Friday, 25 March 2016

Tales of the unexpected, Harmeston & procurement leadership lessons

I do not recall when the professional credibility of a CPO has received as much attention as that of Kath Karmeston (for example,  The Guardian, FT,  and The Times).  Harmeston already had a significant profile, largely through the reputation she gained as Royal Mail's CPO, before moving to the Co-op.  At the Co-op she became responsible for cutting the costs of the >£1bn spent on 'goods not for resale', and The Times claims she was paid £357k a year for that!

However, after a remarkably short stay, say ten weeks, Harmeston and the Co-op parted company. Harmeston decided to pursue a claim of £5.2m for unfair dismissal (I've no idea how that figure was calculated and some would say it was an unachievable negotiating position). Whether intended or not, Harmeston brought the spotlight on herself through the decision to go to the tribunal. You can read the Co-operatives version of the Tribunal here.  Now after almost two months of waiting for an answer, it is reported she has failed in her claim against the Co-op for unfair dismissal.

I am not competent to comment on the legal aspects, and feel a slight discomfort intruding on private grief, but I can have an opinion on some of the alleged practice reported in press - let's remember this blogpost is based on reported evidence and some of the evidence was contested.  Much of evidence struck me as irrelevant to the unfair dismissal case but relevant to the profession and those who would hope to bring about procurement change - it's those areas I discuss below.

We are told Harmeston believed she had uncovered a lack of procurement policy compliance; 70% of the budget. Understanding the extent of non-complaint spend is certainly a good starting position for improvement - understanding 'why' and what to do about it would be an even better position. The CEO though claimed the issues raised by Kath were already known about and Kath had previously been briefed on them. It is always dangerous to claim the glory for uncovering something when others say you didn't - that applies just as much to claiming savings in isolation of the budget-holder's contribution. 

Nevertheless, when the Co-op's head of group risk probed Kath, he concluded that the CPO didn't know the details of the procurement policy. Now given that she was only in post ten weeks, it could be argued that was understandable. What strikes me as unacceptable though was his assertion:
Policy process and governance she defaulted to [her deputy] because she felt it was beneath her. 
Anyway, that was made worse by, Paula Keegan, the former group chief strategy officer's opinion that Harmeston knowingly chose to break the Co-op's procurement policy herself.

I cannot think of any situation when procurement governance should not be a primary concern when seeking to bring about procurement change, indeed even setting the example of compliance.

Perhaps you can already sense the loneliness of the CPO's journey. To me, when you want to bring about procurement change you also need a coalition of allies - the CEO, head of group risk and group chief strategy officer would be useful allies but Kath failed to gain their ownership.

Nevertheless,

against the background of 70% non-compliant spend, it is reported that Kath claimed she could lead the Co-op Group to world-class in 12 months. I don't know how Kath would describe world class but I don't think I would have found it possible to achieve world class in 12 months given the baseline of non-complaint spend.  You should be cautious of setting such an ambitious timeline particularly in the absence of key stakeholder ownership.

At the Tribunal the Co-op's Barrister moved beyond compliance with the Co-op's own policy and challenged Kath to identify anything illegal, and here I think it is worth directly quoting the report from the Co-op's own website:
I've already referred to the need to have key stakeholder ownership. Change management requires bringing people with you and that they view your goal as attainable.  At the Co-op it appears staff were sceptical too, indeed Kath's former deputy, Lucy Halligan, referring to the savings targets, said, 
"They looked very ambitious to us and were not achievable in the timeframe Kath was suggesting, if at all. I was quite alarmed". 
 While Kerrigan, the former group strategy officer, said:
"Given the personal allegations Kath made against Pippa (group chief operating officer) in particular and the distain in the way she regarded both Sam Walker (chief HR officer) and Richard Pennycook (chief executive), I'm not sure how Kath could have expected to be able to work with them again".
If you cannot convince your key stakeholders, and assumed allies, that your vision is attainable, then you need to ask how are you ever likely to win over those who start from a position of being resistant to change?  My experience suggests it is absolutely imperative that you have C-suite sponsorship and ownership - without that you need to go back to the drawing board and ask "why?".

It is reported that Kath claimed she would aim to save £161m by improving cost control and through a new investment process and contract management.

However, concerns were aired about Kath's understanding of the spend profile. Halligan, the former deputy, said she had drawn to Harmeston's attention, that when the CPO referred to £200m being spent on contracts which had a value less than £10,000, it should have been only £9m - I can only assume that Harmeston was referring to 'tail spend' and her proposed strategy for addressing it. I guess addressing tail spend would only have been part of her strategy of saving £161m but nevertheless, the strategy has to be credible, based on a sound analysis and understanding of what is possible. There is another question though, 'are the Co-op procurement management information systems capable of providing that clarity of spend analysis?' - you would like to think they were, but if they weren't that certainly would act as another barrier along the route to world class.

Halligan, the deputy, claimed that the project costs (presumably for the procurement improvement initiative) did not add up correctly. Adding to that criticism, the former group strategy officer, Paula Kerrigan, said: 
that projected figures provided by Ms Harmeston for the Group’s banking syndicate would have represented more than 100% of the Group’s cost saving requirement, but were apparently not fit for inclusion because they “could be undermined by anyone with basic financial or procurement knowledge”.
We have all made excel errors, etc., but to her peers, Harmeston appeared to pluck figures "from thin air" . Remember, if you plan to make a part of your business justification for procurement improvement on the basis of 'numbers' you really need to get them right and can't take the risk of them being undermined during scrutiny.

Moving along, when challenged by the Co-op's barrister, on her change agenda, Kath said "I was giving the executive a menu, ... but given the dynamics I needed their guidance of what could be done and couldn't be done" . To me, clarifying constraints is good practice, but within those constraints it is up to the procurement lead to give a professional judgement on what could be done - you can't expect the executive to do your job for you.
None of the above strike me as the crux of the unfair dismisal case, they all seem to have 'come out in the wash' - but collectively they present an unsual view of procurement leadership and change management.

It is interesting to cite the tips for success of one high-profile CPO:
1. People. Procurement in the future is about recognising that 
you are change agents, sales 
agents for the business. Once 
people have a blend of highly technical introvert as well as highly extrovert characteristics, procurement will 
get noticed. 
2. Appropriate sponsorship is essential and the 
CPO has to fight 
for that. Become the change agent, find that burning platform and translate it into getting noticed.
 3. Transparency. Prove you do what you say you do. Don’t be frightened of transparency – it 
pays off.
I think that's sound advice - perhaps I should have cited the source, Kath Harmeston.

I genuinely feel sorry for Kath Harmeston and the personal stress she must have endured. If any good is going to come out of this disasterous procurement saga it has to be the hope that others may learn from it. 



No comments:

Post a Comment