Capita’s Plans for Procurement – More Questions and a Few Suggestions

In Part 1 we looked at the questions I posed the MBA students last weekend during my session at the University of Birmingham.

Taking the travails of outsourcing firm Capita as a case study, I asked why an organisation that sells procurement consulting and outsourcing services wasn’t better at doing its own procurement. That article looked at my first question, ”why has procurement not previously been an area of focus for Capita?” It actually concluded that there probably were better reasons for this apparent lack of focus than might immediately seem apparent.

So, the next question for the group was “what has changed now”? Why did the CEO identify that procurement was now an opportunity?

That’s a fairly easy one. The new top management has decided that there is money to be saved by focusing on procurement. Given the firm’s somewhat perilous financial position, it is not surprising that he sees a potential pot of procurement gold from applying some consolidation, standardisation and leverage – fairly basic “procurement 1.0” initiatives, that we suspect will be the main priorities.

A secondary benefit presumably will be some credibility with investors, analysts and media if the management can show that they are getting to grips with an obvious shortcoming, and delivering some quick win benefits.

Question three was trickier perhaps. “What barriers might a new Chief Procurement Officer find in implementing a procurement transformation programme”?

Well, anyone who has led or been through a genuine procurement transformation will know that it isn’t easy. The CEO may think that driving out some leverage savings will be simple, but even that won’t be.

Who is going to do it for a start? You need a CPO who is capable of leading this change, a strong but very skilled leader who can work across this devolved organisation. Capita will almost certainly need a team of consultants to make this happen – maybe from their own resources, or maybe an external firm, whether specialist (Proxima, Efficio, Future Purchasing), or big 4, or even the strategy folk (Accenture, McKinsey etc).

Whoever does it will need data, which probably isn’t easily available. It’s not just spend analytics, but there may be systems and therefore data gaps in terms of P2P, sourcing, contract management … If consultants come in, there is always some resistance from in-house procurement staff, and perhaps most seriously there will be push-back from all these entrepreneurial types who have been running “their” business units or contracts, and won’t take easily to procurement interference. And suppliers won’t just roll over and offer big savings, even if there is potential – which there probably is given the previous lack of focus.

Our final question was – “where might she/he (the new CPO) start? (Suggest three or four initial areas of focus)”.

That is actually quite a tough one in terms of getting the balance right between short- and longer-term initiatives. The temptation will be to put everything into the immediate quick win, low-hanging fruit of leverage and consolidation. But if you don’t also address those systems issues, get the data you need and start to build internal capability, then those immediate benefits, even if achieved, may prove not very sustainable.

I would look for some quick wins, without a doubt – stationery, standard IT, facilities etc – and I would also look at putting pretty tight and well-managed spend controls in place for categories such as professional services, capital etc. I would look to develop a technology strategy pretty quickly and a workforce / skills plan. Putting all that in the context of the “target operating model” is vital to get internal understanding and acceptance of the new approach to procurement  – something I learnt from George Owens, that master of procurement transformation.

Actually, I don’t know who the CPO is at Capita. But if they don’t have – or quickly get – someone of the highest calibre in place, then we will know that the Board are not really serious about procurement anyway, whatever else happens. I’ve never seen a successful transformation, or a sustainably impressive procurement function, without impressive leadership being in place. So we’ll watch that point in particular with interest.

First Voice

  1. Richard Durrant:

    John Cromack is the new CPO.
    Interesting questions. Particularly “why an organisation that sells procurement consulting and outsourcing services wasn’t better at doing its own procurement” This is potentially damaging to a brand in the consultancy sector and a question I discussed with Kai Nowosel, CPO at Accenture. A shameless plug here but completely relevant to this thread. Read it here:
    https://www.supplychaindigital.com/brochure/26318

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