HR Group, founded in Edmonton Alberta in 1993, is a partnership of highly experienced management consultants who specialize in organizational effectiveness and human resource management, and promote participative, lean, and cost-effective management practices. All partners are Certified Human Resource Practitioners with extensive senior level experience in both the private and public sectors.

Shared Services Are Inevitable

By Dimitri Pojidaeff, HR Group Management Consultants

Originally published in the October 2000 issue of Municipal World

The private sector, in most instances, has already gone through some form of reengineering and restructuring and is constantly looking at possible business alliances in the form of mergers, partnerships, reciprocal agreements, or just shared services. They are looking for every possible means of gaining more cost effective service and/or production. They have had to in order to survive the competitive pressure of a global economy. There is no other choice; the consumer has no loyalty other than to whoever can provide the best quality at the lowest price. It doesn’t matter anymore if the product comes from another country or if it means that the friendly local store goes out of business.

Reengineering and restructuring is becoming increasingly more frequent in the municipal sector as well, but such words as merger, amalgamation, regionalization and shared services immediately raise the emotions of both taxpayers and local politicians. They talk about the sanctity of local municipal governance, the necessity of maintaining local services and the fight against the intrusion of other levels of government into their own local affairs. But we must remember that these taxpayers and politicians are the same consumers described above who have no loyalty other than to the provider of the best quality at the lowest cost. Tell these taxpayers that they have to pay more taxes in order to maintain or even increase the level of service and their loyalty to local governance is gone in an instant if it can be shown that some other method of providing service is more cost effective.

Municipalities are subject to the same pressures as the private sector as they also have a bottom line – not profit and loss, but tax rate. The public’s loyalty today, in both the private and the public sector, is to the provider of quality service and/or product at the best possible price. Nothing else really matters. 

The private sector cannot survive with extensive and unnecessary overhead. Nor can the public sector survive with extensive and unnecessary overhead in the form of so many overlapping levels and so much duplication and redundancy. In the January 20, 1997 issue of MacLean’s, Diane Francis wrote that the State of California, with more people than Canada as a whole, only sends two senators and 52 representatives to Washington whereas we send 399 representatives to Ottawa or 7.5 times more than Californians. She went on to say that, “What politicians must understand is that governments have not gone through the reengineering that the private sector has had to go through. There is no reason why they should not become as efficient as possible, if only because the taxpayers who support them have had to do so. But the most compelling reason to revamp governments is that the tax dollar money pit is not bottomless. Canadians are now struggling to pay taxes equivalent to more than 50 per cent of their entire incomes, on average. We all deserve better, and smaller, government.”

If we set aside the emotional arguments and the “politics” involved, we are left with a purely practical question of how to provide quality service in the most cost effective manner. If this means shared services then why not? We don’t have to merge, amalgamate or regionalize. All we have to do is avoid unnecessary duplication of services and resources and share where practicable and feasible. The questions of governance must be separated from the questions of cost effective administration. Shared services is a bottom line practical issue, which everyone can understand. The highly charged question of appropriate local governance and representation will develop around shared services if we focus our attention on keeping taxes at a minimal level. This is the more important question and we know where the consumer/taxpayer stands on this issue.

There are already so many examples of shared services. Small rural Fire Departments cannot survive without being part of a larger Regional Fire Authority where resources and services are shared with larger urban municipalities. The same applies to ambulance and other emergency services. Library services and family and community social services are frequently shared by various municipalities as well. Recreational services are usually available in the urban centers, but used by both urban and rural residents. In light of all this sharing it is ironic to hear the ongoing argument between urban municipalities and rural municipal districts and counties. The urban centres complain that the surrounding rural residents use their services and do not pay their fair share. The rural municipalities, of course, respond in kind by saying that the urban residents travel the rural roads and access all the rural campgrounds, parks, lakes, hunting, fishing, skiing and other outdoor facilities and recreation. In spite of all this constant bickering, they are sharing services.

There are other glaring examples, however, of where services are not shared. Most County and M.D. offices, for example, are located in an urban center in close proximity to the town or city offices. Their respective Public Works yards, shops and facilities are also located in close proximity. Yet do they share either administrative or Public Works services and resources? They normally do not. The resulting duplication, overlap and poor utilization of existing resources and services is extremely costly to the taxpayer.

Shared services are inevitable; the taxpayer will demand those efficiencies before paying more in taxes. This is the issue that we should focus on rather than the appropriate governance structure; that will logically follow. The private sector is constantly creating new partnerships and alliances in order to be more cost effective and competitive. The municipal sector has to do the same and they should do it from this practical perspective before being forced to from a political perspective. There are so many opportunities for various types of partnership with other municipalities, the non-profit sector, other public sector areas such as health and education and even the private sector. Better to create your own partnerships based on mutual and congruent needs and cost effective delivery of services, rather than have enforced partnerships through arbitrary delineation of regions. There is also the opportunity, with new technology such as the internet, to have some services provided by a central source such as an association of municipalities.

It is in the best interests, therefore, of the municipal sector to be actively exploring all potential partnerships and areas for sharing that will provide more cost effective use of resources and provision of services to their taxpayers. They should be actively engaged in ongoing strategic planning with potential partners. Such discussions must be based on the principles of Interest Based Bargaining with all parties approaching the discussions with their taxpayers’ interests in mind rather than the protection of their own positions regarding governance and representation. Those who can successfully represent the true interests of the taxpayer will ultimately be the ones who govern. Shared services are inevitable; it would be in everyone’s best interests to start planning for them now.