Part 2: Planning and managing the change

Setting up Central Agencies Shared Services.

2.1
In this Part, we look at how the central agencies managed the change to set up CASS, up to its start date on 7 March 2012. We assess whether the central agencies achieved the goal of showing leadership to the public sector in how they set up CASS, including:

Rationale for a shared services arrangement

2.2
The central agencies identified the drivers for improved delivery of corporate services but those drivers changed in emphasis in the lead-up to setting up CASS.

2.3
The proposal provided to Cabinet in May 2011 focused on value for money, estimating cost savings of $245,000 in the two years after establishment due to more efficient, integrated services. In December 2011, the business case for CASS identified risk reduction, efficiency, and leadership of the public sector as drivers. Improving the resilience of back-office services for DPMC and SSC was also a driver. The small size of these entities had made it difficult for them to ensure that they had effective, efficient, and resilient support services. For example, DPMC had made little investment in its systems, particularly in ICT.

2.4
The chief executives of the central agencies decided to set up CASS after carrying out an options appraisal. An options appraisal is strongly advisable for an organisation working on solutions to service delivery problems. The central agencies' Integrated Corporate Services Project commissioned EY to produce a report, Central Agency Collaboration, in 2008. That report outlined various options for better collaboration of front- and back-office (corporate) functions, including setting up a shared services arrangement. In 2011, the Integrated Corporate Services Project further refined options for better collaboration of corporate services. The shared services arrangement was the preferred and subsequently agreed option, based on an assessment of strengths, weaknesses, and risks.

Not enough operational definition and planning

Lesson 1
A clearly defined operating model together with detailed change management plans are essential to an effective change.

2.5
Overall, the merging of functions into CASS was carried out under significant time pressure. There was no cohesive or comprehensively detailed change management plan that reflected an understanding of the different businesses' needs.

2.6
The central agencies produced high-level plans for setting up CASS. The business case outlined a broad approach to managing the change and there were some overarching plans for communication, consultation (with affected staff and service users), and the transition to a shared services arrangement. These plans provided some broad timelines for actions but did not include details, were not clearly resourced, and were not flexible enough to allow for developments along the way.

2.7
We did not expect planning in minute detail for every eventuality, but the plans we saw were not detailed enough for the purpose they were meant to serve.

2.8
There were no detailed plans for transferring the four corporate support functions. Much had to be done in a short period of time (10 months), and it was clear from talking to staff that many problems were not planned for or resolved.

2.9
Despite deficiencies in planning, senior management insisted on no delay in setting up CASS. DPMC's needs were seen as increasingly urgent and the SSC's lease for its premises was due to expire. The intention was that further planning to stabilise and consolidate operations would continue after CASS was established.

2.10
There were no effective plans for how CASS would support three different agencies with different cultures and operating processes. There was no clear view on what processes might be standardised and by when, nor consideration given to ensure that there were appropriate resources to support three different agencies.

2.11
The business case envisaged setting up transactional services by March 2012 and developing a more standardised and integrated approach to service delivery after CASS was set up. However, the lack of detailed and effective functional planning adversely affected some areas of service delivery. These problems are recognised by the central agencies and clearer plans for how CASS should operate are being developed.

2.12
Detailed plans were produced for consulting staff, for the redundancy process for staff directly affected by the structural change, and for recruitment. The change management team broadly adhered to the dates in these plans. These aspects of the change were better managed because of more effective planning, but, as we discuss later in this Part, did not include effective enough consultation.

2.13
As part of the planning for a shared service, the central agencies looked at international experience. The business case referred to international experience on how shared services had operated. Potentially valuable lessons were drawn from the United Kingdom and Australia. The lessons were that it was important to:

  • retain institutional memory and knowledge on the governance board to help keep traction and initiative;
  • gather accurate information and data to provide baselines; and
  • consult and communicate with those affected by changes.

2.14
These lessons were not fully applied during the change to a shared services arrangement.

Weaknesses in governance and management

Lesson 2
Clear and effective governance and management arrangements are important for successful change.

2.15
The chief executives set up a project governance group with representatives from each agency and appropriately delegated responsibility for decision-making about the change process, monitoring progress, and managing risk. There was also clear direction and leadership to set up CASS by 7 March 2012.

2.16
However, because plans for setting up CASS assigned responsibilities for strategic but not operational actions, we found it difficult to identify how the project governance group was kept informed of progress and able to ensure that change was introduced effectively. Staff we talked to also viewed the project governance group as ineffective, because it was too removed from the process to influence it. Instead of carrying out a key role, the project governance group played a peripheral and detached role throughout the change to a shared services arrangement.

2.17
The three chief executives also appointed a consultant to the position of "Establishment Director" to manage the change process. The Establishment Director reported to the governance group and led a change management team. Although this was an appropriate decision, it appeared from the documentation we reviewed that responsibilities and accountabilities for effectively managing the change were unclear. This contributed to some staff (those directly affected by the change) feeling unsupported.

2.18
The original consultant left midway through the change process and a new Establishment Director was recruited.

Important set-up elements not done well

Lesson 3
An effective change management process needs to be well executed and well resourced, and should include effective communication and consultation, retention of essential skills and knowledge, and clear processes for recruitment and transfer of functions or activities.

