Sharing Back Office Services
This guidance has been developed by CollaborationNI to introduce possible structures for sharing back office services and describes areas to consider before going ahead. It contains relevant links and case studies that illustrate a variety of options.
It may be useful for organisations considering:
- which back office services can be shared
- what structures to use for service sharing
- how to prepare for sharing services
- what the advantages and risks of sharing services are
“Shared services refers to a business model whereby multiple organisations converge and streamline some of their business functions in order to deliver services as effectively and efficiently as possible."
Learning and Skills Council, 2008
Traditionally the development of a shared service model is an attempt to reduce costs through:
- economies of scale
- standardising processes
Sharing services has evolved into a comprehensive and flexible tool for:
- improving processes
- enabling technology investment
- generating profit
- reducing costs
Mark Henricks, Learn to Share, 2001
For more detail on what shared services are and what they can achieve see JISC Infonet's information entitled, Shared Services .
Collaboration to deliver services in the VCSE sector is nothing new. Organisations can collaborate to share premises and/or back office services, those supporting functions that enable organisations to carry out their work. Sharing back office services can mean they are delivered more efficiently than if each organisation was to provide these services for itself. The decision to share services is usually a strategic one with organisations deciding if sharing services is a viable option and one that can help their sustainability.
Which functions can be shared this way?
- human resources, recruitment and staff development
- finance services
- payroll services
Key levers that enable organisations to realise the benefits of shared services
- centralisation of effort, expertise and costs to reduce or eliminate duplication across organisations
- standardisation of processes and systems, leading to enhanced services
- enhanced ability to share best practice, knowledge and experience across organisations leading to improvements in productivity
- improved use of resources (hardware, software and people) leading to reduced requirements at an aggregate level
Infosys, has created a White Paper entitled, A Structured Approach to Shared Services which gives detailed information on establishing shared services.
Organisations can collaborate on one support service or many. They can do so from separate locations or by sharing premises. Each organisation can maintain its own identity or partners can create a new organisation to share services.
The following points outline some of the options, but do not provide a comprehensive guide. Different structures are right for different organisations depending on their aims for the collaboration. Professional advice can help work out what is best in each case.
Structures for joint delivery of back office services
Two or more organisations together deliver back office services. They may work together to deliver services to all the partner organisations involved or one may provide services to the others. Each organisation maintains its independence and its own identity.
- The level of board and senior management involvement will vary with the scale of the collaboration and the type of organisations involved.
- Trustees have final responsibility for the activities of their organisation and must maintain control of collaborative working arrangements.
- Boards of trustees may co-operate to oversee the collaboration for its duration; this could be by forming a joint committee with representatives from each board.
- Trustees may approve the collaboration then delegate its implementation to a steering group of staff from each organisation with a project manager reporting back to this staff group.
- Boards of trustees can agree a code of conduct to formalise how they will work together.
- The collaboration can be controlled by an agreement which separates the joint functions from the ongoing operations of each partner, ie a written agreement like a Memorandum of Understanding or a verbal agreement. Legal advice will help you explore the options.
- The development of shared services can lead to more than efficiency savings with organisations, sharing back office functions, and utility costs. It can also lead to organisations interacting more with each other creating the opportunity to work on joint projects.
Information from JISC Infonet entitled, How Shared Services Develop gives further detail on developing shared services.
The development of shared services can lead to more than efficiency savings with organisations sharing back office functions and utility costs. It can also lead to organisations interacting more, creating the opportunity to collaborate on joint projects.
Case study: Fermanagh House - Sharing physical space encourages collaboration
Fermanagh House is a social enterprise owned by the Fermanagh Trust and the building is a resource for the community and the VCSE organisations based there. As well as providing office space, Fermanagh House provides first class training, meeting and conference facilities for resident organisations and for others to hire. Fermanagh House provides a central reception and kitchen area for its residents. Formal management meetings are held by representatives from each of the resident organisations and through daily interactions in the shared areas a number of organisations have developed joint projects.
Reasons for developing Fermanagh House
A range of VCSE organisations, including Fermanagh Trust, were operating out of poor office accommodation in the Enniskillen area and paying high rents.
