September 2012
David Taylor Smith (Chief Operating Officer)
Fired after Olympics blunder
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May 2013
Nick Buckles (Group CEO)
Resigns
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October 2013
Richard Morris (Regional CEO)
Quit in wake of the tagging controversy
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June 2014
Eddie Aston (Regional CEO)
Quit this week after just 7 months
The announcement that Eddie Aston will be the latest in a line of senior executives and CEOs who have left G4S over the last couple of years is bound to send further shock waves through the industry. As an observer, it would be fair to say that this exodus will send a very clear message out into the outsourcing world: a message that those reliant on providers and vendors for the delivery of their mission-critical services should consider with some urgency and seriousness.
There are some lessons to be learned in terms of not only how G4S has come to be in this position, but also how you can rapidly recognise the early warning signs of whether your service provider is in trouble, and, if so, what can be done to protect your organisation and those who rely on your provider’s services.
Recent G4S History
In 2012 the world’s eyes were on the UK because the London Olympics were about to launch. Against this backdrop, G4S had to announce that they were unable to supply all of the 10,400 security staff they were responsible for providing for the Games, requiring the Government to step in and make up the numbers with army personnel. With international security worries at their highest in years, this was a blow to the company’s reputation and as a result the then Chief Operating Officer David Taylor Smith, and Ian Horseman Sewell, the Head of Global Events, were let go. Chief Executive Nick Buckles managed to keep his job for a while, but amid pressures from all sides he eventually resigned in May 2013.
Last year the company was rocked by another scandal, the tagging controversy, when G4S admitted that they had been overcharging the Government by including criminals who were no longer in jail, in the country or even alive, in their figures. As a result of this, the UK and Ireland Regional CEO, Richard Morris, left the organisation. The fallout from this continues today as the investigation into overcharging remains ongoing.
Despite this, G4S seemed to be picking itself back up again, even winning new public sector contracts since the ban on the company bidding for them was lifted last month. But the news that Morris’ replacement, Eddie Aston, is now to resign after less than seven months in the job is likely to set the organisation back once again.
The bad news ‘Domino Effect’ and how it could affect you
G4S is still the world’s second-largest private employer, but no matter the size of your service provider, if it suffers a prolonged run of destabilising events, this will usually have a knock-on effect on your own organisation and reputation.
Firstly there is the question of confidence. Instability in the senior executive ranks, can and often does:
- undermine a service provider’s ability to win new clients
- affect the company’s ability to raise further finance
- cast doubt on existing clients’ confidence of the vendor to maintain or improve business-as-usual services
- result in key staff leaving the organisation.
All of which will have an impact on the vendor’s ability to not only grow, but to maintain current standards on your services.
Secondly, there is the question of performance. With fewer bids being won, finance more scarce, projects stalling and staff leaving, your service performance from them is bound to slip. While this is not a positive situation for you to find yourself in with your service provider, there are ways to mitigate the impact on your own organisation.
Notably, if all of this happens near to the end of your contract with your provider you may well be able to find a mutually beneficial solution – relieving the provider of the burden of expensive headcount by taking on some of the key staff members and managers who have been responsible for your project to date. If the cost of such a move is prohibitive, consider a collaborative arrangement with other clients of the service provider, either jointly employing the individuals or team, or loaning them on a chargeable secondment basis to other trusted organisations as and when they are needed.
However, just like everything in life, timing is important. If you wait too long to negotiate such an arrangement, these staff may be lost to other service providers that don’t serve your own organisation. This can have a devastating short-term impact on your service performance.
Four primary lessons learned from the G4S situation
If you perceive there is significant unrest and destabilisation in the executive management team within your service provider, the following four steps are essential to consider:
1. Arrange to meet with your provider’s senior executives.
One senior executive leaving does not necessarily constitute reason for worry, but a succession of captains jumping ship may signify deeper issues. Centrica is suffering from similar management destabilisation to G4S as it has recently lost its chief executive, chief financial officer and head of British Gas in quick succession. So, if you believe that there is any truth to the rumours you have heard about your service provider’s ability to continue managing their responsibilities to you, it is important that you speak to the senior executives in the provider about the situation.
