The Caerphilly County Borough Council work with two other council Connecting South East Wales (CSEW) and Cardiff Council as well as all the design team to make a design for considering outsourcing their HR (human resource), payroll and training services. There are also ten other local authorities which take part in this council. This report deals with all the background detail of Caerphilly, cost savings, why and how the Caerphilly is not able to sustain and what we have to do next?
According to (Schulman et al. 1999: 7 cited by Redman ) Shared Service is defined as ' The concentration of company resources performing like activities typically spread across the organization in order to service multiple internal partners at lower cost and with higher service levels '.
(Ulrich's 1995: 14 cited by Redman) explained the shared service as '..............the combining or consolidating of services within a corporation ', it means that shared services is a single organization where various business units of a company comes together to do their common work such as HR, payroll, training etc.
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The main of the report is that why Caerphilly considering the Shared Services? , what are the cost and benefits for the employee and management? , as well as discuss about the failure of the project.
Caerphilly come into existence in the year of 1996 April 1 with the merging of the two District known as Rhymney Valley of Mid Glamorgan and Islwyn Borough of Gwent. It is governed by the Caerphilly County Borough Council.
Later in the year of 1997 the Connecting South East Wales (CSEW) as well as the Steering Group comes with the proposal of implementing shared service. They formed a designing committee with the local people to implement this service.
Caerphilly must consider the Shared Service Model to reduce cost. The main concerned for the designing team is COST SAVINGS. They can reduce the cost for taking some steps:-
The Caerphilly must adopt the business plan two to manage the cost. The current investment of Caerphilly is 4.8 million GBP. By adopting this plan he might be reduce the cost up to 3.8 million GBP which saves the 1 million GBP every year. (Barnett 2009)
3.4.2 By reducing the number of employee from the company such as by establishing the centralized HR committee for all the council at a common location to save cost and time. This committee is solely responsible for all the recruitment for the organization. Reilly (2000) suggest that co-location must be introduced and calls this 'virtual shared services'; because it misses lots of benefits such as cost savings by centralized the staff at one place, recruiting the local people, skilled labour etc.
3.4.3 There must be a single transactional centre which can deal all the work as well as it has also consider a specialist team i.e. it means that there should be a proper team for every work. The new technology should be introduced for better service as well as for reducing cost. There must be the redeployment of staff takes place within the different council for the better work.
The proper DESIGNING should be done so that the organization can run for the long period. The designing team can improved the front line service by mixing the proper staff, talk to the managers to improve the service quality. They must ensure that there is not any communication gap between shareholders, employee as well as customers of the organization. There is proper collaboration between each council of the organization. The designing team must care about the costing service; payroll so that they can reduce the cost to increased the profit.
AS we know that today every country is going with the RECESSION, so every country as well as all the organization wants to reduce cost to gain profit. Caerphilly also wants to reduce cost to provide better service so they follow the Shared Service Model. Shared Service must increase their EFFICIENCY by collecting all the work at a single place from different company. They can provide better service to the customer from one location, they hire skilled employee to reduce cost. As we know the shared service is used for all the financial transaction, human resource management etc. The efficiency must be increase because there is only on governing body who talk to the government for the entire problem facing by the organization.
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The Caerphilly want to IMPROVE their services by introducing new technology, recruiting new employee, providing better culture and friendly environment, giving good training. The managers of the organization introduce their own design to check the quality, power, enthusiasm, skills of the employee as well as all the services taken by the organization. It wants to create sophisticated networks which have all the characteristics of inter-organizational network as well as intra-organizational network.
Caerphilly avoids out-sourcing because out-sourcing is deal with very much uncertainty, it may not take place in longer period of time, and it is basically a bilateral talk between two people or companies. In the out-sourcing there is not any control between the two parties and there is not a proper record or agreement between them. So the Caerphilly must go for Shared Service Model which increases the employment and employing the people. (Wang 2007)
There is a lot of pressure from the Welsh government because government money is also involved in it as well as they want good service for their people. But the mostly pressure by the shareholders whose money is invested in the organization as well as from the common people to produce the better service. The shareholders want their money back with their terms and condition as well as customer wants good service in the cheap rate. So the Shared Service is the only way to get all these benefit.
COST / BENEFIT
According to my point of view Caerphilly has lots of savings as well as benefits while implementing the Share Service Model.
