Insourcing - the new challenge for infrastructure leadership

Korinna Sjoholm
18 August 2017

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Recruitment and skills

With ever changing challenges facing company recruitment practices, Korinna Sjoholm takes a look at insourcing as a possible solution.

Barely a week goes by without news of another public private sector partnership (PPP) failing after pressures to meet unworkable targets. The latest casualty is Carillion, which saw its share price dive after announcing profit warnings caused by unsustainable PPP contracts. The industry is taking note of the threats of zero margin contracts and in the supply chain there is recognition that a toxic agreement can impact both supplier and client if left to run its course.

As more organisations recognise these risks and look to protect themselves, taking projects back internally or ‘insourcing’ is becoming increasingly popular. Highways England and Network Rail are moving towards intelligent procurement and the perceived benefits of insourcing. Highways England created an ‘asset delivery model’ for Area 7, increasing visibility on investment decisions and using local intelligence to become operationally nimble. 

Local authorities have also begun to buck the external contractor trend by insourcing. Cumbria County Council reclaimed its highways, followed by Ealing and Rotherham, and this year Gloucestershire publicly debated whether to take back road maintenance from Amey. Authorities are increasingly exploring ways to save and generate revenue - a necessity against the backdrop of self-sufficiency targets. This has also seen the emergence of innovative mechanisms such as Local Authority Trading Companies (LATCs), as well as complete reshuffles of internal teams to provide services previously procured out to suppliers. This not only allows for greater operational freedom and less reliance on performance measures, but provides vital revenue generating mechanisms. 

While this may mitigate the potential commercial threats presented by outsourcing, it also calls for a review of operational leadership talent able to deliver. Insourcing might ease the financial pressure of catering for a contractors’ profit margin, but management must be able tackle the operational, cultural and commercial challenges it brings, and talent isn’t always found in obvious places. 

Insourcing skills - the winning mix   

Insourcing shifts power, removing much of the client-supplier blame culture and putting the onus on the organisation itself to face up to the results of its delivery. This calls for specific leaders, equipped with attributes and experience to help a business be accountable, agile, able to handle scrutiny and commercially successful. Those spearheading insourced projects need to operate without a safety net and handle PR effectively. 

For an example look to Transport for Greater Manchester (TFGM), the infrastructure delivery vehicle for the Greater Manchester combined authority. Head of projects Alex Cropper is applying extensive experience leading ventures with high levels of scrutiny, including the controversial decommissioning of nuclear plant Sellafield. TFGM also appointed Brian Thompson as head of highways following tenures at engineering heavyweights Jacobs and WSP. Their combined commercial backgrounds and understanding of the supply chain, paired with an appreciation for public sector nuances on the side of a contractor, is uniting stakeholders and helping TFGM to become lean, responsive and accountable.  

Effective insourcing also calls for leadership comfortable with business transformation. Experience in mobilising and managing operational and cultural change, not a career history of safe environments, will breed talent up to the task of engaging staff and creating a seamless evolution. A prime example is Jim O’Sullivan, chief executive of Highways England and former managing director of Heathrow Airport Holdings (previously BAA). Here, he led BAA on a journey from being publicly accountable to a commercial, customer focused and responsive business, making him an excellent fit to drive Highways England, a traditionally slow-moving public sector organisation, forward. This also highlights the importance of sourcing commercially-minded individuals, capable of ensuring effective operations with end-user in mind that deliver financial benefits too. 

Location, location, location 

Often, private sector individuals are well versed in delivering strategic, efficient and lucrative projects, easily transferrable skills for an insourcing organisation. The likes of manufacturing gives individuals exposure to lean principles and operational efficiencies, generating high calibre leaders with a grasp on real-time operational, cultural and financial pressures. Digitally savvy talent from companies such as Uber and Amazon, can also offer lessons, importantly on utilising technology to aid efficiency, planning and scheduling. Electronic devices that track orders and plot delivery routes could be applied to areas including highway maintenance or any field based services.  

Yet, talent capable of supporting successful insourcing is not only found in the private sector. Talented hires need to appreciate stakeholder management and be politically savvy. Unconventional but strong individuals can also be found in the military. Ryan Ramsey, ex-UK Royal Navy Submarine Service turned National Grid head of construction, is transferring years of leadership, risk management and decision making in the forces into utilities. 

For many, the choice to insource infrastructure delivery is becoming an attractive option. It provides the chance to take back control of budgets and align strategic goals of a business to it’s on the ground operations. Getting it right is dependant on leadership’s ability to navigate the practical, cultural and financial - refocusing their attention to the bottom line of their own business. 

Korinna Sjoholm is an infrastructure specialist at executive search firm Berwick Partners.