With Keith McCabe, Managing Director and Principal Consultant, AVAM Solutions
00:00:00 - Starting with procurement in growth forecasting, biscuits and demand planning
00:07:50 - Procurement's role as commercial problem solvers
00:17:40 - Technology, automation and change should be embraced by procurement
00:20:00 - The contrast between goods and services procurement
00:31:20 - Creating the environment for innovation
00:47:30 - A procurement perspective on IR35
01:04:20 - Making the intangibles tangible
01:15:00 - Predictions for the next 6-12 months
Jonny Dunning [0:01]: We’re off. So, Keith McCabe, thank you very much for joining me. I really appreciate it. How are you doing?
Keith McCabe [0:06]: I’m very well, thanks jolly. How are you?
Jonny Dunning [0:08]: Very good. We were just discussing just before we started recording, dealing with the very COVID current scenario of juggling children, and home from school, and this that, and the other, and all that sort of chaos, but it's all part of the fun really, isn't it?
Keith McCabe [0:23]: Yes. After having home school for a few months, mine are now banned from the house; they have to go to school under all circumstances.
Jonny Dunning [0:32]: Particularly difficult for people if they've got teenage kids, certainly secondary age kids where they almost end up just kind of like shut in their room for longer periods of time when they were homeschooling. To be honest, that's a dream for me having my kids be shut in their rooms.
Keith McCabe [0:49]: Yes, mine aren't old enough yet either.
Jonny Dunning [0:51]: Not so easy to contain.
Keith McCabe [0:53]: No.
Jonny Dunning [0:54]: Cool. Okay, so we got some topics around innovation and transformation within services procurement, which we're going to discuss. But before we get into that, could you just give a bit of an introduction to yourself, what you do now, your background, and also your journey through the procurement industry?
Keith McCabe [1:13]: Sure. Yes. Happy to do so. So, it's nice actually to be on this side, I do a few of these kind of podcast-type things myself and one of the few ones where I'm on the other side, so it's quite a nice change. So, my story really. I've been interested to know how many people you've interviewed in the past to actually made a conscious decision to get into procurement as opposed to sort of falling into it. Has anyone ever said they chose to go down this road?
Jonny Dunning [1:47]: I think definitely people have said they chose to go down this road, but not necessarily from the get-go. So, yes, there’s definitely been some conversations where people have sort of said, "I had an interest in financing, I had an interest in the commercial side on contracts, and I went down the procurement route" but it’s definitely been a thing that people have got into procurement almost by accident in some cases.
Keith McCabe [2:13]: Yes. Well, I'm going to be consistent with that thing. I went to university in Liverpool, and I did a degree in English and Communication Studies, and I did that because I really liked it. I like English Literature, I like the media. I had no idea what I wanted to do for a living and then got to the end of the course and basically thought, "Oh, okay, I better think about what I want to do for a living now", quickly kind of realised that I didn't want to be a teacher, debated whether I wanted to be a journalist, but decided against it, and then I was kind of debating maybe some sort of career in production or something within radio. I was quite interested in radio for quite a while.
But that was hard to get into, so while I was doing all of that stuff, I got a standard graduate job really, in a manufacturing company and started to do various jobs there, and I started off by doing just general analysis, that kind of stuff, graduate-level stuff. Then I got into forecasting, a certain demand [3:32] forecasting, again, almost by accident. And I really liked that because you're trying to predict what was going to happen and working with the sales guys in trying to work out what we're going to sell, and then liaisein production people to make the stock so that they'd have it in order to sell it.
I got quite good at that, so I stayed in that kind of line for a while and I moved over to Jacob's the biscuit people and headed up the demand function over there. And they were part of Danone at the time and while I was there, I kind of kept seeing these procurement people in the side and they sit – and it's all relative, but they seem to have a more glamorous lifestyle than I did. So, they had always been the ones that had the suits on because they were going to an important negotiation or they'd have the company car or...
Jonny Dunning [4:32]: Excellent.
Keith McCabe [4:33]: … all that kind of stuff. So, I thought, "This sounds quite interesting" so I kind of wormed my way in really, by nagging people and sort of saying, "Well, I've been doing this for a long time now, I need to develop my career." And I managed luckily, I had a very good director who was very keen on developing his stuff, and he sort of crowbarred me into the team really, I didn't really have any background in it. And I just loved it. Literally, from then on, that's what, 25 years ago or 20 to 25, I can't remember exactly, but a long time anyway.
I’ve loved it ever since and I've basically stayed in procurement since that day. Studied, got my qualifications, moved into different companies – so that was all manufacturing. I moved out of there, went into services. So, I’ve worked for the NHS for a while, I worked for Kirlian [5:26] for quite a long time, and some other companies. And then basically, about 18 months ago, I started my own procurement consultancy called AVAM Solutions, and I've been doing that ever since. So yes, I'm a bit of a procurement career person, I guess, but again, more by accident than design I’d say.
Jonny Dunning [5:52]: Yes, and it's an interesting point because the combination of skills required to be good at procurement are they’re a fairly unique sort of blend in terms of the contractual side of the role versus the relationship side of the role versus the commercial side of the role versus the operational side of the role and certainly, with regards to planning and things like that being quite analytical. You’ve mentioned the director you had at the time in that early career who helped you, do you think they recognized within you the type of skills, just kind of sort of think, I think this would be good for you, or do you think it was more led by you kind of following your nose and saying, that looks interesting?
Keith McCabe [6:36]: I think a bit of both really. I mean the guy I'm thinking of, I suppose he was a bit like a football manager, he was sort of keen on developing the team and there's quite a certain age at the time and in those days I was one of the young ones, I like to think back on those times. And so, he probably saw it as part of his role was to kind of future-proof the team. He obviously saw some potential in what I was doing. I was quite young to be doing the role I was doing, and I had quite a lot of responsibility, so he would've seen that.
But yes, there's obviously, transferable thing. I mean, organization skills, analytical stuff. Relationships were always really important in what I was doing because, in a sense, I was the go-between, between the sales function and the production team and also other bits, like, the procurement guys as well, so I was kind of always having to manage relationships. So, he probably saw something in that as well. And probably negotiation as well because I was having to negotiate with salespeople to say, “Look, I know you want this stuff, but you don't really need it that early. Do you? Let's stagger the production a little bit” and all that kind of stuff, so there probably was quite a lot of transferrable stuff out there.
Jonny Dunning [7:58]: And in terms of the kind of skill sets that you needed back in those days when you look at procurement teams now from a kind of external consulting perspective, what do you see has changed in terms of the requirements within the skillsets for people with procurement? Has anything changed?
Keith McCabe [8:20]: I don't think a great deal has changed. Ultimately, I think -- look, there are loads more tools available now, there are loads of models that weren't around 20 years ago, all that kind of stuff, but the fundamentals of procurement, as far as I'm concerned is about relationships. It's about establishing credible relationships with your partners in the business so that you can get stuff done and I don't think that has changed. I don't think it ever will change.
