content Tier 1 Metrics – combined Corporate Services view (no external targets) showing distribution

Tier 1 Metrics – per Function (no external targets) showing distribution and median

Functional baseline – Costs and FTEs showing composition

Indicative format

Principal Department Report

Content Functional baseline – Costs and FTEs Tier 1 Metrics – per Function (no external targets)

Indicative format

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The implementation of the Corporate and Shared Services reform across NSW Government will require focussed investment in people and capability during the implementation and transition phases.

1. Implementation phase roles

IMPLEMENTATION MANAGEMENT STRUCTURE

• Departmental responsibilities:– Establishment of effective implementation structure and team

composition– Accountable for monitoring and achieving the reform benefits– Liaising with central government agencies for business case approval

processes and performance reporting

• Corporate Services Office responsibilities:– Provide ultimate input into the business case and transition plans to

determine what is either corporate, shared or front-line (business) services

– Continue with business as usual accountabilities across the Principal Department

– Ensure sector coordination and membership of sector forums– Ensure ongoing funding and resourcing issues during transition and

end state operations– Accountable to reach agreement on SLAs, timing and funding

priorities for the smooth transition to Corporate and Shared Services (in-house or multi-tenanted)

– Ensure transition shadowing resources are kept to a minimum and phased out as early as possible in the end state operation

• Reform Program Office responsibilities:– Working with Corporate Executives ensure the smooth transition from

‘as is’ to Corporate and Shared Services– Realise cost benefits in a timely manner– Build an ongoing continuous improvement culture– In multi-tenanted model ensure smooth cut-over to the provider

Department

Corporate Services Office

• Corporate Services Director• CIO• CFO• HR Director• Integration - Chief Operating

Officer1

Reform Program Office

• Reform Director• Change and Communications

Manager1

• People, Process and Technical Transition Team1

• Project Management Office1

– Project Administration– Program/Schedule Manager– Program Financial Controller

(manage cost and benefits realisation)

– Risks/Issues Manager

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The implementation of the Corporate and Shared Services reform across NSW Government will require focussed investment in people and capability during the implementation and transition phases.

1. Implementation phase roles

IMPLEMENTATION MANAGEMENT

Department

Corporate Services Office

• Corporate Services Director• CIO• CFO• HR Director• Integration COO1

Reform Program Office

• Reform Director• Change and Communications

Manager1

• People, Process and Technical Transition Team1

• Project Management Office1

–Project Administration–Program/Schedule Manager –Program Financial Controller

(manage Cost and Benefits Realisation)

–Risks/Issues Manager

Corporate Services Director

• Ultimate responsibility for transition to and steady state running of Corporate Services

• Corporate governance

CIO • Ensure Technology standardisation and policies across Principal Department

• ICT Strategy and investment prioritisation • During transition period work with technology team to

ensure all legacy activities are accommodated

CFO • Strategy (financial and investment)• Financial Controls and Framework, Reporting (DG and

Ministerial, Treasury, Tax, Audit and Budget)

HR Director • Principal Department wide communications (working closely with Reform Change Manager)

• Strategy (Workforce planning, training and development, OH&S planning, IR and total rewards planning)

• Reporting (Statutory, DG and Ministerial)• Planning organisational size and structure for transition and

end state operations

Integration COO • Ensure that corporate direction is reflected in transition planning

• Work with CFO and Corporate Services Director to ensure funding and resources issues are addressed in transition period

• Own the building and approval of the business case • Head up team deciding on split of functions between

Corporate, Shared and Business services• Communicate clear roles and responsibilities across

Principal Department, agencies and transition teams• Work with Departments/agencies to ensure other current

initiatives can be recognised and not compromised• Liaise with sector team and Executive Communities

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The implementation of the Corporate and Shared Services reform across NSW Government will require focussed investment in people and capability during the implementation and transition phases.

1. Implementation phase roles

IMPLEMENTATION MANAGEMENT

Department

Corporate Services Office

• Corporate Services Director• CIO• CFO• HR Director• Integration COO1

Reform Program Office

• Reform Director• Change and Communications

Manager1

• People, Process and Technical Transition Team1

• Project Management Office1

– Project Administration– Program/Schedule Manager – Program Financial Controller

(manage Cost and Benefits Realisation)

– Risks/Issues Manager

Reform Director • Own the transition process

• Have dotted line accountability to the sector Reform Director

• Focus downwards on delivery by the transition team

• Ensure Department/agency business cases align with other initiatives and there is no double counting of savings

• Ensure a service delivery and continuous improvement focus is achieved in end state

Change and Communications Manager

• Work with HR Director to provide smooth deployment of staff into new roles

• Ensure sufficient communication, change and training planning and delivery for transition

People, Process and Technology Team

• Leverage experience to provide the necessary re-engineering, planning and implementation skills to enable a smooth transition

• Work with Corporate and sector teams to drive efficiencies and identify further potential areas of improvement

Project Management Office

• Provide Program Management services including:

– Project management/right sizing of team

– Reporting

– Cost benefits realisation measurement

– Risk identification and mitigation

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There are a number of critical success factors to support a smoother transition to Corporate and Shared Services.

CRITICAL SUCCESS FACTORS

1. Strong Business Case Upfront

2. Strong Project management Skills

• Enable an informed decision based on:– Baseline of current operations– Preferred operating model structure– Where benefits will be realised– Performance goals, metrics and method for tracking– Supporting technology systems required

– People and skill set requirements– How the governance will operate during and after

transition– Program costing including upfront implementation and

funding options for transition and ongoing operation

• Manage delivery against the business case

• Manage the complexity of a staged rollout project

• Ensure consistency of management approach, tools and reporting

• Keep stakeholders informed and engaged

• Alignment with other Departmental initiatives

• Effective transition plans, timings, costs and risks (mitigation strategies)

• Manage anticipated staff issues associated with change management, training and communication plans

3. Executive Support

4. Logical Standardisation of Processes and Technology

• Executives need to be:– Seen to lead the decision to adopt and implement the

Corporate and Shared Services Solution– Able to articulate what their Super Departments are

trying to achieve from the program– Providing governance to lead, direct and keep program

on track

– Maintaining support for change and encouraging their teams to persevere through transition

– Allocating sufficient resources and funding to manage the change

– Quickly addressing any resistance directly– Own the outcomes

• Maximum efficiencies are driven through as much standardisation as possible

• Technology & process standards are required to underpin the efficient function of the Corporate and Shared Services

• Critical fact based review of functional/process decomposition to determine and maximise the number of processes to move into the Shared Service Centre

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There are a number of critical success factors to support a smoother transition to Corporate and Shared Services.

CRITICAL SUCCESS FACTORS

• Client patience and cooperation during transition based on methodical initial and ongoing communications

• Employees need to know personal impact and what will be expected from them (individual and union consultation)

• Education in how Corporate and Shared Services work is essential

– Optimise use of Centres and what SLAs are in place

– How to handle the additional automation (self service) that will exist

– Who are and how to engage, the points of contacts into the Centres

– Understand how all old critical functions occur in the new centres and specific changes

• Global experience indicates that a big bang approach introduces more risk than a phased approach

• A phased approach is more manageable and better accepted by clients (e.g. rollout may be by function, geography, Agency etc)

• Clear milestones and dependencies must be defined and

communicated throughout the program

• Corporate and Shared Services rollouts can take approximately 18 months to complete, requiring a disciplined, consistent approach to managing progress throughout

5. Strong Change Management

7. Build trust with Stakeholders

6. Phased Implementation

• Engage key client stakeholders early in the transition

• Set up SLAs providing clear direction and value in service delivery early with a regular review process

• Measure ‘as is’ support performance and be able to demonstrate how it has improved

• Build upon process improvements

• Continuously review and report on performance against targets

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8. Benchmarking and Best Practices

i. Principles and Framework

ii. Taxonomy/Functional Decomposition

iii. Metrics, Targets and Best Practices

iv. Ongoing Benchmark Program

a. Methodology & approach

b. Roles & responsibilities

c. Location structure

d. Question sets

e. Tools and data sources

f. Definitions

g. Assumptions

h. Validation

i. Reporting

v. Implementation Considerations

Content

116

• Be based upon a precise common language to define activity consistently across the NSW Government

• Ensure data captured is consistent and comparable across all government entities

• Facilitate a consistent central agency data collection approach to avoid duplication and rework, whilst supporting the needs of all users of information

• Encompass metrics that are aligned with the objectives of the NSW Government and the departments within it

• Be underpinned by a bottom up approach for data collection in order to enable early identification of improvement initiatives and greater visibility of performance

• Recognise that challenges exist for many Departments/agencies around data collection, and enable a transitional approach to embedding performance measurement capability

• Ensure that external targets selected are:– relevant and achievable for the NSW Government, and focused on the ‘vital few’ for each in-scope function– defined based on a whole of government perspective and are re-based/adjusted for application to individual agencies according to their own context

and drivers– adjusted over time as the external environment changes and the NSW Government’s performance progresses

• Enable the Departments/agencies to gain visibility of performance and service levels against the agreed metrics and understand how to use them to better educate end users and lower Corporate and Shared Services costs

• Provide the central agencies with the ability to gauge relative performance between Departments/agencies against the agreed metrics

The benchmarking methodology for Corporate and Shared Services should . . .

GUIDING PRINCIPLES – BENCHMARKING AND BEST PRACTICES

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117

• The framework enables the NSW Government to perform:

– External comparison – to pre-define targets based on an industry peer group and tailored for applicability to NSW Government

– Internal comparison – between the ‘Principal Departments’ of NSW Government

– Ongoing best practices – at Principal Department level to track improvement initiatives and monitor performance levels

• The Benchmarking program will:– define best practice enablers to assist in

closing performance gaps – aid Departments to identify where and how

practices can be improved– provide feedback on where improvements

are being realised

• Whole of Government comparison

• Top level performance information• External targets (relevant peer group)• Internal comparison between Principal

Departments• Rate of best practice adoption

• Baseline development• Identify initiatives• Ongoing performance

management• Benefits realisation

What does this enable?Who has visibility?

