What is commercialism?

Yesterday I was invited to give evidence to the UK’s Public Administration Parliamentary Select Committee. The topic to be examined was Procurement skills, but the focus was in fact around the question of ‘commercialism’ and to what extent it is lacking in Public Procurement.

It is possible to try to define commercialism as a list of demonstrated skills or the application of specific knowledge – and IACCM has of course done that as part of its skill assessment program. But perhaps it is more important to try to describe the way that commercialism manifests itself – what are the key deliverables?

For most people, it seems to boil down to the simple matter of whether there was good business judgment. The select committee cited numerous examples in which that judgment – in hindsight – appears to have been lacking. In my mind, there are three core phases of commercialism:

1. Possibility. At an overall level, and given known constraints, does it appear possible that whatever is being proposed can be achieved?
2. Probability. As we examine the proposal more closely, what are the probable issues and opportunities and how will alternative approaches affect those probabilities? In this phase, we are exploring both macro issues – for example, the likely reaction of major stakeholders and how that can be managed, or the probability that we can access adequate resources with the right skills – and micro issues, such as whether a particular contract term might have an adverse or beneficial impact on the outcome. Obviously this probability analysis is a phased activity based on relative importance of the item under review.
3. Affordability. Within the various options available to us, can we demonstrate that this initiative will generate economic benefit for all significant stakeholders (in the case of the public sector, benefit may of course be measured by some non-economic indicator, but affordability will remain a critical issue).

Of course, another significant question is where responsibility for commercialism should reside. Is it primarily within the remit of a specific function, or is it a more generic organizational capability? My opinion on this question is that it must be intrinsic to the organization, but ultimately management has the responsibility for framing the underlying commercial capabilities for the organization and a ‘commercial function’ should have the job of implementing and overseeing those management policies.  This function should be responsible for delivering required knowledge and capabilities to the wider business as well as alerting management when commercial policies are misaligned with business strategies or market needs.

If such a framework had existed, I believe many of the high cost and high profile failures in public procurement would have been avoided. But it is perhaps unfair to level all the blame at Government employees because it was also the responsibility of the major suppliers to apply good commercial judgment – and they also appear to have failed to make those assessments of possibility, probability and affordability.

Finally, how realistic is it to link ‘commercialism’ with the Procurement function? It seems to me that at present it is largely unrealistic. There is little to suggest that most Procurement groups have the skills, knowledge, systems or motivations that are consistent with the holistic view that commercialism demands. Certainly, at this point, it seems important that we distinguish the role of the Procurement function from the bigger question of the procurement process – and work out how those should interact and become better aligned. And that view seems to be reflected in the attitudes of the average CPO, most of whom seem reluctant to take on such a massive expansion in their role and accountability.