In my experience, if more procurement people kind of had that mindset, ‘why are we here?’We are here as a support function for the business, we’re here to help. We're not there to drive our own initiatives, we're there to help. Now that might be because the business might want to save money, they might want to reduce cost. Great. Well, that's something that procurement typically get excited about, but it might not be that the business might want to drive revenue or they might want to drive innovation or any of those things.
And then procurement have to help the business do those things. So, in order to do that, you've got to be able to develop relationships with people, firstly, to understand what it is you need to help them on and secondly, so they trust you, that actually, this guy can add some value here and this team can add some value. So, I don't think that will ever change, I think the ability to build relationships and credibility is crucial to get stuff done and I think that will always be the case.
Jonny Dunning [10:07]: And I guess it's very much acting as a link between the business and its external resource function and making that part of the wider organization capacity as it were. And as you say, relationships are extremely important to that, particularly when you talk about things like innovation, for innovation to happen it has to be the right environment.
But I think really, it's never been more important in terms of the relationships and the trust that exists within supply chains than what we've seen over the last 12 months. If you look at, for example, the medical supply chains, I know at the moment, there's a sort of something in the news today saying vaccine supplies in the UK may be delayed because a shipment [10:56 inaudible]. It's incredible the way that the supply chain has operated and the amount of money that's gone through the supply chain globally is just absolutely staggering. But I think it has also shone a light on the importance of procurement and that wider management of supply chain as a resource for governments and organizations alike.
Keith McCabe [11:19]: I think you're right, I think it has shown shine a light on procurement. But what it’s uncovered, I think there are real extremes in what you see under that light. So, I think in some cases you're seeing some really good examples of what I've been talking about where procurement are effectively –well, I had to say, describe them as commercial problem-solvers – totally, totally ingrained in the fabric of the company, involved in pretty much everything and sort of adding that kind of commercial nouse[11:56] to the conversations and that kind of project management. That's on one hand.
On the other hand, I think what the light has discovered is that there's still a lot of procurement people who are frankly not very good – not always their fault, but really kind of operational, transactional, doing stuff that arguably could be automated, being very rigid, being very blinkered, not engaging, not speaking to stakeholders, not building relationships. So, I think in some ways, it’s helped the profession in that focus, but in some ways, it’s just highlighted the fact -- I think there's a real variability in the quality of people in this profession, probably like any profession, but I don't know about the other ones.
Jonny Dunning [12:49]: We definitely see from a tech perspective, we definitely see the hindrance that a lot of organizations have around having manual processes, particularly in services where the adoption of tools is at a very early stage. But do you think there's also a hindrance in some cases from the kind of direction of the senior, the way the board run the company in the sense of, how much do they let procurement in? How much do they have them as a trusted advisor, and a fixer, and a facilitator within the business that allows them to, exactly as you described before, support the business, support function, but a very important support function? How often is it that that's hindered by them being seen as a marginalized function with almost like a bolt-on rather than something that's integral?
Keith McCabe [13:40]: Well, I think it depends on the company and the culture. It's still a common thing that I hear and that I experience is about procurement complaining that we don't have a seat at the top table. That's the common complaint you hear. My answer to that is always, well, why should you be there? It's very easy to think, well, of course, we should be there, but okay. Let's face it, the executives in any company are not going to be daft, so if they think that you're going to add value, they will ask you to get involved in stuff.
The fact that you're not there means that you haven't convinced them yet. It's not some sort of vendetta, it's just simply that you haven't been very good at selling or convincing them that the value you're offering --and I've seen it where procurement have been almost the first person at the table, but equally, I've seen it at companies where they barely get a look in. It all comes down to that ability to communicate really, I think. Communicate what it is you're doing, and also making sure that you're doing the right things as a team.
So, you need some direction from whoever's running your team, but you've got to be making sure that you're helping the business. Going back to what I said earlier, really, what is the business objectives that you're supporting?If you're focusing on cost reduction because procurement people are obsessed with it and the company's focusing on revenue growth, is cost reduction going to help revenue growth?
Well, it might, because it might mean that you can sell stuff cheaper and then you sell more of it, but it might not. Perhaps if procurement were more involved in getting their supply chains more involved in, I don't know, innovation or being far quicker to market, that might help within with revenue growth more and you might find you're at the table. So, I think it comes down to that level of maturity.
Jonny Dunning [15:58]: I totally agree. It's all about demonstrating value to the business. Like you say, any C-suite that have got a procurement team that are jumping up and down and showing loads of value and loads of opportunity and the C-suite are ignoring them well, then that's more for them. But yes, I think two things I want to pick up from that though, really, I think the excellent points are; one is in terms of showing value, that's where things like automation are crucial because, otherwise, the clever people that are in procurement are just transacting rather than operating in any strategic type of manner.
It's a question of automating the things that should be automated. And actually, clever procurement people using their communication, negotiation, organizational skills to really take that information and build processes that they can achieve the objectives, whatever they may be. Cost reduction, greater return on investment, revenue growth, whatever that the business objectives are, which I'd like to think that businesses are generally pretty good at communicating those operational goals, organizational goals, but I think in a lot of cases, that's something that needs tightening up as well.
So, that kind of like demonstrating value is one side of it, but I think just understanding where the business is going is the other side of it. Sorry, I lost my thread a little bit there. But I think it's really about creating value, but then being able to follow that up within the business context.
Keith McCabe [17:41]: Yes. And I also think procurement people shouldn't be scared of technology coming along that might automate stuff that they've historically done manually. I think it's natural for people to be resistant to change, but hopefully, procurement people aren't because change is really what we're about. So, for start, if you don't like change and you're in procurement, then you're not going to be a great fit, I would say.
But really, I think it's about procurement people, if they see that there are activities they've historically done that are now being automated, that's an opportunity for them to not – they shouldn't have the mindset that they're not going to be needed anymore. They should have the mindset that actually, as you alluded to, this is freeing us up, this is giving us time where we can now do other stuff that's maybe more strategic or contributes more to the business as a whole, stuff that, really, you can’t automate, stuff that needs a bit of creativity and relationship management and dealing with people, these are all good things.
If you're in the mindset where you're not prepared to try new things or you don't like change, as I said earlier, really, go and find a different thing to do with your time because procurement is about change and it's about improvement and learning new stuff all the time.
Jonny Dunning [19:16]: Yes, and I think the thing that kind of just slipped my mind as it wandered down a particular cul-de-sac a minute ago was the other point you made was around innovation and that is a more sophisticated part of what procurement people can do, but they've got to be able to engage effectively with their supply chain. They've got to understand their supply chain, they've got to know what they've got out there, and they've got to have the right relationship to enable that innovation because I think for a lot of companies, definitely on the services side, they just can't see that.
And also, a lot of companies are blinkered by working with maybe one or two or three really big consulting firms, for example, that have a bit of blanket coverage. It's very difficult to see the other suppliers that could be potentially adding innovation. Obviously, you've worked across some interesting different areas, but just to take the contrast of the work that you've done on the manufacturing side versus the services sector.
And obviously, from my point of view, I've got a particular interest in the procurement of services and how that's managed, obviously from a technology perspective. What would you say were the kind of contrast you can make between that manufacturing environment and the more services type scenario?
