If you’re thinking of embarking on any kind of consolidation initiative in HR or payroll, last week’s damning government report on the Department for Transport’s (DfT) shared services fiasco provides a helpful guide to what not to do.

The DfT was accused of “stupendous incompetence” by the House of Commons Public Accounts Committee for its efforts to pull HR, payroll and finance administration into one in-house shared services centre. And for good reason. In the course of a project that converted £57 million worth of anticipated benefits into an £81 millon net cost to the taxpayer, the department seems to have broken pretty much every rule in the book.

The project, which kicked off in April 2005, provides half-a-dozen good lessons for any organisation looking to embark on a big IT-related change project.

1. Don’t skimp on the planning Despite being aware of the risks, DfT put together an aggressive timetable for its shared services project that called for two agencies (the Driver and Vehicle Licensing Agency and the Driving Standards Agency) to go live within a year, believing that there was “no advantage in planning for a longer detailed design and later start”. This compressed timetable was at the root of many of its problems – not least its decision to save time by building on an existing IT system rather than going out to tender. Anyone who’s been involved in tendering knows it can be a time-consuming and tedious process, requiring liaison with multiple departments – but it has the big advantage of forcing you to define your requirements closely and analyse risks.

2. Get buy-in Centralised shared services projects are all about standardising on best practices – but the committee reported that the DfT couldn’t fully resolve “the inherent tensions in securing the agreement of seven separate agencies to a single set of processes”. After going live, meanwhile, it seems DfT wasn’t overly concerned that users lacked confidence in the system, believing this was normal for a large change programme.

3. Know what you’re capable of According to the committee’s report, the department didn’t have enough skilled or experienced project management staff. Likewise, its various agencies “were unable to provide appropriately skilled staff with detailed knowledge of their individual business processes to work at the shared service centre”. This kind of skills gap isn’t uncommon in a shared services project, so you need to be sure you can track down outside help if you need it and budget accordingly

4. Monitor progress and act on the evidence The department realised within two months of kicking off the project that its original timing assumptions were wrong, but pushed on regardless. Not surprisingly, the committee recommended that future projects adopt a milestone approach to assess progress and check the feasibility of the budget and timetable

5. Use meaningful metrics More than three-and-a-half years on from the project launch, DfT collects data on only 14 out of 18 performance indicators, which implies less than total commitment to the principles of performance management. Worse, at the time of the committee hearing, it had hit only four of them. In its defence, DfT argued that its performance lagged averages in the private sector because it has less economies of scale and government reporting requirements add complexity. Both claims may well be true – but, if they are, the department needs to develop more meaningful metrics that take these factors into account.

6. Test, test, test The harsh reality of software is that it usually doesn’t work the way you expect first time round, so you have to test extensively before you go live. DfT took the opposite approach, cutting testing from two months to two weeks to make up lost ground – and, not surprisingly, ended up with an unstable system.

The DfT initiative isn’t the first time that these kinds of mistakes have been made, of course – although it’s rare for one organisation to tick off quite so many boxes on the blunder checklist. The question is, will the rest of us learn from its experiences?