To improve public procurement – use the Trust Test
Public procurement is too often solely made on price, and not enough on true value and to account for areas...
I recently had the pleasure of listening to Stephen Green’s lecture at the Mansion House here in London. The lecture was the first in a series of lectures on ‘Tomorrow’s Value’ and Stephen spoke on the link between ‘values and value’.
As the chairman of HSBC he is in a unique position to talk on the subject given the impact of the credit crunch on society and the central role the banking sector plays in our long term prosperity. Interestingly, he challenged Milton Friedman’s view that the social responsibility of business is to make a profit. “Of course you need a profit,” he said, “but it is a by-product, a hallmark of success”.
He, like other prominent business people, is increasingly aware that we have experienced a period of history in which for many companies the raison d’être of business has been subsumed by an almost blind obsession for making money. And for some this obsession has resulted in business decisions which lacked integrity and honesty, where profit was made by a
knowing exploitation of others.
As always, the route of the problem is human behaviour. Given the right environment we all have a tendency to game the system. I’ve speculated whether the ‘shareholder value’ mantra might also have had a part to play. Put simply, we’ve taken the complex subject of shareholder value and tried to translate it into a simple formula and set of management actions. Gearing or leverage is a good example of the type of output that results, a technical solution with clear financial logic but significant unintended consequences.
At the same time that financial engineers have taken front stage so many companies appear to have lost touch with what made them really successful – a clear sense of purpose, and employing highly committed and motivated employees to deliver a unique customer experience. Surely this is the starting point. Get this right and the profits and shareholder value will flow.
So the challenge in Stephen Green’s eye for chairman and their boards is to get back to the raison d’être of business and to focus on those actions which form lasting and sustainable relationships. Here it’s as much about the tone from the top as the process, controls and metrics that lie below. Win the hearts and minds of your employees, customers and suppliers and you’re well on the way to success.
So I was comforted when I read a recent publication from PwC entitled – “Tone from the Top – Transforming words into actions”. In this survey, 87% of respondents strongly agreed that culture contributes to the mitigation of risk around fraud, corruption and ethical behaviour.
Here almost everyone polled thought the CEO was a key custodian of culture. Unfortunately, the survey went on to highlight that despite the importance of this topic there remains significant shortcomings which appear to pervade most organisations, in particular:
•Leaders are not always doing what they say
•Ethical risks are being identified but not measured
•Adequate training is not being provided
So it appears there’s a lot to do to get this tone right, and dare I say it make sure it pervades the whole organisation. Importantly, this whole topic is gaining greater traction within the networks that I am involved with, both within companies and amongst the regulatory community. This should be encouraged, as we all know that regulation is a poor moderator of human behaviour and is no substitute for moral values and trust which are essential ingredients of a civil economy, where business is seen as a force for good.
This article can be read on PwC Blogs.
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