Keith McCabe [20:34]: So, there's a lot of differences. From a procurement perspective, an obvious difference is how quality is measured. If you take a product, something you can touch, this made, this manufactured, and say that you're involved in some capacity in that product. So, you might be buying a raw material or something that goes into it. It's very easy really, in theory, to see whether it's good or not, whether it's fit for purpose, both the thing that you've contributed and also the finished product.
It's a thing you can pick it up, you can look at it, you can shake it around, you can smell it, whatever you want to do with it. And if you asked a hundred people to look at it and you had a specification next to it, they should, in theory, be able to say, yes, it meets the spec, or no, it doesn't. It's too small, it's too big, it's too white, whatever. So, it's quite objective. With a service, and these are obvious points, but sometimes I think they get overlooked with a service. I think it's much more subjective.
If you're assessing whether a service is a good quality, for a start they might not even be a specification in my experience, so let alone being able to compare it to a specification, there might not even be one. And even if there is, people will assess whether its service is good, bad, or indifferent often based on their own idea of what good, bad, or indifferent means as opposed to what the specification says. And the other point was obviously, it's kind of fleeting, so there's no opportunity to go back and say, do you know what? Let's have another look at that service and just lift it up and touch it again and examine it.
It's gone, it doesn't exist anymore once it’s been delivered. So, the initial response is really the only response, and so it's subjective, it disappears as opposed to a thing you can touch and feel, that you can look at. And so, it makes it much harder, I think, to buy a service than it is to buy a product and also, makes it much harder to work out whether it's any good or not.
Jonny Dunning [23:17]: I think you captured it really, really well. It's a complex, nuanced thing, buying a service whereas, goods and materials, there's plenty of complexity, but I would see it more like as supply chain complexity and logistics, [23:34 inaudible] logistics. But it's fairly binary in the sense, you might be picking something from a catalog, either it is a red widget, or it isn't. And the thing is generally, with every service, they're all different and that's where it's very difficult to compare suppliers.
That's an area that's very close to my heart because that's effectively the challenge that we've taken on as a business. But if you want to measure services and compare suppliers within services, you need to capture the full process so you can capture all the information because clearly there can be qualitative inferences around what, how well the service was delivered, but you need to be able to use quantitative metrics as well, to really have a clear definition.
If you're looking at different suppliers, every project is different, but if you understand that a milestone level, whether they were on time, what their average cost overrun was, how much scope creek [24:27] there was and combine that with the qualitative feedback, then you can get a much more accurate picture, which you can normalize across the population of suppliers that might be doing totally different things. But yes, the process of buying and delivering a service is pretty complex.
And what I tend to see a lot in the market is if you don't capture that feedback and that information at the point in real-time, then procurement can be left with a very difficult job where the CFO says, okay, we spent a hundred million with X firm last year, what did we get for it? Because then it's a question of potentially even going back and just going right up there and get a look at a shared folder and find a statement of work and hope there are milestones on it. And look at those milestones, they probably won't necessarily be measured or recorded, and they probably changed along the way, but that's –
Keith McCabe [25:17]: You’ll probably just get an invoice value and that's it.
Jonny Dunning [25:21]: Yes. And I think that's where you can end up with these situations where from a CFO's point of view, there might be saying we spent 50 million on services last year, chop it down to 40, whereas actually, if they understood what return they were getting from it, it might be driving fantastic growth in the business, for example, or innovations creating new service lines that’s driving revenue. If that was clearly understood, then the CFO's approach might be, we need to increase the spend in that area because we're getting some great value from it.
But again, it comes down to visibility as I said earlier, the visibility is where the innovative suppliers can come in. I'd like to think that more big businesses are taking that approach and I do think probably COVID has moved that forward a bit in terms of considering the wider supply chain because if you look at some of the big, massive supply chain problems like PPE, people have had to be super creative and think outside the box to get these things done and hear these stories of almost like unknown suppliers taking on gigantic contracts.
Keith McCabe [26:25]: Sure. No, I completely agree. I think we're going to talk about innovation in a bit, and there's a whole thing about risk I think that's really important, and I think it's very hard to innovate without taking risks, and I think sometimes when you're forced, like in the PPE example, when you're forced to take a risk because there's literally no alternative, that's when you can find the most innovative behaviors. Sometimes companies need that kind of kick-up the backside to take a risk through an external factor, otherwise, they wouldn't take the risk and they wouldn't innovate.
But yes, I was just thinking when you were talking about the services, I think having painted a bit of a gloomy picture, I, like you, I've been working in services more recently. I have actually since I started the consultancy been doing some work on direct categories as well, but it’s mainly been services for quite a long time with me now. And I wouldn't want people listening to this to have a gloomy view about procuring services, it's great fun, it's just more difficult.
But in terms of what we're saying, there's plenty of things that you can do, I think, in order to buy services well. I think that the mindset's important if you’re procuring services, you can't go into it thinking, well, there's nothing that can be done, it's all going to be intangible, and it's all going to be fleeting, and I can't compare anything, it's impossible. I don't think that's the right attitude to take, and I think there are lots of things you can do to buy service as well.
Jonny Dunning [28:28]: Totally agree. From my point-of-view, the future of services procurement is very rosy in the sense that you've got technology providers like ourselves that purely specialize in that area. And our entire reason for being is to make that whole thing easier for procurement people to transact very effectively and have the information they need so that they can use their skills to make predictions, inferences, strategic input to the business.
So, I actually think services procurement, not just because of the fact that technology is catching up with this area, but also because of how important services are and how the room for growth and sophistication that there is within services procurement compared to, for example, goods and materials, which is much more, I would say, of a solved problem that's more formulaic. So, I think there are great opportunities. I think like you say, you could get people looking at a services category as being a tougher category, but I think there are massive opportunities there and companies are really addressing this now.
And I think previously, where companies may have been more comfortable to say, services spent was X last year, but it was to budget, I don't really know the detail of what I got from it, but it was to budget. So, everything must be okay. I just don't think companies are willing to do that anymore. So, I think that gives procurement the opportunity to say, okay, in terms of how the business buy services, we need better processes and tools in place so that I can really give you the information to help business drive what's most effective.
So, I think it's a very opportune time and I think that's only going to increase because we're moving to more and more of a service-led environment. If you look at businesses like challenger banks or new energy companies, their spend is so highly skewed towards services and a lot of these emerging industries are very skewed towards services. So yes, I think there's loads of opportunity.
Keith McCabe [30:21]: Yes. I think the UK economy is largely a service-based economy, isn't it? So, I think if you're UK-based, I think it's good to be in the services area if you're a procurement person.
Jonny Dunning [30:36]: Yes, particularly with some of the changes happening around the workforce. So, with Brexit happening, that obviously reduces the ability to bring in continental European talent, for example, via contractors. So, I think that's going to push outsourcing in that area where companies can engage with specialist talent and employ them on a tier-two visa, for example, and then provide those services into end organizations.
