I gained three major insights from my visit. First, M&S ran a centralised buying function rather than devolving this to individual stores. Its buyers were experts in the markets in which they operated, often having direct experience of making the goods and products they were responsible for purchasing. This meant that they negotiated from a position of strength and were able themselves to bring ideas and suggestions to suppliers to help them deliver what M&S and its customers wanted.
Second, M&S operated on the basis that its relationships with suppliers were usually long term. As a result, buyers invested in developing and building relationships to achieve mutual advantage. These relationships were of course underpinned by legal contracts, but the emphasis seemed to be more on working together to overcome difficulties and disappointments rather than using contractual levers to achieve results. Failure to sell sufficient numbers of suits or dresses in one season, for example, could be addressed in the next.
Third, and linked to the last point, contracts between M&S and its suppliers at that time were short documents that focused on issues seen as key by both parties. These documents were supplemented where appropriate by master copies of the products concerned (ties, shoes, underwear etc) that could be invoked in the event of disputes over quality. Frequent contact between buyers and suppliers, involving buyers spending time in factories and farms, helped to avoid these disputes becoming routine. Relational contracting rather than legalistic contracting was the preferred approach.
These insights remain as relevant to the NHS today as they were at the time. On the assumption that the separation between commissioners and providers will continue, they are a challenge to system architects to think hard about:
- the balance to be struck between concentrating scarce commissioning expertise and devolving responsibility to commissioning organisations at a local level
- the expertise required by commissioners and the value for the NHS of hiring experts, including more clinicians, able to speak the same language as providers and to add real value to the contracting process
- the way in which commissioners work with providers and are able to develop ‘win win’ relationships in which both parties can benefit without these relationships ever becoming too cosy
- the nature of communication between commissioners and providers, including the extent to which they rely on voluminous contract documents as opposed to strong personal relationships.
These are all issues that Simon Stevens, the incoming chief executive of NHS England, will have thought long and hard about, drawing on his experience in a large health insurer in the United States. Stuart Rose may not have been asked to advise the NHS on how to make the commissioner/provider separation work more effectively but he would provide a valuable service were he to share his experience in this area.