Agenda Item

Action date

24/04/2014

Background

This session featured contributions on the experience to date of organizations that have already established Global Service Centers.  The presenters were UN-DFS, WHO, UNHCR, and FAO.  

UN-DFS presented their Field Support Service Delivery Model.  Over all, the ASG, DFS noted the significant potential benefits of this delivery model.  However, he stressed that the effort to manage change has been significant and the importance of change management cannot be underestimated. 

The general aim has been to improve services and to change the legacy of every Mission operating as a free standing entity with its own human resources, IT and finance.  It was necessary to look at field support as a global enterprise and at how to standardize processes.  

The structure that has been set up has global service centers in Brindisi and in Valencia that focus on IT and engineering. Also, a shared service center has been set up in Entebbe which carries out general operations and transactional services. The creation of this center has enabled the organization to capitalize on economies of scale. The Entebbe center has improved reporting, processing of contracts, payments and all issues related to education grant processing. A key for success in this endevour is to develop solid performance indicators so that the clients, the Missions, know what to expect and can track the quality of services.

The benefits include having a leaner and flatter organization with standardized processes.  Specialization can be developed and the dissemination of best practices is made easier. The costs are significantly lower than having a large staff footprint in hardship duty stations. This leads to “more days at the desk” when there is no need for Rest and Recuperation. Also, staff health services and security are significantly better in a less difficult duty stations. In general, UN-DFS reports a 15% saving in staff numbers for every consolidated Mission. The overall financial benefit is estimated at USD 18 Million over two years. It should be noted that with the implementation of an ERP system, implementation of common centers is easier.

The greatest challenge was represented by deep-rooted cultures and resistance to change; hence, the importance of change management. The re-engineering was difficult but it is more or less in place now. Furthermore, every Mission has different requirements and this makes the importance of performance indicators even stronger.   

The ASG indicated that it may be possible for the new model to support other organizations.  It would be challenging and would come at a very large transaction costs.  However, UN-DFS would be willing to move in this direction. 

The other presenters largely echoed the experiences of UN-DFS. WHO stated that their development of a global service center coincided with the introduction of an ERP system.  Doing the two at the same time was a great advantage. Their center in Kuala Lumpur serves approximately 7,000 staff and does provide some support to other entities, e.g. UNAIDS.  They noted that the key principle for extension of the center to others is that they use the WHO legal framework.   

The challenges in setting up the Kuala Lumpur center were similar to those experienced by UN-DFS. There was significant reluctance among staff to make the change but this has now been overcome. The transition process was also challenging. However, in going through this process, it was recognized that it makes more sense to not only focus on transaction processes but to also include control functions at the center. This has allowed the organization to strengthen controls, compliance and data quality. This is an important lesson for other organizations going in this direction.  

UNHCR has established two centers. The larger one of the two is in Budapest and was established in conjunction with a broader organizational change management reform project that had as a goal to reduce the footprint in Geneva and Headquarters in order to move closer to the field. This center focuses on transactional processes such as human resources, accounting, budgeting, supplies and logistics but also has a learning facility. A second center focusing on IT services was also set up in Amman.  

UNHCR reports the same challenges as UN-DFS and WHO.  There was significant resistance to change in the organization. This resistance even included legal challenges to the move. The process did have significant impact on staff  - 129 positions were cut in Geneva and for many staff who were not Swiss this led to lost residence permits etc. This impact needs to be kept in mind when moving to a global center.

The governance structure of the UNHCR center retains the Director for each unit at Headquarters.  The center is run by a D1 who ensures the smooth operation of the center but substantive decision making remains in Geneva.  

The location of the center has provided an opportunity to tap into a very strong young pool of potential employees and finding qualified staff has not been difficult.  Also, the Hungarian government provided 10 years of rent-free premises to the organization.  

In terms of expansion, UNHCR would welcome a more detailed analysis of the different options. The preliminary view, however, is that some services lend themselves better to common service centers than others, e.g. transactional functions.  There are some complex issues that would need to be investigated, such as ERP systems and financial rules and regulations. And, the basic condition for any expansion would be that the services to UNHCR should not drop in quality.

FAO presented similar views but also added another caveat. They still have regional centers in Bangkok and in Santiago because their governing body did not allow full centralization in Budapest.  They also noted that there is a concern that at some point Budapest will become too expensive given salary and cost developments. Thus, there might come a point where another move will have to be envisioned. This needs to be kept in mind when looking at global service centers. Currently FAO has the decision making power at the global service center but are looking at the model used by UNHCR.  