And then you've got the IR35 reforms, which are happening in the next month, which are also driving that kind of outsourced agenda as a different way of getting things done, so I think the opportunity is only going to increase. But just to come back to a point you made earlier, just talking about innovation, that's the sort of thing that people can take quite a formulaic approach to, whereas actually, it's quite an organic creative thing.
What are the barriers within organizations at the moment to accessing innovation within supply chain? Because we're always hearing that people are really excited and really interested in bringing more innovation into their business, but what do you think might be stopping some companies from achieving that?
Keith McCabe [31:55]: I think the main problem that companies have when trying to talk about innovation, encourage innovation from their suppliers is that the procurement teams and the suppliers don't have – the same word again, that don't have the right relationship. So, if I look back at the places I've worked and the clients I've had, if I'm honest, I haven't really seen this done very well, generally speaking.
If you think about a set of objectives that a procurement team might have for the year, there'll be all the normal ones – cost reduction and payment terms and then there'll be things about sustainability and there’ll be things about numbers of suppliers and all the kind of usual suspects. And then increasingly, there'll be something in there around innovation. And that will kind of get rolled out, in my experience, to everybody. You must deliver some innovation within your category this year. Okay, great.
The problem with that approach is it's bonkers because you can't expect every category to have innovation. You can only really expect innovation to come where if you think about the typical sort of crowd [33:24] check portfolio structure for categories where you've got high risk and high spend and where you've got sort of in the strategic box, that is where you can expect to find innovation. You cannot expect a supplier who's in a leveraged box.
So, there's loads of competition, they're being really hit on price; you can't go through a really aggressive meeting with one of those suppliers and then at the end of it say, right, let's talk about innovation. It just doesn't work. It's madness to think that you could. And so, it's a problem.
Jonny Dunning [34:07]: Supplies [34:07 inaudible] [cross talk]. Feeling crushed and thinking, well, if I got some great innovation, I don't feel very inclined to share it with you because what's in it for me? Kind of thing.
Keith McCabe [34:17]: Exactly. You just told me, unless I reduce my prices by 30% in a week's time, I'm going to lose this business that we've had for 20 years and now you want me to open all my vaults of my innovation and share them with you. Well, I don't feel like doing that, I don't feel particularly trusted right now. So, it comes down to trust, that's the first thing. I think the relationship has got to be, right. You can't have an adversarial relationship and expect innovation to fall.
Now, what I'm not saying is that all relationships can't be adversarial, I'm just saying that where you've got a category that sits nicely in a leveraged box, and I'm not saying that's the wrong place to put it, I'm just saying don't expect innovation to fall out of those suppliers. So, I think having the same objective for every category is bonkers. I think you've just got to pick innovation in the logical places that it will flow from and that's where the relationship is much more aligned to partnership and trust and sort of openness, genuine, not just lip service. So, that's the first thing.
Second thing follows on from that really, I think it's got to be a two-way thing, so I don't think you can, as a buyer, you can say to your supplier, tell me about all your innovation and I'm going to write it all down and then we're going to take it and we're going to figure out a way that's going to make us money. In order to have that relationship, I've just talked about its two-way. So, therefore, the conversation around innovation should be two-way as well.
I think the buyer should be coming to the supplier with innovation ideas. Maybe they've got some things that they’re doing in their business that the supplier might benefit from, maybe there are things that they can work on together. I don't think it all has to be a present that's given to the buyer on a plate, wrapped up in a bow. It probably can be co-designed [36:24 inaudible] [cross talk].
Jonny Dunning [36:25]: It makes sense that it has to be a collaborative process, really. But just picking up on one of the points you mentioned there about saying, the strategic box, where it might be high spend and high risk, that's where innovation would come from. So, one of the questions that raises in my mind is, how does that work for the smaller suppliers? Because that's likely to be a tougher area for them to get into in many companies. And yet, I would say it's the potential that there's disproportionately more innovation that can be taken from those really agile, small suppliers that have to work so hard to be in the game they're growing. Do you think that's maybe possibly a bit of a problem as well?
Keith McCabe [37:10]: Yes, I think it's a great point. When I'm talking about high spend and high risk, I'm talking about the category, really. Now, I think it's really important for innovation and for sustainability, and for all sorts of reasons, for continuity of supply. I think it's really important to make sure that it's not just really big companies that you have in that box. There's no reason really why a high strategic category can't be supplied by a smaller supplier, or a number of small suppliers, or even a mixture between big suppliers and small suppliers.
I think the days where you have sole supply, there's still a place for it, but arguably, not in that box. I think those days are gone and I think sometimes what you've got to do if a supplier is in that box because the risk is high, then one of the ways of reducing that risk is by developing more of a market, more alternatives and sometimes you have to take a bit of a leap of faith with some smaller suppliers in order to help them along that journey, so that in the future, actually that category will be less risky because there are more supply options out there.
I think it's really important actually to not just assume that innovation is the playground of the big players. I mean, obviously for things that are technology-based and require lots of investment could well be more naturally aligned to big suppliers, but I don't think it has to be the case.
Jonny Dunning [39:03]: No, and I think, again, it comes back to that inherent thing of visibility. What is your supply chain? Are there some real gems in your supply chain that you're not aware of? And it's like if you look at an organization and all of the people that are part of that organization, if you've got clear objectives and you're all rowing in the same direction, then everybody's opinion is really important because it's driving towards that objective. And the same exists within the supply chain, but the voices need to be heard if there's no clear direction of what you want to have your supply chain and you've got the visibility that you can see people that are doing a great job.
I think a lot of companies, particularly in services specifically, will not be able to see that at the moment. And it comes back to what I was talking about around supplier comparison and things like that. You might have somebody work with a small innovative company and they take a bit of a risk in a particular area, which might be more of a low-risk area. They take a risk, work with a smaller supplier and their feedback might be -- they might have, for example, a quality score that's based on innovation as one category of that quality score.
And these guys might be constantly getting five stars for everything that they do, and if the organization can see that that's something that they can say potentially take into higher risk areas, but they need to surface that type of information and otherwise, these businesses just won't be heard. If you look at the UK environment in particular, but makes the same on a global sense, some of these smaller companies, they have to fight so hard to grow and they have to fight so hard to compete and they're very, very driven to create a great solution for their customer and be invited back to do more.
Keith McCabe [40:49]: No, I completely agree.
Jonny Dunning [40:50]: And I think when you were talking about this idea of innovation, not really blossoming within an adversarial environment, it's almost like you can't force someone to be creative.
Keith McCabe [41:07]: No.
Jonny Dunning [41:07]: It's not necessarily an on-the-spot process, so it can't just be a tick box to say, have you delivered some innovation? What is innovation this week? I would say that's where I think it comes back. You talked about relationships, you talked about communication being key. Communication, absolutely, and relationships in this sense where you get these smart suppliers that are doing business for you, delivering services for you if they understand your overall objectives and they're bought into that journey, they can be thinking away in the background.