“As Enniskillen is the centre of County Fermanagh rents are very high; organisations such as the Fermanagh Trust were based in inappropriate space and paying quite a bit of money for it.”
Lauri McCusker, Director, Fermanagh Trust
Fermanagh Trust moved accommodation several times and also had to hire meeting, training and conference facilities on an ongoing basis. Fermanagh Trust considered the opportunity of linking with other organisations for better accommodation with excellent training meeting and conference facilities onsite.
"We thought, is there something there in terms of collaborating with others? We started to think about bringing organisations together under one roof, utilising the budget lines they all have in terms of rent and office costs such as heat, light and photocopying.”
Lauri McCusker, Director, Fermanagh Trust
Fermanagh Trust contacted organisations to explore if the opportunity for a shared building and services was appealing and found there was a general view this would be beneficial. Fermanagh Trust then secured a site from Fermanagh District Council, and resources. Fermanagh House was built and opened in 2007. Shared areas and utility costs were included in the rents and service charges.
“The charities do not have to worry about ordering oil, or catering, care taking or cleaning. Nine different organisations do not have nine building insurance, electricity or oil bills having to be paid. Organisations come to work to provide the services that they have been set up to provide. Also there is one reception. It is one point of contact for everyone coming into the building.”
Lauri McCusker, Director, Fermanagh Trust
Sharing information is also one of the benefits of the shared premise. The circulation of information to members and beneficiaries of the other organisations helps to both promote and support each other’s work, and widens the circle of influence.
“It’s a supportive environment, for many small organisations that is a bonus.”
Lauri McCusker, Director, Fermanagh Trust
Through using the shared areas in Fermanagh House a number of the resident organisations have interacted with each other and developed joint projects. Liveability Ireland and Development Media Workshop delivered a joint project, as have CAB and Bryson Energy.
“There is a lot of information sharing and it’s amazing what happens over a cup of coffee in the kitchen or a chat over lunch in the reception area, including idea development.”
Lauri McCusker, Director, Fermanagh Trust
Some organisations that come together set up a new organisation so that they can separate the collaborative working element from the continuing activities of each organisation. This may be appropriate where there are significant financial or liability risks involved in starting new joint work.
Creating a separate organisation formalises the way that the shared work is managed, meaning that none of the partners should benefit unfairly from the advantages or suffer disproportionately from the disadvantages possible when sharing services.
- Each original organisation maintains its own identity distinct from the identity created for the new organisation.
- The new organisation is a legal entity in its own right. Legal structure will vary. It may, for instance, be a registered charity as well as a company limited by guarantee, but there are many other options for a new organisation's structure.
- The original organisations may share the governance of the new organisation. In the following case study the new organisation has its own separate board with each partner having an agreed number of seats on it.
- One person may represent all the partner organisations on the board of the new organisation, but partners' input into management may be looser than this.
- Where organisations' right to influence the running of the new organisation is not formalised by the governance arrangements, alternative mechanisms will usually be built into a written agreement. This might state when the partners have the right to be consulted, eg when they have power of veto over a decision that concerns their activities.
- A new organisation may be established to raise income for the partners by selling spare capacity. The clients who pay for services may be organisations from the VCSE, public or private sectors. The new organisation may be a trading company governed by a Memorandum and Articles of Association, with a shareholders' agreement or a joint venture agreement ensuring that trustees maintain control. Legal advice is recommended.
Case study: Will to Give - coming together and creating a new organisation
In March 2008 the Institute of Fundraising NI hosted a session in NICVA on legacy giving. During this event two local fundraisers proposed that charities in Northern Ireland needed to look more strategically at legacy giving. NICVA organised a meeting to discuss legacy promotion and a steering group was formed to meet with representatives of the legacy promotion initiatives already established for the whole of the UK and the Republic of Ireland: Remember a Charity and Legacy Promotion Ireland. A decision was taken that these national initiatives did not fully meet the needs of regional and local charities in Northern Ireland.
