I am struck that in several, perhaps many, parts of the UK public services there has been a shortage of commercial leadership. This is no surprise of course - government is not about commerce - despite some people's efforts to make it so. Government cannot pick and choose who it serves, it must be transparent, open and accountable, and it is about producing social outcomes not just financial ones. So for all these reasons, in my view, public services are not the same as commercial ones.
That said, the public services do enter into commercial arrangements where they have to negotiate value for money contracts with suppliers. I do worry that sometimes this has not been done as well as it might. In short, I fear that our local and national government have been stuffed by some rather canny operators in the commercial world.
It seems to me that some public service leaders have treated transparent procurement as a proxy to commercial negotiations. But they are not the same. Negotiating a contract with a supplier after they have won the procurement competition is not the same as negotiating with them before...
I know - I am painting things in black and white here - and being deliberately provocative. But I came across a story the other morning which left me sad and fed up. I attended a seminar hosted by Civil Service World and sponsored by Hewlett Packard on the 'Digital Dividend'. (It was a very good event - so thanks to the organisers.) In the networking time I spoke to a young chap from a large government department who explained to me he had recently developed a macro for a commonly used spreadsheet in his organisation that would save a lot of people a lot of time. But then he found out that if his department were to use this - they would have to pay the outsourced IT contractor about £15k every time they used it. You see - there was a clause in the contract... So this small innovation (and you know how much I like small creative ideas) was squashed from the outset.
So this got me thinking - how much commercial leadership is there in the public services. Given the current austerity measures - I would propose that we need a lot more of this kind of leadership.
What do you think?
What does commercial leadership mean for you - what skills (apart from negotiating skills of course) need to be well honed?
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Just spotted this interesting and related article:
http://www.supplymanagement.com/news/2009/nao-slams-government-purchasing-capability/
9 November 2009 | Jake Kanter
"Significant weaknesses" in procurement skills are jeopardising value for money on major projects, according to the UK's National Audit Office (NAO).
The spending watchdog's latest report, Commercial skills for complex government projects, said the public sector lacked commercial capability in areas including contract management, commissioning and risk management....
The first thing I noticed on moving from a private company to local authority (at officer level) was the apparent absence of quality control in day-to-day work. Every part of my former work hinged on ensuring quality standards were met.After five years (comfortably ensconsed) in the public sector, I struggle most to comprehend the small-mindedness of having to spend all your budget "because you'll get less next year if you don't"! Personally, I feel proud whan I come up with some cost-saving innovation (without the help of external consultancy, of course).My overall opinion is this: the more people flit between public and private employment the better. There are good and bad at both, in both. One final whimsy: is the lack of joined-up thinking in local government such a bad thing if it provides lots of work for local, private employers?
ReplyDeleteThe cultures of public service and commercial enterprise are diffficult to blend, but changes are taking place.The lack of commercial expertise in local authorities is not a surprise as it is not understood by the many of the stalwarts. Risk aversion pervades most parts of our organisations and this will allways stifle any enterprise.You can make a difference, and win support, but it takes time to build confidence in commercial enterprises. Without a doubt the way forward for local governement is to be more entrepeneurial.
ReplyDeleteAn interesting question and one that I ponder every day!I like to look at it like this - a local authority could be viewed as a large enterprise with a total monopoly on the local consumer base. It has immense power but very little choice of customers - those that are based within its area of control are automatically its customers and generally, the organisation cannot choose who it deals with.But in every other sense, I often struggle to understand why people believe local authorities are completely different from private companies. The social outcomes argument is often used, but some of the more progressive and entrepreneurial private companies will sometimes talk about having a social impact with their products and services - witness Apple with the iPod or EasyJet with low-cost travel. Profitable enterprises for sure, but also profoundly changing the quality of people's lives.What I believe marks out the commercial world from the local government world is that private organisations have to innately understand and then meet particular customer needs in order to provide value to the individual and deliver profit for the company. Those that get this wrong go out of business, simple. In a local authority, you can piss your customers off as much as you want and the worst outcome is generally likely to be complaints, councillor involvement and a bit of bad publicity. But in most cases, your finances are not affected and you never lose customers. Many private companies would love to be in that situation, I'm sure.I am with the arguments posted here - more entrepreneurialism and commercial mindset in local government please. Treat every customer as business to be won, not business that we are entitled to and learn from the commercial sector.People's expectations are changing - we're in the 21st century now. Imagine your local authority was a small, fast moving organisation, always thinking ahead and providing services in a manner that fits with your experiences of other organisations (the good ones that is!). Imagine they took calculated but bold risks, did exciting, magical things for the local area. Why should Councils be boring?Commercial mindset - much needed.