Great for them because they get more work out of you. And great for you because you've got this extended part of your business going away, trying to do clever things. I think it's a really exciting part of it. When you tie in things like the demand around sustainability and stuff like that, as well, CSR, that's a huge, huge area for businesses because for so many particularly big organizations, their business very much is their brand and if they can't link their purpose, and their brand, and everything that they do, they won't attract young people particularly to go and work for them.
But also, some suppliers, it is a two-way thing. If the suppliers might not want to work with the organizations, you might have the real best supplier in a real key area, he thinks, well actually, your values don't align with mine. Or you might have the other way around for suppliers as well, where their values if they match up to the company's values, that's something that works very well.
Keith McCabe [42:34]: I agree. I think it's increasingly important for people joining companies to -- really a lot of companies are very similar now. If you're a new entrant into your career, I think a lot of people will base their decisions based on the values a lot of the time, all things being equal for the same sort of money, same sort of job. They're going to pick a company where that alignment is more in line with their values, I think, and rightly so. Arguably, that's the way it should be.
Jonny Dunning [43:14]: Definitely something that we're seeing. Absolutely. Some really, really big companies that are putting this upfront and center, it's not a box-ticking exercise, it has absolutely become kind of fundamental. And as I say, when you look at young people who are coming into the workplace, that's probably a lot of cases, the number one criteria they're making judgments on as to whether they want to work for a company that applies right the way through, however, any kind of resource channels.
Keith McCabe [43:38]: And it's cultural as well. I think the other thing that I was going to say on the topic of innovation, it is around culture and it's around risk. Actually, of all the discussion we've had, I think this is the most important bit is, in my opinion, the reason that innovation often doesn't work in a company is because of that company's attitude towards risk. And we touched on this earlier, but I think the stats out there, various degrees in there, but I think it's generally accepted, I think between sort of three-quarters and sort of 95% of all innovations fail.
And so, if you're in a culture as a company where failure is not acceptable and anything you spend has to yield a result, then why on earth would you expect to be really successful in innovation? Culturally, you've got to have that mindset to say, actually, we expect to fail, we're going to do some innovation here with these suppliers and we expect it to yield nothing at all for quite a long time, and you should expect that, and you should expect that you might have to fund some of that failure. And there you go.
Most companies say, no, what you're talking about, we just want the innovation. But the point is if you look at any of the innovative companies out there, they all prepared to play the long game and fail, fail well, by which I mean learn from the failure, clearly stop doing something when it clearly proves not to work, but you can't expect, unless you're very lucky to innovate and get an instant win.
So, I think a lot of companies, particularly publicly traded ones, certainly need to deliver quick results. It's not necessarily their fault, but they just don't have that culture of, okay, we'll go on that journey and we'll be prepared to fail a lot before we win. So, I think that is the major barrier. I'm not sure how you overcome it other than just sort of change your mindset, but it's easier said than done, I think.
Jonny Dunning [46:11]: Yes. I wonder how many companies actually implement the innovative ideas and projects that are put forward as well. So, companies might be paying lip service to it, and maybe even investing in saying, let's get some innovation, get suppliers, putting forward some innovative solutions, but I wonder how many of them just sit on the shelf where that risk factor is too high and the company spent the money on it anyway, because it's in that case, kind of a box-ticking exercise.
Keith McCabe [46:40]: And you get the attitude as well. Why should we be the guinea pig? We're effectively paying for this supplier to road-test something, and then they're going to go out and make loads of money if it's successful. Well, I'm sorry that again, comes down to your relationship, that's not the opinion of somebody who's in a genuine partnership, that's a suspicious opinion from somebody who is not on the right square with that supplier in order to innovate in the first place.
Jonny Dunning [47:10]: Yes, exactly. They could be taking the point-of-view of saying, where's this relationship going to go for us as an organization? Never mind what happens elsewhere, if this company is successful, maybe that's even better for them. Yes, very true. Just going on to a slightly more kind of structured topic in terms of a very rigid thing.
We mentioned IR35 earlier, UK market IR35 looming obviously, from our point-of-view is interesting seeing the uptake in the use of statement of work, the requirement for technology to manage that end-to-end workflow. What are you seeing? Or the kind of the misinformation…? I hear all these interesting things that people are saying, “Well, apparently you can't do this, and you can't do that and there are some grey areas in the legislation, admittedly”, and there are a lot of complaints around the CEST tool, for example, but how do you see that playing out in the organizations that you're involved with at the moment?
Keith McCabe [48:13]: So, obviously, from April, the private sectors coming into line with where the public sector’s been for a while in terms of IR35, and all that’s changing is the liability is shifting from being the contractor's responsibility currently to determine if a role’s inside or outside IR35 and soon, it's going to be the client and the agencies or the client's role to determine and the agency will have the liability. And so, the first thing to say is that it's absolutely right, I don't think you'll get many reasonable consultants or contractors who do disagree with the concept.
If you are a disguised employee, you should pay tax, you should pay the right amount of tax, you should pay income tax. But where this is falling down a little bit is that people are worried that they're going to be hit with big liabilities if they get the determination wrong. And so, there tends to be at the moment, a bit of a carte blanche approach by a lot of clients and a lot of agencies to put things inside IR35 where they don't need to be.
So, I think firstly, there's a lot of scaremongering going on, so people who have a vested interest in that situation are doing a really good job. And I want to say who it is, but it starts with big and ends in for. They are doing a really good job of scaring the hell out of clients to avoid using interim people or to only use them if they're inside IR35. And of course, they're the big beneficiaries of that because clients who might have otherwise use an interim might then be going to one of those consultancies to get work done. So, in terms of the myths, let me try and cut through a few myths. Okay.
So, the main myth is that it's really hard to structure an engagement outside IR35 and that's not true. In fact, it's really easy to do and anyone that says anything other is either misinformed or has an agenda. So, all you have to do to structure role outside of IR35 is make sure -- sorry, it's not a role, but it's an assignment. If you're a client, for example, and you're looking to do this, what you have to do is describe the activity and the outcome that you want to be achieved.
So, it's a service that you're buying. Coming back to services, we've been talking about, you're talking about service. This a series of activities, or tasks, or outcomes, or objectives you want to be delivered and you're basically buying a company not a person, a company to deliver those outcomes. And that's it. So, you're buying a service, not a person.
If you have to name a person in there, that's okay, but better not to, but if you do, then you need to have a substitution clause in there to say, if that person can't do it for whatever reason it will be, they can be substituted by someone else. But that's it. So, it's really about asking the right questions. What do they need to be done in structuring their assignment that way? And if you do that, largely speaking, you're going to be able to structure things outside of IR35.
Jonny Dunning [52:18]: And I think it comes right back, as you said to what's the piece of work that needs to be done. It's not just about sticking a contract, having something that's clearly an inside IR35 contractor situation, and just trying to put a different slant on it. That doesn't work. It comes back to, what is the piece of work that needs to be done? What's the most effective work delivery model for that piece of work and whichever engagement method you choose, you just follow the compliant routes to get it work delivered in that way.
