4.1. Shared Services Business Model

An emerging trend in the early care and education (ECE) industry is the formation of shared services alliances, which help providers realize cost savings. Shared services alliances are membership organizations (or multi-site ECE organizations) through which shared services are provided [156]. Shared services may include accounting, administrative services [157], billing and fee collection, bulk purchasing, enrollment management, food services (central kitchen), janitorial services, marketing, professional development and more.

Shared services are offered by a “network” or an “alliance hub,” which can be a large child care center, a third-party organization such as a Child Care Resource and Referral agency or a central administrative office created by alliance members. Alliance members pay membership or contract fees and/or receive support from foundations (e.g., through grants) to pay for such services. Each alliance is created to meet the unique needs of its members, but they all share the same goal of creating a structure that helps providers implement cost savings, share staff, information and resources, and focus on their core mission (to educate and care for children) and pedagogical outcomes. Providers who wish to create or be part of an alliance usually use the services of a central hub organization [158].

In sum, shared services alliances or networks are created with the goals of centralizing certain services, improving efficiencies and offsetting some of the operational costs of running a child care or dependent care facility. It contributes to alleviate human capital concerns (e.g., hiring and paying staff with the right expertise to carry out administrative tasks) and helps employees focus on pedagogical or client support and outcomes. Shared back offices are reported to be the biggest return on investment in shared services [159].

In West Virginia, those interested in taking advantage of shared services can form local or regional alliances with other providers by creating networks among themselves, working with Child Care Resource and Referral Agencies [160] or contracting the services of a central hub organization that can help to facilitate the creation of such alliances, potentially with the financial support from foundations that focus on child care issues in the state. Alliances tend to have the support of a funder because members usually cannot afford to pay for shared services themselves. Such funding initiatives are an effective and affordable growth strategy for agencies and foundations that wish to serve more children. Instead of having to raise money to cover 100 percent of operating expenses for child care providers, they only need to subsidize or cover alliance membership fees for a much smaller amount [161].

A successful example of a shared services alliance is the Chambliss Center for Children [162] (former Children’s Home/Chambliss Shelter) in Chattanooga, Tennessee, which provides complete back-office services on a contractual basis to six child care centers in the community [163]. The Chambliss Center provides management and support services to alliance members on a fixed fee, which is set each year [164], including managing the day-to-day operations and back office work. Additionally, the Chambliss Center executive director oversees all programs and fulfills the role of executive director for each center they contract with. Four of the six centers in the alliance are independent and have a separate board of directors, staff and 501(c)(3) status) [165]. The programs also use the same curriculum, slide scaling fee, employee benefits package, salary scale, financial software system, bulk purchase and set of operating procedures as the Chambliss Center.

Before becoming part of the alliance, these centers had high turnover rates, low program quality and struggled to stay open because they were all serving low income, at risk children and could not charge fees commensurate with the true cost of providing services to sustain their operations [166]. The Chambliss Center then worked with the board of directors of each entity to develop a management agreement to operate their programs, which helped to improve the quality of their services and ensure sustainability [167]. Today, the centers collectively serve approximately 750 children (from 6 weeks to 12 years old) and prepare over 90 children each year to enter school with the skills and tools they need to excel [168]. This collaborative effort has received national recognition as a stable financial and management model for child care networks and it is seen as a great example of what can be done to sustain small, community-based child care businesses [169].

The keys to a successful shared services implementation are putting together alliances that are built on trust (i.e., the alliance members need to trust the entity that will provide shared services), identifying key players who can join the effort, capitalizing on the resources and partnerships that exist within a community, having a stable hub (center, agency, organization) with the capacity to expand and provide shared services to all providers in the network and having access to subsidies through a robust network of funders and supporters [170].