Managing the Risks in the Retained Organization: A Priority for New Leaders

Introduction

The movement to shared services should continue to be a priority for the new leaders of our government. Shared services bring operational effectiveness, cost efficiencies, and increased customer service. The transition to shared services is a significant transformation for any leader and organization. It is also significant for the people working within that organization. As with any transformation, the human capital element should be top of mind. As leaders engage in the planning for and transition to a shared services operating model, they must consider the size and composition of the workforce. Their shared services workforce is a blended one: it consists of the staff that will operate the shared service center. It also includes the functions and services that do not transition, traditionally referred to as the retained organization.

As part of the ongoing series on human capital risk management, the National Academy of Public Administration (the Academy), in partnership with Ernst & Young LLP (EY), hosted a panel on October 6, 2016 to raise awareness and share insights on human capital risk in a shared services transition. The panel focused specifically on the risks associated with the retained organization. Featured panelists included: Beth Angerman, Executive Director, Unified Shared Services Management, U.S. General Services Administration; Anita Blair, Academy Fellow; Ellen Herbst, Chief Financial Officer and Assistant Secretary for Administration, U.S. Department of Commerce; and, Mark Rose, Director of Financial Operations/Comptroller, U.S. Coast Guard. Karen Shrum, Senior Manager in the Government & Public Sector Practice of EY, moderated the panel. The panel shared their perspectives on the retained organization. Their insights, presented below, are valuable for new federal leaders.

The Risks

While shared services is not a new topic in the Federal landscape, the conversation traditionally covers the benefits of automation and increased efficiencies. We must also extend this conversation to the retained organization and how this entity affects the success of the organization. The retained organization is the hub of the function to be migrated. While often blamed for inefficiency and reduced levels of service, it does house employees who have years of organizational and functional experience. It is thus a critical organizational consideration for any leader. Leaders must be focused on the "new" work of the retained organization and the capability and capacity of the staff to execute that work. Strategies for the retained organization include attrition, re-purposing and re-training. There are inherent risks in these strategies. Risks include:

• Risk One: Regardless of the "corporate" message, the fear of a Reduction in Force (RIF) is always on the minds of the impacted employees. It can be a significant distraction to the effectiveness of ongoing operations and the stand-up of the "new" organization.
• Risk Two: The transition to shared services is not a straightforward path. In reality, an organization's journey is one of consistent change. This can lead to considerable fatigue and often resistance.
• Risk Three: Attrition is not always a reliable workforce resizing strategy. The reality is dependent on the financial and personal situations of individual employees.
• Risk Four: Re-training can be costly and time-consuming.In addition, there are some employees, who, for a variety of reasons, cannot be easily re-trained or repurposed. These include employees who have been performing their functions over a long period of time and do not have the desire to change. 
• Risk Five: Not all employees are comfortable with new roles that the retained organization demands. Typically, transactional, repeatable and highly administrative functions shift to the shared service center, while the retained organization, takes on a more strategic role. As an example: retained organization employees are often seen as "consultants to the mission." This role requires a specific skillset that may include strategic thinking; data analysis; presentation skills; and other consultative behaviors.
• Risk Six: In the face of change, the rumor mill tends to become employees' main source of information. This often leads to misinformation and misconceptions. Employees spend more time worrying about changes that may never happen than about their work and their customers. Productivity levels drop.

Risk Mitigation Strategies

Mitigating risks and overcoming challenges requires detailed planning and creative solutions. Practical strategies for federal leaders include:

• Strategy One: Create a compelling story to drive communications. Once the decision to transition has been made, investing in and planning for the organizational change with an emphasis on people is the defining factor for a successful transition to shared services.
• Strategy Two: Employ clear and consistent communications. These are the key to mitigating the risk of change fatigue and uncertainly. Change management and communications should be incorporated into the transition planning and their value should not be underestimated.
• Strategy Three: Talk to your employees. You should ask them what they want to do; invite collaboration; engage them in the solution and in the formation of the new organization. Draw them in through focus groups, working groups and tiger teams.
• Strategy Four: While training, or re-training, is expensive, it cannot be overlooked. Effective strategies include "values and behavioral" workshops that help define the culture of the new organization. Another practical idea is "Scenario Day" for staff to try out new job functions. Other methods of training include: mentoring, self-study, and e-learning. While each organization's employees likely have different learning preferences, the key is management's commitment to planning and investing in its people.
• Strategy Five: Celebrate and leverage generational differences. The retained organization can be comprised of all three generations of workforce: retirement eligible, tenured (i.e. those with 10-24 years of experience), and millennials. Each generation brings its own talents and strengths. Those who are more experienced have valuable "real world" experiences to share; millennials bring innovative technology skills that are invaluable to the new data and analytical requirements of the retained organization. Retirement eligible employees, desiring to leave a legacy can serve as mentors. Mentorship, whether formal or informal, helps bridge the gap between the generations: for example, it enables millennials to see themselves in the context of the future, while providing the tenured workforce an opportunity to share experiences and advice.

Conclusion

Shared services, because of the efficiencies it brings to the organization, will continue to be a focus of the new Administration. For new leaders, the retained organization cannot be an afterthought - its seamless integration with the shared service function is key to organizational success. Within the retained workforce lies a wealth of organizational knowledge that can be shared to aid service continuity, new employee onboarding and overall knowledge retention. Determining how to tap into the experience of the retained organization, and focusing on creating opportunities for employees within the organization, is key to successful transition and mission execution.

Authors

Karen Shrum is a Senior Manager in the Government & Public Sector Practice of EY where she leads the federal human capital risk management service area. She has over 19 years of federal and private sector experience leading and supporting government organizations through organizational change. Karen holds a Masters in Business Administration from the George Washington University.

Liz Burokas is a performance improvement consultant in the Government & Public Sector Practice of EY where she focuses on workforce analysis and transformation management. Prior to EY, Liz performed data analysis, project management and training development for the non-profit sector. Liz holds a BA from Georgetown University and a Masters in Business Administration from the University of Maryland.

Katie Hilferty is a consultant in in the Government & Public Sector Practice of EY where she focuses on human capital, change management, and shared services. Prior to joining EY, Katie provided Executive level Human Capital support to a fortune 500 defense contractor. She holds a BA in International Affairs from George Mason University in Fairfax, Virginia

Jonathan Wigginton is a consultant in in the Government & Public Sector Practice of EY where he focuses on human capital support for federal agencies. Prior to joining EY, Jonathan worked at a leading non-profit organization focusing on organizational assessments. Jonathan holds a BA in History from the University of Mary Washington in Fredericksburg, Virginia.