Arrange a meeting with their senior executives quickly as the longer the situation goes on, the larger the problem can potentially become. The purpose of such a meeting is for you or your team to undertake some high level due diligence on the provider’s operational plans to ensure your service delivery remains intact. It is often the case that when incumbent CEOs leave and the vendor organisation has financial challenges, the remaining executives do not feel empowered to continue investing in new ways of maintaining or improving service delivery. First innovation usually suffers, and then service levels will often start to deteriorate.
2. Take a proactive service performance management stance.
Having undertaken step one above to ask the difficult questions about whether they believe they can maintain expectations, keep the pressure on. Make sure that you keep a close eye on service performance. In the past we have found that service often deteriorates by stealth; an occasional key vendor staff member leaves, then another and another. It is important to keep track of who leaves and when. Performance gradually starts to atrophy, but not seriously at first. It can be a little time before you actually notice that the key staff with the really strong experience who have left are not being replaced, nor is there any intention to do so.
One other sign that resources are not being properly maintained is your business-as-usual process documentation and ongoing contractual realignment is not being updated by the provider as it should be. If you had sensibly built six-monthly process and methods reviews into your contract and you start to see that changes in current service delivery are not being updated in the required documentation as often or at all, warning bells should start to ring. This can help you to quickly identify when issues have arisen and, with largely up-to-date documentation in hand, you will also be able to effect a smoother transition to another provider or to bring the service in-house more easily. This is usually only relevant if the worst happens and your provider is no longer able to maintain and improve service outcomes.
3. Keep your lines of communication as wide open as possible.
Stay in regular contact with the remaining provider-side senior executives. Having regular and informal ‘coffee’ meetings each month with them, even if only for 15 minutes or so to ‘catch-up’, can help build higher levels of trust and openness in relationships. This in turn will enable you to work out ways between you to maintain and improve service levels, while the uncertainty within the vendor organisation remains. In other words, jostle and hustle for the attention of your service provider, but in a mutually positive and trust-building way.
4. Know your plan ‘B’ for maintaining service delivery.
Always have a Plan B. Even with the best of intentions – building strong and trusted relationships, having informal catch-ups over coffee with their senior executives so you can get an early warning heads-up of potential problems within your provider – there are no guarantees that service levels will be maintained, let alone improved.
If regular senior executive changes within your service provider mean that matters do really deteriorate beyond acceptable performance levels, and despite your best efforts, including informal and formal escalation, matters are not being improved, or cannot be improved within a reasonable time, then you need to be able to execute a contingency plan quickly.
Of course, it is advisable to have a backup plan well in advance of things going so wrong that you need one, so it’s worthwhile investigating your options early, reviewing potential new providers for suitability, even discussing transition strategy internally with your team as part of ongoing business continuity planning.
While an exit and transition plan for moving away from a service provider will usually have been agreed in the contract, there are many reasons why your confidence in their completeness may be misplaced. To start off with, in our experience, they are often incomplete, with ambiguity over specifics such as costs for exit and transition, and the resources, roles and responsibilities of all those involved in such a move. They are rarely delivered within the time frame agreed, and the documented service delivery requirements are often woefully out of sync with the current operating methods being used.
Unless these issues are addressed and fast, they pose a significant risk if your provider starts to deteriorate in its service performance to you.
In conclusion
Prepare your contracts carefully, building in behavioural governance features that will act as early warning signals of potential internal issues within your service provider. Keep your lines of communication always open, so you are able to not only recognise when your provider is challenged, but work with them to resolve matters or maintain service levels. Ask the difficult questions and keep asking them until the instability is behind them. By all means, hope for the best, but have an eye open to the worst.