And it's not just a regulatory thing, it's just a pragmatic business process thing in the sense that companies should be thinking like that anyway. I think, to be honest, the way that IR35 hasn't been enforced over the last 15 years or whatever it is has created a problem that is almost you can have a kind of slight laissez-faire attitude. For companies, where they've got 30 contractors in doing a piece of work, they're kind of sitting there, they're getting on with it, the stuff on a daily basis, but there's not a real clear focus on objectives necessarily.
I'm sure in some cases there is, and it's a very well-run scenario, but it's easy to have expertise in the business and just feel comfortable thinking, I just like having that expertise, I know I need that expertise. But the business won't necessarily know what they're getting from it. And there is an exercise and possibly a mindset culture shift that a business has to go through to start thinking about outcomes. People often struggled to write a job spec, never mind an outcome.
But if you're dealing with outcomes, then you know what your function within the business, you know what that function needs to deliver because you're breaking down a component part of that. And if that function knows what it needs to deliver, the department knows what it needs to deliver, the organization knows where it's going and what it needs to deliver. That's like the kind of panacea of business, organizational perfection if you can really drill it down to that level,
But ultimately, it's about what do you need to do? And what's the most effective way to do it? There's still always going to be delivery of work and services that is better with a permanent employee and the same applies to compliant contractors and temps, and the same applies to the use of outsource services.
Keith McCabe [54:41]: Absolutely. The way to think of it is if you take somebody -- I was having a conversation with somebody who knows much more about this the other day than I do, and they made the good point. So, if you take a project manager – role. If you describe what's needed as I need a project manager and they're going to come in and they're going to sit there and any projects that come along, they're going to manage those projects. That's clearly a role, isn't it?
That's a person coming in to fulfill a role and that's much more akin to employment and therefore, would be inside IR35. If you’re talking about management of some projects, and you can be more specific about which projects they are, when they start, when they finish, what the stages are involved in those projects, you might have a project plan or maybe the outcome is to devise those stages, then you’re getting much more into the realms of something being delivered, and a service, and an outcome.
So that's much more outside IR35, you're using the scope of work, it's very clear what you're talking about, it's very clear what you're being engaged to provide, there's no expectation of future business after it. You have to do it well, otherwise, you have to put it right at your own cost. All those things flow from that because you've got a very specific brief as opposed to just being a warm body on a seat. So, that's the way to look at it, really. I think it's really important to have common sense. And it's really important if you're an employer, not to panic and just shove everything inside IR35 for the sake of it because apart from anything else, you're going to pay a lot more by doing that.
Jonny Dunning [56:46]: Yes, absolutely. It's happening soon, it's a big change, no one can avoid it, everyone's going to do something about it, people are going to take different strategies. But ultimately, businesses are going to have to find a way to move forward and skilled individuals are going to have to find a way to move forward, whether they decide that actually creates better permanent opportunities for people, or it creates contractual roles that are more based on how contracting was designed to be when IR35 first came into place. But there are no excuses. And I think there will be no excuses once it's in place.
And I think from a productivity point-of-view, it's not like companies don't buy services anyway, they buy loads of services. Generally, services spend is four times the size of contingent workforce spend within most organizations. So, businesses will have processes, kind of understanding where things should sit as well, and I think this is a conversation between HR and procurement as well.
Looking at things like resource centers, strategic workforce planning because I personally think that, certainly, I see a lot of instances where organizations have problems within their services spend, particularly the tail spend in relation to disguised employment anyway. So, you've got this issue of, we've got 2,000 contractors, we need to find out whether they're inside or outside of IR35, make sure we're compliant, make sure we're engaging in the right way, and getting this work done.
But by the same token, what about all the stuff that snuck under the radar? Because there are headcount freezes, but someone's got a consultancy budget that they don't need any sign-off for and that's where you can get body shopping and disguised headcount within the services supply chain. You can't avoid the subject of it being, it's a broader services procurement conversation, as well as the workforce is this extended workforce that includes suppliers delivering services. So, I think it's a great opportunity for organizations to shine a light on that area of work delivery, understand it more, and make sure it's compliant, use it when they need to, and hopefully, get maximum benefits from it.
Keith McCabe [59:07]: No, definitely. And I think building on what we were saying earlier, really, it's a good opportunity as well for companies to spend time actually specifying services, defining what it is that they're buying, what outcomes are actually procuring, really tightening up those specifications as statements of work. There's never been a better time to have the excuse to do that, the company should embrace these changes as a reason for doing that. And then in addition to everything else, they’ll have much more visibility of what it is that they're buying.
Jonny Dunning [59:49]: And surely the procurement teams can be a hugely valuable resource within organizations to help with that process because ultimately, they're going to be the best people to advise and maybe even triage and sign off requirements or help people educate people as to how to build requirements.
Keith McCabe [1:00:06]: Absolutely. There's no one better, is there? There’s no one better placed, in theory, to talk about specifying services than the procurement people. So, [1:00:17 inaudible] [cross talk].
Jonny Dunning[1:00:17]:[inaudible] [cross talk]as well.
Keith McCabe [1:00:19]: Sorry?
Jonny Dunning [1:00:20]: Sorry, I spoke over you there. I was just going to say, I think suppliers can help as well.
Keith McCabe [1:00:26]: Yes. As I said earlier, without being ultra-cynical, I think you just got to be careful as to which suppliers you're talking to, because the ones that will have a vested interest in an outcome, either way, all you want is suppliers who can offer impartial advice, not ones who are going to benefit. For example, one of the things that is really interesting, I found out recently, is about a liability.
So, actually, if a client is using an intermediary, whether that's an agency or a managed service provider or whoever, an intermediary between them and the actual contractor. If a client is taking reasonable care to determine whether a role is inside or outside of IR35, if at a later stage they are wrong, the tax liability does not go to the client, it goes to that intermediary. Now, you won't get many intermediaries making sure that the clients are aware of that because it's not really in their interest to do so.
It's quite good if the client thinks, actually, it's us who’s going to be on the hook for the tax bill. Well, no, it isn't. It would be the intermediary, the agency, or the MSP who would get the tax bill, as long as the client's taking reasonable care to determine whether it's inside or outside. So, in the event of a challenge, the client isn't liable. Now, I didn't know that. And the reason I didn't know that is because not many people are saying it because they've got vested interests. So, it's just things like that, I think are very interesting, and I think some of the advice that people are giving is very much geared by who's to benefit.
Jonny Dunning [1:02:25]:Yes. I think there's a lot of small print involved as well, that won't fully become clear until this is actually live. Even if you look at the public sector versus private sector, there's almost like an uplift on what the public sector had put in place anyway. So public sector organizations actually need to pay real good attention to these reforms because some of the reforms are also reforms to what’s been -- it's like an upgrade.
So, they're bringing the private sector up to level with the public sector but upgrading the whole thing with some tweaks and certain amendments. And I’ve said, I think there's possibly an announcement on at the end of March and then obviously, it goes live on the 6th of April. But I think there'll be a lot of kind of washing up and the big legal firms and people like that analyzing the exact information that's put out even though effectively, I'm sure people already know what that is.
