Judge Mihayo, supplier risk management and the CIO of Her Majesty’s Revenue and Customs

by Peter Smith on October 15, 2010

In our latest post where we take three seemingly unconnected items and weave a rich strand of comment between them… we start with retired high court Judge, Honourable Justice Thomas Mihayo, of Tanzania.   We reported his comment here, at the East Africa Procurement Forum, when he said “Salaries are paid after a payee renders a service to a client, and therefore to me that is procurement”; therefore he considers staff costs to be part of procurement.

We’ve also written a fair bit recently about temporary (contingent) labour; a growth area in most parts of the world.  And that in a sense demonstrates the merits of the Judge’s point.  We engage an interim, particularly if it is in a management role, through either an agency or in many cases through the individual’s own firm.  So is that procurement or employment?  The boundaries are certainly blurred here between ‘procurement’ and ’staff’ expenditure.

Supplier risk management then must come into play.  But the risk is often not around the agency; it is around the specific individual.  What if our interim Finance Director suddenly decides she’s off, 3 months before we expected?  What about that group of programmers on a short term contract who are developing our key new sales order system?  What if they get fed up or are offered 30% more by our competitor?  So supplier risk management in these cases becomes very closely aligned with what we would term succession planning in the internal world of Human Resources.  How would we cover the CFO role? Can we lock in the programmers, or build resilience through other means.

Now this is what, it appears, HMRC did NOT do in 2009, when their CIO, who had been on a fixed term contract, failed to get the job on a permanent basis.  OK he said, I’m off.  No, don’t do that – how will we manage without you before the new person starts?

OK, he said, £149,500 for three months.  And that is what they paid him, through his service company.  Incredible.

So why was there no succession planning?  As a ‘contractor’ of sorts, did he fall between HR and Procurement’s stools in terms of risk management?  (HMRC have a good procurement function, but I can’t speak for their HR.)

Anyway, here’s an area where HR and Procurement need to be working together in any organisation to identify key non-employed staff and look at the risk implications.  Too late for HMRC though in this particular case; and Judge Mihayo’s comments are looking more and more perceptive to me.

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