If you consider the report while taking the account of option two, the FBC suggested that Caerphilly saves one million GBP every year. The sharing of administrative staff as well as specialist from the organization Caerphilly saves lots of money (300,000 GBP) annually. They hire only limited amount of skilled or experience staff which can manage the different council works within a very less amount as well as within a given time. The Shared Service must recruit local staff with the help of local authorities to minimize redundancy. The Shared Service establish a better training centre for the employee, provide specialist team which deal with the recruitment, payroll facility etc which saves 600,000 GBP per year. The one main problem arises that how much each company benefit because there might be some company big and some small, so there must be proper accounting should be done. There must be mutual distribution of cost takes place. The Caerphilly invested 4.8 million GBP for training, HR and payroll service which includes 2.2 million GBP for only training and recruitment service which is very high. So they must have reduced this amount by implementing Shared Service. (Barnett 2009)
Shared Services is defined as the bundling of all the activities and supporting process of different business units into a single organization or entity which is responsible for common task such as payroll, HR (Human Resource), service etc.
The main task of Shared Services to reduce unit cost by considering the overheads. There is lots of advantage while considering the Shared Services Model is: -
Shared Service is used for reducing cost.
It is used for longer period of time.
It contains number of partners in a single organization.
It is used for basic business functions such as accounting financial transactions, human resource management (HRM).
It reduces duplication within the network.
All the risk shared among the partners.
It looks like an internal outsourcing.
It has a common centre for re-deployment and training for the employee of all the company within the organization.
Adaptability for any new change according to customer needs.
Maintaining all the details about the process system, applications, procedures and all the government rules and services.
(Redman et al. 2007) suggested that with a few number of staff, there is small advantage for HR (Human Resource) employees in human resource shared service (HRSS) systems. We must select the staff according to the specialisation as well as the work experience for its wider implementation of Shared Services organization. Redman also divide the HR contribution in three ways: 'transactional, professional advisory and transformational'. The transformational is always thrust out from the shared services whereas professional advisory is always admitted. According to the (Quinn et al. 2000) many organization deals with the transactional but later they include professionally advisory as well as transformational also. (Redman et al. 2007) also suggest that for the better Shared Service and reducing cost the organization is must be located within a good geographical location. Caerphilly is not located anywhere so there is also a contradiction between the no of employee as well as the HR related issue.
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Shared Services consider the benefits of both i.e. centralisation and decentralisation. The goal of Shared Services is to minimize the cost and time and mainly focus on the service. According to (Walsh 2008) Shared Services must have a proper leadership and governing body. The government must be curious to look all the problem and profit for the Shared Services organization. There must be healthy and friendly culture so that any people can work without any bias from the cultural as well as language background.
The Shared Service must be introducing to reduce cost, increased quality and changes different technology. There must be implementation of fewer employee so that accommodation cost reduce, hiring a skilled employee, find within the locality so that transport cost will be minimized etc. There must be proper communication between the employee as well as stakeholders of the organization. There must be a proper steering committee including the top members of the organization. This committee is fully responsible for any decision i.e. it can't deals with operational detail but all the key problems for running the organization and check the business is running properly or not. There must be another small team known as implementation team which works day and night for complementing their task and provide service to the customer.
According to (Walsh 2008) the key benefit of any organisation is to reduce cost by implementing Shared Service model. If we take the example of MSO there is only one group which can talk or negotiate with the government agency and make a single contract to reduce cost. The MSO is also used for combining marketing, fundraising, advertising, establishment of all the setup for company as well as the quality assurance for the systems.
CONSEQUENCES OF THE SHARED SERVICES ON STAFF AND MANAGEMENT
If we go through the report there are huge consequences for employee joining as well as the management of Caerphilly has to face. Due to shared service there is 30% staff has been thrown out from the organization. In the three year period all the staffs of HR and payroll that is not transferred to any new work or any location must be re-deployed to the other work towards the local authority. (Barnett 2009)
All the benefits from all the staff should be withdrawn because of the downsizing of the organization which is quite impractical. The staffs which are in the council must have professional background so that they must work with all the specialist team.
The management has face lots of problems to unite all the council which was not done by Caerphilly. Due to this the Cardiff city and County council withdraw from the shared service. The management has facing lots of financial risk, service risk from the higher authority or different council. There is lots of pressure from the government to improve their services as well as to make profit. The trade unions do not want that the proposals to be moved to the Shared Services. (Barnett 2009)
The management has still facing the problem of money or fund for running the organization. The management realised the financial benefits without a clear picture by the government and members of the Caerphilly for the Shared Service centre as well as all the staff which include all the process and procedures, terms and condition etc which is extremely difficult. (Barnett 2009)
FAILURE / FUTURE ACTION
5.0 REASON FOR FAILURE
It has already decided by the Council that the Shared Service Model will not go in future. According to (Barnett 2009) the project is now withdrawn due to various reasons which are as follows:-
5.1 INITIAL INVESTMENT
It requires lot of investment initially due to which it has high financial risk. It requires 33 million GBP in three years and there is not any proper guidance of pay back policy is there. The amount may be pay back after 7 years which is very long period. There is not so much fund to sustain the organization in a longer run. There must be fixed price for different services of the organization.