• Whole of Government

• Whole of Government• Principal Departments• Central Agencies

• Principal Departments• Agencies

Total Cost & FTE Metrics

Key efficiency & effectiveness

metrics and targets

Process level performance information (cost,

productivity, practice)

Consistent activity and data definition• Common language • Comparable data• Deeper level of definition

TIER 1

TIER 2

TIER 3

The NSW Government has adopted a four tier Benchmarking and Reporting Framework

Operational Tracking and ReportingDepartment Corporate Dashboard

Shared Services Customer DashboardShared Services Operational Dashboard

• Ongoing performance management

• Benefits realisation• Target setting and tracking

• Principal Departments

• Agencies

TIER 4

Operational Tracking and Reporting

The intention is to improve the practices and capacity of the sector as a whole and the visibility of process and operational data for operational improvements and management oversight.

The tier 1-3 formula has been developed with Hackett, as part of its methodology.

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Benchmarking and best practices framework.

• The benchmarking and best practices framework defines the metrics and targets which will form part of the Blueprint for Shared and Corporate Services, and the ongoing operational requirements for measuring performance against those metrics and targets

• The framework enables the NSW Government to perform:– External comparison – to pre-define targets based on an industry peer group and tailored for applicability to NSW Government– Internal comparison – between the Principal Departments of the NSW Government– Ongoing performance measurement – at Principal Department level to track improvement initiatives and monitor performance levels

• Metrics and data collection question sets have been identified at three levels:

• This framework is founded upon the following elements:– A consistent taxonomy to define ‘Corporate Services’ activity across all NSW Government entities– Data collection definitions and guidance that are consistently applied and linked to a consistent process taxonomy– Data collection tools that enable roll up of metric performance from a Principal Department level to a whole of government level– Data validation processes defined to ensure the viability and relevance of data submitted, and minimise data discrepancies– The data collection process leverages existing sources to the extent possible

Purpose Description

Tier 1 Provide visibility of overall Shared and Corporate Services cost and FTEs, and establish a baseline for current Principal Department performance

Cost per operating budget and FTE per total organisational FTE for each in-scope function, plus at an aggregated Corporate Services levelBaseline data for each Principal Department by in-scope function

Tier 2 As for Tier 1, plus:Drive achievement of primary objectives for Corporate and Shared Services Reform

As for Tier 1, plus:‘Vital few’ metrics based on key efficiency and effectiveness drivers, volume metrics and limited practice adoption assessment

Tier 3 As for Tier 2, plus:Enable deeper visibility of performance to track improvement initiatives and monitor ongoing performance/service levels

As for Tier 2, plus:Expanded set of metrics and practice indicators comprising a much deeper level of granularity

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Benchmarking and best practices framework – metrics and targets.

Dimension Purpose Driven by/Used by Blueprint Tools Level Frequency Transitional Considerations

Inter-agency metrics and targets

• Top level performance information

• External comparison

• Internal inter-agency comparison

• Rate of best practice adoption

• Driven by Central Agencies

• Used by Central Agencies and PrincipalDepartments

• Headline metrics (Tier 1)

• Driver-based metrics and associated best practices (Tier 2)

• External targets defined (Tier 2)

• Inter-agency dashboard design

• Detailed process taxonomy

• Question sets

• Corporate Services, Function and Process

• 18-24 months (external comparison)

• 6 months (inter-agency comparison)

• Initial population of dashboard contingent upon PrincipalDepartment baselining exercises

• Tier 2 metrics subject to consultative review at end of transitional period

Principal Department baseline, best practices and tracking

• Baseline development

• Initiative identification

• Ongoing measurement and tracking of benefits

• Define the minimum standard for data collection

• Driven by Principal Departments based on Central Agency guidelines and negotiated arrangements

• Used by Principal Departments predominantly

• Headline metrics (Tier 1)

• Driver-based metrics and associated best practices (Tier 2 and 3, but see transitional considerations)

• External targets defined (Tier 2)

• Detailed process taxonomy

• Question sets

• Function, Process and Sub-Process (but see transitional considerations)

• Initial baseline within 6 months

• Ongoing frequency determined by PrincipalDepartments

• Minimum standard for data collection (Tier 1) with all Principal Departments to aim for Tier 2 completion

• Definition of broader metrics and associated data requirements (Tier 3), with early adoption where achievable

Dependency

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Benchmarking and best practices framework – metrics and targets.

* FTE and Labour Cost data is collected at a sub-process level for all Tiers

IMPLICATIONS FOR DATA COLLECTION AND VISIBILITY

• The data collections undertaken by the Principal Departments will achieve two primary objectives:1. The production of a baseline for current cost and activity for in-scope functions2. Visibility of current performance against the agreed metrics and associated world-class and peer group targets

• Principal Departments will collect data and other information utilising a tailored question set. A tiered approach has been taken to the development of metrics and their associated question sets, in order to recognise that some Principal Departments may wish to collect data at a deeper level of granularity than others. As a consequence these Principal Departments will gain greater visibility of, and insight into current performance. See below:

• For metrics see section 8(iii)

Tier 1

Tier 2

Tier 3

Data collection level Visibility of baseline data Visibility of performance results

Corporate Services and function* Principal DepartmentDPC

Principal DepartmentDPC

Function and process* Principal DepartmentDPC

Principal Department DPC

Function, process and sub-process* Principal Department Principal Department

DPC

8(i)

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Benchmarking and best practices framework – operational and commercial model.

DimensionTransitional (next 6 months approx) End State

DPC role Benchmarking Partner role

Department/ Agency role DPC role Benchmarking

Partner roleDepartment/Agency role

Inter-agency metrics and targets

•Build competency and data collection tools (supported by benchmarking partners)

•Review dashboard•Review Principal Department reports

•Transfer knowledge

•Support DPC in building competency and data collection tools

•Populate dashboard

•Receive tailored output (showing own Principal Department versus others)

•Own the process•Provide tool for data collection, analysis and reporting

•Produce dashboard

•Re-baseline at agreed milestones (optional)

•Re-set targets at agreed milestones

•Provide data•Receive tailored output

Principal Department baseline, best practices and tracking

•Drive the process•Engage consultancies

•Support Principal Departments and their consultants around data collection

•Run validation process

•Input data to benchmarking partner portal

•Produce report assessing performance against agreed metrics

•Provide data extract to DPC

•Collect data (supported by consultancies)

•Internal validation of data

•Provide context and insight to performance results

•Build competency and data collection tools (supported by consultancies)

•Provide guidance to Departments around process

•Establish commercial terms for accessing the benchmarking partner’s benchmark products

•Provide range of benchmark services to Departments on an optional basis per agreed whole of government commercial terms

•Own the process (in line with DPC guidance)

•Collect data•Provide tool for data collection and analysis

•Internal validation of data

•Reporting

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122

Benchmarking and best practices framework – indicative timeframes.

Blueprint

Department and agency data collection and reporting

Inter-agency dashboardD

PCD

epar

tmen

ts

Competency building and tool design/development

Competency building and tool design/development

Jan 2010 Aug 2010 Ongoing 6 monthly intervals

Inter-agency dashboard

Inter-agency dashboard

Inter-agency dashboard

Inter-agency dashboard

Inter-agency dashboard

Inter-agency dashboard

Re-benchmark(optional)

Reset external

comparisons

Re-benchmark(optional)

Reset external

comparisons

Pro

vide

dat

a

Pro

vide

dat

a

Pro

vide

dat

a

Pro

vide

dat

a

Pro

vide

dat

a

Pro

vide

dat

a

Ongoing performance measurement and benefits tracking

Col

labo

ratio

n

Col

labo

ratio

n

Transition Moving to End State

Check point to review metric/target composition

8(i)

123

The summary process taxonomy demonstrates the scope of the functional decomposition.

SUMMARY TAXONOMY

HR IT Finance Procurement E&CS (Other) Miscellaneous

Total rewards administration Technology infrastructure Cash disbursements Supply data management Administrative services Library services

Payroll services Application management Revenue cycleRequisition and PO processing

Travel and transportationFreedom of Information (FOI) requests

Data management, reporting and compliance

IT risk managementGeneral accounting and external reporting

Supplier schedulingReal estate and facilities management

Staffing services Planning and strategy Tax management Receipt processing Government affairs (N/a)

Workforce development services

Management and administration

Treasury management Sourcing execution Legal

Labour relations Compliance management Compliance management Quality management

Organisational effectiveness services

Planning and performance management

Supplier management and development

Risk and security management

Total rewards planningFiscal analysis (aka business analysis)

Customer management Executive

Strategic workforce planningManagement and administration

Planning and analysis

Management and administration

Function management

© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Baseline data collection only, no metrics defined.

The full detailed taxonomy can be made available on request from DPC

8(ii)

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Mapping of the existing DPC taxonomy* to the Hackett taxonomy shows overall consistency.

PROCESS TAXONOMY MAPPING

Finance

Process Sub-process Mapping

Cash disbursements Accounts and program payables

Travel and expense

Revenue cycle Cash application

Credit 4

Collections

Customer billing

Dispute management 4

General accounting and external reporting

General ledger

Inter-agency accounting 4

Cost accounting 4

Fixed assets

External reporting

Tax management Tax management

Treasury management Cash management

Capital and risk management

Compliance management Compliance management

Process Sub-process Mapping

Planning and performance management

Planning and performance management

Fiscal analysis (aka business analysis)

Fiscal analysis (aka business analysis)

Management and administration

Function management4

IT

Technology infrastructure Infrastructure management

End user support

Infrastructure development

Application management Application maintenance

Application development and implementation

IT risk management Quality assurance

Risk management

Planning and Strategy IT business planning

Enterprise architecture planning

Emerging technologies 4

Management and administration

Function management

4

= Hackett taxonomy covers and expands upon DPC taxonomy

= DPC taxonomy does not include any processes in this area

* Per the Activity Dictionary included within DPC’s Corporate Overhead Costing Guide

8(ii)

125

Human Resources

Process Sub-process Mapping

Total rewards administration Health and welfare administration

Pension and savings administration 4

Compensation administration

Payroll services Payroll administration

Time and attendance

Data management, reporting and compliance

Employee data management and HR reporting

Compliance management 4

Staffing services Recruiting and staffing

Exit process

Workforce development services

Transferable skills

Non-transferable skills

Labour relations Labour relations

Organisational effectiveness Organisation design and development

Employee relations

Process Sub-process Mapping

Total rewards planning Total rewards planning 4

Strategic workforce planning Strategic workforce planning

Management & administration Function management 4

Procurement

Supply data management Supply data management

Requisition and PO Processing Requisition and PO Processing

Supplier scheduling Supplier scheduling 4

Receipt processing Receipt processing 4

Sourcing execution Requirements definition and supplier bidding

Negotiation and supplier contract creation

4

Supplier management and development

Supplier management 4

Supplier partnering

Customer management External customer management

Internal customer management

Product development and design support

4

4

= Hackett taxonomy covers and expands upon DPC taxonomy

= DPC taxonomy does not include any processes in this area

PROCESS TAXONOMY MAPPING

8(ii)

Mapping of the existing DPC taxonomy* to the Hackett taxonomy shows overall consistency.

