Lessons from the shared services battleground


By GovTechReview Staff
Tuesday, 16 April, 2013



There are few IT paradigms with as chequered a history as shared services. Once held as an invaluable way of consolidating resources and spreading risk, shared-services disasters like Victoria’s CeniTex and the restructuring of Queensland’s CorpTech operation have provided pause for thought as the challenges of government-wide transformation bite hard

The New Zealand Defence Force (NZDF), which undertook a shared-services initiative several years ago, has proved to be no exception. Just ask Stewart Baillie, director of the organisation’s Defence Shared Services (DSS), who for the past three years has looked after operational services across the three NZDF branches – Army, Air Force, and Navy, which together comprise over 13,000 service and civilian staff – and worked to introduce consistent shared services. As in a real battle, charging headlong into shared services proved disastrous at first. "We got it wrong," Baillie admitted to attendees at the recent Shared Services & Outsourcing Week conference in Melbourne. “In classic military terms we were given our mandate, booked project plans, and set out doing it. And, very quickly, we hit the wall.”

The problem was one that would be familiar to any IT executive: despite their assurances that they could improve the way IT and administrative functions were run, the shared-services team found themselves playing to a tough crowd that was unready to change its ways.

“You’ve got to remember that if you’re talking with the Army, as an example, they’ve got cultures that are hundreds of years old,” Baillie explained. “Making them change isn’t easy – especially if they think they can do it better than you can.”

Long-standing internal cultural rivalries meant that each of the three military branches had to be sold on the benefits of shared services individually – and winning over one branch provided no leverage when approaching another one.

“You have to convince them you’re on their team, and you have to be able to tailor for each of their customers what they want and how they want it,” he said. “It’s a complete waste of time telling the Air Force that the Army is happy with it; that’s a 30-second conversation. So it’s a real challenge, and we got huge pushback.”
"We got it wrong. In classic military terms we were given our mandate, booked project plans, and set out doing it. And, very quickly, we hit the wall."
Slowly, surelyThose challenges led to years of struggle for DSS, which was originally formed in 2001 and now comprises five separate groups that provide a range of technical and administrative functions across the organisation. Operating groups include Commercial Support, which manages sourcing, procurement, contract development, relationship management and the like; Customer Support, which offers personal service such as SAP master data management and payroll services; Property, which manages land-related infrastructure, environmental, facilities management and related programs; Business Development, which handles tasks like financial analysis, project management, and reporting; and Business Processing, which administers tax compliance, credit cards, internal controls, insurance, accounts payable and receivable, and more. By working to productively engage the three branches of the armed forces, the shared- services group was able to steadily build its case for legitimacy within the NZDF – and learned some valuable lessons in the process. It became clear, for example, that the best way to win the support of the service branches was not to tell them how good the DSS was – but to point out how bad the branches were at running their operations.

“Typically they overservice themselves,” Baillie explained. “For example, we deconstructed the NZDF travel machinery and found a huge amount of savings because each group had its own private travel agency working with them. We told them we would give them what they need [at lower cost].” Eventually, small pieces of the organisations began to bite. And once a few small wins started to accumulate, Baillie’s team began gaining footing within the defence organisation that it had struggled to achieve in its earlier years. Aided by a force-wide mandate to trim NZ$240 million from the Defence budget within three years, DSS has been able to justify its existence and rapidly grow out its staff and service base past 340 employees. 

Polishing up the new shared services. Once DSS began to put runs on the board, Baillie said its improving profile within the military organisation helped it start to position shared services not as a disruptor of long-held traditions, but a genuine way to deliver real savings and better operational efficiencies. DSS positioned itself as a purveyor of Six Sigma quality controls, and promoted its skills in areas such as change management, documentation, and training to highlight its ability to deliver better outcomes than internal groups. These processes demonstrated the group's commitment to governance and, in many cases allowed it to set a baseline measurement by which future operational improvements could be measured.

It also worked on building productive vendor relationships, and striated its base of ‘customers’ into three types to focus on building meaningful relationships with the operational commanders who “call the shots” in the military. “The key to the way we ultimately became successful is, in a word, excellence,” Baillie said. “Absolutely everything we did, had to be better and smarter than what they were used to. Once we got over this military rigour, they were very responsive. As long as the outcome was better than what they had, and we could convince stakeholders and customers that what they had we could do better and at less cost, they got on your side.” Branding was also important: whereas in many organisations the concept of ‘shared services’ remains nebulous and poorly defined, DSS’ focus on elucidating its value proposition helped it build a reputation for excellence. Backed by a clear mission statement, set of corporate values and guiding principles, the brand became associated with integrity and skill that put it in good stead for the future. “Effectively we built the brand, and that turned out to be critical,” said Baillie. “We were originally seen as ‘those critters over in shared services’ and were a bit separate – but we targeted our customer base and convinced them we were part of their delivery responsibilities.” “At the end of the day, you must be seen as an agency that delivers – and delivers quality. We chewed up a few years learning this lesson the hard way – but now that we have that identity, the brand itself is beginning to learn. It’s very hard work and you’ve got to spend a lot of time and effort on it, but we’re now in the lead. It all comes down to the brand.” – David Braue 

This feature originally ran in the April/May 2012 issue of GTR.

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