Competitive or caring? The potential for shared services in higher education

Andrew Rothwell

The shared services model has been a success story in both the private and public sectors – does it work in higher education?

It is tempting for hard pressed vice chancellors to grab something from the management toolkit that now seems proven to make worthwhile savings. However, the shared service success belies a number of ideological and practical issues that have yet to be fully thought through in higher education.

In a forthcoming executive report, Dr Andrew Rothwell and Ian Herbert of Loughborough University’s Centre for Global Sourcing and Services will discuss how the shared service phenomenon is more than just about headline cost savings and ask how it might work in higher education. This article highlights some of the emerging issues.

The challenges and opportunities ahead

A radical view is that Higher Education in the UK is facing a shakeout in which the ‘rich’ will get richer and the ‘poor’ will disappear. Those institutions stuck in the middle between the large and the niche and between either research excellence or mass teaching at low cost will be doomed.

It is not our intention to get involved in the ‘whys and wherefores’ of that debate: perhaps the future might be more benign, even more positive. The doomsayers suggest that HE will be squeezed between student-led market forces and central government increasingly intolerant of institutions who fail to balance the books. However, this argument cuts both ways.  With greatly reduced direct government funding UK HE could yet be on the cusp of a new, more entrepreneurial and independent landscape.

Four key issues

We suggest this overarching puzzle resonates with a number of issues around shared services within the UK HE sector. Here are our top four.

1. HE already ‘does shared services’

For many multi-national companies the shared service centre has been a success story. Economies of scale and scope have been achieved as their quasi-market facing Shared Service Centre has been a vehicle for back office functions to become entrepreneurial and innovative. Business divisions have unbundled peripheral activities and become more focussed on winning and keeping business. It is inconceivable that that such management medicine should not be good for sleepy bureaucratic institutions such as universities. Or is it?

The myth of HE sector inactivity needs further scrutiny. First, the UK HE sector has been quietly sharing things successfully for many years. UCAS is a shared service but its form is largely unacknowledged, precisely because it is difficult to imagine how else it might operate. There are many other examples, especially when it comes to ‘high road’ services and resources that no one institution can afford, such as the M5 Universities Manufacturing Technology Centre.

2. UCAS – private vs public

Second, HE is both a public asset and in a position of trust with regard to the education, welfare, rights and prospects of young people. UCAS has found itself exactly between the horns of the public versus private dilemma. Should it be entrepreneurial and reduce its costs by selling its data, or should it act with public sector integrity and keep secure the personal details of young people who have supplied information because UCAS is the only effective route to a better career?

3. HEIs can reduce their transactional costs

Third, universities are simply organisations who process transactions, in exactly the same way as a business organisation. In the university context some of these transactions relate to student registrations or other aspects of students data, but these are transactions nonetheless. Hence, universities also have the potential for cost savings in respect of transactional work in exactly the same way as any business organisation: through shared services, through service integration, or by outsourcing. This potential includes offshore processing, and Middlesex University has already taken this step. Yet, HEI’s are nervous about migrating the processing overseas, perhaps fearing negative public relations reactions, or possibly having concerns about data security, even though our individual financial transactions can be handled this way.

A further concern might be that HE has responsibilities to ‘UK plc’ to preserve employment and corporate social responsibility and this is particularly keen in those areas where towns and smaller cities are dominated by higher education, or where alternative employment options are scarce. Multi-national corporations might potentially attract negative PR when migrating thousands of white collar jobs to cheaper offshore locations but imagine the story in provincial cities where ‘town and gown’ relationships run deep.

4. Does competition trump caring?

Fourth, since 1992, the policy of successive UK governments has been to cast Higher Education as a competitive cauldron judged by media produced league tables and the more subtle but no less important Research Assessment Framework. Much of the back office support systems of universities goes hand in glove with pastoral care in which diligent administrators spot vulnerable students and ‘have a quiet word with a tutor’. Would this happen with a remote call centre?

Barely moving the ‘corporate needle’?

Although this is not intended to be an exhaustive list for caution, a final observation is that even in the private sector ‘cost cutting’ through shared services does not tend to move the ‘corporate needle’ unless the new administrative structures can help to improve business unit effectiveness.

For an individual chief finance officer, cutting the costs of the finance function from, say, 1.5% to 1.0% of company revenue is cause for a significant bonus but it is not a ‘game changer’ in itself. Whilst ‘non-core’ activities such as administration are easy targets to be labelled as non-productive overheads, the largest proportion of cost in any university or college is staff costs for teaching and research. Perhaps these activities should be the natural targets for rationalisation and sharing?

On the other hand, the case for change…

First, support services comprise a range of activities, some will be best retained whilst others could be placed into shared services. Unnecessary duplication might just as readily be eliminated between schools and departments within an institution as between institutions.

Second, there are already numerous examples of good practice from sharing student facing services such as FXPlus in Falmouth or University Campus Suffolk.

Third, sharing does not have to mean centralisation for its own sake. Most HEIs use similar student support systems and administrative software. Individual services can retain their own identity if the enabling platform can be standardised. For example, every iphone in the world comes out of the box identical; but, within an hour every iphone is different. Platform standardisation (e.g. ERP) does not have to equate to standard delivery if there can be a sensible discussions about appropriate standardisation and affordable customisation, rather than a blunt ideologically driven mantra for change through compliance and conformity.

Fourth, whilst almost everything that can be achieved through shared services can be achieved through ‘normal’ systems evolution, the shared service model provides both a catalyst and a vehicle for transformational change in support services, throughout the organisation.

Finally, for service leaders, shared services are akin to the ‘elephant in the room’; impossible to ignore. With austerity measures really now starting to bite across the public sector, managers now need to be seen to be doing something and the adoption of the form and/or nature of sharing services is becoming a ‘comply or explain’ issue in terms of demonstrating value for money to stakeholders and preserving income.

Dr Andrew Rothwell and Ian Herbert are based at the Centre for Global Sourcing and Services, Loughborough University. Their forthcoming research report on shared services in higher education in the UK has been supported by the Efficiency Exchange.