By stevenmills, Jul 9 2015 07:59PM
Who’s deceiving whom? Let’s not pretend that the history of public sector reform programmes driven from the latest review or whitepaper isn’t replete with false starts, missed targets and dramatic disappointment.
There are numerous public sector case studies in organisational uncertainty driven through these ministerial reviews and challenges. Seldom do these government white papers create anything more than intense pressure to clarify financial benefits, establish control and challenge current practices. Yet despite overwhelming reports, whitepapers and evidence of the need to address the cultural, operational and best practices across public sector expenditure, the answer always reverts to procurement not using its national buying power effectively. So is this an opportunity lost? Is the organisational structure destructive towards the delivery of common goals? Is there a skills shortage within procurement staff and does this raise urgent need to address a talent agenda? Or, is this just another opportunity for those that walk the corridors of Whitehall to bend it around their own departmental strategies and objectives?
Over a series of articles I will address these areas in an attempt to challenge and navigate a path through the deceptively simple changes required in transformation – Direction, Speed, Momentum and Focus.
An American born newspaperman in the 1930’s called Damon Runyon, was once quoted saying “The race is not always the swift, nor the battle to the strong, but that’s the way to bet”. This is no different in transformation and reform programs. Speed of change and implementation is everything. However, activities such as the long awaited whitepapers into NHS and public sector spending have created stagnation in change and organisational uncertainty in how procurement could and should establish its operating model, a sort of acute structural anxiety to utilise NHS terminology.
The latest review by Lord Carter has announced some bold statements specifically around procurement. It highlights a belief that there are greater savings to be had in the NHS through price reduction, inventory management, standardisation and aggregation. This is to be followed up with a report in to what a “model hospital” should look like and a further report in Q4, setting out the strategic recommendations as to what each hospital is expected to save.
Brilliant, over a year to produce the initial analysis with an army of advisors touring 22 hospitals, costing tens of thousands of pounds to conclude that procurement need to apply basic category management value levers. Now, if we all turn to page 3 of the “how to do procurement book” maybe we can get to the section on implementation as this should not be about strategy. It’s should be about the execution of strategy and until we stop trying to lead transformational change from Central Government nothing will change.
Now I know that it’s easy to be cynical around these issues but the ugly truth is that producing a paper stating “there is significant efficiencies to be made but no magic wand for delivering them” doesn’t add any value; it distracts and creates disruption whilst individuals engage in a perpetual debate over who has the best practices. This disruption and distraction then further results in an additional deterioration in performance and service. Investment is cancelled, infrastructure projects are placed on hold and protracted reviews into joint system needs are undertaken. Finally another review is then undertaken to identify the products and services that are required and the whole cycle starts again.
If not exhibited by Lord Carter’s current plan into multiple publications and reports, this scenario has been demonstrated with the Lord Young report in to SME’s, which could also be challenged is in direct conflict to Lord Carter’s recommendations.
The Prime Minister’s Enterprise Advisor Lord Young reviewed the changing face of small businesses in the UK and established an aspiration for 25% of all UK government expenditure to be channelled through small and medium enterprises. A recent announcement has been made by the government stating this aspiration has been reached, achieving 26.1% (£11.4bn). Interestingly though one of the ways this has been achieved is through disaggregation of contracts, which adversely Lord Carter believes could save the NHS £2bn if re-aggregated and standardised to reduce cost.
So what does this tell us? Well, simplistically if you want to shape new culture or drive behaviours, consistently with your organisations values, you must select strategies that exemplify and focus on creating value. You must focus on leadership that is compelled to act. If you ask any Chief Procurement Officer involved in a private sector transformation programme, they will tell you that “deciding is not the same as doing. Procurement in the public sector requires a fundamental change. They need to be more decisive and act faster.”
So what are the lessons that can be learnt from private sector transformation?
Provide Clear Direction
Every procurement transformation starts with a vision of a better future state. This vision is critical as it demonstrates that transformation will make a difference but more critically provides confidence that the current performance and service will not deteriorate during the change. No matter where the transformation is focused, operational sourcing, strategic procurement or inventory management the impact will affect people, processes and systems. It will require additional skills, knowledge, and tools to address entirely new challenges whilst solving current ones more creatively.
Speed of Change
Executives and clients have little patience for process, no tolerance for time wasting and have a single minded focus on a return for investment. Transformation programmes are staggeringly expensive with a heavy impact on resources and can easily impact service as the day job gets put to one side. Transformation success is measured in time. Research has shown that the first 100 days is critical for the capture of economic value. This is because this is generally the outer limit of stakeholder enthusiasm. Maximising value early will minimise the decline in performance
By way of reducing the impact, executives rightly focus on reducing the time and cost of implementation. They hire in dedicated teams of interims, consultants and specialists to act as rapid delivery teams with aggressive goals and clearly defined areas of focus. The benefit of this is that the teams quickly come together to not only express the high level strategy for delivery but deliver the organisational structure required, system requirements, resources and approach.
Transformation is complicated and you can easily lose sight of you goal amid the demand on your time. Programmes have a habit of growing, scope creep occurs and next thing you know Procurement Transformation has turned to Business Transformation, although the time line for deliver remain static. Results stagnate, confidence wains and failure is once again on the horizon. Plan and create short term/quick wins. Good transformation is about optimising performance and recognising and rewarding improvements to retain focus and drive.
So we’re back to the crucial understanding that underpins transformation: Direction, Speed, Momentum and Focus. Procurements role throughout transformation will need to change fundamentally and adopt a more extensive role. We will need to not only continue the basics of financial control but also become custodians of sustainable business practices and practitioners of supplier innovation, developing new products and services offerings. This will require new operating models to optimise local and regional differences as well as global or central government support. Decisions around operating models and execution may vary between organisations, but the need to define functional and organizational direction will always remain.
As it stands today procurement in the healthcare supply chain remains an untapped opportunity for transformation but driving collaboration across specialities is the key to success and that calls for a different operating model. Transformational change cannot be lead from observations and analytics of a whitepaper. It must be led through the commissioning groups and local trusts. Stakeholder buy-in must first be achieved by focusing on clinical outcomes as well as efficiencies if procurement is to succeed.
In a rapidly changing global economic environment, the sharing of experiences is a critical path for success. For further discussion on procurement or support within your business please do not hesitate to contact me at Steve@promatters.co.uk