G4S has been appointed the Official Security Service Provider for London 2012 Olympic and Paralympic Games. In addition to much talk about social responsibility, the G4S website states:
We specialise in outsourced business processes and facilities in sectors where security and safety risks are considered a strategic threat, with expertise in the assessment and management of security and safety risks for buildings, infrastructure, materials, valuables and people. G4S is the largest employer on the London Stock Exchange with over 657,000 employees. We have operations in more than 125 countries.
G4S was contracted to provide 10,400 personnel but today Mr. Buckles, CEO of G4S, admitted in a grueling hearing at the British Parliament that G4S currently only had 4,200 security personnel at Olympic venues. That’s right, only 40% of the promised service level! And the shortfall is very unevenly distributed: only 30 out of a contracted 300 G4S personnel had arrived to provide security at the Olympic cycling event on Tuesday. Moreover, the 51-year old Buckles also said that G4S “would provide a minimum 7,000” when the games begin.
A few comments on the operations strategy (outsourcing service ops and capacity planning) and management (execution): First on operations management: According to the New York Times,
Mr. Buckles said he learned of the looming crisis while he was on vacation in the United States on July 3, but the company informed the Olympic organizers only on July 11 that it could not meet its obligations. He was forced to apologize, saying he was deeply sorry for the shortfall in security staff and blaming it on the failure of a scheduling system.
This is a failure of executive oversight of G4S’s highest profile project and a cheap blame. Here we have a firm whose business is staffing and a project whose requirements were known years in advance and then blaming it on “a scheduling system?” Your operations = Your firm.
Second on operations strategy and the outsourcing of service operations: consider the decision by the Olympic Games committee and the British government by applying the framework we use in our operations strategy class and textbook:
- Is outsourcing feasible? Is a stable supply base with necessary capabilities available? Is outsourcing politically viable?
- Yes, a capable supply base appeared to be available.
- Yes, outsourcing of public security used to be politically viable but this may change…
- Is outsourcing necessary? Are internal financial and operational capabilities insufficient?
- Could the government take care of the public security internally? Note that it decided on a dual sourcing strategy: part military, part outsourced. Given that the military is increasing its role, it clearly has the capacity but does a free country want to present itself through a militarized sports event?
- Is outsourcing in line with strategic priorities and risks? Is this activity “non-core”? Is the risk of outsourcing it tolerable?
- Clearly, the provision of public security is core to any government’s mission.
- The assessment of risk was underestimated, but one can see why government officials have incentives to outsource: if something goes wrong, there is somebody else to blame; this is a temporary project which may be harder to staff than typical government jobs (but I don’t see that as a serious issue as any government takes care of temporary projects).
- Is outsourcing desirable given our value proposition? Can external suppliers do it better?
- This speaks in favor of asking a private company that specializes in this task to do the job.
- Do we have the ability to manage suppliers and ongoing risk? Can we contract on detailed requirements? Can we coordinate incentives and operational flows?
- Contracting and specifying requirements was easy
- but clearly there was a huge lack in the Olympic committee’s or the governments’ capabilities in supplier relationship management. Was nobody following up on the actual staffing progress? Was there no timetable with easy checks? Was there simply too much trust in G4S’s capabilities or a “it’s not my problem” attitude?
Conclusion: As in many fiasco’s on complex projects, there are several failure points by the service provider and by the service buyer. Luckily, the service buyer has the internal back-up capabilities and capacities, but this failure of investment in supplier relationship management capabilities seems not dissimilar from Airbus’ and Boeing outsourcing fiasco’s (read today’s post by Gad on lack of visibility). Good outsourcing = good operations, not finance!