ReplyDeleteThere are definitely some barrier to risk taking in the public sector and most of them seem to come from Central Government. I agree about procurement regulations being a limiting factor to innovation and forming partnerships, although my authority has had some success in that department (we are blessed with a small but skilled procurement team).I get a little wound up when people characterise the purpose of the private sector as "profit-making". This is true but if you think about it holistically, what it is really about is the generation of profit through the creation of value for individuals. Purpose of the public sector? Delivery of social outcomes through the creation of value for individuals. It's the by-product that is different but the means of achieving it is much the same in principle.Of course, as has been stated Central Government don't get it (although I think the coalition has a better idea than their predecessors).My personal view is that most of these problems are within our control at local authorities. It just requires the right individuals who are prepared to take a risk and stand up to the regime to move it forward.
ReplyDeleteI would suggest that the issue of culture difference is not confined to the public vs the private sectors but also the V&C sector. I think the best of LSPs or indeed the experience of Common Purpose and similar programmes helps to create bridges between these sectors. However we need to go much further.I know that SMEs regularly hit problems that would require minor tweaks, which are in the hands of Local Government. It would not be beyond us to mainstream the LSP/CP approach of bringing together the three sectors.So you have raised a problem that the private sector could help with. Mine for the public sector is that when procurement processes demand high levels of Public Liability Insurance simply to get into the procurement system, well before contracts have even been identified simply creates a barrier for the SME with no gain for the public sector (indeed the only gain is to the insurance industry). Another is that procurement across a range of LA's (a recent one for AV eqpt was being run by Kent on behalf of Dorset, Hertfordshire, Suffolk and Hampshire, and demanded a maximum of 3 different companies) is completely at odds with the Govts desire for 25% of contracts to go to the SME sector.Give me a day in the procurement dept of Local Government to fix the parts of the system that cause me pain and I will give you a day in the same department advising you on the issues that cause you pain. Alternatively you spend a day in my office understanding how difficult it is to work with the public sector, and you might come away with the understanding of how my sector works. The same is true for the VCS, particularly as notions of Intelligent Commissioning begin to roll out. To quote a friend, there will never be intelligent commissioning until there are intelligent commissioners!
ReplyDeleteI struggle to understand the insistence of going for large contractual agreements to save money? Often the products or services provided are of questionable purpose to meet the needs of the public sector organisations. It too often goes on the assumption that one size fits all and is more cost effective. Th result - it doesn't meet everybody's needs fully and could stifle economic growth by not supporting innovation of smaller businesses in the community.Local Authorities and their major partners have become like supermarkets, responsible for the need of all, but they don't really have to fight to keep their customers, as there is no competition. Hence quality has suffered. Because of this, marketing too is not perceived as a valued activity, meaning the brand identity of most LA's is poor.LA now will have to focus on 'empowering communities', which requires a total cultural shift."We can't solve problems by using the same kind of thinking we used when we created them." - Albert EinsteinI agree with Donald when he suggest the 'flitting' between public and private sector employment.
