Outsourcing support services.

• Author: Usry, Wayne

Elected officials and citizens alike are continuing to "raise the bar" for performance expectations of their local governments. These governments are pressured to improve customer service and provide quick, efficient service delivery without an increase in taxes. Local government managers are challenged to motivate their employees to continuously improve in all that they do. Progressive managers understand that these competitive pressures are likely to increase and are looking for innovative ways to do more with less.

Increasingly, these pressures are driving businesses and some forward-thinking local governments to reevaluate how they manage and deliver the services that are not directly related to their primary functions, or core competencies. Among the services they are evaluating are the support services, such as finance and accounting, information technology, and human resources. These functions, which provide vital services throughout the organization, have demonstrated opportunities for significant cost reduction through process improvements or investments in information technology.

The private sector has seen substantial savings in support services through the application of business process improvement and client/server technology: the average cost of running a corporate finance department, measured as percent of corporate revenues, has plummeted 37 percent from 1988 to 1996, according to an Ohio-based consulting firm. How many local governments have seen such dramatic cost reductions in their finance organizations? This article will provide a conceptual framework to evaluate the possibility of outsourcing support services.

Why Outsource Support Services?

Core competencies - the activities that the organization does best, which directly impact the public, and which are essential to its continued existence - are the areas where executive managers and elected officials should focus most of their attention. Local government core competencies vary, but generally include policy development, public safety, land-use planning, court administration, environmental monitoring, economic development, transportation, and water resources.

In order to realize the improvements that are possible in noncore areas, some organizations may choose reengineering; for others, outsourcing is the best option. To ensure that decisions regarding outsourcing are made that meet established objectives, there are several important questions to ask when evaluating options. Among the most important are:

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