The effective organization of administration functions through shared services.

• Author: Kreklow, Steven R.
• Position: Solutions

To centralize or decentralize? That is often the question governments ask when trying to decrease costs and improve the delivery of administrative functions such as purchasing, human resources, accounting, or information technology, Some unfortunate government agencies have even found themselves alternating between centralization and decentralization every few years searching in vain for the correct organizational structure.

The goal is to find the correct balance between the organization's need for efficient administrative functions and adequate internal controls with the individual departements' needs for responsive service. A growing number of governments are realizing that the centralization/decentralization dichotomy often presents a false choice and are working to resolve this dilemma through a shared services approach.

WHAT IS A SHARED SERVICES APPROACH?

"Shared services" has come to mean the convergence, standardization, and streamlining of administrative functions and transactions across the entire organization. A shared service approach to administrative functions usually includes:

* a single set of organization-wide integrated administrative policies, strategies, and standards;

* a single processing center for common transactions that enables the organization to take advantage of economies of scale; and

* improved customer service to departments through the use of service-level agreements and a customer-driven governance structure (e.g., a customer committee that heavily influences or even sets priorities and standards and evaluates the service center's performance against those standards).

The benefits of a shared services strategy, when implemented successfully, include improved efficiency, decreased paperwork, higher levels of customer (departmental) satisfaction, and improved consistency in policy and administration across the organization.

HOW CAN GOVERNMENTS BENEFIT FROM THE SHARED SERVICES APPROACH?

While a decentralized approach to administrative functions can lead to a high level of responsiveness to departmental needs, it can create concerns related to consistent application of policies, equity and fairness, all of which translate into organizational risk. Furthermore, unnecessary duplication of services in various independently acting departments can increase the overall cost of administrative functions and take resources away from the delivery of services to the public.

Centralization, on the other hand, may not be an...