The Northern Ireland Legacy Promotion group, as it was first called, considered setting up a new organisation immediately, but instead chose to function against Terms of Reference for its early development; 21 organisations signed up to the group and paid £50 by way of commitment. As the group developed and plans became more certain the need to manage and apply for funding became more of a driving force for forming a new organisation. The promotion group knew recognition of the initiative was important so it decided to become a new independent organisation which became constituted, received charitable status and was formalised in January 2011.
Benefits to member organisations
Each member organisation pays an annual fee of £250 and in return receives:
*promotion and marketing materials including a presence on the Will to Give website
*use of Will to Give logos - materials and press releases
*advice on legacy fundraising
*reduced or free access to events and training organised by Will to Give
*Will to Give leaflets bundle
*contribution to the development of the campaign
*reduced costs for the will notification service in Northern Ireland
One benefit of this collaboration is that donors can support a range of causes. What also has worked well is that by working together Will to Give organisations have enhanced their fundraising capacity. Smaller organisations do not have the same capacity as larger organisations but will be able to advertise and promote legacy giving with respect to their organisation through Will to Give. It gives them the opportunity to be creative about income generation.
"All the charities have a stronger voice by working together on this initiative."
Neil Irwin, Secretary, Will to Give
Another benefit was that some organisations came with no idea about legacies but by being involved in Will to Give they learned about legacy giving from other more experienced fundraisers in this field.
Within a geographic area, there are opportunities for sharing many types of services which require close proximity.
Case study: Skainos Project - community regeneration through shared premises
For some time, the inner East Belfast area had been neglected and in need of regeneration. East Belfast Mission (EBM) developed the concept of an ‘urban village’ made up of VCSE organisations, a mix of owner-occupied, privately rented and social housing units, an auditorium to serve as the worshipping space for the Methodist Congregation at East Belfast Mission, an onsite hostel, and retail units. This urban village, the Skainos Centre, opened in October 2012 and is a regeneration project providing shared space for community transformation and renewal.
Initially EBM considered renovating its existing building in the Ballymacarret area of East Belfast however a decision was taken to develop a new building instead. As well as moving all its own operations over to the Skainos Centre, EBM has linked in with a range of partnering organisations over the regeneration of the area and has had great success attracting them to the new building. These organisations include:
*Belfast Metropolitan College, which has a satellite unit of six classrooms to its main campus
*AgeNI, which has a day centre for older people
*Oaklee Housing Association, which works in partnership with EBM for the provision of a homeless hostel
*Northern Ireland Association for Mental Health (NIAMH), which runs a mental health day centre
*Tear Fund NI, office headquarters
*Replay Theatre Company, office and rehearsal space
EBM has attracted its partnering organisations through word of mouth; for the commercial and private rentals the organisation has used estate and commercial agents to assist in the process. Shared services include:
*cheap bulk buying
*lower utility costs due to a district heating system to be supplied to all tenants at 10% less than market value
*Wi-Fi in all common areas
*a family centre, IT suite, classrooms, drop in centre, seminar rooms, board room, dance studio, counselling and mentoring rooms, auditorium and community hall available at competitive rates
some organisations with a similar remit or that provide similar services collaborate by sharing premises and/or back office services.
Case study:Cara Friend - sharing premises
In 2009 the Director of Cara-Friend realised that the building in which the organisation was located did not fully meet the needs of disabled beneficiaries. As a result the Director spoke to colleagues in the LGBT sector and, along with the Directors of The Rainbow Project and Lesbian Advocacy Services Initiative (LASI), identified the Memorial Building in Waring Street, Belfast, as a suitable new location.
One of the positive outcomes of the organisations sharing premises was that they reviewed their administration and stopped duplication. It became apparent that the arrangement of operating from different buildings had led to a situation where each organisation was not fully aware of the services and support the others provided.
"We stopped duplicating, we examined what areas we worked in and decided we could co-operate in some and be open that we were competing in some. If we couldn't co-operate we would try to see who was best placed to provide a service."
Steve Williamson, Director, Cara-Friend
This has developed further. The Directors of Cara-Friend, The Rainbow Project (TRP) and LASI now meet on a monthly basis to discuss services and opportunities. The management boards of Cara-Friend and TRP have also met as part of their strategic planning processes to explore how they can link their strategies and business plans.
