Tag Archives: G4S

The G4S fiasco poisons attitudes to the private sector

The British contractor G4S has specacularly failed to find anything like enough staff to support its contract to provide security staff for the London Olympics…which start in less than two weeks.  The details aren’t clear yet, but this one has all the makings of a fiasco that will be examined in deph in MBA courses for a long time.  A bigger question is the effect it will have on public attitudes to the private sector here in Britain.

For now the politicians and journalists are having some fun.  “Is this a humiliating shambles for G4S?  Yes or No?” (or similar words) one MP asked Nick Buckles, the hapless G4S Managing Director, this morning, showing the sort of skills of forensic questioning that make people wonder how useful parliamentary select committees really are. Mr Buckles had to agree.  It wasn’t just the size of the recrutiment gap, it is that nobody at the top seemed to have any idea that there was trouble until a couple of weeks ago.

Another revealing encounter was on Radio 4’s Today programme this morning.  John Humphreys was interviewing the senior police officer coordinating Olympics security.  The latter referred to G4S as a “partner”.  They’re not a partner, retoted Mr Humphreys, they just a private company only interested in profit.  And that seems to summarise a widespread attitude here.  Private companies are greedy and heedless of ethical standards.  Meanwhile the good old public services, like the police, the armed services or the NHS are selfless public servants working for the good of us all.

What a difference 30 years makes!  Back in the 1980s public services were supposed to be crassly managed, unable to control their unions and unable to deliver anything on time or efficiently.  The private sector on the other hand, the odd (state supported) car manufacturer apart, was all enterprise, innovation and efficiency.  It says a lot for the process of public sector reform that has happened since that public services command such respect now.  The private sector, on the other hand, has not come out of the banking crisis well, as the parallel case of Barclays seems to demonstrate.

This matters because further public sector reform, especially in the NHS, implies greater use of private businesses.  This was already a hard sell politically.  It’s not getting any easier.  Should it?

Well, management screwups are by no means the unique preserve of the private sector.  Last week a coroner reported on a case of a patient dying at our local hospital, St George’s.  This looks like a case too many people being involved, not aware of the complete picture, and nobody taking the initiative to sort problems out.  The hospital said that it had changed its procedures to prevent future incidents like it.  You can almost guarantee that this means an extra check or process spatulaed on top the ones already there – theoretically dealing with the problem, but actually making the process more complex and difficult to manage.  Reengineering of operations to deal with risks like this seems to infinitely more difficult in public sector organisations than in private sector ones, perhaps because it means trampling over well established demarkation lines.  Cases of bad management abound.  The quality of police management was shown in very bad light by last year’s riots, especially in London, where they were caught flat footed by youngsters with Blackberrys.  And as for the armed forces, whose public stock is currently very high, the amount of money they have wasted in equipment procurement programmes is absolutely eyewatering.

And as for the G4S scandal, the wider story is not necessarily against the private sector.  The company is clearly accountable, and is picking up the extra costs instead of the taxpayer.  And surely the procurement process is a much to blame as the contractor?  G4S may have been suffering from “winner’s curse” – required to cut costs to win the contract, and then finding that it had been unrealistic, or taking too many risks.  Realistic or cautious bidders simply get eliminated.  But this is a well known procurement problem – and surely the commissioners should have seen fit to take precautions?  Some rather obvious questions are being asked about how such a large and important contract was being supervised.

And it’s interesting to reflect a little further on the currently popular subject of “culture” in organisations, that, for example, was supposed to be so bad in Barclays.  Well senior managers not knowing about problems building up within their organisation is often a sign of bad culture.  Mr Buckles said he was a “no excuses” manager; so were staff afraid to pass up bad news?  The twist on this is that this sort, tough, no excuses style of management is beloved of politicians and the public (provided they aren’t actually working in the organisations concerned).  I’m not sure that most politicians would recognise healthy corporate culture if they saw it.  And that is bad news for the public sector.

So it would be a pity if this episode slowed down the process of involving private companies in public service reform.  But it would be as well to learn the lessons for public sector procurement and contract management.

Share