Squeeze. But not too hard.
Darren Meeks looks at the risks of squeezing suppliers until the 'pips squeak'.
The current Public Sector financial squeeze means we’ll have to redouble efforts to find innovative and proactive solutions to the acute service demand pressures and budgetary constraints. The Comprehensive Spending Review (CSR) has focussed the minds of Public Sector leaders achieving greater impact with fewer resources. Certainly public service providers look to be sat right in the firing line of the financial downdraft which had already begun to be keenly felt.
Although ‘providers’ may seem relatively easy and obvious targets, I would advocate taking this approach with both care and common sense; witness the Connaught debacle.
In Local Government or indeed, any area of the Public Sector, corralling your partner into a corner without realising the implications could be damaging and lead to long lasting negative impact. Can you imagine what would happen for example if your Care Service provider went bust or your Waste Management partner could no longer collect or process the waste and recycling in your area?
Aside from potential service failure and all that may entail on a human level, the political fallout and reputational risk could be substantial. Consider also whether your partner and, most importantly, your own organisation could be materially weakened in terms of its current and future capacity to deliver. Should the public sector continue to push its suppliers on cost issues alone, then those partners may no longer be sufficiently resilient when Local Government and the wider Public Sector needs them most – which is now and over the coming two to three years.
Conversely suppliers, as ‘gate-keepers’ of their respective markets, have a professional responsibility for the shape and health of those markets. Take the Public Sector Executive Headhunting space for example. Largely as a consequence of the over supply of competing recruitment firms and the lack of significant product/organisational differentiation, many have tended to use price as the instrument of differentiation and have resultantly bought market share as a last resort. As a result, these companies would now appear to have little scope for offering true innovation and added value – right when the Public Sector needs those most.
Rather, what Public Sector head-hunters and suppliers more widely should be doing in this instance is engaging more deeply with their clients so that they truly understand their priorities, challenges and concerns. Through taking this approach and making the investment now, suppliers stand a much better chance of being able to provide intelligent and responsive solutions that deliver exceptional results for their clients at all levels and at all times in the future.
So what’s the universal message here? Well it is simply this: Smart employers treat their suppliers as fellow combatants trapped in the same foxhole and vice versa.
Take the example of Chrysler, the American car manufacturer in the teeth of the 1990’s recession. Chrysler’s strategy was spot on. Rather than inflicting financial pain on their suppliers, they got closer to them. They outsourced more to them, reducing inventory and improving cycle times. If suppliers came up with a cost saving of more than 10% they would share the savings with them. Chrysler used this cash to invest in new products and as a result was the only ‘Big Three’ car maker to turn a profit the following year.
Essex County Council has taken a similar approach in their partnership with IBM, which is predicted to ensure significant economies over a number of years. Essex has also been innovative in better understanding the resilience of their actual and potential supplier base, with a focus on improved management in the event of supplier collapse. Key to this strategy has been supplier engagement, identifying areas of risk or weakness and then helping them to develop solutions to mitigate these. This has involved a genuine two-way dialogue; openly sharing information directly with suppliers to help strengthen both the Council’s and the Eastern Region’s supply chain.
However Public Sector and local structures develop now after the CSR, there will be a continuing need for financial prudence and a mixed economy of Public Service provision – which surely must be both transparent and relationship driven. And its focus should be on deep understanding and the delivery of real value and impact measured over time.
I truly believe it is imperative the Public Sector and Local Government in particular embraces this approach. Only by doing so will they strengthen supply chains and bring partners and suppliers into the heart of their rapidly changing organisations. Ask your suppliers and partners to do more by all means - but at the same time engage with them… and in all probability you’ll achieve the desired results without the need to remove their pips!
Darren Meeks is a Senior Consultant, Senior & Executive Recruitment, (Public Sector) with Prospectus Ltd and can be contacted at darren.meeks@prospect-us.co.uk or on 020 7400 6373.