* Per the Activity Dictionary included within DPC’s Corporate Overhead Costing Guide

126

Procurement (continued)

Process Sub-process Mapping

Compliance management Compliance management 4

Planning and analysis Sourcing and supply base strategy 4

Function management Function strategy and performance management 4

Function management 4

Other (Executive & Corporate Services)

Administrative services Administration support

Cafeteria and catering services 4

Mail services and record retention

Travel and transportation Transportation services

Travel services

Real estate and facilities management

Facilities management

Real estate management

Government affairs Government affairs 4

Process Sub-process Mapping

Legal Corporate governance 4

Intellectual property 4

Legal advice - internal

Litigation and dispute management

4

Merger and acquisition 4

Regulatory compliance 4

Legal management and administration

4

Quality management Quality management 4

Risk and security management Risk management 4

Environmental health and safety

Security

Executive Corporate communications 4

Planning and strategy 4

Executive office 4

4

4

= Hackett taxonomy covers and expands upon DPC taxonomy

= DPC taxonomy does not include any processes in this area

= Not appropriate for use within Government clients

PROCESS TAXONOMY MAPPING

8(ii)

Mapping of the existing DPC taxonomy* to the Hackett taxonomy shows overall consistency.

* Per the Activity Dictionary included within DPC’s Corporate Overhead Costing Guide

127

Some Corporate Service activities performed in NSW Government fall outside the taxonomy.

TAXONOMY EXCEPTIONS

DPC Activity* Activities which fall outside the process taxonomy Proposed solution

Library Services Some activity is captured within the Procurement area (e.g. obtaining library materials) and the IT area (e.g. supporting library management system), but more operational activities such as indexing, cataloguing, inter-library loans are not captured within the process taxonomy

Activity relating to Library Services and Information Requests will be captured using two of the miscellaneous processes which can be built into a benchmarking project.The key process activities relating to Library Services and Information Requests will be defined and incorporated in the question sets and supporting guidance.Data collected will therefore form part of the overall Corporate Services cost and activity baseline, however this will be backed out in order to enable comparison to external targets for whole of Corporate Services cost and activity metrics.

Information Access and Reference Services

Activities include answering simple and complex information requests are not explicitly covered within the process taxonomy. Managing information content in portals could be captured within Application Maintenance or Development.

Workers Compensation

Comparability – Workers’ Compensation is a significant liability for the NSW Government, and as such generates high levels of activity in relation to the management and administration of claims. Activity will be captured and performance shown via HR metrics in the main, and there is a risk that metrics may not truly be comparable to external targets as a consequence of the Workers’ Compensation driver.

This risk is mitigated through the selection of a target based on a peer group which comprises organisations of a similar driver profile to NSW Government.

Visibility – activity relating to Workers’ Compensation will be captured within the process taxonomy (primarily in HR/Data management reporting and compliance), but it will not be easily apparent the extent to which Workers’ Compensation drives activity versus standard absence and special leave management

Within the existing Workforce Profile Data set, it is possible to isolate individuals coded 45 – OH&S. This position code reflects both OH&S and Workers’ Compensation related activity, so will provide some recourse for drill-down analysis into this area for the Principal Departments.During data collection, coordinators will be requested to add a comment regarding the distribution of individuals coded 45 – OH&S.

* Per the Activity Dictionary included within DPC’s Corporate Overhead Costing Guide

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128

The NSW Government’s investments in assets and office accommodation are considerable, and hence Asset Management is a significant area of activity and cost within the sector.

ASSET MANAGEMENT

• The NSW Government’s investments in assets and office accommodation are considerable, and hence Asset Management is a significant area of activity and cost within the sector.

• The process taxonomy as defined does not categorise asset management activities within one function or process area. Rather these activities are distributed across the taxonomies as shown:

Asset management activity area Covered within process taxonomy

IT Assets – acquire, develop, maintain, manage, dispose IT – all areas

Property – acquire, develop, maintain, manage, dispose Other – Facilities & Real Estate Management

Fleet – source, contract, manage, administer, dispose Other – Travel & Transportation – Transportation Services

Accounting for fixed assets – acquisition, valuation, impairment, depreciation, disposal

Finance – General Accounting & External Reporting – Fixed AssetsFinance – General Accounting & External Reporting – Cost Accounting

• Further visibility of Asset Management activity will be enabled by reference to the existing Workforce Profile Data for positioncode 24 – Asset Management General.

• In the event that Principal Departments have dedicated Asset Management teams supporting core service delivery assets (e.g. rail infrastructure, roads, housing, schools) a Miscellaneous Process should be utilised to maintain comparability of overallresults yet also provide visibility of current costs and activity.

8(ii)

129

Overall objective: build a framework in which tailored and achievable target metrics can be set.

METRICS, TARGETS AND BEST PRACTICES

The operational deliverables of the Blueprint are to:

• Define the drivers for effectiveness and efficiency that will enable the NSW Government to understand the framework for achievement of the key objectives for Corporate Services reform

• Identify the key metrics that align to those drivers

• Select a meaningful peer group by reference to which external targets will be initially established

• Set tailored and achievable target metrics against peer group performance

• Define the best practice enablers for achievement of target performance

The underlying deliverable of the Shared Services Blueprint is to enhance the capability of DPC and the Principal Departments to monitor andimprove performance:

• Improving performance is a dynamic process that focuses on the key drivers and metrics that enable performance

• Tracking individual metrics is risky as their movements are unpredictable – tracking drivers described by numerous metrics reduces volatility

• The drivers and metrics identified in this Blueprint are not static. These should be re-focused and evolved by DPC and the Principal Departments as understanding of current performance improves, and corporate services reform progresses.

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130

Top level metrics will be employed to enable a single dimensional assessment of Corporate Services provision from a cost and FTE perspective across and within Principal Departments.

TIER 1 METRICS

• The collection of baseline data via the ongoing benchmarking program will enable Principal Departments and DPC to report upon high level functional metrics (Tier 1).

• For all of the in-scope functions (Finance, IT, HR, Procurement, Real Estate & Facilities Management and others) functional cost and FTE data will enable definition of current performance against the baseline metrics:– Function cost as a % of operating budget– Function FTEs as a % of total workforce FTEs– Overall Corporate Services cost as a % of operating budget– Overall Corporate Services FTE as a % of total workforce FTEs

• External targets will not be established for these baseline metrics, as the ability to define meaningful external targets for overall functions is limited in the absence of detailed driver information for each Principal Department.

• External targets will however be set for the Tier 2 metrics, and the methodology for establishing these targets is set out on the following pages.

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131

The process we worked through builds the driver set and aligns to metrics, sets the targets and identifies the best practices to close the gaps.

OVERALL APPROACH – TIER 2 METRICS

Identify all drivers

Identify all the metrics for the

driversCategorise

Define the key set of

drivers and metrics

Align the best practice

processes

Category criteria:• Binary Lead• Binary Lag• Analogue Lead• Analogue Lag

Category criteria:• Relevance• Achievability

• Definitions and drivers

• Category criteria:• Effectiveness• Efficiency

Summary descriptions of practices that enable the Principal Departments to close the gaps

Set targets against Peer

Group

Category criteria:• Select appropriate

Peer Group based on complexity and size

• Set tailored and achievable target

Metric Identification Target Setting Best Practices

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132

METRIC IDENTIFICATION

• The Tier 2 metrics contained within the Blueprint aim to be simple and relatively easy to measure. They do not seek to cover allaspects of performance, but provide an indicator as to progress and direction, motivate changes in behaviour, and support improvement efforts.

• The indicator set captures key aspects of EFFECTIVENESS (defined as ability to deliver optimal value) as well as EFFICIENCY (defined as organisational cost and productivity).

• Taking this balanced approach to assessment of measures will assist the sector to understand the extent to which they are ‘doingthe right things’ and ‘doing things right’

• For each functional area, the drivers for future achievement of efficiency and effectiveness were identified and utilised to focus down on the key metric indicators for each function. These are shown on the next page.

