Thursday, July 12, 2012

Is G4S too big to manage? | Nils Prately | Business | The Guardian

Soldiers man a security checkpoint London 2012 Olympic Park at Stratford in London

WIth G4S not supplying enough security staff, soldiers man a security checkpoint at an entrance to the London 2012 Olympic Park at Stratford. Photograph: Luke Macgregor/Reuters

The cover of G4S's latest annual report (pdf) proudly sports a picture of the Olympic stadium alongside the tagline "securing your world". An alternative headline could now read: chief executive desperately trying to secure his job.

Nick Buckles will have known that the Olympics gig was the one contract G4S had to execute to perfection this year. The mess is still developing but the scale already risks doing very serious damage to the company's reputation for competence, and thus to its ability to win high-profile contracts in future. A total of 3,500 troops have been put on stand-by to cover for G4S's failure to hire enough security guards on time.

If Buckles can rapidly round up a few thousand gap-year students, the eventual requirement for troops may turn out to be smaller. Equally, though, the problems could get worse ? and prolonged chaos would probably require Buckles to put away his high-visibility jacket for good.

His personal stock is yet to recover from the cack-handed and failed attempt to buy rival ISS for a colossal ?5.2bn last year. Shareholders hated the deal and shot it down. In part, that was because they thought a company with a proposed combined workforce of 1.1m would be too big to manage. The same question should now be asked of G4S in standalone form. It employs 575,000 people. Is management too stretched?

For now, investors are taking a relaxed view of the shambles. Even on a "down" day in the market, G4S shares fell less than 3%, perhaps reflecting the thought that a ?280m contract is small beer in the context of a company with revenues last year of ?7.5bn. But what does the market really know? Remember: on day one of Barclays's Libor revelations, the bank's share price actually rose. This could get a lot worse for G4S and Buckles.

Source: http://www.guardian.co.uk/business/blog/2012/jul/12/g4s-too-big-manage-london-olympics

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