Victoria’s Auditor-General John Doyle has found that a majority of local governments across the state have difficulties in measuring the impact of shared services due to a lack of baseline data and other information.

In a report tabled in state parliament this week titled Shared Services in Local Government, this was identified as a “significant weakness” of current shared service activity in the state and makes it difficult to measure the full extent of both financial and non-financial benefits from shared services.

This lack of knowledge about how to quantify the benefits of shared services was detailed in the report, with most councils using evaluation or review, cost analysis and satisfaction survey without the aid of a benchmark to measure against.

With shared services emerging as a preferred method for councils to deal with cost pressures and boost service, the Auditor-General has expressed concern that councils aren’t able to demonstrate the achievement of their intended results.

Mr Doyle said it was “concerning” that surveyed councils said they didn’t know how to measure the benefits for a quarter of initiatives, and that five per cent of initiatives had yet to be measured or quantified.

Another problem is that although surveyed councils could identify cost savings as a benefit, they often couldn’t quantify the expected cost saving or the cost saving actually delivered.

“They were unable to set a benchmark for delivery, or measure whether this benchmark had been met,” the report said.

To combat this problem, Mr Doyle has recommended that councils develop and implement “effective processes” for monitoring, evaluating and reporting outcomes to assess the extent to which “these are being realised” and to drive continuous improvement.

He has also recommended that Local Government Victoria, a division of the Department of Transport, Planning and Local Infrastructure assist councils to improve in this area by addressing the shortfall in management information.

The report identified other challenges that Victorian councils face in implementing share services, the most significant of which being the perceived loss of autonomy and local control.

Leading global analyst firm Gartner has offered its own informed perspective about the importance of benchmarking in shared services in a report titled Public-Sector Shared Services Must Maintain Their Commercial Relevance by its UK-based vice president Neville Cannon.

In the report, Mr Cannon said that changing political opinion and the inability of shared-service organisations to justify value or defend costs will cause shared-service owners to reconsider their initiative’s value proposition.

They will insist that shared services are directly compared with external commercial offerings, Mr Cannon said in the report.

He warned that this will render the shared service vulnerable if it is not able to adequately demonstrate that its service delivery competes with that offered by the best providers.

“Therefore, not only must the shared service offer excellent service, it must be able to provide benchmarked evidence of its capability,” Mr Cannon said.