ReplyDeleteHi,As local authorities are increasingly behaving like supermarkets ( Heidi's point ), and demanding bigger and bigger contracts ( Ian's point ), then I would fully expect the Office for Fair Trading or the Competition Commission to launch an investigation into their behaviour because it is anti-competitive.Public bodies cannot have it all ways. If they say that something must fall under OJEU procurement rules, then do not be surprised if creating frameworks, and aggregating contracts falls foul of Article 85 and EU Competition law.Does anyone know of a test case being launched against Frameworks by e.g. the Federation for Small Businesses ? It seems to me that this might be one way of protecting their members.Jon's original point - Number 10 has opened up a web page for SMEs to make their feelings known
ReplyDeleteRemoval of Discrimination against SMEsI agree with Alex on the anticompetitive nature of aggregated contracts. Most authorities use a 4 times rule for PQQ qualification and unless careful, larger contracts can eliminate SMEs. That means your turnover has to be more than 4 times the annual contract value.Currently we are advising a group of LBs on how to remove the discrimination so it can be done but requires effort and new thinking. The reward for the authority is to get the work done at a substantially lower price so helping to achieve cost savings and boost the local economy. However, just as the Civil Service are being increasingly wedded to larger contracts the Cabinet Office have just published a Green Paper on Modernising Commissioning.This is your chance to get the points made in the blog onto the agenda. Replies for consultation are due by 5th Jan 2011to ocscommissioning@cabinet-office.x.gsi.gov.uk
ReplyDeleteThere may be much that can be learnt from the (best of) Third Sector - a combination of the need to entrepreneurial, with key social/community/charitable objectives, all the more so in the current situation.Ian - there are some good examples of Third Sector Commissioning procedures; here's an example from our Authority - http://www.newcastle-staffs.gov.uk/community_index.asp?id=SXBE48-A780B781&cat=1432. The Compact can, and should, provide guidelines in this respect - link here to the Staffordshire Compact Code of Practice - http://www.staffordshirepartnership.org.uk/thirdsector/. With both of these examples, they were drawn up in partnership between the Public Sector and the Third Sector.In this context, both worrying, and in my view unacceptable, that there appears to be no place for Third Sector representatives in the new Local Enterprise Partnership governance structures.
ReplyDeleteRobin, many thanks for the response - my comments about procurement come mainly from one of my private sector interests. The rub there is that the private sector is not part of the compact arrangements.
ReplyDeleteJon,Thanks for your post. I've read all the above with interest and mainly agreement. The "one size fits all" approach of Councils can be infuriating - and not at all comfortable!The other element which has struck home of late is the size of the discrepancies between councils.In the Central belt of Scotland, where we had so much snow recently, I saw several snow ploughs wandering aimlessly about - but none working. The only one we saw doing anything was performing painfully slowly - and in the rush hour! This helped to further congest the roads.Outside our house, the road was covered with a foot of snow - too deep for wellies - and doctor and carers were being prevented from getting to work.When the third snow plough passed our house with its plough raised in the air, I stood in front of it(we were busy shovelling by hand) and asked that he helped clear the road. "Ah'll try ma best" he said reluctantly, and cleared about five yards at the corner. .He then announced"That'll do!" and drove off before we could protest. Today the road (less than a mile from the M8) is passable for the first time in ten days."Customers" we are not.Meanwhile, I heard of other Councils clearing pavements as the snow started to fall (amazement) or getting snow ploughs out before 7a.m.(That story takes a bit of believing!)Residents are very angry - not because the snow fell at an inappropriate time and caused many difficulties - but because there has been a distinct lack of visible effort - and everyone has commented. My mother called for a gritter because the road outside her house had not been treated for three days - and the gritter came - but only drove along - it did not grit the surface.For the last ten days, people have been asking everywhere: "What ARE the Council playing at?"If you asked anyone in these parts about commercial leadership in the Public Sector, you would be promoted to the top slot in a comedy programme!
