Procurement of Professional Services can be dangerous to your Board – ask the Met

When Fiona Czerniawska and I wrote our book (“Buying Professional Services” published by Economist Books), it wasn’t too hard to think of reasons why organisations should take this spend category seriously. Many organisations spend a lot of money in this area, services are complex and so on.

But there was one factor which we tried to emphasise that isn’t quite as immediately apparent – the issue of what we might call “gearing”. What we mean is the resulting effect, positive or negative, that expenditure on professional services can have on the client organisation. And that effect is potentially huge in either direction, many times greater than the actual cost of the service. That is not the case for many goods or services purchased, where the up or downside may be pretty much limited to the amount of money spent.

By contrast, a few thousand spent on legal advice might make – or lose – an organisation millions. An insightful two-week consulting assignment might propose a strategic direction worth millions in shareholder value.  Or indeed lose it if it turns out to be flawed advice.

And a PR adviser, engaged as a consultant without perhaps full analysis of the risks, and without thinking through what the downsides might be, has arguably cost two of the most senior policemen in the UK their jobs. The £24,000 contract with Neil Wallis, the ex News of the World executive, is being discussed as the principal reason for the resignation of Sir Paul Stephenson (Champneys incident notwithstanding) and his deputy, John Yates.

That’s a pretty dramatic analysis of what has happened. But it does demonstrate the potential for unexpected consequences, far greater than the cost of the contract, arising from even the smallest professional services contract. It may also bring a new dimension to supply chain risk management. An opportunity for more “content enrichment” perhaps from Supplier Information Management providers – a supplier rating based on “likelihood of this supplier generating a scandal which causes your top executives to resign”?

Seriously though, it is worth thinking about whether your organisation is employing anyone who could embarrass the organisation. And if you don't have the controls or tools to allow you to know who your organisation is employing as a contractor or consultant - well, that's a risk, and an opportunity, in itself.

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First Voice

  1. Michael Materesi:

    Just read the book and is fantastic. Recommend to all

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