Tips for sharing services

Information adapted from resources available via KnowHowNonProfit and NCVO

Collaborative working

Organisations can use collaborative working to share premises and/or back office services: the supporting functions which enable organisations to carry out their charitable activities. Sharing back office services can mean they are delivered more efficiently than if each organisation were to provide these services themselves in house.

Examples of functions which can be shared:

  • Purchasing
  • Premises / administration
  • Human resources, recruitment & staff development
  • IT
  • Finance services
  • Payroll services

Other terms often used to describe sharing back office services include: Joint project, joint initiative, partnership, shared support services, administrative consolidation, joint venture, managed services organisation, cluster.

How can organisations share back office services?

Organisations can collaborate on just one support service or many. They can do so from separate locations or by sharing premises. Each organisation can maintain its own identity or partners can together create new organisations to share services.

The following points outline some of these options, but do not provide a comprehensive guide. Different structures are right for different organisations depending on their aims for the collaboration. Professional advice should help work out what is best in each case.


Why do it?

Advantages

Sharing back office services can improve organisations’ effectiveness for beneficiaries by increasing their efficiency and making better use of resources. Time, skills and money can then be redirected to frontline activities.

Quality of back office services

  • Improved or wider range of services
  • Access to a higher level of expertise and to the latest technology, making greater specialism possible for partners so they are able to keep up to date with developments in specialist fields
  • Greater confidence in quality of service as the responsibilities of providers are formally specified, for instance in a Service Level Agreement
  • Increased business continuity. It should be easier to cover for holidays and staff sickness by drawing from a greater staff pool than would have been available to each separate organisation

Potential savings

  • Cost savings through economies of scale, releasing more money for frontline work
  • Greater bargaining power with suppliers when buying in bulk
  • Leaner workforce

Staff effectiveness

  • Staff who used to multi-task on areas where they felt they lacked suitable skills can concentrate on more specialist work
  • More productive use of management time
  • Networking benefits which will either improve back office efficiency or the effectiveness of charitable activities

Potential source of income

  • Opportunity to make profit which can be re-invested in charitable activities
  • Potential to sell services beyond partnership, perhaps through a trading company

Disadvantages

  • Time and resources can be drained from existing work, particularly when setting up then running a new organisation. Additional tasks in such a case include Trustee recruitment, production of annual reports and supplying Annual Return forms to the Charity Commission for the new organisation.
  • Possible redundancies when duplicated posts are no longer needed
  • Smaller partner organisations may fear that priority will be given to larger partners. Fear of losing out in this way may be particularly common where back office services are provided by staff who are already working for a larger partner.

Change can be worrying for staff and volunteers, particularly when it involves a loss of control.

  • Trustees and/or managers may need to start sharing decision-making on areas where they previously had autonomy. This can be both culturally difficult and time consuming.
  • The work of managers freed from multi-tasking on back office services will change. Other staff and volunteers may also have new roles.
  • Starting to run services on commercial lines will involve a cultural change which staff, volunteers or beneficiaries may find hard to accept.
  • Sharing services may be seen as downsizing unless its purpose is clearly communicated.

Tips

  • If you choose to outsource back office functions, don’t outsource all functions in one go. Prioritise, start small and gradually increase the services that you share. That way you can build confidence among partners / clients and their staff and volunteers.
  • Depending on its scale and nature, a project champion at senior level may be useful to take a visionary role while a dedicated project manager leads on implementation.
  • Ensure you have the support and involvement of Trustees
  • Retrain people with changed roles.
  • Set up a system for maintaining regular contact with partner organisations’ staff and volunteers. Poor communication can lead to misunderstandings which may derail a shared project.

Ways to share services

Joint working

Two or more separate organisations together deliver back office services. They may work together to deliver services to all the partner organisations involved or one may provide services to others. Each organisation maintains its independence and its own identity.

  • The level of Board and senior management involvement will vary with the scale of the collaboration and the type of organisations involved.
  • Trustees have final responsibility for the activities of their organisation and must maintain control of collaborative working arrangements.
  • Boards of Trustees may co-operate to oversee the collaboration for its duration. This could be by forming a joint committee with representatives from each Board.
  • Or Trustees may approve the collaboration, then delegate its implementation to a steering group of staff from each organisation with a project manager reporting back to this staff group.
  • Boards of Trustees can agree a code of conduct to formalise how they will work together.
  • The collaboration can be controlled by an agreement which separates the joint functions from the ongoing operations of each partner. This could be a written agreement like a memorandum of understanding or a verbal agreement. Legal advice will help you explore the options.

Creating a new organisation

Two or more organisations create a separate organisation to provide all the partners with services.

  • Each original organisation maintains its own identity distinct from the identity created for the new organisation.
  • The new organisation is a legal entity in its own right. Its legal structure will vary. It may, for instance, be a registered charity as well as a company limited by guarantee, but there are many other options for the new organisation’s structure.
  • The original organisations may share the governance of the new organisation. In this case, the new organisation has its own separate Board with each partner having an agreed number of seats on it.
  • Another option is for one person to represent all the partner organisations on the Board of the new organisation.
  • But partners’ input into management may be looser than this. The tenant members of Mezzanine Services Limited (see Community Action Network case study) chose not to have a formal means of influencing the way the enterprise was run, but did have a voice through informal channels.
  • Where organisations’ right to influence the running of the new organisation is not formalised by the governance arrangements, alternative mechanisms will usually be built into a written agreement. This might state when the partners have the right to be consulted, for example, or when they have power of veto over a decision that concerns their activities.
  • A new organisation may be established to raise income for the partners by selling spare capacity. The clients who pay for services may be organisations from the voluntary, public or corporate sectors. The new organisation may be a trading company governed by a Memorandum and Articles of Association, with a shareholders’ agreement or a joint venture agreement ensuring that Trustees maintain control. Legal advice is recommended.

Why create a new voluntary organisation?

Some organisations set up new organisations so that they can separate the collaborative working element from the continuing activities of each charity. This may be appropriate where there are significant financial or liability risks involved in starting new joint work.

Creating a separate organisation formalises the way that the shared work is managed, meaning that none of the partners should benefit unfairly from the advantages or suffer disproportionately from the disadvantages possible when sharing services.


Things to consider before going ahead

Like other types of collaborative working, setting up shared back office services takes time and effort. A due diligence exercise helps organisations find out about partners’ potential liabilities so that they can judge whether to go ahead. Professional advice will help determine what level of investigation is appropriate.

  • Why do you want to share back office services? Are you aiming for cost savings, improved service or both? How do you know this will be achieved?
  • Feasibility studies and a system of monitoring and review will help answer these questions.
  • Be clear about how each partner is already meeting its back office support needs. How would the new arrangement improve on this?
  • The VAT implications of sharing services need to be considered. Are you planning to generate income by selling spare capacity to other organisations?

Employment law

Organisations taking on functions previously carried out by another organisation or transferring work to another employer may be affected by TUPE, the Transfer of Undertakings (Protection of Employment) Regulations.These concern the rights of employees to protection for their terms and conditions. Legal advice should be taken on whether and how TUPE affects you.