Metric Identification Target Setting Best Practices

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133

A driver influences a future outcome…

METRIC IDENTIFICATION - DRIVERS Metric Identification Target Setting Best Practices

EFFECTIVENESS

Proc

urem

ent Supply Base Performance Internal Quality

Stakeholder Alignment Economic Value

Finan

ce

Role of Finance Quality of Output

Talent Management Economic Return

Value of Analysis Information Access

HR

Role of HR Value of Analysis

Talent Management Quality

IT

Role of IT Automation

Quality Talent Management

Running IT

EFFICIENCY

Proc

urem

ent

Total Cost Productivity

Cycle time Staffing

Finan

ce

Total Cost Cycle Time

Transaction Processing Cost Technology Leverage

FTEs & Productivity

HR

Total Cost Cycle Time

FTEs and Productivity Technology Leverage

Transaction Processing Cost

IT

Total Cost Information Access

FTEs and Productivity Complexity

Cycle Time

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134

… and will be described by one or more metrics: lead or lag; binary; or analogue

METRIC IDENTIFICATION - CATEGORISATION

Binary: Either the metric definition is met or is not mete.g. Use of a Project Management Office: yes or no

Analogue: Metrics can take any value in a given rangee.g. % projects meeting specification (range 0-100%)

Lead indicators: Depict an intent/decision to influence a resulte.g. to have a Service Catalogue - binarye.g. Reduction in # of applications - analogue

Lag indicators: Depict an outcome and encourage action/decision to change the result

Influences Progress

Lead

Lag

Binary Analogue

Enables Progress

Confirms Progress

Qualifies Progress

Categorisation of Metrics

Performance

Take Action

Lead Indicators Lag indicators

Working together

Definitions

Metric Identification Target Setting Best Practices

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135

Targets are defined based on a relevant peer group…

TARGETS – PEER GROUP SELECTION Metric Identification Target Setting Best Practices

• Participants differ from function to function, which leads to different Peer Group for each function

• Peer companies are of various size and complexity, with the focus on Government agencies and multinationals with an Australian footprint in the database

• Measurement is made against Median (50% breakpoint) of the database

• The pool of companies in the Hackett data cut is regularly updated and changes on a yearly basis

• The database contains only companies that have completed the Benchmark within the last 24 months

Peer Group – Methodology description

Peer Group Characteristics Finance HR IT PR Other

Operating Budget/Revenue $ 10.9 Billion $ 6.3 Billion $ 15.3 Billion Spend:$ 1.5 Billion $ 9.9 Billion

Employees 23k 21k 26k 12k 32k

Locations 107 166 135 40 277

Countries 1 1 3 1 24

% of Government agencies 79% 80% 50% 83% 14%

Sample Size - total number of companies 39 25 18 24 14

8(iii)

136

… and normalised for structural factors within the sector

TARGETS Metric Identification Target Setting Best Practices

World-Class

Peer Group

NSW Govt target

Target normalised to take account of specific structural factors (e.g. average labour rate)

Based on a comparative peer group. Comparisons are normalised against a functional driver, e.g. Finance = Op Budget/Revenue, HR = Employees

Top quartile for Efficiency and Effectiveness

• The Blueprint includes external targets for the Tier 2 metrics.

• These are based upon :– a World-Class comparator group, and – a comparative Peer Group for NSW

Government selected as per the methodology outlined previously.

• The NSW Government targets have been defined based on an assessment of the Peer Group median targets, to adjust these for specific structural factors present in the sector. See following page.

Illustration of the Blueprint target model

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137

Peer Group indicators have been flexed to take account of specific structural factors within the NSW Government environment.

* Average NSW Government Labour Cost is $72,964 based on the 2008 Workforce Profile snapshot and uplifted by 24% to determine a fully loaded labour rate. Specific functional average labour rates have been adopted and applied to each relevant functional metric.

SETTING THE NSW GOVERNMENT TARGETS

• NSW Government targets have been derived based on the median point for each metric of the comparative Peer Group.

• Each target has been subject to a two layered adjustment process to take account of specific structural factors within the NSW Government environment and ensure the relevance and achievability of the targets.

• The two layers of adjustment are:1. An exchange rate adjustment to reflect that the peer group data was expressed in US Dollars. The exchange rate adopted

represents the average for the financial year ending 30 June 2009.2. Where labour cost is the primary driver for metric attainment, an average NSW Government labour cost* has been

substituted into the Peer Group data to recognise the limited ability of the sector to address this.

Metric Identification Target Setting Best Practices

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The Blueprint defines the best practice ‘enablers’ which underscore the target levels of performance.

BEST PRACTICES

• In isolation, comparison to a target can only demonstrate a current performance gap. In order to begin to build insight into thekey changes required to close that gap, one must look at the practices adopted internally (i.e. process, technology, people etc)and by the comparator group to identify the key enablers for an enhanced level of performance.

• For each of the metrics identified within the Blueprint, the key Best Practice ‘enablers’ have been defined based on Hackett’s Certified Best Practices™.

Hackett Best Practices Repository

Best Practices Performance metrics Process Flows Implementation

GuidesRequirements

MatricesConfiguration

Guide

Hackett Certified Best Practices™ are based on the empirical data from over 4,000 Hackett benchmark studies and have been proven to correlate to higher levels of performance. There are over 400 best practices in the Finance area alone. These practices define how the world-class companies perform and the common characteristics they share, which can assist the NSW Government and its Departments/agencies in validating the future process model design, and also identifying future improvement initiatives.

Metric Identification Target Setting Best Practices

Best practices defined:• Aligns with strategy • Reduces costs • Improves productivity • Promotes timely execution • Enables better decision making • Leverages/exploits existing/emerging technologies • Ensures acceptable levels of control and risk

management • Optimizes the skills and capabilities of the organization • Promotes collaboration across the extended enterprise

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CLOSING THE GAP

• Once the Principal Departments have determined their performance gaps to the peer group target and world-class performance, the roadmap to narrowing that gap will need to be locally defined based on particular priorities and ability to invest.

• The organisation model design and service delivery model design toolsets included within this Blueprint will be of particular importance in identifying the critical ‘close the gap’ activities required.

• The diagram below indicates some examples of the various strategies that organisations can take in order to move closer to their desired target level of performance. Those organisations that attain World-Class performance (as defined by Hackett’s empirically based methodology) make appropriate tradeoffs and decisions regarding the practices they follow, and execute on those decisions extremely well.

High investment, value-driven

Master data definitions & standards

Data warehouse design and deployment

Strategic planning process design

Budget and forecasting process re-engineering

Decision support organization design

Dashboard deployment

Hackett Value Grid™ Examples of Possible Roadmaps to Closing the Gap

1

Balanced approach

Shared service and ERP deployment

Data warehouse design and deployment

Identify labour arbitrage opportunities

Strategic planning process design

Budget and forecasting process re-engineering

Balanced scorecard deployment

2

Save to invest, cost-

driven

Six sigma process design

Eliminate duplicate processing

Implement shared services

Deploy ERP application environment

Deploy self-service, workflow and imaging capabilities

3

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Guidance has been developed for Principal Departments as they progress through the benchmark program.

ONGOING BENCHMARK PROGRAM

• A Program Guidance has been developed to support the benchmarking program.

• This provides an introduction to the program, outlines the key planning and project management activities required, provides detailed guidance on the data collection and validation approach, and suggestions for communications.

• The major components are summarised in the following pages.

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ONGOING BENCHMARK PROGRAM

COMPONENTS

a. Methodology & approach

b. Roles & responsibilities

c. Location structure

d. Question sets

e. Tools and data sources

f. Definitions

g. Assumptions

h. Validation

i. Reporting

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The benchmark program will be delivered through the following key work steps during the transitional phase.

Planning Training Data Collection Data Validation (Cleansing)

Analysis & Draft Results

Final Results Presentation

Internal Kick-off

DPC x x x

Benchmarking Partner x x x x x x x

Principal Department x x x x x x x

Consultancy x x x x x

Planning Meeting: Project overview Location structure Collection

timeframe Identify project

resources/team Discuss

documentation Agree data

sources Set up web

collection tool Establish weekly

status meeting Roles and

responsibilities

Activities: Provide training

on the following to all data collectors:

Benchmark methodology & timeline

Roles and Responsibilities

Review planning assumptions

Definitions and question set

Web based portal demo

Activities: Complete FTE

worksheet and process questions

Gather directionally correct data

Enter data into online portal

Raise questions and issues to benchmarking partner

Activities: Internally validate

collected data Externally

validate collected data

Preliminary review of benchmark results

Review selected peer group data

Investigate and finalize data submission

Sign off on final data

Activities: Perform analysis

on final data Obtain context

and insight from Principal Departments

Conduct Executive preview with Principal Department

Executive Presentation:

PrincipalDepartment:Review of

benchmark results with comparison to peer and World-Class Improvement

recommendations (Tier 2 only)Next steps

DPC: Incorporation of

metric results into inter-agency dashboard

Activities: Review Workforce

Profile (WFP) data extract and pre-populate FTE worksheet

Time-line Agree data

collection plan and training requirements

Resources Roles &

Responsibility Data location Stakeholder

interviews Executive

Interviews

PH

AS

EIN

VO

LVE

ME

NT

AC

TIV

ITIE

S8(iv)a

143

DPC will take ownership of the benchmark program following the transition phase.

Planning Training Data Collection Data Validation (Cleansing)

Analysis & Draft Results

Final Results Presentation

Internal Kick-off

DPC x x x x x x

Benchmarking Partner x x x

Principal Department x x x x x x x

Consultancy x

Planning Meeting: Project overview Location structure Collection

timeframe Identify project

resources/team Discuss

documentation Agree data

sources Set up web

collection tool Establish weekly

status meeting Roles and

responsibilities

Activities: Provide training

on the following to all data collectors:

Benchmark methodology & timeline

Roles and Responsibilities

Review planning assumptions

Definitions and question set

Activities: Complete FTE

worksheet and process questions

Gather directionally correct data

Enter data into online portal

Raise questions and issues to benchmarking partner

Activities: Internally validate

collected data Externally

validate collected data

Preliminary review of benchmark results

Review selected peer group data

Investigate and finalize data submission

Sign off on final data

Activities: Perform analysis

on final data Obtain context

and insight from Principal Departments

Conduct Executive preview with Principal Department

Executive Presentation:

PrincipalDepartment: Review of

benchmark results with comparison to peer and World-Class

Improvement recommendations (Tier 2 only)

Next steps

DPC: Incorporation of

metric results into inter-agency dashboard

Activities: Review Workforce

Profile (WFP) data extract and pre-populate FTE worksheet

Time-line Agree data

collection plan and training requirements

Resources Roles &

Responsibility Data location Stakeholder

interviews Executive

Interviews

.

PH

AS

EIN

VO

LVE

ME

NT

AC

TIV

ITIE

S

optional

optional optional optional

The future model will be refined during the transition phase, but the table below indicates how the program could be delivered:

8(iv)a

144

DPC Sponsor– Provide project oversight; remove barriers as needed

Overall Project Manager (DPC)– Coordinate the entire benchmark across all Principal Departments

(full time commitment)

Principal Department Functional Coordinator– One per function per Principal Department– Support overall Project Manager in the resolution of specific queries– Assume responsibility for the accuracy of functional Principal

Department data

Agency Functional Location Coordinators (Agency Function Lead)– Various, depended on location structure for the Principal Department– Collect and submit data– Provide status updates as to collection progress– Follow up and correct validation issues

Project Team– Consists of Project Manager, Benchmark Competency Centre and

Subject Matter Experts to support during all Project phases

Agency FinanceLead

Agency HumanResources Lead

Agency IT Lead

Agency Procurement

Lead

DPC Sponsor

Principal Dept Functional

Coordinators

Project Team

OverallProject Manager

Agency Other Processes Lead

Roles and responsibilities.

