A partnership is not a purchase order

Whilst this article from the Harvard Business Review by Ben Gomes-Casseres is about private sector businesses it is nonetheless relevant to the public sector. Indeed with all the government talk of partnership in the last ten years or so perhaps it is more relevant to the public sector in the UK than than the private sector. I think that it is important for public managers to know the difference between partners and vendors. Having been involved in setting up strategic partnership arrangements for local authorities I know that one of the reasons for doing so is that they were looking for an arrangement that could be more flexible and dynamic than a standard contractor. 

If an organisation simply wants a certain product or service reproducing over and over again then a purchaser-vendor relationship would be fine. If the organisation wishes the product or service to adapt as the level of funding changes, or public expectations change, or politicians introduce new policies then a collaborative partnership is more appropriate. Both parties have to recognise and accept that change will happen over the term of the relationship and make a commitment to work together to adapt to the changes. Such working together requires, I think, the supplier to understand that the public sector organisation is interested in the quality and volume of outputs and outcomes; and the public sector organisation to accept that the partner is entitled to make a reasonable profit in return for its efforts. If both parties in a partnership are achieving their respective objectives then the chances of them working together to deal with unexpected events have got to be much higher than if they were not.

To hire or not to hire (a management consultant)

I read this short blog post on the Harvard Business Review website today and I agree with the author's fundamental point. Consultants can be very useful to an organization but if you hire one then you should manage them to make sure you get value for money. In my experience problems can start even before the consultant is hired. The absolutely critical step in any procurement process is to know what you want to buy. If you don't know what you want then you leave yourself open to the sort of cross-selling and scope creep described in the bloq. Sadly I have been witness to situations where a manager has decided that a consultant is the solution to a problem and hires someone without ever trying to describe what the problem is and what kind of solution was required.

Also, in the real world, consultants are sometimes hired because a manager is expected, obliged or even forced to hire one. Major outsourcing deals and PFI contracts involve lots of consultants each with their own area of expertise. It reminded me, though, of the time I was managing the outsourcing of the contract services division of a London borough. We were advised by an external firm of solicitors and in practice we had to be because the council only had one qualified solicitor in post at the time and they had lots of other things to do. Anyway, I was asked by my boss if I wanted some support in the form of management consultants or financial advisors. I was loathe to hire anyone because if they always agreed with what the lawyers said then they weren't needed; and if they disagreed with the lawyers, given that we were talking about a contract and not a set of accounts, I was going to take the lawyers' advice. The moral of this? I could easily have spent tens of thousands of pounds with one of the big firms of consultants with the full support of my boss. It would have covered my back, too. But it would have been a waste of money because we did not need them. Knowing what you want to do is all well as good, but you need to know when you don't need to buy as well.

Another comment about Suffolk County Council

I've written before about the Suffolk County Council's plans for a radical outsourcing of its services. I've been sceptical about the chances of success from the point of view of the technical difficulties in procuring a complex web of inter-related services from multiple suppliers. I suspect that once procured there would be enduring problems of management and co-ordination for however long the service contracts last.

Having read this post in Patrick Butler's cuts blog, it would seem that the Council's plans are floundering because a more fundamental problem: leadership. An extremely difficult operational management problem is inevitably made more difficult when there is not support from the very top of the organization.

Look after the pennies ...

It is an old saying that if you look after the pennies the pounds will look after themselves. Maybe, but one might say that being focused on details means that one misses the big picture. It seems to me that this is the effect of the government's transparency policy: by enabling anyone to see details of payments for £500 swamps them with masses of data but they aren't really holding anyone to account. Accountability, you see, requires explanation as well as information (just as accounting requires words as well as numbers). Knowing what £500 was spent on does not tell you whether it was spent on the right thing. As Carnegie and West put it: “a hospital that is well managed in financial terms cannot be presumed to be meeting a community’s needs for health care.”

I spotted a couple of things in yesterday's news that brought this issue to mind. First I saw that Grant Shapps was criticising the Audit Commission for spending £20,000 on the failed recruitment of a chief executive last spring. The amount doesn't seem unreasonable to me and the fact that no chief executive was recruited had more to do with Shapps's boss than anything else. Shapps was also critical about the various minor payments made by Audit Commission staff on its procurement card. Now, procurement cards are usually normal-looking credit cards that are restricted only to allow purchases of certain classes of goods and services. They are promoted to public sector organizations to make the purchase of low-value goods in a cheap and efficient way by avoiding all the red tape of writing formal orders and processing invoices etc. In my experience their use is well-controlled, often the control being better than under previous systems because the credit card company can provide so much information about when and where the card was used. The fact that someone in the Audit Commission bought something from an HMV shop suggests to me that there was a business reason for buying whatever it was. I would be very surprised if it turned out that someone bought the latest Take That CD to listen to in their car on the way home from work. That sort of thing rarely happens, and it is even less rare, I believe, when it is as easily detectable as a payment made on a procurement card that will have an itemised bill sent to the finance department. All in all, the Audit Commission will probably spend more time and money providing evidence to Grant Shapps that it was a legitimate business expense than the item cost. That's not value for money in anyone's book.

The second story I saw yesterday was about the Department for Education spending £21million on consultants. A much more significant amount of money, you'll agree,  and it may well be that it is much less than Labour spent. But the figure by itself doesn't tell us what the consultants have done so that we can judge the value for money of their services. If I can only have one explanation, I'd rather know what the £21million bought us than the £20,000 spent by the Audit Commission on its procurement cards.

Reference

Carnegie, G. D., & West, B. P. (2005). Making accounting accountable in the public sector. Critical Perspectives on Accounting, 16(7), pp. 905-928. doi:10.1016/j.cpa.2004.01.002

Proofreading

I got the proofs of my book from the typesetter a few days ago. I'd expected to receive a large packet through the post with all the pages set out as a kind of loose-leaf version of the book. In fact, modern technology means I was sent a pdf file and directed to a website to download a plug-in for the Adobe Reader that allows one to mark-up the pdf with those funny squiggles used by typesetters. It is exciting but somehow the electronic version is just a little bit less romantic than using a pencil on paper. Whichever method is used though, I still have to learn what all the squiggles mean before I can make corrections to the proofs. I've got just under 3 weeks to finish the job if the 12 July publication date is to be met. I can't wait.

It's not you, it's me.

When I was the finance director of a council one of the issues I faced was how to get proper engagement from the public about the proposed budget. Each year we would try something different and each year we would receive very little back from the public. My colleagues and I would then conclude that the public were either not interested in what the council did with their taxes or too apathetic to tell us what they thought. Having watched this TED talk  by Dave Meslin perhaps we should have spent more time thinking about the barriers that made it difficult for individuals to engage with us. I could say that I was too busy with other things to spend the time and energy to break down the barriers, but perhaps I was just apathetic about it.

This talk comes from www.ted.com. Visit the site for access to hundreds of interesting talks on all manner of subjects.