Case study: Cultúrlann - sharing premises creates a shared community
In 1991 Cultúrlann opened to accommodate an Irish-medium second level school and since then the centre has been the springboard for many Irish language initiatives and enterprises that subsequently spread out around the area to create Belfast's Gaeltacht Quarter. As the popularity of the centre grew, different Irish language organisations including Pobal, Aisling Ghéar, Aisling Ghéar films and Raidió Fáilte became attracted to the centre and applied to become resident within it.
These organisations had visions which were similar to that of Cultúrlann in their support of Irish language and culture.
“Our common goal was to promote Irish culture in Belfast however this has led to organisations that reside in Cultúrlann sharing other resources as well.”
Eimear Ní Mhathúna, Director, Cultúrlann
The relationship between the organisations developed organically. Each had a desire to further develop and support Irish language, art and culture and in their efforts to do so worked together to promote the centre and its services. The running costs of the centre are shared and a representative from each organisation sits on the management committee, however Cultúrlann has become a company limited by guarantee and its governance is not solely made up from organisations within the building. Now a tenants’ group has been established so that representatives can discuss issues which fall outside the remit of the management committee.
The building has recently undergone renovation and most of the initial organisations moved out while the work was completed. Some have grown and have relocated within the Gaelic Quarter. The centre is now home to Caífe Feirste, Oifig Fáilte tourist information point, the Siobhán McKenna theatre, the Dillon Gallery, Na Ballaí Bána Gallery, An Ceathrú Póilí book/craft shop, Raidió Fáilte, Aisling Ghéar theatre company, the design company Dúch Dúchais, Taca, that support Irish medium education, and Tobar, a television production company. Since the renovations have taken place a centralised telephone service has been installed with each organisation contributing to its cost and maintenance. The Director hopes that now tenants have returned there will be even more opportunity to work in collaboration.
“We are trying to work closer together in marketing, we already do quite a bit at the minute, but once everyone moves back in there will be a more strategic approach to pooling resources.”
Eimear Ní Mhathúna, Director, Cultúrlann
Services can be developed for organisations which are not naturally associated with each other due to geography.
Case study: Confederation of Community Groups - location based sharing
Sharing premises: Ballybot House and An Storás is a social enterprise developed by the Confederation of Community Groups (CCG). It provides premises and several discounted support services to a range of VCSE organisations. In addition to organisations from the VCSE sector, CCG leases units to a number of retail businesses to ensure a diverse income. Before renting a unit organisations sign a tenancy agreement. Ballybot House is at 95% occupancy and An Storás has full occupancy. This means that the social enterprise is financially sustainable. CCG uses the income generated through this social enterprise to support its own projects so that it is not solely reliant on grants. In addition it means that the rent for each unit is at a very competitive rate. Rent has not increased in over four years.
“We haven't increased costs of rent or discounted resources in four years. We haven't changed terms and conditions. We have on occasion even reduced rents when organisations were waiting on funding, and then made the difference up when the funding came in. We are very flexible as we are not a private landlord. We are here to contribute money to projects, and to help organisations reduce costs through shared premises."
Raymond Jackson, CEO, The Confederation of Community Groups
The tenancy agreement covers the unit space and distribution of post, cleaning, caretaking and maintenance and use of Wi-Fi in common areas. Charges are made for photocopying and faxing and there is a discount on the charges for meeting rooms, however the charges for these have not increased in four years.
Sharing back office services can improve organisations’ effectiveness for beneficiaries by increasing their efficiency and making better use of resources. Time, skills and money can then be redirected to frontline activities.