BENCHMARK PROJECT DELIVERY TEAM

8(iv)b

145

Role Resource(s) Indicative Effort Responsibilities

Project Sponsor TBD Available throughout the project (as needed)

Responsible for project communication and organisational mobilisation Responsible for issue resolution Participate in status meetings

Overall Project Manager TBD 1 resource involved for full

project life cycle

Responsible for coordinating benchmark across all functions and Principal Departments

Manage project according to the agreed upon timeline Develop an internal communication strategy for questions and concerns

regarding the program by answering general questions and coordinating responses from the benchmarking partners

Communicate directionally correct approach for data collection Responsible for results presentation review/coordination

Principal Department Functional Coordinators

Various, one per function per

Principal Department

Preplanning: 15-20%Training: 3 hours

Data collection: 10-20%*Data validation: 20-40%*

Provide subject matter and organisational expertise during pre-planning and training phase

Support overall Project Manager in the resolution of specific queries Assume responsibility for the accuracy of functional Principal Department

data Conduct internal validation of submitted data Follow up on internal and external validation items of submitted data

Agency Functional Location Coordinators

Various, depended on location structure

for the Principal Department

Training: 3 hours + reviewData collection: 10-40%*Data validation: 10-30%*

Participate in a training session on the benchmarking partner’s methodology and tools

Initiate data collection of costs, FTEs, and volume questions Upload FTE spreadsheet and necessary information into portal Provide status updates as to collection progress Follow up and correct validation issues

*Level of effort is impacted by consistency and accessibility of data, organisational structure and volumes of sites with Corporate Services resources

Roles and responsibilities.

NSW GOVERNMENT ROLES AND RESPONSIBILITIES – TRANSITION PHASE

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146

Roles and responsibilities.

NSW GOVERNMENT ROLES AND RESPONSIBILITIES – TRANSITION PHASE

* Performed by experts during the transition phase

Role Responsibilities

Data Collection ToolsDesign & Build

Enable current WFP data to pre-populate tailored FTE spreadsheet during the transitional phase Wok collaboratively with benchmarking experts to develop in-house capability and enhance/refine existing tool set Identify and agree any commercial arrangements required to provide the optimum delivery model for the ongoing benchmarking

program

Benchmark Support & Management

Manage relationship with NSW Government Project Sponsor Support the NSW Project Manger with project coordination and oversight Finalise project assumptions (e.g. location structure, collection period etc) Overall coordination of the benchmark process Support training sessions/web-cast Participate in weekly status cells Answer day-to-day questions on taxonomy, definitions and data collection that the NSW Project Manager cannot answer Identify data validation issues Ensure adherence of data to definitions and taxonomy Enable knowledge transfer to Principal Departments and to DPC Support the development of DPC in-house capability and tool design

Subject Matter Experts* Ad-hoc support on function relevant question

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147

Location structure

DEFINITION

The Data Collection Location Structure refers to a framework which is developed in order to make Departments/agencies’ data tangible and accessible.

It is a template to layer on top of the organisation structure in order to efficiently gather data but also to facilitate detailed insights and internalcomparisons, if required.

• Locations may or may not be physical locations (e.g. organisational unit vs. geographic functional location)

• Locations should be at the lowest level of granularity so that data can be aggregated appropriately to enable internal comparisons (e.g. department, agency, region, ownership type, etc.)

• Locations should make transparent the diverse ways of executing processes (e.g. different systems, practices, performance profiles, productivities, etc.)

• Shared service centers or corporate locations performing centralised processes should be highlighted separately. They can be designated as “source” which can then be allocated to the entities they support

• There are two key tests to assist in the determination of the location structure and question set assignment:– Visibility - which is the level at which data should be collected to provide insight related to functional and process performance– Variability - which is the degree to which differences exist related to process execution

• It is important to evaluate the desired level of visibility required prior to finalising the Location Structure. The level of detail desired has a direct impact on the Location Structure design and thus the effort required on behalf of the Principal Department teams to undertake the required Data Collection activity.

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Some options for location structure are outlined below, but in all cases this structure must be defined and agreed at a Principal Department level prior to undertaking any data collection activity.

OPTION A – HIGH LEVEL OPTION B – MID LEVEL OPTION C – DEEP DIVE

Principal Department

SSC* Corporate/ Functional

* If applicable to Department environment

Principal Department

SSC* Corporate Centre

A B CDepartments, statutory

bodies etc

Principal Department

SSC Corporate Centre

A B C

Y* Z* X* Y* Z*

Departments, statutory bodies etc

* Identification of different physical locations as appropriateBenefits:• Aggregated data collection – shorter time

frame for collection, fewer collectors required, less Department/agency resistance

• Some high level visibility of shadow structures

Drawbacks:• Heavy reliance on assumption and

allocation in data• Risks around comparability of data• Very limited ability to generate insights or

perform internal comparisons

Benefits:• Visibility of shadow structures• Ability to perform high level internal

comparisons• Insight generation at an organisational

model level

Drawbacks:• Still a level of reliance on assumption and

allocation in data• No visibility of physical location of

functional activity

Benefits:• Identification of regional consolidation

opportunities, centres of excellence etc• Visibility of shadow structures• Ability to perform detailed internal comparisons• Data collection occurs down to lowest levels,

hence minimal use of assumption and allocation

Drawbacks:• Large number of data collectors to manage and

train

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As data will be collected for multiple functions at the same time, this must be taken into account when determining the location structure.

LOCATION STRUCTURE – FUNCTIONAL OVERLAYOPTION A – HIGH LEVEL

OPTION B – MID LEVEL

OPTION C – DEEP DIVE

Principal Department

SSC* Corporate/ Functional

* If applicable to Department environment

Principal Department

SSC* Corporate Centre

A* B C

Principal Department

SSC Corporate Centre

A B C

Y* Z* X** Y* Z*

Departments, statutory bodies etc

* Identification of different physical locations as appropriate

= Additional location required for each Function (IT, HR etc)

* Some agencies/units may not be large enough to require more than one data location

Departments, statutory bodies etc

** Some locations may not be large enough to require more than one data location

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The location structure is utilised to allocate data collection questions to the most appropriate location.

ILLUSTRATIVE LOCATION STRUCTURE

• Question guides are allocated based on the location structure which is determined, in order to ensure that the appropriate questions are asked at the appropriate level.

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KEY QUESTIONS TO CONSIDER

• In determining the appropriate location structure, Principal Departments should consider the following key questions:

– What are your key organisational units?

– How are these geographically dispersed?

– What are the main centralised functions which fall within scope of the benchmark?

– Is a Shared Service Centre utilised? If so, what services does it provide and to whom?

– To what extent are processes executed consistently across your organisational units?

– How many FTEs approximately are involved in in-scope activities within each organisational unit?

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Assignment of question sets.

Each location will complete one FTE worksheet. Each location will select and answer only those process-level question sets that apply. If there are more than two FTEs in any process, complete the FTE worksheet. Be cognisant of double counting volumes.

Questions answered at either one location representing the entire function (e.g. Finance) or by each location individually. Need to determine whether these function questions are answered once at the enterprise level or for each organizational unit.

Questions answered only by the Principal Department Project Manager. Seeks to understand the demand or environmental factors that influence overall business complexity

Principal Department Level Questions

Revenue Questions

Environment Questions

Legal Structure Questions

Demand Driver Questions

Business Unit Volume

Questions

Technology and Other Cost Questions

Application Architecture Questions

Transaction Volume

QuestionsCost QuestionsFTE Questions Process

Questions

Organizational Unit /Regional / Functional Level Questions

Location Level Questions

Structure of Question Set Question Details

Once the Location Structure has been determined and configured in the on-line portal, assignment of the appropriate question sections to each location is required. Every location may not be assigned every process and associated question sets within a function. By reviewing the following table along with assessing the Visibility and Variability of process and best practice execution within each organisation, Principal Departments can ensure that processes are only assigned to the relevant locations, helping to ensure that Location Coordinators only answer questions relating to processes that are relevant to their location.

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Question sets.

DETAILED QUESTION SETS EXIST FOR ALL PROCESS AREAS

• A detailed question set will be developed for this benchmarking program and will be tailored to support each of the reportingTiers

• The questions will be cumulative, and the Tier 1 related data requirement represents the minimum data collection standard forparticipation in the program.

Tier 1

Tier 2

Tier 3

Labour cost and FTEs; Outsourcing Cost; Technology Cost; Other Costs (facilities, overhead, travel, training etc)

Labour cost and FTEs; Outsourcing Cost; Technology Cost; Other Costs (facilities, overhead, travel, training etc) Limited volume data; Limited practice data (i.e. system integration, self-service adoption)

Labour cost and FTEs; Outsourcing Cost; Technology Cost; Other Costs (facilities, overhead, travel, training etc) Full volume data (i.e. all transactional processes, all functions); Full practice data (i.e. system integration, self-service adoption)

DATA COMPONENTS

NB For all Tiers, organisational baseline data will be collected, e.g. operating budget, number of FTEs, number of end users

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Tools and data sources.

TOOLS FOR DATA COLLECTION

• The primary tools for data collection are the FTE spreadsheet, the detailed Question Sets, and an On-line Portal which enables collation, validation and analysis of the data collected.

• This is shown below:

On-line Portal

FTE Spreadsheet- FTE- Labour Cost- Functional allocation

Question Sets- Volumes- Practices- Additional costs- Profiling

Tier 1 = Limited set of questions defined so as to enable reporting against the minimum Tier 1 metrics and targets

Tier 2 = Expanded set of questions to provide greater visibility to the Principal Departments around current performance against a broader metric set and high level best practice adoption

Tier 3 = Full set of questions to provide enhanced visibility to the Principal Departments around current performance against a comprehensive metric set and best practice adoption indicators

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Tools and data sources.

