Reorganization and ‘Shared Services’

“Shared services” is an important component of Gov. Asa Hutchinson’s proposed government reorganization, the first serious effort to reorganize state agencies since 1972.

“The proposal will improve management control throughout state government through the creation of the Department of Transformation and Shared Services,” Hutchinson’s office said in announcing the move, the first reorganization since Democrat Dale Bumpers’ first term (1971-72) as governor.

According to the Encyclopedia of Arkansas, Bumpers “gained legislative approval of several major reforms” that Republican Winthrop Rockefeller “had championed but had been unable to convince the Democrat-controlled state legislature to enact.” Bumpers, in a 1974 interview, explained that when he took office “the governor had 165 department heads reporting to him … So what we did, we took 65 of the major departments, the big ones, and consolidated them into 13 departments. So I now have 13 people reporting to me.”

Gov. Hutchinson’s proposal would also reduce the number of cabinet-level agency heads reporting to him, from 42 to 15.

There are differences. Bumpers raised the top income tax rate as governor, while Hutchinson is calling for its reduction to 5.9% over four years.

One component of Gov. Hutchinson’s reorganization plan – “shared services” – has not received adequate attention. Under the plan, a new Department of Transformation and Shared Services will “improve management control” by bringing the following agencies under one roof: Department of Information Systems (DIS), Geographic Information Systems (GIS), the Office of Transformation, and these divisions of the Department of Finance and Administration (DFA): Employee Benefits, Building Authority (DBA), Office of State Procurement (OSP), and Personnel Management (OPM).

A few observers were puzzled by this component but “shared services” is well-known among management consultants and policy analysts.

The U.S. Treasury Department operates Shared Services Programs that “provide common administrative services that benefit customers both within Treasury and outside agencies.” These services are provided “on a centralized basis, where they can be administered more advantageously and more economically than they could be provided otherwise.”

NASA’s Shared Services Center was launched in 2006 at the Stennis Space Center in Mississippi. The Center “performs selected business activities in financial management, human resources, information technology, procurement and business support.” The Defense Department’s first-ever CMO said earlier this year the agency can “operate more efficiently” through shared services.

There’s also precedent for ‘shared services’ in Arkansas.

A 2016 PricewaterhouseCoopers report, commissioned by our non-profit think tank included a management survey of Arkansas Department of Finance and Administration (DFA) personnel and this recommendation: “Enhance Information Systems governance and develop a centralized shared services and infrastructure architecture plan.”

The report found “significant opportunities for more efficient accounting financial reporting and planning processes, personnel management processes, e-procurement, and more.” Shared services could “significantly reduce the amount of time State employees spend on paper-based processes.” The insights of state employees are crucial to the success of Gov. Hutchinson’s reorganization plan.

DFA, to its credit, advanced the idea by “working with DIS” on “data center consolidation and infrastructure planning,” according to 2017 testimony.

Some critics argue “shared services” create failure demand. But state officials can overcome this problem through a relentless effort to engage customers, in this instance, Arkansas taxpayers.
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Editor’s note: Economist Greg Kaza is executive director of the Arkansas Policy Foundation, a Little Rock think tank founded in 1995. The opinions expressed are those of the author.