But yes, the devil's in the detail with this. And as I say, I think if you take the attitude of what's the best way to get a piece of work done, rather than trying to make the engagement type fit what you want, you decide what engagement type is most effective for what you want to do, make a genuine business decision about how you should resource that. Obviously, if you're trying to resolve something and you think, I want to resource this via contractors, and you look at it and you just go, well, there's no way that can be compliant, then they'd hire some permanent employees to do it if it's all about management, running teams and stuff like that, for example. So, I think that's a good fallback position for people.
They need to get the compliance right, they need to take the right advice, they need to audit what's going on in their contingent workforce and their services and supply chain. But if they take the honest approach of saying, let's just get work done really smartly, lineup our objectives, what do we need to do? What channels to market have we got in terms of getting this work done? And what's the best way to do it?
I think that's a huge opportunity for companies and certainly an area I could rabbit on about for plenty of time. But I just want to come back to a point you made earlier and just see if you can kind of expand on it a little bit. I think it's quite a nice one to kind of round up our conversation because one of the things you talked about within services was intangibles.
And when you compare that to goods, materials, quite binary, very solid in touch at [1:4:55] any failure, okay, with some services you'll get delivery of a report or a strategic piece of advice and maybe assets that can be reused in the future and things like that. But in terms of those intangibles and bringing them out, making them tangible, what do you see as the key intangibles that need to be brought out?
Keith McCabe [1:05:19]: Yes, it's a tricky one. I think for me, it comes down a bit to the type of specification that you've got. I think with a tangible thing as we said earlier, it's very much input-based specification. So, talking about how big it is, how much it weighs, where it comes from, what its chemical properties are like, whatever. And if you take that for a service, it doesn't work as well so you can do it that way.
And you can certainly say, I want this window cleaning service to be turning up every Tuesday, and I want it to clean these windows first for 30 minutes, and then these for 20 minutes or whatever. But what tends to work a lot better is to say, take the sort of output specification route and say, well, actually, what I'm concerned about is that these windows are clean every week, so that when we do an inspection, they look clean and however you do that is kind of up to you.
Now that doesn't make the intangible tangible, but what it does is it makes the service a lot more – you're relying a lot more on the supplier and the supplier's expertise to work out how to do stuff. And that's always been one of the bugbears I've had with services is that if you're too prescriptive, you have to ask why you're bothering outsourcing the service in the first place, because really, if you're the expert, you should probably just be doing it yourself if you know that much about it.
So, one of the ways building from that, that you can kind of make it a bit more tangible is if you give the supplier the freedom to work out, how? There's nothing wrong then in asking the supplier to give you a statement of work or a delivery description of how they are going to deliver that. And then from that kind of method of work, you can work on developing measures and KPIs. And I think you do need to measure stuff. To make things tangible, you need to be able to measure stuff.
So, even if it's quite an intangible idea, you're given the supply freedom to work out how to do it. They can give you a delivery program of their method of delivering that, and then you can build KPIs from that. And I think that's really important because, otherwise, what you get is the typical situation where someone says to you, I want to change the supplier and you say, why? Well, they're not performing. Right, but how do we know they're not performing? When was the last time you did a performance review with them? We don't have those.
Okay, well, what KPIs are they failing on? Sorry, KP what? KPIs? No, I just want to get rid of them. You have to equate it to if you had a member of staff and they had a performance problem, would your first reaction be let's sack them, let's sack them and get a new person in? No, of course, it wouldn't. Well, I hope not. You'd go through some sort of programme to try and improve and work out what the issue is and give the staff member time to kind of turn it around and in the same way, you've really got to be doing that with suppliers and you can't, unless you've got these KPIs in place. So, the short answer to the question is measure. That's how you make it tangible, you measure stuff and then you work on trends, but you basically agree what to measure and then you measure it.
Jonny Dunning [1:09:27]:Yes. And I think this is where things like change requests are very important because these are complex services that are being delivered often. And therefore, you can have this collaborative approach with the supplier, particularly if you're in a bidding situation, if you put a requirement out to tender, then I think you get a much more unbiased approach of suppliers suggesting milestones, for example, and where organizations may be, it's difficult to write a requirement because it's extremely specialist and they're going out to specialist suppliers, cybersecurity, or something like that, for example.
It makes sense that those suppliers are going to have greater domain knowledge and as long as you can set out the overall objectives, they may be able to come to you and suggest ways that you can break that down and how they would deliver it. And some people might have a different approach to others. So, I think within that bidding process certainly, something that we see is that you get that kind of collaboration where people can say, here's the outline requirement, we want you to propose what the milestones and things would be, which could then be negotiated.
Keith McCabe [1:10:35]: And then you can build the measures and the KPIs against their methodology of delivering that thing. Because you're right. If you try and do the measures of the KPIs against your kind of vague objectives that you're trying to deliver, it's very hard. But if they take your outcomes that you want to achieve, tell you how they're going to do it, you can clearly create KPIs and ways of measuring that progress.
Jonny Dunning [1:11:05]: Yes, and I think it has to be granular as well, particularly with things like any kind of variations because you could look at a requirement and go from an overall perspective, this supplier took longer than they were supposed to, and it went over budget, sad face. But actually, if you really understood it and you really broke it down and you could follow the audit trail, you might be able to see that there were change requests that came in play where completely unforeseen problems were encountered and the supplier actually used some real smart working to say, okay, well, what we suggest is we had that lined up like this, why don't we change it to that, then all these sorts of things need to be considered.
And I think your point about measuring it, is absolutely right and unless you're recording information and capturing what’s been agreed, there's no way you can ever measure it. I made a little note to myself just at the beginning of what this topic… just what was asked and what was done, there can be clear quantitative measures around that. And then there's the whole qualitative side of it as well where a supply might have taken longer, but they got it right first time, they did it first time or something like that.
So, in terms of how that feeds into data, you've got to have the data, but you've got to have the feedback as well. And I just think it's impossible to go back to somebody for procurement to go to a business stakeholder and say, yes, last year you did three projects with this supplier, how did it all go? To really get into the granular information, unless you're capturing that in real-time. And I think that's where –
Keith McCabe [1:12:46]: No, exactly, because -- sorry to interrupt. But if they've used that supplier since with services, everything is going to be geared by the last experience, isn't it? So, if they've done something a year ago and then they did something more recently, their whole perception of that supplier's ability to deliver is going to be based on what happened recently.
If they did a really good job, they'll probably forget about the problems they had and if they did a really bad job, they'll probably forget how good it was a year ago. So, you’re absolutely right, it's got to be real-time. And because of that reason, we said right at the start is, these things disappear, don't they? They’ve gone, puff of smoke. Once it's delivered, it's gone. So, all there is the immediate kind of recollection of how it went, otherwise, you can't, unless you're videoing it or something, there's no way of capturing how it went.
Jonny Dunning [1:13:45]: Certainly, I passionately believe that's where technology can help in the sense that if you couldn’t free up procurement from doing the administrative stuff, that should be automated and allow business stakeholders to do the bits they need to do, then you kind of removing a log jam on both sides. And that means that stakeholders can interact with their suppliers through smart technology and then procurement could just see the information.
