Shared Services 'Trickle Down' from Canada?

A workshop analyzing where shared services are now found Canada was a leading example of where things may be heading next.
August 2, 2006
Jerry Mechlin
By Jerry Mechling  |  Contributor
A consultant and former faculty member of the Harvard Kennedy School

Americans tend to think of trickle-down from Canada in terms of cold weather ... BLAME CANADA!!!

However, at a recent Harvard workshop on shared services, Canada was a leading example of where things may be heading next. (See workshop overview.)

Until recently, "shared services" meant internal support work supplied to multiple departments of the enterprise -- services such as payroll, personnel, accounting (information-intensive services), or vehicle maintenance (a physical service). The key benefit was economies of scope and scale. High-volume production could offer lower unit costs, and potentially higher value per unit, than if each department provided for itself.

The downside to external, high-volume support services production -- at least for departments previously providing for themselves -- was loss of local control. Outside producers, especially those with monopoly power, have a poor reputation for customer care and innovation.

In analyzing where shared services are now, our workshop came to several broad conclusions:

· Major opportunities for efficiency remain to be harvested. Good numbers have not been adequately documented, but practitioners and researchers are convinced that the benefits are real. If you haven't been investing in shared services, you should be.

· The hard part of implementation is the soft part, not the technology: i.e., leadership and governance are the big challenges, and are not getting the attention they deserve. We need to design shared service projects as organizational change efforts. We need to explicitly and carefully design incentives for operational responsiveness (with service level agreements important in many settings, but not all). We need to reinvest efficiencies into new opportunities for innovation and improvement.

· The future of shared services will embrace face-to-face customer service and supply by outside organizations in addition to internally provided support. Here is where Canada provided the leading examples. Service Canada is implementing face-to-face customer service (as well as telephone, mail, and Internet interactions) under a "one-stop/no wrong door" design. While Web portals -- sites that provide multiple services through one entry point -- have long been getting serious attention around the globe, Canada has gone farther than others in face-to-face customer service on a shared services/multi-departmental basis. (See: While the 311 operations that are rolling out now offer shared over-the-phone service, Service Canada also offers shared face-to-face service -- a major step forward.

In addition, Canada has been aggressive in standardizing for productivity and transparency across completely independent institutions, not just multiple departments within a given government enterprise.

In this context, think back (if you can) to the Planning-Programming-Budgeting Systems (PPBS) work of the 1960s, which looked to standardize financial management across programs and departments. Talk then was that the Department of Defense should not think of itself as an aggregation of Army, Navy, Air Force and Marines, but rather as a capacity to use cross-cutting resources for nuclear deterrence while also fighting multiple conventional battles. PPBS was developed for analyzing cross-boundary management and policy issues. While the financial and personnel numbers in PPBS were huge, the focus of reform was department-by-department within the Department of Defense enterprise.

That's different from what Nova Scotia is trying to do today. For Nova Scotia, shared ERP services (enterprise resource planning -- mostly human resources and financial management) extend across 15 departments in the provincial government, eight separate school boards, 55 separate municipalities, nine health departments (with 40 hospitals), and also the colleges and universities of the province. The dollars managed are smaller than for PPBS in the 1960s, but it's amazing to see all those programs and semi-sovereign groups using the same standardized software.

If your government -- like many others -- is under unrelenting financial and customer pressure, then the shared-services models of Service Canada and Nova Scotia should perhaps be a priority.

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For you, are Service Canada and Nova Scotia essentially aberrations? Do they depend on legal frameworks and a political culture that will not travel well to the south?

Or, in contrast, do they represent the next wave of reform? With some new legal language and effective political leadership, will the Canadian approaches work in U.S. and other contexts?

If so, then Canadian trickle down may soon become a flood, and the next wave. To catch it, maybe you should get your board ready....