Business textbook authors must be devastated that one the juiciest business case studies in recent years exploded into the headlines just a little too late to be included in the latest editions of their textbooks for the 2012/13 academic year. Without doubt, this one will be puzzled over and debated for many years to come in business studies classes and on MBA courses up and down the country and across the world. The central question that all this analysis will focus upon will surely be how could G4S get it so spectacularly wrong?
Today saw embarrassment heaped on embarrassment as Whitehall and the Olympic organising committee drafted in 1200 further security personnel from the army, navy and RAF to further supplement the private security guards that G4S were contracted to provide for the Olympics which start this weekend. This 1200 are in addition to the 3500 that are already standing post. The security firm has supplied fewer than 6,000 guards despite a contract to provide more than 10,000, with the armed forces forced to make up the shortfall so as not to compromise the security of the London Games".
This after Nick Buckles, G4S Chief Executive, was mauled by a parliamentary select committee this time last week. We learned there that despite the scale in the shortfall of staff recruited, he hadn't known about any issues with the contract till July. Not that he feels any contrition for this. In an interview published in the Telegraph two days before the select committee hearing, he said when asked if he accepted responsibility for what had happened,
"I don't actually, I really don't; I feel accountable, but not responsible"
Naturally, since he is not responsible for the debacle, he plans to keep the £57m management fee included in the contract on the grounds that they will be delivering a little over half of the promised security guards. This is the equivalent of an electrician coming out to fix a light, disconnecting the mains then demanding his call-out fee because he has done a significant portion of what needs to be done.
The simple truth is that G4S has been caught out by the unique scale and scope of the London 2012 contract. The security contract is the biggest ever awarded in terms of manpower. A £280 million contract to supply over 10,000 trained security personnel is without question a huge project. This could have been G4S's calling card around the world if the planning and execution of this project had been up to muster. However, blind optimism in the ability of his company to do anything it sets its mind on to do is no substitute for a workable plan to deliver what is by any measure a very challenging project.
Nick Buckles told the select committee that he had no reason to doubt his company would deliver as it had robust processes and plans in place. They accepted a contract and in doing so must have considered its delivery achievable. And when the number of staff required trebled they happily agreed they could still deliver. Except, patently, they couldn’t. What G4S had in place was what Richard Rumelt, one of the world’s most eminent thinkers on business strategy and management, would call a bad strategy not a good strategy.
Without question, G4S are ambitious but were deluded as to what exactly it would take to deliver a project different in kind from anything that they had really attempted before. On the 6th July, just a few days before the first tranche of 3500 troops had to be called in to meet security requirements for the Games, Ian Horseman-Sewell, MD of G4S Global Events was boasting that G4S could not only cover the Olympics here, but another one simultaneously in Australia!
It’s not even that they didn’t understand some of the unique challenges they would face as part of the project. Nick Buckles articulated the central difficulty that they faced really clearly last Sunday,
"You have got to get them [staff] probably working about six weeks, so it's almost in between an event where you get them for one or two days and a full-time contract where they work for you forever.
"When you stand back and look at it, how many people can you find that want to work for six weeks and will go through all the process involved in that?
"They probably have to commit two and a half weeks of their own time, which they will be paid for, to get six weeks' work, whereas usually you commit two and a half weeks and you get a job for life."
Whilst G4S have enormous experience with contracts for both short duration events and full time security work, the Olympics was a different beast, a kind of halfway house between the two types of contract that they specialise in covering. The fundamental difference in this type of contract necessitates a different approach. So what was the approach they settled upon?
The problem was never a lack of interest from potential recruits. Indeed, over 100,000 people applied for the 10,000 positions G4S needed to fill. The principal risk to the project the G4S team identified was people accepting jobs months before the event and then pulling out. The company's plan to cope with the threat of people accepting was to recruit relatively late and recruit more staff than needed.
This plan if properly executed might have worked. Even an average strategy can work given excellent implementation. However, the dubious strategy coupled with poor execution is a recipe for disaster. At the select committee, here are just some of the words MPs used to describe the unfolding disaster: "fiasco", "shambles", "humiliating", "inexcusable", "astonishing", "amazing", "unacceptable" and "amateurish".
Nicola Blackwood told Nick Buckles: "Your performance today will lead quite a lot of people to despair." Before the meeting she had had little confidence in G4S. "Now we don't have any at all"
When the textbook case studies are written, any number of conclusions may be drawn from the debacle. These authors seem to use case studies like the ministers of the various creeds and denominations of Christianity use the Bible; to prove whatever they want. For our purposes, I think that there are three important lessons to learn from the whole sorry affair.
Ambition is not a strategy. A leader’s job is to motivate their team with compelling goals and exciting visions of the future. The London 2012 contract was an example of a leader setting a great stretch goal. This was uncharted territory for G4S and as a British enterprise; this could have been G4S’s proudest accomplishment to date. Unfortunately, a leader’s job is more than to just point the way and call for superhuman efforts from the troops to be equal to the task. The job of a leader is to create the conditions that will make the push effective with a strategy worthy of the effort called upon.
An effective business plan needs to be a ‘living document’. It’s not enough to write it and wait for it to deliver. Instead it needs to be constantly monitored, checked and challenged. Circumstances change rapidly, so we need to ensure that your plan is flexible enough to change rapidly as well. Otherwise, don’t be surprised if it falls short.
Outsourcing is not easy. LOCOG, the London organising committee has escaped relatively unscathed from this mess and yet it should be asked why it took five years from being awarded the Olympics for them to award the security contract for the Games. Even after LOCOG put the contract up for tender, the goalposts have been moved several times
In his interview with the Telegraph last Sunday, Buckles says G4S has been treated fairly by LOCOG, but that the organisation was late in presenting the company with its final requirement, a document called the D41.
"Yes. There have been mitigating circumstances, but I can't say we weren't aware of all of that. There are things we could say we should have known.
"They were late in giving us a lot of information, which hasn't helped. But if that was the case we should have flagged it.
"I haven't been made aware of anything in the process to date that LOCOG had done to cause us problems or else I would have tried to deal with it."
The media backlash has led to G4S's chairman John Connolly stating that "if a contract was being given out by a government department or other large business at the moment, you can understand they would find it difficult to hand that contract to us". Prior to this statement, G4S remained largely silent on the topic of the ongoing relationship with government, a customer worth in excess of £600 million each year to G4S. So when LOCOG demanded an extra 8,000 security guards at short notice – a big ask for any organisation, even the world's largest security company, they simply said yes and did their best to oblige. The cost of openly criticising their best customer may have been even more frightening than the possibility of failing to deliver, so G4S just kept their fingers crossed that they could somehow deliver against all the odds.
With proposals being negotiated concerning the management of nine British prisons, and 1,100 back-office jobs supporting Bedfordshire, Cambridgeshire and Hertfordshire police, it is certainly in the long term interest of G4S to shoulder the blame. But I'm sure, behind closed doors, that there have been defensive discussions about the consequences of poor governance.
The concept of outsourcing – working with specialists to supplement your operation to achieve cost benefits and fostering innovation – cannot be blamed for failures. But there are cases where deals are not being managed effectively. You get out what you put in: that means investing effort into strategic alignment, relationships and governance procedures. To succeed, outsourcing clients simply need to know what they want, and how to make sure they get it.