DATA COLLECTION - SOURCES

• Principal Departments are regularly subject to data requests from central agencies and other bodies. As a consequence, the ongoing benchmarking program should seek where possible to achieve alignment with, and leverage of, other data collections.

• The primary source of FTE data (the largest data component) for the ongoing benchmarking program will be the existing Workforce Profile (WFP) data, which is collected quarterly by DPC. This data is utilised for a variety of purposes, includingworkforce management and planning, corporate overhead analysis, etc.

• Mapping of the Blueprint taxonomy to the position codes embedded within the WFP data indicates a good degree of overlap and consistency, sufficient for this data to provide a solid starting point for the benchmarking data collection without significant alteration of the current model.

• Ultimately, the processes for collecting FTE data for the ongoing benchmarking program will lead seamlessly from the WFP collections, and can also be utilised to cover off on many other potential usages for the data. In the transitional model however, the Principal Departments will need to perform additional work on the FTE data provided by the WFP collection in order to populate the FTE spreadsheet for upload into the data collection portal.

• In both the transitional model and the future state, Principal Departments will be required to provide responses to the broader question sets for each function. In completing these question sets, the Principal Departments will be able to draw data from their ERP or finance systems, Human Resources Information Systems etc, and central agencies will be able to provide pre-populated data from systems such as e-recruitment and the NSW Treasury ICT benchmarking project.

• This is illustrated diagrammatically on the following page.

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Tools & data sources.

CommentsLeverage existing WFP data

Extract FTE data incl. position codesPre-populate FTE spreadsheet

Further effort required to complete FTE allocation across sub-processes

Complete utilising cost, volume and current practice information

Aggregate totals uploaded to benchmarking partner portal

Role

DPC/Core team

Coordinate WFP collection

Prepare FTE extract & pre-populate spreadsheet

Ongoing support and query management

Principal Department

Review for reasonableness

Perform upload to portal

Location Complete FTE allocation

Complete assigned question sets

WFP data set

WFP extract

FTE spread sheet

Question sets

Upload to benchmarking partner portal

Data validation

FTE dataSee further details on validation approach –section 8(iv)h

DATA COLLECTION - FLOW OF DATA IN TRANSITION PHASE

Other data sources e.g. e-recruitment

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Tools and data sources.

DATA PROTECTION, OWNERSHIP AND VISIBILITY

• The approach to collecting, analysing and reporting on data during the transition phase has been designed to ensure the protection of all data provided and to clearly define ownership of data.

Ownership Visibility

DPC own and manage use of dashboardPrepared by benchmarking partner, used by DPC, available to other Departments/agencies via DPC

Each Principal Department owns and manages use of their own benchmark report

Prepared by benchmarking partner, used by Principal Department, available to DPC

The benchmarking partner own this aggregate data to conduct the analysis and to use in future engagements. Data is not identifiable or used in such a way as to disclose the source.

Principal Departments retain a perpetual, non-exclusive right to use the data for their own analysis and future use

Principal Departments own all detailed data collected. No detailed data leaves the Principal Departments’ own source systems or network environment.

Principal Departments have sole visibility of this data

Inter-Departmental Dashboard - targets and high level analysis

Baseline and Performance Report – detailed targets, metrics, analysis and baseline for each Principal Department

Aggregated Factual Data – FTE and cost data at a sub-process level, plus volume and practice data provided

Detailed data from all locations – cost, FTE, volumes, practices, IT environment etc

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The new approach builds on and enhances DPC’s approach to Corporate Overhead Analysis.

THERE ARE SIMILARITIES IN APPROACH BUT ASSUMPTIONS AND TYPES OF DATA COLLECTED DIFFER

BU Structure and Cost Centre Analysis

Workforce – FTE and Cost Working expenses

Location structure

FTEs and Fully Loaded LabourCost

Outsourcing cost (labour, technology)

Other non-labourcosts

Demand, structure, market, revenue

BU and process volumes

Application Architecture

Process (best practices)

Includes:• Advertising & promotion• Audit fees• Contractors/ Consultants• Insurance• Operating leases• Rent & utilities• Travel• Maintenance• Depreciation• Grants• Borrowing• Other

• Corporate Overhead only (excludes Ancillary and Core Services)

• Uses Workforce Profile (WFP) codes, assigned where employee spends >30% of time on related functions

• Includes contractors only where fees represent >10% of total employee related expenses

• Capture FTE and cost data across end to end process, regardless of where activity resides

• FTE data captured where individual spends >4 hrs per week per sub-process

• FTEs can be designated as Manager, Professional or Clerical• Other costs include:

− Related IT support costs per function (labour and non-labour)

− Related facilities and overhead costs per function− Related Travel and Expense costs per function− Related training costs per function− Related other costs per function

DPC Ongoing Benchmark Program

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DPC’s approach to Corporate Overhead Analysis compared to the standard Hackett approach.

THE NEW BENCHMARKING APPROACH BRINGS SOME ENHANCEMENTS AND CHANGES

DPC Corporate Overhead Analysis New Benchmarking Approach

DPC currently exclude support services that provide specific support to business units delivering core services, defined as Ancillary Services

A number of activities defined by DPC as Ancillary Services will be required to be captured as Corporate Service activities under the new benchmarking approach, to ensure comparability:•Occupation-specific training – captured within HR/Workforce Development Services•IT support for core systems – captured within IT/Application Maintenance•Canteen services – captured within Other/Administrative Services•Project accounting – captured within Finance/General Accounting & External Reporting/Cost Accounting

Costs are captured against a cost centre structure Yes, but data can also be captured against a physical/geographic location

Workforce Profile (WFP) codes are assigned based on individuals spending greater than 30% of their time engaged in a particular process area

The new approach includes an assumption that proportions of individuals’ time are allocated at a sub-process level in increments of 10%, i.e. if an individual spends greater than 4 hours a week on a sub-process activity then that proportion will be captured against that sub-process. During the transitional period we recognise that some Departments/agencies may not find it possible to capture data at this level of granularity, and so allocations may occur at a process level.

Excludes positions delivering corporate services to those outside that department

The new approach will capture Corporate Services activity wherever it is delivered within the organisation structure, in line with the activity definitions included in the taxonomy

Includes contractors where fees represent >10% of total employee costs

The new approach includes all contractors and any outsourced FTEs who are under direct control of management (i.e. not managed via a service level agreement)

IT support costs for functions are not attributed Going forward the approach will capture IT support costs attributable to each function –includes hardware and software maintenance, and telecommunications (i.e. data and voice) spend

Working expenses are collected based on 16 categories and adjusted for centrally recorded expense items

The new approach will collect other expenses according to the Hackett definitions.

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A number of key scope assumptions will be agreed at a Principal Department level during planning

ASSUMPTIONS - SCOPE

• During the planning phase for the benchmarking program, a number of key scope assumptions will be reviewed and determined for each Principal Department participating. These are shown below:

– Definition of the benchmark data collection time period – What is the 12 month period for which data will be collected?

– Determine the organisational scope - What, if any, business units / agencies / regions are out of scope?

– Determine the machinery of government change scope - What machinery of government changes occurred during the data collection period? Will the entities in question be included or excluded as part of the scope of the engagement?

– Determine the process scope – Upon review of the process taxonomy defined within the Shared Services Blueprint which, if any, of the processes are to be excluded from the scope of the engagement?

– Consider the impact of major initiatives - Are there any major initiatives during the data collection period that could significantly impact the benchmark results? Do these initiatives have significant one-time costs? If yes, then visibility of the activity and estimates of the financial and personnel impact should be provided to the DPC Project Manager.

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The main objective of data validation is to identify and correct data errors to achieve a clean set of data.

VALIDATION APPROACH

• Validation is concentrated around completeness and a sense check of the data provided

• The data is validated at a location level, to ensure the underlying factors are exposed

• For the completeness check existence of FTEs, cost, and functional performance data (volumes, cycle times and error rates) are reviewed. For example, to identify instances where a location reported FTEs but no cost, or a location reported volumes but no FTEs

• A sensitivity analysis is run against external comparisons, overall NSW and Principal Department comparisons to highlight data anomalies

• A data validation log is created to track all data discrepancies

• Data collectors review action items in the data validation log, adjust the data where necessary and return the data validation log with comments

• All comments on data validation log action items are then reviewed

• Data rework concludes with data sign-off by the Principal Department

A rigorous validation process is essential in any data-driven measurement program. The quality of the data submitted into the analysis tool is directly proportional to the quality of the insight and analysis that results. The validation approach taken for this benchmarking program incorporates local validation, external validation (both automatic and manual), and a formal data sign-off point to ensure that Principal Departments can be confident that the data provided is a directionally correct reflection of the current environment.

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High level process flow for Data Validation.

Location

Core Team

Principal Department

Adjust data if necessary

Conduct completeness

and sense check

Create issue log

Review issue log

Comment on issue log

action items

Review issue log comments

and data changes

Final review and sign off

on data

Local validation

Review collected data

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REPORTING PROCESS, APPROVALS ETC

• Following sign-off of the data at a Principal Department level, the benchmarking reports will be produced.

• The following pages outline the form and content of the reports that will be generated at each Tier. The content and extent of analysis for each Tier of report will be reliant upon the breadth and depth of data which is provided.

• In all instances, Principal Departments will see an executive preview of their own results and be provided with an opportunity to add relevant context or insight as a cover report to the document prior to finalisation.

• The outline reporting process is shown below:

Benchmarking Partner

Generate reports

Principal Department

Performance Improvement & Review Branch

Review reports

Provide comments/

changes

Adjust if necessary

Produce final reports

Produce context &

insight

Review Principal

Department report

Produce/update Inter-Department

dashboard

Receive dashboard

report

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Tier 1 reports will provide high level Corporate Services and Functional Cost & FTE indicators, but will not utilise external comparisons or practice indicators.

FORM AND CONTENT OF REPORTS – TIER 1

Inter-Agency Dashboard

Content Tier 1 Metrics – combined Corporate Services view (no external targets) showing distribution

Tier 1 Metrics – per Function (no external targets) showing distribution and median

Functional baseline – Costs and FTEs showing composition

Indicative format

Principal Department Report

Content Functional baseline – Costs and FTEs Tier 1 Metrics – per Function (no external targets)

Indicative format

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Tier 2 reports will build on Tier 1, and provide external comparisons, a balanced indicator of Efficiency and Effectiveness, and results for all Tier 2 metrics and associated processes.