ReplyDeleteJon,Thanks for your post. I've read all the above with interest and mainly agreement. The "one size fits all" approach of Councils can be infuriating - and not at all comfortable!The other element which has struck home of late is the size of the discrepancies between councils.In the Central belt of Scotland, where we had so much snow recently, I saw several snow ploughs wandering aimlessly about - but none working. The only one we saw doing anything was performing painfully slowly - and in the rush hour! This helped to further congest the roads.Outside our house, the road was covered with a foot of snow - too deep for wellies - and doctor and carers were being prevented from getting to work.When the third snow plough passed our house with its plough raised in the air, I stood in front of it(we were busy shovelling by hand) and asked that he helped clear the road. "Ah'll try ma best" he said reluctantly, and cleared about five yards at the corner. .He then announced"That'll do!" and drove off before we could protest. Today the road (less than a mile from the M8) is passable for the first time in ten days."Customers" we are not.Meanwhile, I heard of other Councils clearing pavements as the snow started to fall (amazement) or getting snow ploughs out before 7a.m.(That story takes a bit of believing!)Residents are very angry - not because the snow fell at an inappropriate time and caused many difficulties - but because there has been a distinct lack of visible effort - and everyone has commented. My mother called for a gritter because the road outside her house had not been treated for three days - and the gritter came - but only drove along - it did not grit the surface.For the last ten days, people have been asking everywhere: "What ARE the Council playing at?"If you asked anyone in these parts about commercial leadership in the Public Sector, you would be promoted to the top slot in a comedy programme!
ReplyDeleteThe point was made in this thread that a council's 'customers' are a self-contained lot that are not going to move to another district the way they might move supermarket if they are not happy with service.The word 'customer' itself is misleading - a word that came about over the last ten years or so as some of our fearless leaders sought a means of encouraging better service delivery. Before they were 'customers' they were just people, and what they thought didn't matter much.But 'customers' we all are and with that comes a healthy dose of expectation - and this is where commercial leadership is both essentiall and often lacking.How do you manage the expectations of your customer base while building favourable awareness of what it is that you do for them? Linda's experience with the snow plows and gritters is a great case study - it is not necessarily what you do that matters but what you are perceived to be doing; or not as the case may be.The importance of favourable awareness is the overarching aim that public sector should seek - this is what a commercial leader recognises and I think what the public sector often lacks at the top.Some years ago an industry chief told me that 95% of his marketing budget and 100% of his customer service philosophy was dedicated to one single theme - to satisfy the customer so as to retain their business. If you retained the existing customer base and then grew it by acquiring new customers, you would not only build a stable business environment but would also build trust and confidence of your 'customers' so that they follow your lead when you ask them to. Having a strong reputation is like golddust as things stand today.In general, people don't have much good to say about their Council; its not an adversarial relationship but one that has little depth.Commercial leaders understand that the profits they seek are not only achieved by delivering quality products and services at the right price and the right time; but also by positively shaping their business environment.Surprise and delight them and see how things change for the better.
ReplyDeleteTotally agree with you Michael. Perception is reality and that is what the good private sector organisations understand.
ReplyDeleteWhy is it that as soon as public servants walk through the Town Hall door they forget that they are customer service experts in their personal capacities. Ask anyone about a good or bad customer experience and they get animated. Transferring their own lifetime experience to the workplace puts them in the customers shoes.I am the first to acknowledge that Town Halls are not Tescos but you ask any local tax payer what they want from their Council and the last thing they ask for is community stewardship, polices on this or strategies for that. They ask for services....cleaner streets, bins emptied on time etc. Get that right and the Council gets voted in again. So there is the link between politics (an essential and defining distinction for local democracy), customer focus and commercial leadership. Or am I making this too simple?
ReplyDeleteWhy is it that as soon as public servants walk through the Town Hall door they forget that they are customer service experts in their personal capacities. Ask anyone about a good or bad customer experience and they get animated. Transferring their own lifetime experience to the workplace puts them in the customers shoes.I am the first to acknowledge that Town Halls are not Tescos but you ask any local tax payer what they want from their Council and the last thing they ask for is community stewardship, polices on this or strategies for that. They ask for services....cleaner streets, bins emptied on time etc. Get that right and the Council gets voted in again. So there is the link between politics (an essential and defining distinction for local democracy), customer focus and commercial leadership. Or am I making this too simple?