So, procurement might want to put good levels of control on it, or they might put very light levels of control and allow people to transact in a pretty straightforward manner, but they've got the information. They can still see there are 10 milestones overdue in that project, what the hell's going on over there, or they can still see that this supplier is getting really good ratings they want to keep an eye on. Have we considered them for this project over here?
So, I think, as long as you can capture the process and that's where I think services procurement has always struggled, whereas I think that's very much a solved problem in the world of goods and materials, catalog buying, and fairly binary type transactions. But yes, really interesting to get your viewpoint on that.
Just to kind of wrap things up, in terms of the next six to 12 months from a purely procurement perspective, in terms of the type of consulting projects you're going to be working on. Obviously, we kind of hopefully be entering a bit more of a post-COVID world. What do you think over the next six to 12 months will be the main things that are cropping up in the work that you're doing that will come up time and time again?
Keith McCabe [1:15:24]: So, I think when the dust settles, I think a lot of businesses are going to be looking strongly at cost. I think particularly when furlough eventually finishes, it keeps getting extended, but I think that's giving a kind of an artificial insulation for a lot of businesses against some of the real impacts of what's been happening. So, I think there'll be a lot of cost reduction, which places procurement's traditional sweet spot, so it should be okay for them.
I think there'll be a lot of and I think this is already happening, but I think it will continue, a lot of redesigning of supply chains. So, I think, if you take Brexit and you take COVID, both of those things have shown that I think companies have potentially been too reliant on certain supply chains and haven't had enough resilience and flexibility. A lot of companies have had to form kind of interim arrangements to get through COVID, but I think, there'll probably be a bit more time working on that and sort of making sure in other areas that they've got sort of plans B and C maybe even D.
I think technology, you've alluded to some, I think there is going to be an increasing role for technology within procurement teams over the next year or so because there's an opportunity I think, to stop doing stuff that doesn't add a lot of value, let technology do it for you, and then focus on other stuff. And the other thing, I think, this is quite interesting, and I don't know which way it's going to go, it's just a genuine level of interest for me is because most of us have been working from home or working remotely for a year now. What's going to be interesting is where that goes.
So, we get to June and the last restrictions on COVID are lifted and everyone's having a party. What do we do then? Do companies carry on letting people work remotely or do we all flock back to the office straight away? And I think depending on what the answer to that is, will impact a lot of procurement activity and obviously, procurement activity around real estate and that kind of thing, but also, procurement activity on travel, procurement activity on facilities, management, lots of services, which will be impacted by whether companies have head offices still effectively, or whether they really trim those down, move to regional ones, or let people work from home. The associated things as well, because it opens up a can of worms. You got me on a roll now.
Jonny Dunning [1:18:35]: No, it's a very interesting point.
Keith McCabe [1:18:38]: You take role salaries. So, we're all used to the idea that jobs in London attract a greater salary than jobs in Aberdeen. Okay. But in the future, if people are based remotely, does that provide an opportunity or risk, but probably an opportunity for companies to say, well, actually we don't need that London bias anymore because you could do this role from wherever.
So, there's a real kind of an HR angle and a recruitment angle to say, well, actually this could be – remote working could actually save a lot of money, not just from real estate, but from the cost of employment as well. And then you go down the road of, well, does it even have to be a UK person doing it? Could it be... so, that's an interesting one. I don't know the answer, but it's interesting.
Jonny Dunning [1:19:28]:Yes. They’re great points and opportunities and risks around it. It covers aspects from the HR cost savings, availability of talent, the type of working engagements, again, if you've got a lot of people working remotely, I think that naturally ties in with output-based work because if someone's remote, you can't really see what they're doing. And having clear deliverables is better possibly for the company and for the persons working remotely.
I've had interesting conversations with companies during the pandemic, during the lockdowns where people have kind of jokingly said, well, my team are all at home, I can see they're logged on to teams, but they could just be sitting there watching Netflix, and it kind of gets into this thing where I think it's built up a lot of trust between organizations and individuals. And it's also meant that people who work together are having more person-to-person interactions, you're talking to people, they're in their kind of more their home clothes and they're in their strangely shaped loft rooms or wherever they might be.
So, that's in some ways, made it more of a personal relationship, but there's all that kind of productivity, mental health, transport aspects of it. I think when the restrictions are lifted, I think there will be an overcompensation of people really wanting to get together and party and you can't blame people. I certainly would be feeling like that. And maybe with work, the same thing might happen where you might get a rebound where people are just desperate for that office environment and they want to get out of the house because actually, it's really hard working in their particular situation.
But I'd like to think that it will probably normalize hopefully, at some sort of advantageous progression which is a bit of both, a mix because if working from home continues for some people, that's going to be a major advantage to them and they're actually going to be way more productive for their company and way happier. But for other people, the opportunity to get back into the office, it's going to be a lifesaver.
So yes, I think it's all these things, there's going to be years of study in university textbooks in the future, based on the world's biggest experiment on the human society, but it was really interesting the point you were making about from a procurement perspective, how that might significantly impact particularly, some categories within larger procurement teams where a huge volume of their work is dealing with facilities, management, or property.
Yes, I've definitely heard of some big businesses shedding head offices, for example, but I think the nature of office space will change. From my point-of-view, I like the idea of pretty much complete flexibility for people, the ability to congregate in a set place, but the ability to go and do what you need to do and use technology and do things remotely as we've all learned to do. But yes, I think it will be a bit of a blend.
Keith McCabe [1:22:28]: Yes. I think that's right. I don't think it has to be an either-or, I think it will be both, but it just poses interesting questions. If you're a category manager that looks after travel, how on earth do you negotiate hotels for the next 12 months? How do you know what the level of demand is going to be? You no longer can just look back. Well, what did we do last year? Okay, well, I'll adjust that by a certain percentage. Who knows...? Who knows how often people are going to be flying? Who knows how often people are going to be using the motorway?
Jonny Dunning [1:23:12]: Again, it's going to come down to relationships and communication between suppliers and buyers. And that's going to be totally crucial. Like I say, with this kind of more open and interpersonal type of relationships, I think that's going to have to exist everywhere because the hotel supplier’s sitting there thinking, God we've been decimated, and the buyer's thinking, well, we don't know when or how are we going to be able to use your services? Hopefully, there's an opportunity to really work together to benefit both parties on that side of things.
But yes, it's certainly going to be interesting to watch everything pan out, but where there are these sorts of changes, there are always opportunities as well as all the downsides as well. So hopefully, we can all adapt, and businesses can adapt and come out of it stronger, although maybe a bit different. But I always like to take a positive view on it. Well, thank you so much for taking the time to chat really, really enjoyed that. Some excellent points, great insights, and some things that really actually got me thinking now.
Keith McCabe [1:24:20]: Well, thank you. It's been a pleasure. I've enjoyed it.
Jonny Dunning [1:24:23]:Excellent stuff. Well, listen, thanks very much. Take care of yourself and yes, I'll speak to you again soon.
Keith McCabe [1:24:27]: Okay. Thanks very much.