Consultancy spend at Co-operative Group ‘feral’, tribunal hears

Co-operative Group spend on consultancy was “feral” and allegedly worsening during its financial crisis, an employment tribunal has heard. The Group’s former chief purchasing officer, Kath Harmeston, claims...

Co-operative Group spend on consultancy was “feral” and allegedly worsening during its financial crisis, an employment tribunal has heard. The Group’s former chief purchasing officer, Kath Harmeston, claims she was unfairly dismissed because she exposed “endemic” and costly procurement non-compliance at the Group. She is suing it for £5 million.

The Group says it had lost trust and confidence in her. They say her procurement activity was non-compliant with Group policy and her claims are “an attempt to mask her own serious misconduct”.

Ms Harmeston was employed from 1 April 2014 to cut costs on a £1 billion budget in goods not for resale across the businesses. The Group had headhunted her from the Royal Mail, where she helped deliver £650 million savings on a £2 billion budget.

In her witness statement, Ms Harmeston claimed the business was “haemorrhaging money” on management consultants. “The daily rates charged by the top 10 consultancies were the highest I had ever seen in my career,” she said.

She alleged chief operating officer (COO) Pippa Wicks, who had joined the Co-op one week after her arrival and was paid around £8,000 a day as a consultant, 3 days a week, was “conflicted” because she was both COO and a supplier. Ms Harmeston added that the firm Ms Wicks works for, AlixPartners, was the Group’s highest paid consultancy and was practising a “land and expand” strategy.

According to the Group’s annual accounts, Ms Wicks was paid £949,000 in 2014. A Group spokesman said: “Pippa has been instrumental in leading a major cost reduction programme which has seen us achieve year on savings of over £100 million per annum. Pippa not only had executive responsibility as COO, but also chief finance officer.”

Ms Harmeston said the Group had paid up to £8 million more that it should in 2013 for consultancy due to non-compliance. This was “exacerbated by the poor examples set by the senior executive team”, she said.

She had brought forward her employment from 1 June to 1 April after Euan Sutherland and Rebecca Skitt had left the group, and had been promised executive sponsorship of her cost cutting drive by chief executive Richard Pennycook. But she lasted just 11 weeks: she was suspended on 16 June, given a written warning on 5 September and dismissed on 12 September.

Ms Harmeston told the tribunal that she believed the Group’s executive had failed to support her attempts to police spending and had turned against her after she drew attention to their own non-compliance. She alleged they had assigned her a code name, “Wimbledon”, to avoid creating a paper trail of emails. This, she said, deliberately circumvented the Group’s obligations under the Data Protection Act.

Representing the Group, Andrew Burns QC asked Ms Harmeston whether it was possible to always comply with purchasing policy. “One is never going to reach that ideal status of 100%,” she said. “You aspire to 100% recognising there will always be some error.”

She added: “The organisation wasn’t just non-compliant, it was feral, and that was because it was extraordinarily adept at getting around the rules and it was supported by an executive that allowed it.”

She estimated 70% non-compliance across the Group and said it was seen by suppliers as weak, out of control and ripe for exploitation. “You were recruited to sort that out,” Mr Burns said.

“Yes,” she replied, “but I needed executive sponsorship… If members of the executive are circumventing the procurement policy purposefully and blatantly, that tells me there’s something extremely wrong.”

Mr Burns challenged her to describe anything unlawful that the Group had done in terms of procurement. She said she believed it to be unlawful to manage procurement in an unco-ordinated, uncontrolled manner. “It’s important to maximise value on that spend even in difficult circumstances,” she said.

Mr Burns said she had pushed to take on part of the COO’s role, and had “camped out” on the ninth floor of the Group’s Manchester headquarters with the executive, rather than with her team on the sixth floor, even after she had been asked to move. Ms Harmeston insisted she had been inducted on to the ninth floor and did not consider herself part of the executive but an “influencer of the executive”.

She said her campaign had been radical and had required radical approaches, but she had been “faced with political situations that were quite frankly impossible at times”.

The case continues.

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