FORM AND CONTENT OF REPORTS – TIER 2

Inter-Agency Dashboard (includes Tier 1 content plus…)

Content Value Grid per Function* Tier 2 Metrics – per Function, comparison to external target and showing distribution

Indicative format

Principal Department Report (includes Tier 1 content plus…)

Content Value Grid per Function* Tier 2 Metrics – per Function, comparison to external target, shows practice adoption

Indicative format

* Value Grid can be produced for the four main Functions only – Finance, IT, HR, Procurement

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Implementing this benchmarking program will represent a step-change in the best practices culture of the NSW Government.

TRANSITIONAL IMPLEMENTATION

• The ultimate objective for the ongoing benchmark program is to support the NSW Government in driving corporate services consolidation and improvement throughout the sector.

• DPC’s vision is that through a transitional approach to implementing this program, appropriate skills, tools and competenciescan be built at a Principal Department and whole of government level to ultimately take forward the program without undue reliance on external providers. The ultimate goal is for there to be one primary data collection mechanism for the sector, managed and delivered by DPC, which will support ongoing benchmarking and best practices.

• In order to deliver on this vision and objective, a number of implementation considerations must be observed and addressed:– Significant communication and change management requirements– Recognition of data collection challenges driving a prioritised approach to data collection and measurement– The need to develop in-house data collection, validation and analysis tools and competencies– Integration with and leverage of other central agency data collection mechanisms

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A detailed transition plan will need to be developed in order to implement the Blueprint, with broad coverage of the key implementation considerations.

TRANSITIONAL IMPLEMENTATION – HIGH LEVEL ACTIVITIES

Planning Phase Data collection Validation, Analysis & Reporting

Communication & Change

Management

Benchmark Planning & Execution

Tool Development

Integration/ Leverage

• Principal Department Executive Briefings

• Ministerial briefings• Multi-level communication plan design and rollout – explain the project, process and benefits

• Determine location structures• Identify data collectors and strategy• Tailor question guide help text• Comprehensive training program• On-line portal and tool set up

• Develop mapping codes for WFP data to FTE spreadsheet

• Determine forward strategy for WFP • Construct mapping from other data sources

• Consultation sessions with relevant agencies/units

• Mapping exercises

• Program status communications• Ongoing communications plan delivery – process and benefits

• Feedback loop regarding completeness/accuracy of pre-population process

• Ongoing knowledge transfer• Build/test data collection repository

• Feedback loop back to other agencies /WFP team for enhancements/changes to data

•Executive briefings to support validation process

•Ongoing communications plan delivery – benefits, learnings, next steps

•Feedback loop regarding validation issues impacting on data collection process

•Knowledge transfer on validation, analysis and report generation

•Feedback loop regarding validation issues impacting on other data sources

• Integration of other department reporting needs into reporting profiles

•Support data collection and field/ resolve queries

•Ongoing refinement of help text and guidance

•Ongoing knowledge transfer

•Validation process•Analysis and reporting•Explanation of results

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Initi

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Currently, sources of data within the NSW Government are largely embedded in Departments/agencies and there is scope for misrepresentation of data prior to collation in various central repositories.

IMPLEMENTATION RISKS – DATA SOURCES

Issue Mitigation

No integrated data environment – cannot get a whole of government view at the ‘push of a button’

Lack of an integrated data environment is typical for both private and public sector organizations. A benchmarking process uncovers data visibility issues and visibility can often be leveraged as a key driver for change. If the location structure (i.e. levels of data collection) is defined properly, this will allow data to be ‘rolled up’ to provide a consolidated government view.

As a consequence, data is provided to central agencies via ad-hoc or routine data requests (e.g. Workforce Profile data provided quarterly via completion of a web based question set with an underlying validation engine)

The above drives significant activity at a Department/agency level around validation and approval of data submitted, which can cause long lead times in data collection

The taxonomy and data collection toolset included in the Blueprint is activity based and provides a way for the client to “map” to the right processes consistently across all Departments/agencies.Principal Departments and their constituent agencies will be supported through the first data collection process in order to ensure that sustainable data collection processes and department and agency-level competency are built in to ensure future data collection exercises are less resource-intensive.

The legacy system environment at a Principal Department and agency level often makes identifying and collating data time consuming and complex

The opportunity exists for review and misrepresentation of data at a Department/agency level prior to submission, and there is a tendency for gaming; particularly in relation to defining staff as front vs. back office

The provision of a clear and unambiguous definition of activity and cost data required through the taxonomy and question sets mitigates this risk.While there is no way to prevent data misrepresentations if the department is determined to mislead, a number of checks and balances are built into the model to challenge the Principal Departments during the data validation process. The key driver information normally assists with determining reasonable values for cost, volumes, staff, etc. This is used to challenge data submitted and normally the process results in adjustments to the data during data validation

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Failure to build local capability and effectively ‘sell’ the benefits of the benchmarking program will comprise the sustainability of the program.

IMPLEMENTATION RISKS – CHANGE MANAGEMENT

Issue Mitigation

Risk of lack of cooperation at a sub-agency level. If the program is not properly socialized, milestone dates will be drastically pushed out due to cooperation issues

Planning is key to mitigating the tendency of Departments/agencies to refuse participation. The implementation plan includes a strong focus on engagement at an department level to explain the project, process and benefits. Given the state of change at NSW, this approach is viewed as essential

A clearly defined communication plan which targets multiple layers of management within the Principal Department framework needs to be defined and implemented consistently throughout the transitional phase

Need to ensure a tie up between various initiatives from central government, e.g. NSW Treasury efficiency reviews, WFP collection

Consultation sessions with other interested departments e.g. NSW Treasury, DPC performance units, policy units etc, should be held in the early stages of the planning phase

The program will not be sustainable if there is a lack of capability and capacity at a Principal Department and department level once the transitional phase is complete

A comprehensive training program on the data collection approach and tools will be delivered as part of the transitional phase

Involvement of Principal Department and department staff in the training sessions, as well as supporting consultancies, will be required to ensure knowledge transfer to permanent staff and encourage ownership of the program at a local level

The program will not be sustainable if appropriate tools and competency are not developed within DPC in order to take over the program once the transitional phase is complete

The ongoing program includes a tightly blended benchmarking partner and DPC team to deliver on the first round of benchmarking during the transitional phase. This will provide a framework for knowledge transfer and skills development.

A specific component is also included in the ongoing program for investment by DPC in developing in-house data collection, analysis and reporting tools, with support and input to be provided by benchmarking partner professionals.

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170

i. Staff Change Managementii. Corporate Structure Complications iii. Capability of Workforce iv. Investment and Standardisation of Technology v. Department/agency Expectations of Service vi. Branding of Departments vii. Non Standard Approach viii. Rate of Changeix. Effects on Current Departmental Initiatives

There are a number of key issues/barriers that need to be taken into account as Principal Departments prepare their Corporate and Shared Services transition plans.

PERCEIVED BARRIERS

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171

What

• Changes implemented will require consultation, communication and impact analysis with both staff and unions.

• Staff roles and the nature of operations of a Shared Services organisation will need to considered to meet the business requirements of clients and their services.

• Thorough understanding of what a Corporate and Shared Services is and how it may impact people will need to be fully understood by Departments as they implement their reforms.

STAFF CHANGE MANAGEMENT

Mitigation Approach

• A well thought out change management strategy will need to be constructed upfront. Executive, management and HR staff as well as the implementation team will need to be well versed in its contents and issue avoidance/minimisation during the rollout.

• Build a well documented change management framework including:– Assessing the Department’s willingness, readiness and ability to

change– A strategy for change

• Implement the change management plan and track progress– Evaluate experiences and address lessons learnt

• Create good communication plans, addressing:– The audience (provider and client) and their communication needs– The most effective means of communicating with this audience– Who should deliver the message

• Write detailed job description and KPIs.

• Build appropriate training plans.

Why

• Staff in Shared Services centres need to be multi-skilled and work towards a strong service and performance culture.

• This move needs to be underpinned by a well executed change management, communication and training regime for both client and provider personnel.

Staff Change Management will need thorough consideration and planning to ensure clear communication regarding changes across a broad range of employees.

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What

• There are many smaller entities and statutory bodies across the sector that are considered to be independent.

• Decomposition of what they need to deliver is important to determine which of their activities can be provided by improved Corporate and Shared Services via the Principal Department .

CORPORATE STRUCTURE COMPLICATIONS

Mitigation Approach

• Build a strong understanding of all statutory/legislative requirements across the Departments and agencies.

• Within these, decompose what functions the Departments and agencies need to retain and where any purely transactional functions can be included in the centralised services.

• Begin with the approach that all functions are to be included in Corporate and Shared Services and determine by exception those functions to be retained at Department/agency levels.

• All functions proposed to remain at a Department/agency level should be justified for specific retention.

Why

• Some entities operate within prescriptive regulatory environments that will need to be assessed prior to reform.

• These must still be met in the new Principal Department and centralised Corporate and Shared Services environments.

Varying regulatory requirements may impact the ability to combine specific functions due to assumed limitations on changes to internal structures and responsibilities.

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What

• To maximise the customer service and efficiency business as usual will need to change, moving away from legacy developed processes to a more dynamic model of continuous improvement.

• Up-skilling and expectation setting is required within the Department to provide effective project management, reengineering, analytical assessment and vendor management skills.

CAPABILITY OF WORKFORCE

Mitigation Approach

• Business cases need to be developed outlining the benefits for the Corporate and Shared Services reforms.

• Robust implementation plans need to be carefully built that demonstrate how the transitions will occur.

• Transitions plans need to include the resourcing skills mix required for the Corporate and Shared Services centres as well as their job descriptions, KPIs and training needs.

• Deliver effective training courses (particularly in process improvement) to address capability gap.

• Given that the Departments/agencies are at different stages of planning and maturity, there will be a number of different transitions and timeframes.

• Phasing the functions transition into the Corporate and Shared Services centres will aid the timing of the up-skilling process.