5.2 LOCALITY OF ORGANIZATION
Due to large geographical area and topology of the landscape the location of the organization is not decided. The location is quite critical to implement Shared Services.
5.3 WITHDRAWAL OF COUNCIL
Cardiff City and County Council back from the project because of large investment as well as no future of the project. There is very less fund to implement the project. Due to withdrawn of this council it makes the project very weak.
5.4 WEAK MANAGEMNT
There are very weak management to implement the project. There is no any proper guidance how and where the project will be implemented. There is no any proper process for recruiting the staff. There is not any proper management of staff according to the specialisation.
5.5 CULTURAL DIFFERENCE
There is not any proper culture within the organization for the employee as well as outside the organization for the customer is described or prescribed.
5.6 TOP DOWN VALUE CHAIN ANALYSIS
It is not using top down value chain analysis which is mainly for IT planning and strategy formulation which deals with the lowering transaction costs, providing more services to customers and sharing of knowledge & information with all the partners of shared service.
5.7 WAG CONTRIBUTION
The Welsh government has agreed to give the 10 million GBP for the implementation. But still it is unclear that the money is for grant or loan. It contributes to reduce the time as well as the services of the organization.
5.8 TRADE UNIONS
The trade unions do not support the proposals to move to the shared services. They are asking from the Connecting South East Wales (CSEW) is that there is any guarantee for return of the money. There is lot of question which is unanswerable to make any decision for implementing the Shared Services.
5.9 HEALTH AND SAFETY
There is no any proper guidance for the health and safety management for the employee. There is only 13 staff included for this as well as less amount of money can be invested for this i.e. only 150k GBP.
5.10 SEVERE RISK
5.10.1 Service Risk
There is a great risk while moving to new service, managers has to deal with that service. This might increase the employee law litigation if there is proper advice is not followed. There is huge investment in the HR system and has begun the process of internal service centre.
5.10.2 Financial Risk
According to project there is very high financial risk because it takes seven years to achieve any savings with a high investment. After the seven year period assumption is made that the net saving is 1 million GBP per year. Caerphilly required extra fund of 50k GBP per year for borrowing.
5.10.3 Lack of Planning
The Caerphilly does not do proper planning before the implementation. They should not call all the head of council for the meeting. The design team has to do lots of work for the establishment of the organization. There should not be any facility of the transaction, customer help, introducing new technology etc.
5.11 WHAT NEXT?
5.11.1 With my careful observation, thinking and through reading of the project I think this project must be hold for the sometime for the benefit of the council. The project required a huge investment to implement so any decision must be taken with all the care. The Caerphilly talk to their partners i.e. all the other two council Cardiff and County council with all the issues related to the project. They come in a joint venture and discuss all the pros and cons of the project. The Caerphilly also talks to the Welsh government for their support as well as grant some money for the establishment of the organization. They must follow the bottom-up approach to analyse the potential benefit and risk of sharing. The Caerphilly must be discussing with all the partners to find a proper location and reduce all types of risk such as financial risk, service risk etc. They must consolidate the trade unions for the implementation of the project as well as they must follow the step by step process for the implementation of Shared Services. They must be ensure that there is proper process for the entering and leaving of the organization or in other words the HR committee must be responsible for the recruitment of employee. The committee must give some benefits for the employee instead of only pay such as they provide some discount policy, pension plan, pick and drop facility etc. There must be some grade should be given to employee according to their work. There is also a proper agreement should be made so that there is n any conflict arises in near future.
5.11.2 According to my point of view the Caerphilly must adopt the PEAK BODY SUPPORT MODEL and CO-LOCATION MODEL to run the organization. They must provide a range of services to their customers and in return they must charge the subscription fee, renewal fee, membership fee or combination of different fee from their customer. It must share a common place to exchange their services and facilities such as payroll, HR etc. Example of this is Local Government Association Queensland (LGAQ) which is running successfully. They provide different types of subscription products via the web such as award services, enterprise bargaining, human resource management, financial management, voluntary worker, helping for job seekers, student help, census data etc. (Walsh 2009)
6.1 Caerphilly must implement the Shared Service model but after some time. He hold the project for a few years and in between that he make the proper connection agenda while talking with all the council so that it deal with HR(Human Resource), payroll and training etc.
6.2 It seems that the model which is proposed by Caerphilly is very sound; it requires certain improvements for their participants as well as Caerphilly too.
6.3 Caerphilly would have to follow certain model to implement this SS. They have to reduce all the risk such as service risk, financial risk etc from the project. They have to discuss all the cost and benefit for the SS with to respect to organization as well as employee prospective.
6.4 Caerphilly has to come out with all the consequences for the employee as well as management to run the organization. They invite the other council for the open dialogue and Welsh Assembly Government regarding all the issue of the SS project.
Caerphilly must go through this Shared Service Model but after some years.