The Committee was also briefed on the pilot Joint Operations Facility being established in Brazil. The HLCM Vice-Chair co-led a joint HLCM-UNDG mission to Brasilia to facilitate the establishment of the joint facility, which is envisaged to serve eight participating organizations, with four more that are considering joining. UNESCO participated in the mission to lend support, as one of the largest partners in the joint facility. The establishment of the facility would represent an important step forward also as a response to the mandates of the QCPR. However, there are still many operational details to sort out, including the modalities to cover infrastructure costs and to charge for services. Similarly to the 2010 joint HLCM-UNDG mission on identifying bottlenecks to collaboration in operations, this mission also found that most of the work that organizations need to do jointly can be done within existing regulatory frameworks. The lesson from the experiences from the global service centers also apply to the Brazil case - you can never communicate too much with staff and government when it comes to changes of this relevance. The mission report was being finalized and would be shortly shared with the Committee. 

Discussion

During the discussion, IOM informed the Committee of its experience with its global service centers in Manila and Panama City. The establishment of the centers has been very positive. It has led to significant savings and have not faced difficulties finding local qualified staff in both locations. However, one challenge has been that despite the nature of the work of the local staff of the centers providing administrative services to the organization globally, they have limited or very specific contact with the overall activities of the organization around the world, resulting in limited knowledge and ownership of the work, mandate and principles of the organization. The importance of access to qualified staff with the technical and linguistic skills needed was later emphasized by other Committee members as well.

In the subsequent interactions, a number of organizations expressed their gratitude to the presenters and noted that there are a number of lessons to be learned. One identified lesson was that standardizing transaction processes across the organization is key.  In the UN-DFS model, for example, each mission acted independently and the different approaches to finance and recruitment all needed to be standardized before bringing them into a shared service.

Concern was raised about letting the political agenda drive the process of re-designing service delivery models. The condition for success is a sound cost-benefit analysis and subsequent implementation drawing on the lessons learned from those that have done it already. The Committee also agreed that it is important to look at global mega-trends in the area of service provision and to learn from these. Such trends could include looking at a multi-tower approach and at work-streams rather than individual specialities. It is also important to consider multi-functions of staff given that some transactions are seasonal, e.g. education grant. The link to the feasibility study for the inter-operability of ERP systems was made and it was recognized that input from, or a review of, how multi-national corporations address this issue would be of great value.

Some organizations noted that if they are already working closely with larger ones that provide services, such cooperation with an aim towards centralized service centers should continue. However, experience gained from the presenters should be carefully reviewed as a basis for moving forward. The Committee also emphasized the importance of looking beyond global centers and also assessing the pros and cons of regional ones given the concerns about time difference and distance. The issue of local service centers, given the Brazil initiative, should also be looked at in relation to global and regional ones.

Key actions from governing bodies that would simplify the process of moving towards shared services came out during the discussion.  The following principles would greatly enhance the ability of the system of moving in this direction: a) A UN staff member should have the authority to undertake a role for the whole system; b) UN funds should be internally audited only once; and c) Any UN business process should be respected as a valid process by other organizations. In this context, the importance of learning from the BOS pilots and the Brazil experience for addressing such structural issues was emphasized. 

Action

The Committee:

  • Took note with appreciation of the experiences and lessons learned from the establishment of Global Service Centers by organizations of the system, which can serve as a reference for the on-going and future investments in this area by other organizations.
  • Noted that there may be four possible models of consolidated service provision and utilization that merit consideration:
  1. Individual organizations consolidating their own back office operations in one (or more) global/regional location/s;
  2. Shared services, where one (or more) service center can provide services to several organizations on a cost recovery basis or other service agreement;
  3. The establishment of cost shared common centers clustered around organizations with similar business models;
  4. Outsourcing of services to United Nations service providers and/or to external entities. 
  • Committed to the completion of an analysis of options for cost-effective service delivery, to be informed by experiences of organizations to date and by global trends in the area of provision of support services.
  • Requested the HLCM Networks to identify services where harmonization of procedures and work processes could be standardized, leading to efficiency gains if carried out together; and, the harmonization (where necessary and feasible) of rules, regulations and policies to make this happen.  
  • Requested that such assessment be also informed by the outcome of the Business Operations Strategy pilots, by the studies and analyses already conducted by organizations that have established Global Service Centers, as well as by the results of the ERP inter-operability study mandated by the QCPR.
  • Re-affirmed its support to the Brazil pilot on the establishment of a Joint Operations Facility structured along the model offered by the Business Operations Strategy (BOS), and looked forward to a comprehensive cost benefit assessment of the outcome of the BOS pilots.