ReplyDeleteHi Jon,Sorry to come into this discussion so late, you are right that the public sector lacks commercial acumen, the problems are many fold, effectively the old regime of CCT created a few senior managers in LA's who understood how to run a business inside the council. Some of those managers were very canny (in the short term) and made profits via claim and conformance to contracts as opposed to delivering excellent customer service.Many of the problems for procurement originate in the European Parliament rather than our own, the very low thresholds for compliance creates either a plethora of contracts or a few larger ones. Having been part of a tender process which was perceived as the best, but our firm was a little small... (we only had three times the resources needed??) It's galling getting past stage one, and yet I know the people on the inside would prefer to employ masters of the subject areas, rather than large corporate bodies who supply junior staff less agile to create unique solutions.As to snow ploughs et al, I've headed emergency support in many ways including gritting, you've got to be ahead of most contingencies, and have salted primary routes in advance, then deal with other areas on a needs based approach, i.e. Hospitals, Schools, Commerce, Collective homes.... I was in Budapest last week, watching heavy snow fall in the evening and walking on numerous cleared footways the next morning. It's not rocket science, BUT public sector management is dominated by well-meaning Accountants and Bureaucrats, the power base has shifted from service managers to these ?professionals? That's the prime reason for escalating costs and diminishing returns.
ReplyDeleteKeith - yes I would argue that you are making this too simple. As a council taxpayer and citizen - I am not only a customer. True - when it comes to things like having my bins emptied and roads salted - I want this done effectively, efficiently and with good customer care. However, I am also very happy to pay for my local fire service but never want to be a customer of theirs. Moreover in this era of Big Society (although this is not really a new concept) - part of the job of local councils (and police and health service etc etc.) is to encourage / enable / empower me (and my neighbours) to take action to co-create a healthier / safer / cleaner / more prosperous communities. For example my health and the health of my children are and will be affected if my neighbours don't take their full courses of antibiotics as this contributes to the development of super bugs. It is not an act of 'customer service' that the doctors and nurses must use to encourage this.So - true - we are all customers in some respects - but we are also so much more than that. To reduce all that local councils do to 'customer services' is over simplifying things. This is not some ideological point - as I was accused of the other day - but an intensely pragmatic one. I write more about this here: http://jonharveyassociates.blogspot.com/2009/05/empowered-citizenship.htmlThis said - many local authorities could do a lot more to understand the needs and wishes of their customers / clients / users / tax payers (etc.)
ReplyDeleteMay I repeat the original question: What does commercial leadership mean for you - what skills (apart from negotiating skills of course) need to be well honed?
ReplyDeleteHi Jon,I have enjoyed reading your blog and the comments that have followed. I feel I am looking at this, however, from a different perspective. I believe there are 'commercial leaders' in abundance within both the public and third sector. But instead of leaving their skills at the door as they enter places of employment (e.g. the town hall), their employers treat their commercial leadership skills as threats, to them, rather than potential opportunities and definite strengths to/for the organisation.Transferrable skills are of great value and importance when we are recruiting, but we bury any mention or recognition of these skills far into the HR filling cabinet once they've signed the contract. Employees then become our bidders and when they offer to lead on their strengths e.g. commercial themes, they are patted on the head and told it's not their concern or above their pay scale! I feel that CV's should be taken out and given a real good airing every now and again, this way we don't miss what's right under our nose.So what do I consider to be 'commercial leadership skills'? To me a good commercial leader requires to have as well as negotiation ability: vision, good communication, knowledge management, business modelling, budgeting and conviction of purpose. AM Azure Consulting under ‘Leadership Rethink’ outline it better:Leadership capability that knows how to: pinpoint the key trends in the external business environment to keep on the “competitive front foot” identify how to reposition the organisation to identify future profitability in the market spot what is no longer organisationally working and how to develop the capabilities that will be needed in future understand the process of execution and the disciplines of change management manage the range of external stakeholder expectations to build corporate reputation and create influence © AM Azure Consulting Ltd 2007If employees were audited on what commercial leadership skills they hold and recognition was given to the importance of them within planning, I am sure, we would equal any commercial leader.AM Azure Consulting note that what is needed is ‘leadership assessment and audits to assess the breadth and depth of business leadership available to the organisation in facing up to its future challenges’...Just a thought.