Quality of back office services
- improved or wider range of services
- access to a higher level of expertise and to the latest technology, making greater specialism possible for partners so they are able to keep up to date with developments in specialist fields
- ensuring improved and more up-to-date IT and communication systems
- greater confidence in quality of service as the responsibilities of providers are formally specified, for instance in a Service Level Agreement
- Cost savings through economies of scale, releasing more money for frontline work
- Greater bargaining power with suppliers when buying in bulk
- Leaner workforce
- Staff who used to multi-task on areas where they felt they lacked suitable skills can concentrate on more specialist work
- More productive use of management time
- Networking benefits which will either improve back office efficiency or the effectiveness of charitable activities
- Release of staff time from 'commodity' activities for more added-value/customer-facing activities
Potential source of income
- opportunity to make profit which can be re-invested in charitable activities
- potential to sell services beyond partnership, perhaps through a trading company
- gaining competitive advantage
Improvement and sustainability of services
- continuity and resilience of service
- raising quality and improving the flexibility and agility of existing services
- ability to offer otherwise unsustainable services
Accessible and appropriate accommodation
- access to better accommodation which meets the needs of the organisation
- access to appropriate meeting and conference facilities at a reasonable cost
- more central location for the benefit of beneficiaries
Like other types of collaborative working, setting up shared back office services takes time and effort. A due diligence exercise helps organisations find out about partners' potential liabilities so that they can judge whether to go ahead. Professional advice will help determine what level of investigation is appropriate.
- Why do you want to share back office services?
- Are you aiming for cost savings, improved service or both?
- How do you know this will be achieved?
Feasibility studies and a system of monitoring and review will help answer these questions.
- Be clear about how each partner is already meeting its back office support needs. How would the new arrangement improve on this?
- The VAT implications of sharing services need to be considered. Are you planning to generate income by selling spare capacity to other organisations?
Finding potential partner(s)
Sharing services is a non-starter unless you can find the right organisation(s) to share with. The best way to do this is to network with organisations who are interested in sharing services. Organisations do not need to have similar services for such a partnership to work; they simply need to focus on what back office services they are able to share. Organisations also need to be able to trust each other if they are going to be sharing resources.
Organisations taking on functions previously carried out by another organisation or transferring work to another employer may be affected by TUPE, (Transfer of Undertakings/Protection of Employment Regulations). These concern the rights of employees to protection for their terms and conditions. Legal advice should be taken on whether and how TUPE affects you.
VCSE organisations face challenging times. A volatile financial environment is impacting funding opportunities while demand for services and operating expenses are increasing. For the majority of organisations with already limited resources, these challenges indicate a need for innovative change. For many organisations, the solution comes in the form of collaboration and consolidating their "back office" operations to streamline their efforts. Joint efforts allow VCSE organisations to share:
- financial and human resources operations
- increase purchasing power
- reduce costs
- increase operating efficiency
- reduce risk
- improve access to high-quality services
- foster collaborations that lead to programme innovation
Experiences in the private, public, and VCSE sectors prove these gains are possible when shared services are designed effectively.
While sharing services is very popular and considered by many as good practice there is a fear that the driving force behind collaborative working such as shared services, and the use of language when discussing it, does not fully address the risks involved. Before deciding to make such changes VCSE organisations must decide if the delivered benefits outweigh the risks.
JISC Infonet, Risks of Shared Services, can give some further guidance on the risks involved in joint service delivery; some of the risks are detailed below.
Sharing back office services does not always successfully reduce costs in the short to medium term. Sometimes the real benefits are more difficult to measure such as networking opportunities and opportunities to share and learn. The VCSE sector needs to be aware that while there is potential to make savings from shared services, it is important to be aware of the potential risks including:
- Time and resources can be drained from existing work, particularly when setting up the running of a new organisation. Additional tasks include: trustee recruitment, production of annual reports, and supplying Annual Return forms to the Charity Commission for the new organisation.
- Possible redundancies when duplicated posts are no longer needed.
- Smaller partner organisations may fear that priority will be given to larger partners. Fear of losing out in this way may be particularly common where back office services are provided by staff already working for a larger partner.
- Change can be worrying for staff and volunteers, particularly when it involves a loss of control.
- Trustees and/or managers may need to start sharing decision-making on areas where they previously had autonomy. This can be both culturally difficult and time consuming.
- The work of managers freed from multi-tasking on back office services will change. Other staff and volunteers may also have new roles.
- Starting to run services on commercial lines will involve a cultural change which staff, volunteers or beneficiaries may find hard to accept.
- Sharing services may be seen as downsizing unless its purpose is clearly communicated.