Why

• To achieve the efficiencies and effectiveness outcomes the appropriate number of skilled and trained resources are needed at the right place.

• People are required with experience and skills sets to effectively challenge the business as usual processes and technology.

Individual and aggregated workforce capabilities require assessment to ensure the correct mix of skills is available to deliver the required customer service levels.

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What

• Significant investment in upgrading and standardisation of systems are required to underpin new Corporate and Shared Services environments.

INVESTMENT AND STANDARDISATION OF TECHNOLOGY

Mitigation Approach

• Business cases need to clearly demonstrate benefits expected from technology standardisations.

• Leverage scale by looking across multiple Principal Departments. For example larger, possibly outsourced, data centres, virtualisation of servers, upgrades etc.

• Look for a funding model that, is fair, preserves a health dynamic in Corporate and Shared Services centres to continually improve and become more financially self sustaining.

• Build in a benefits realisation framework to monitor performance.Why

• Significant economies of scale will be achieved from standardising the technology applications, platforms and data centres.

• The degree to which this is undertaken will need to be reviewed on a case by case basis.

• A minimum of 20,000 users is considered the first reasonable scale of FTE to deliver benefits in Shared Services.

• Ongoing self funding arrangements to ensure Corporate and Shared Services continually improve and become more self sustaining.

Significant investment to upgrade and standardise technology is required to enable longer term benefits due to economies of scale.

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What

• Individual Departments/agencies have expectations of service being improved from Corporate and Shared Services at a lower cost.

• In the majority of cases where Departments/agencies now use some form of external Shared Services, there is lack of trust and belief that they are not getting value for money (performance metrics not in place and/or not understood).

DEPARMENT AND AGENCY EXPECTATIONS OF SERVICE

Mitigation Approach

• Build an expectation framework that:– Outlines and sets realistic expectations for all stakeholders, including

base-lining of current service levels– Demonstrates to users what SLAs will be in place which include

• Description of services to be provided• Roles and responsibilities of clients and provider• Pricing models and recovery method• Transition date and contract duration• Methods for initiating change• Performance metrics for both client and provider• Communication between clients and providers• Dispute resolution between the parties• Disaster recovery process and procedures for client and provider• Audit requirements

– Shows what levers there are for users to optimise the use of the Corporate and Shared Services

– Explains the performance measurement process and how this will be used to underpin continuous improvement. Continually educate users to more effectively use Shared Services and in doing so lower the overall Shared Services costs

• Take a phased approach during transition stages.

• Acknowledge that there will be some pain during transition and that all parties need to stay maintain commitment.

Why

• Where Shared Services are used by Departments/agencies now there is a lack of understanding of performance service levels, levers to optimise Shared Services costs and poor communications leading to a very mixed idea of department and agency service expectations.

• This has led to inefficient use of Shared Services and a mistrust between providers and Department/agency staff in some cases.

• Over servicing has arisen in some cases.

• Current Department/agency experience with Shared Services has set certain performance expectations for the new Corporate and Shared Services regime.

Expectations associated with Shared Services need to be clearly and thoroughly defined for delivery and ongoing monitoring by both service provider and the client Department/agency.

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What

• The brands associated with Principal Departments and their associated agencies are very strong part of the employee culture.

BRANDING OF DEPARTMENTS

Mitigation Approach

• A strong change management process needs to be undertaken that explains to the would be Corporate and Shared Services users and staff:– What the Principal Department is all about, how their section fits in

and its direction forward– What a Corporate and Shared Services does and the services that will

be available to them, – How to use the Corporate and Shared Services – What will be expected of them as individuals– Transition steps setting expectations and the training that will be

required

• Visible senior level support and communications will be essential.

Why

• The ongoing amalgamation and service delivery improvements as part of the Principal Department reform will establish new cultures under new brands.

• Much of this is through a lack of understanding of how Corporate and Shared Services can enhance, rather than inhibit, front line services.

Existing Department/agency brand presence needs to be understood with respect to staff and customers as part of the change management process.

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What

• The reform program needs to be broadly communicated throughout every organisation.

• Planning for Corporate and Shared Services has commenced in some Principal Departments, beginning the detailed diagnostic phases in order to understand the baseline positions.

NON STANDARD APPROACH

Mitigation Approach

• Have a centralised sector view of all Principal Department plans.

• Encourage across Principal Department dialogue and debate during the building of Corporate and Shared Services plans.

• All business cases should be presented and signed off at sector level.

• From a sector level Principal Departments need to be challenged on why certain functions or technologies are not rolled up across Principal Departments.

• Depending on financial funding models chosen, Principal Departments need to show to the sector how they will monitor performance and tracking benefits against their business plans.

• Lessons learnt need to be actively shared across all Principal Departments.

Why

• Without taking a sector view and having numerous forced interventions, individual Principal Departments will not achieve the leveraged economies of scale available.

• Some decisions may also adversely affect the ability of other Departments/agencies to realise the full benefits.

• Some suppliers may use this lack of clarity to their own financial advantage.

Varying degrees of progress and a lack of standardised approach to date may adversely impact overall progress.

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What

• There is a different level of Corporate and Shared Services maturity across the Departments/agencies.

• Progress across the sector will be extremely varied.

• Potential providers are still in a state of flux.

RATE OF CHANGE

Mitigation Approach

• Acknowledge that multiple Corporate and Shared Services Operating Models will emerge across the sector as the Principal Departments continue their rollout planning.

• Engage Principal Department Executives to own and drive the initiative to move to Corporate and Shared Services.

• Ensure good communication is maintained to allay concerns and build an understanding of what will be delivered in the new Corporate and Shared Service Centres.

• Ensure a sector level review of all plans to ensure optimal decisions/planning are made and better leverage the economies of scale available.

• Leverage this sector level visibility of planning to assist Principal Departments to further improve the efficiencies of their planning and implementation rollouts.

• Build a mechanism to share lessons learnt so that mistakes are not replicated.

• Instigate sector level communications to monitor/aid progress.

• Build a sector level rollout plan and dashboard against which to monitor progress.

• Providers need to fast track improvements and build business cases that demonstrate the phased transition by Principal Department to their services.

Why

• Setting expectations for all stakeholders together with appropriate levels of change management/communication is essential for a successful rollout of Corporate and Shared Services.

• There is a fear in some Departments/agencies that control may be lost and service levels go backwards.

• There needs to be an acceptance that there is not one generic solution or a single transition path available to achieve the sector wide Corporate and Shared Services reforms.

• Any impact to frontline services during the transition period must be carefully managed and minimised.

.

Individual Departments/agencies currently have varying forms of Shared Services and the rate of change to the desired end state will similarly vary across Departments.

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What

• All Departments/agencies have multiple internal and Government initiatives underway.

• Concerns exist for how this Corporate and Shared Services reform will coexist with these programs and be included within budget and saving expectations.

EFFECTS ON CURRENT DEPARTMENT AND AGENCY INITIATIVES

Mitigation Approach

• Ensure all current major initiatives are well understood.

• Leverage the value add/positive aspects of these into the planning of Corporate and Shared Services.

• Undertake impact assessments of these initiatives as part of the business cases proposed.

• To avoid financial/costing surprises at a later stage ensure that there is no double counting of benefits for overlapping initiatives.

• Leverage the benefit of sector wide visibility of these initiatives as lessons learnt to share across the Principal Departments.

• Ensure good communications with stakeholders so that they can understand where and how their initiatives fit into the Corporate and Shared Services planning process.

Why

• All Departments/agencies have multiple initiatives underway and many of these have been factored into their current budgets, significant expectations set and some associated planning underway.

• To achieve the anticipated economies of scale, these initiatives need to be challenged and factored into the planning of Corporate and Shared Services.

Establishing the overall Corporate and Shared Services program will have significant inter-dependencies with a range of other initiatives being conducted across all of NSW Government.

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10. Document AppendixDEFINITION OF COMMON TERMS

AP Accounts PayableAR Accounts ReceivableBest Practice Best practices are proven, repeatable, documented techniques

that deliver measurable performance improvements.CE Chief ExecutiveCES Chief ExecutivesCFO Chief Finance OfficerCIO Chief Information OfficerCOO Chief Operating OfficerCRM Customer Relationship ManagementCS Corporate ServicesDG Director GeneralDGEC Director General Executive CommitteeEPM Enterprise Performance ManagementERP Enterprise Resource PlanningFMO Future Mode of OperationFTE Full Time EquivalentsFTE Spreadsheet

Data collection tool which is utilised to provide FTE and related Labour Cost data, and perform the allocation of FTE’s time across the functional processes

Functional Decomposition See process taxonomyGL General LedgerGIPA Act Government Information (Public Access) ActHR Human ResourcesHRIS/HRMS/HCM

Human Resource Information System - a database system that lets you keep track of all types of information related to the organisation and its people

ICT Information and Communication TechnologiesIPART Independent Pricing and Regulatory TribunalIR Industrial Relations

IT Information TechnologyMetric A measurement used to gauge some quantifiable component of an organisation's

performanceMSS Manager Self ServiceOH&S Occupational Health and SafetyOLA Operating Level AgreementOLAP Online Analytical Processing - a data structure that allows fast analysis of dataP2P Procure to PayPeer Group A comparator group for benchmarking purposes of organisations similar in size

and complexityPMO Present Mode of OperationPMO Project Management OfficePO Purchase OrderProcess taxonomy

A means to establish a common language for the 'back office' processes within an organisation.

Question set Data collection tool to provide all non-FTE and Labour Cost benchmarking data SDCC Service Delivery Cabinet CommitteeService Level Agreement

An SLA is an agreement between a provider and a customer that specifies, usually in measurable terms, what services the provider will furnish.

SLA Service Level AgreementSOC State Owned CorporationSS Shared ServicesSSO Shared Services OperationTarget A performance goal established with reference to an external comparatorValidation Process of automated and manual checks to ensure that data submitted into the

on-line portal is directionally correctValue grid A two dimensional graph illustrating the position of a function in terms efficiency

and effectivenessWFT Workforce Profile, data not collected by DPCWorld Class Comparison against the median of the World-Class companies in the Hackett

database. World-Class is determined based on first quartile performance in both efficiency and effectiveness on a function level