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Achieving new efficiencies in higher education through shared services

Colleges and universities are exploring shared services as a way to achieve greater operational efficiencies and service delivery quality.

Overview

Higher education institutions today face financial challenges that threaten to diminish their potential for long-term success and continued organizational growth. However, feeling the pressure of strained finances should never distract higher education institutions from their core purposes, aspirations and customers’ needs.

The shared services model can contribute to a stronger financial footing, a greater ability for higher educational institutions to meet their missions and, ultimately, new efficiencies. But while the model is only just beginning to make headway in the area of academia, it has already built a convincing and growing track record of its effectiveness in reducing costs, developing new cohesion within universities, and refocusing attention on colleges’ and universities’ fundamental purpose of quality education and research.

This Accenture point of view explores the growing movement toward shared services within higher education, including how the model fits within the unique mission and attributes of the higher education environment.

Background

Across the country, as education budgets are cut, operating costs escalate, and tuition increases, higher education institutions are challenged to do more with less like never before. While the battle to control costs appears to have no simple solution, many college and university leaders are promoting a shift toward thinking about higher education as a public good that should be more strongly supported.

To break out of this dilemma, many higher education leaders are exploring how to reduce the costs of administrative operations while improving the quality of services provided. Increasingly, regents and senior administrators are starting to grasp the full potential of shared services as a tool for rethinking their operating models and achieving consistent, long-term performance improvements.

An organization operating under a shared services model has five key characteristics that make it unique from businesses operating under decentralized, standardized or centralized approaches. The shared service organization:

  1. Is a separate organizational unit that is linked to customers through a governance model that involves customers in decision-making.

  1. Treats the users of shared services as customers who drive transactions.

  2. Manages service delivery through clear service-level agreements that define the responsibilities of both the shared services organization and its customers, with metrics and costs for performance.

  3. Operates within a performance-driven culture that uses metrics and feedback to analyze how well the business processes are functioning – all the way down to the individual level – to foster continuous improvement.

  4. Takes ownership of the processes behind the services it provides, and monitors and enforces compliance with the process standards it sets.

Shared services is a way of organizing service delivery to optimize cost-effectiveness, flexibility and reliability services.

Analysis

Studies reveal that six out of 10 Americans think that colleges today operate more like businesses, focused more on the bottom line than on the educational experience of students. Understandably, higher education institutions are sensitive to any perception that adoption of private-sector practices may impact their educational mission, so the differences between how higher education organizations and companies approach shared services needs to be acknowledged.

Three key differences include:

  1. Higher education institutions put mission before profit maximization more often.

  2. Higher education institutions typically have more decentralized and, at times, unique operating cultures across campuses or across departments.

  3. The independence and entrepreneurial nature of schools and researchers creates a perception that by surrendering a portion of administrative work, the culture of the school may somehow be put at risk.

These differences often inhibit the ability of colleges and universities to move forward with shared services, but Accenture’s perspective is that the differences should be viewed in light of their impact both on the business case behind shared services and the design of the shared services model (e.g., in performance metrics):

  • Mission before margin in higher education institutions –Higher education’s mission and overarching goals mean cost efficiency will not always determine operating decisions. However, administrative cost savings resulting from shared savings can be repurposed toward the academic mission, student financials, and attracting and retaining distinguished faculty. Standardizing business processes can also help to unify schools and units with different perspectives.

  • Preserving the value of unique identities in higher education institutions – In an effort to preserve the culture and identity of the university, faculty may interact with administrative functions in a more formal manner than is common in the public sector. Accenture’s experience shows that although the level of rigor and accountability required for shared services to be successful may be uncomfortable for some, the benefits should sway the argument that standardization in processes is essential.

  • The implications of decentralized operating cultures across campuses and departments – In a recent client bench-marking study, Accenture discovered that the costs of one large state university system’s finance function, as a percentage of the overall operating budget, were 52 percent higher than those of a cross-section of peer group public and private-sector organizations of similar size and complexity. Our experience indicates that, in general, the larger, more complex, and more dispersed the institution, the stronger the case for shared services from the potential of reducing costs.

Recommendations

Accenture describes shared services as the consolidation of administrative or business support functions—human resources, finance, IT, student services and procurement—from several departments into a single, standalone organizational entity that has one mission: to provide services as efficiently and effectively as possible.

This point of view provides the basic principles behind the shared services model:

  • Focus on the benefits beyond cost savings

  • Build a case for shared services

  • Garner strong executive support

  • Communicate to alleviate concern

  • Build strong governance that includes customer representation

While success may be founded in these principles, what is also clear is that there is no “one-size-fits-all” approach to shared services in higher education. Managed properly, a shared services project involves systems that measure service to drive accountability and continuous improvement. It must also be supported by a strong institutional mission and a clear vision of long-term goals, in terms of cost savings, higher productivity, improved customer service, a more disciplined approach to cost management and greater employee engagement.

The shared services model frees up scarce resources, allowing departments to focus on their core mission and on their customers’ needs while providing organizational flexibility and considerable financial implications.