2.19
Some aspects of the change process were effective. The change team kept on track in terms of timelines, and the governance group acted quickly to replace the Establishment Director. The change team ran an effective process to recruit staff to fill permanent positions, used the learnings from the consultation process to improve further consultation, and brought in extra staff where it identified the need as the process progressed.

2.20
However, important aspects of setting up CASS (such as consulting staff and service users, retaining skills and institutional knowledge, and building a culture for CASS) were not handled well. There were initial operational difficulties that should have been foreseen and mitigated.

2.21
In addition to insufficient detailed planning for the change and weaknesses in governance and management, not enough resources were allocated to carry out the change. There was no dedicated HR support until later in the process, and there were no change "champions" or staff dedicated to ensure clear and effective communications.

2.22
Feedback to us from staff directly affected by the change process indicated that initial consultation was poor. Staff received a comprehensive consultation document in October 2011. This document outlined the proposed functional elements to be transferred, staffing structure, and recruitment timeline. However, the document contained a number of inaccuracies about functional transfer and staffing structure, overstating the number of potential redundancies. A revised, more accurate, consultation document was then released, but staff confidence in the process had already been damaged. The recruitment and selection process for the new structure generally went well, although several positions remain unfilled and many temporary staff continue to be employed.

2.23
Staff in the central agencies who would be users of CASS services (service users) were not consulted effectively during the change management process. Ineffective consultation resulted in inaccurate information about services. This meant that CASS did not meet the expectations of service users. This was particularly apparent in the Treasury, where staff we interviewed expressed disappointment with the level and type of service that they were receiving. As well as not managing expectations, unsatisfactory consultation also led to a perceived lack of customer focus from CASS, because the needs of service users were not perceived as being fully considered.

2.24
In the HR and finance functions, fewer staff (and, therefore, less knowledge of DPMC and SSC processes and culture) transferred than anticipated. This, combined with the lack of detailed planning for permanent staffing resources required after setting up CASS, contributed to staff working long hours. The use of temporary staff helped with some resourcing problems. In Finance, efforts made to fill these gaps of knowledge included retaining two key accounts staff from DPMC and SSC for some months after the establishment date. However, a lack of knowledge – particularly of DPMC and SSC processes and culture – resulted in operating problems after establishment.

2.25
Although there was documentary evidence to suggest that cultural change was considered, there was little in the way of a managed approach to build a clear culture for how CASS would operate internally. An important part of setting up an effective team is for management to understand the type of culture that they would like staff to aspire to. Without that clear view, the culture of CASS has been allowed to develop in an unplanned way. This has sometimes limited CASS's customer focus and has affected how well the organisation has functioned.

2.26
The transfer of the four functions varied in effectiveness. CASS experienced many initial operational problems after the March 2012 establishment date, such as ICT staff not having access to some areas of DPMC because appropriate security clearance was not applied for, or CASS staff not having security passes to visit DPMC or SSC. This affected the ability of CASS staff to quickly introduce changes for critical services. More effective planning should have resolved or mitigated these and other problems by the time of establishment. Instead, CASS experienced delays in further developing the shared service function while sorting out establishment and service delivery problems that could have been resolved earlier. We discuss the differing rates of progress for the four functions in more detail in Part 3.

Ineffective collection of baseline data to measure progress

Lesson 4
It is essential to gather detailed data about the range and level of services, functional costs, and the level of maturity of the service functions, to provide accurate baselines for determining future investment and to measure progress.

2.27
The most significant problem we found in our audit was a lack of thoroughness in gathering information to form a basis for working out what CASS needed to include in its scope, and to inform the change planning. Although CASS commissioned a later analysis of ICT functions, carrying out this work sooner would have helped establishment planning.

2.28
The central agencies used Benchmarking and Administrative Support Services (BASS) data to set the level of service delivery required. Appendices to the business case issued in December 2011 outlined baseline information on cost and numbers of staff for each of the four transferring functions. However, the collection and use of detailed information on the level and type of service delivery was not good enough, requiring further work after the establishment date.

2.29
We were told that, in some instances, extensive information was collected by some staff within the central agencies but not "picked up" by the consultants tasked to produce initial baseline data. It was clear from the first consultation document that there were several inaccuracies in describing the services transferring, such as information management services and HR's capacity required to deliver transactional services.

2.30
Detailed assessments of how well the four functions were functioning in each agency (maturity assessments9) should have included the collection of data about the level and type of services that were being delivered, accurate costs of the delivery of these services, and the performance level of these services before transferring.

2.31
There was no evidence of any performance information collected before the transfer of services to set a common understanding and planned approach to service delivery. This information would have also supported a better understanding of the resources and capability required and where to focus future investment.

2.32
CASS carried out its own review of early lessons learned in August 2012. The review highlighted the need for better understanding of the business needs of the central agencies and the potential benefits of a shared services arrangement. CASS management and the Partnership Board acknowledge that the collection of better information on how services were delivered before establishment would have improved initial delivery after establishment.

9: "Maturity assessments" measure functional and organisational capability and performance effectiveness.

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