HR trends in shared services and outsourcing in public sector organizations

More and more, today's public sector Human Resources (HR) organizations are looking beyond traditional methods and past fixes to improve operations and services. From the most basic process improvements to complete IT system overhauls, often times change only happens when public sector HR professionals break outside the status quo to consider alternate problem-solving models. Pursuing a new or different approach to transformation presents its own set of challenges, especially in the context of limited budgets, already stretched staff and skeptical management.

There are many potential alternative solutions. They include moving to a shared services model for back-office and support services as well as information technology outsourcing and business process outsourcing (ITO/BPO), concepts already popular and generally successful within the private sector. While shared services and outsourcing have become commonplace in the corporate world, they remain elusive solutions - at best - within the public sector, particularly at the local and municipal levels. A lack of awareness of the potential benefits of these models coupled with negative stigma and confusion often cause public sector organizations to dismiss these models as options for change. Despite these roadblocks, more public sector organizations are implementing outsourcing and shared services in an effort to transform HR processes and operations and, as this report will highlight, are achieving some interesting results.

This research report seeks to explore the use and potential of shared services and outsourcing within public sector organizations and how these models are shaping HR transformation. Further, this report examines the factors and parties that influence the decision-making process around implementing a new model and the selection of service providers. The goal is to answer the following questions:

• Can outsourcing and shared services models work in a public sector environment?
• What are the most significant barriers to introducing these concepts?
• And to what HR functions are these models most applicable?

This report considers these questions and others in an effort to understand trends around outsourcing and shared services.

This IPMA-HR research effort was sponsored by ADP. EquaTerra conducted the research study, performed the analysis and developed this report on behalf of IPMA-HR and did not receive any funding from ADP. EquaTerra surveyed more than 100 senior-level HR professionals to examine current trends around shared services and outsourcing in public sector organizations during June and July 2006. The respondents represented all major public sector categories and were located in the United States.

Overall Study Results:

1. Shared services and outsourcing remain unrecognized but often effective tools for improvement and transformation within public sector HR.
2. Satisfaction levels with shared services and outsourcing arrangements within public organizations are overwhelmingly positive.
3. Cost remains a key factor in considering an alternate model such as shared services or outsourcing.
4. Performance measurement and measuring success in general - both for HR overall and for specific shared services and/or outsourcing arrangements - remain a challenge for public sector organizations.
5. Current satisfaction with alternate models and solutions does not necessarily translate into future plans to further incorporate these models in additional business function areas. However, additional analysis indicates this trend may be more tied to an overall lack of planning than a proactive decision to forgo these alternate models.

Download the full report here: Trends in shared services and outsourcing in public sector organizations