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Weekly UpdatesShared services are now a critical strategic tool for government officials the world over. Stand-alone organizations that manage administrative or service functions as a core competency, supporting a number of disparate departments, have become an essential part of government service, and have proved to be efficient and effective.
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One of the keys to success in shared services implementations is getting the right service level agreement (SLA) in place. Doing so requires the engagement, not only of the shared services organization, but also its clients. That dynamic relationship is essential.
In November 2005, the Conference Board of Canada, in partnership with Accenture and sponsored by, among others, CMA Canada, did its part in encouraging further discussion of shared services with a conference in Ottawa specifically geared to the public sector's needs in this arena. The two-day conference included a wide variety of speakers from Canada and abroad, sharing their experiences of the challenge of changing their practices to this model.
The importance of a well-crafted SLA was raised in many presentations, and one session, by Dan Ralph, vice-president, corporate services, for Hydro Ottawa Limited, focused on the issue specifically. Reaching the point at which an SLA is in place and functioning to the benefit of both the shared service organization and the departments it serves is an important goal. But, as many presenters at the conference noted, the process of getting to that agreement is equally important.
Two-way accountability
Introducing the shared services model is impossible without a good SLA in place, Ralph insists. "It forces you to have discipline," he notes. "It forces you to figure out what it's costing you to deliver service now. When you start down that path, you'll figure out if your financial information and software systems that deliver them are robust enough to figure out how to charge your customer."
With the deregulation of the hydro industry in 2000, Hydro Ottawa was looking for efficiencies, and the shared services model was chosen as a way to do so. Shared services often takes on many functions. Currently, corporate services at Hydro Ottawa encompasses operational functions associated with IT, supply chain management, facility management, fleet services, emergency preparedness, health and safety and HR.
Working through the SLA also makes process deficiencies clearer by clarifying exactly what processes you are engaged in and what borders they cross within the organization.
"You will also realize that there are a lot of informalities in your business processes that you have to tighten up," says Ralph. "Shared services and an SLA create a change in working relationships. Suddenly you have to talk to the person in the next office as a customer, so this becomes a formal relationship. Essentially you have the same basic infrastructure but different business expectations--life changes with a shared services model."
This isn't an easy change to make, of course. As Bruce Deacon, assistant secretary at Treasury Board of Canada, Secretariat, notes, "We are not just changing work systems and processes but mindsets." Deacon is assistant secretary of the Corporate Administrative Shared Services Initiative at Treasury Board. He was also a presenter at the conference. As he explains, an important cultural change occurs within departments and in the relationship between the service delivery organization and the client groups, "and that starts right in the planning stage," he insists.
The process of putting an SLA in place involves doing a self-audit to see whether the tools are in place to create change in the organization. It answers the question, 'what do I get for my money?', but it also helps to establish what clients truly want from shared services.
"An SLA should provide two-way accountability," says Ralph. "You have to have a smart customer as well as a good service provider. When we first went to talk to customers, many didn't know what services they were getting, and some weren't really concerned. But you have to push back and say, 'you've got to tell me what you want'--you have to challenge the customer to figure this out."
Hydro Ottawa used surveys to start the process of understanding what clients really wanted, what customer service really means to them--and many other organizations have done the same at the start of their shared services journey. Ruth Bramson, chief human resources officer for the Commonwealth of Massachusetts, discussed her use of surveys to better understand client needs during a luncheon session at the event.
Ralph also insists that shared services shouldn't work in isolation--it needs to be plugged into business planning and strategy. "It has to evolve with the rest of the organization," he notes.
The SLA helps to facilitate the bundling of services into logical elements of costing and tracking--so that IT and HR managers can see that they're knocking on the same door and understand that if they go to that door as a team, they might be able to leverage better services for the customer.
The size of the SLA, as several presenters pointed out, is an indication of how much trust there is in the organization. "Keep it brief to begin with and then build as necessary," Ralph suggests.
Valerie Judge, an independent consultant and former CEO of Eastern Health Shared Services Ireland, suggested at the conference that if you have a good SLA, you depend less and less on it as time goes by. "You'll know you have the right SLA when you get to the point where the relationship is effective and the SLA isn't as important," Judge continues.
But Dan Ralph has had a different experience. "My customers, year to year, look at the SLA every year--they live and breath the SLA," he explains. But both Ralph and Judge stated that no two SLAs are the same--hence the divided opinion. It isn't possible to simply transplant an SLA from one organization to another--each will have its own unique needs.
SLA basics
Ralph outlined several basic aspects that are essential to have in an SLA. His organization developed these with the assistance of a consultant.
"Enlist consultants, certainly when you're starting out," he notes on this point. "But don't let your employees abdicate responsibility." Ralph believes it's important to create pride in the organization, and give employees ownership of the work they do. Too many consultants on the job can take that away.
The main components of an SLA, as suggested by Ralph, are as follows:
Purpose statement: This should state the general scope, the parties to the SLA and its duration.
Business assumptions: This should include accountabilities, business processes, policies and definitions.
Services to be provided: This should describe the services, what is included and excluded, costing principles and costs, etc.
Service levels: This should deal with response time, resolution time and quality indicators--basically how you're going to measure what you're going to be providing. Ralph encourages starting with what's easy to measure. "You want some quick wins--you don't want shared services to die because you take on too much right away," he stresses. Many other presenters echoed these sentiments.
Performance measures: Whether using the balanced scorecard or another approach, it's important to be able to explain how you're doing.
Responsibilities of the service provider: This should set out reporting practices, prioritization, competencies, training and cost control.
Responsibilities of the service user: This should include planning, lead times and effective communication with the provider.
Dispute resolution process: While you don't want to have to use this, it's worth having some terms and conditions and rules of engagement in case there is a disagreement.
Evolution, not revolution
As Ralph points out, the new arrangement creates new demands for staff--they have to improve their negotiation skills and conflict resolution skills. They have to go into meetings and barter and bargain for price. They also have to have some understanding of the metrics in place to measure their performance. Ralph emphasized several times the fact that he wants employees to own the process, so he actually has front line managers sign SLA agreements.
None of the presenters suggest that the development of an SLA, or the shared services relationship in general, is ever without challenges. But that's to be expected. Ruth Bramson probably said it best in her address to attendees of the conference. "We are looking for evolution not revolution" in the development of services, she stated. Bramson also encourages choosing projects for shared services based on the feasibility of getting them done, and insists that allowing stakeholders to make their own case for their projects is important.
Developing the two-way communication between service provider and client is as essential for shared services as it is in any other business relationship
The SLA is an important part of developing that two-way communication. As Judge notes, the SLA "shouldn't be taken out at every client meeting but neither should it sit and collect dust. It should be something that has key measures and targets--that the relationship is such that you can work around it and at key intervals take it off the shelf to see if you should be changing your ambitions, changing your targets again."
The SLA is an organic document--watch your organization grow with it.
For more information on this and other Conference Board events, visit www.conferenceboard.ca. Full conference information from the shared services event is available at www.e-Library.ca.
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