ReplyDeleteThanks Paula - that is great.I am now wondering if commercial leadership was rather too short in supply in the Forensic Science Service - or have they been stitched up?
ReplyDeleteHi JonJust to say that based on my observation the VCS is prevented from being involved in LEPs but because the business sector has barely got in through the door, the chances of the VCS voice getting through does not seem very high (In East Sussex two businesses are on the board (BT and one other PLC) and then the various chambers of commerce and Sussex Enterprise are expected to be involved at one stage removed (which leaves any VCS voice at least one stage back from there). When my neighbours have a party I get to hear the music, but that doesn't necessarily mean I enjoy the experience
ReplyDeleteThanks for the heads up Ian - I am off to a local Chamber of Commerce Xmas networking do this afternoon (at the Snozone in MK) - I will do what I can to buttonhole the CEO of the Chamber to find out what is happening in the East Midlands LEP.
ReplyDeleteThis is both timely (austerity) and fascinating. I agree with much of the sentiment and also agree with Paula that there are some very astute individuals out there. However a large part of the problem stems from the very structure of LG. The majority of staff are knowledge and "practice" behaviour trained (think social workers, lawyers, environmental health, trading standards, planners, teachers to name just a few). Their training focuses on their initial day job which it front of house support to clients or "customers". The best of them then get promoted based on this knowledge and practice and not on their commercial accume.The second point is that whilst LAs do undertake to create a plethora of contracts they are frequently operated from departments with the very leaders highlighted above. Commercial negotiation is not done frequently enough to engender "experience" and thus very often mistakes are repeated both within departments and across the council.I agree that you need to look at your staff's skill base, since there is often considerable talent that goes unrecognised. It is one of the reasons that I support the notion of the workplace being an equally (or better) learning environment that a training course and that we should promote the use of skills within the sector that best suits the operation and that staff should be able to gain recognised qualifications based on the evidence they build up in their workplace. Paula is right though that there are barriers to this.If you want an example of the oddities of LAs, I ran a large team that was entreprenurial. We were so successful that CG paid for 50% of the service directly, we were able to take on more staff than our base line budget (around a further 30% staffing) and off course that made us more money. However we were not allowed to tender for work in neighbouring boroughs despite being recognised as the best in the country.It is interesting that we have been training our graduates in financial planning, costing and entrepreneurialism for years and they hate it. They dont see the reason for doing it as they are focused on the getting into practice and helping their clinets, without seeing that financial planning, contract negotiation, innovation can all lead to a better, effective, fitter service that provides their clients with more for less.
ReplyDeleteI see Jon took the time to put the question again."What does commercial leadership mean for you - what skills (apart from negotiating skills of course) need to be well honed?"Which is just as well, as we were straying a bit from the track.I'm going to start with Listening - not simply hearing, but taking the time to understand what is meant. If someone has a good idea, and nobody else acknowledges it or values the effort that person has contributed, it is unlikely that he/she will try again.Encouraging would be my second. If the said "good idea" isn't quite what is needed, I would still try to see some potential use. Maybe it could be adapted slightly. Talk it over with the contributor. There is almost always some merit in an idea someone brings to you - it may not quite be fully formed....that is where the next stage comes in.....Fostering. Such people, who have the good ideas, need to be led and guided gently. They need to build confidence.Following is the last. Everybody should be able and willing to follow when there is obvious talent.Every office throughout the land should be challenging its workforce to a competition: to come up with a bright idea that is money saving and will engage the public.Once the public is engaged, costs will tumble.
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