. . . . How many of us are employed by a company where facility management is not a core competency?  Lets suppose for a moment, you work for an electric utility.  The utility company’s primary responsibility is to produce and distribute power.  Facility management within this type of business is often viewed as a “necessary evil” and does not add to the company’s core objectives.  As you might imagine, opportunities for advancement in this department are limited.  Lets now suppose that an outsourcing partnership is created and you are now an employee of the outsourcing provider.  Your opportunity for career advancement has grown exponentially.  You now have an ability to grow within an organization whose core competency is facility management.

Employees who have left “the big corporate” to join an outsourcing provider, have often found their careers re-energized due to the prospect of a real career path.  Working for a company that understands real estate and values its importance often results in increased employee moral.

While on the subject of benefits, we should take a moment to dispel a common outsourcing myth.  Many believe outsourcing to be synonymous with employee layoffs.  This is not usually the case.  Today there exists a shortage of well trained and qualified facility professionals and outsourcing providers, like most companies, have a difficult time finding and hiring good employees.  If you are a skilled manager of facilities, the outsourcing provider will likely welcome you on board with open arms. 

If your department is outsourced and you are asked to join the outsourcing providers staff, you bring a unique perspective and knowledge base that you can leverage to your advantage. You have already established a “people network” and you own specific knowledge that the outsourcing provider does not yet possess.  Take the imitative and volunteer to be a part of the transition team.  You’ll provide your new employer with valuable insight and you’ll create the perception of being an indispensable member of the outsourcing team.  Become a student of transitions and you just might be asked to sit on future transition teams.

What kind of employee is an outsourcing provider looking for?  Like any company with employees, an outsourcing provider is looking for hardworking, loyal and bright people who are not afraid of change.  They are not looking for facility managers who are inflexible and unwilling to try new processes.  A good employee will be an ambassador of outsourcing, willing to share with others the victories that outsourcing has achieved.  Of course, the best way to become an ambassador of outsourcing is to educate yourself.  Reading trade publications and articles such as this can assist you in your endeavors.

Finally, be prepared for change.  Most facility managers will not automatically be running their buildings as efficiently as possible.  The outsourcing provider will introduce new ideas and technology that will make you more efficient.  Change may come in the form of writing new maintenance specifications, re-bidding of services, learning new software, instituting preventative maintenance programs or replacing old equipment at the end of useful life.  These changes usually don’t come about very easily but they do pay dividends.  Be open to these changes, in fact champion them and you will counted as a true ambassador of outsourcing.

Why Do Companies Outsource?

Early in the evolution of outsourcing, cost savings was the most important factor; however, today savvy managers have realized that outsourcing can provide so much more. A good outsourcing partner can provide specific expertise, proven processes, access to a more qualified employee base, improved quality at a lower cost and cutting edge technology.

The concept of outsourcing has been around for a number of years. Large corporations have outsourced functions such as security operations and information management with great success.  Consider the example of a typical retail store.  This retail store accepts catalog orders over the telephone, but finds it difficult to hire and train customer service representatives.  Call center computers and the software that run them are expensive and the technology is changing rapidly.  Additionally, call center space is needed and this additional cost is quite expensive.  Finally, existing management within this retail company is unfamiliar with the call center business.  Their expertise is better suited to sales and marketing.  Call center personnel can be hired, but is that the answer?  This scenario presents an excellent opportunity for outsourcing.  The outsourcing provider can leverage its size and expertise to solve each of these problems for the retail store.

Over the past decade, the natural evolution of outsourcing has opened new areas of responsibility, which include facility management and corporate real estate. 

3 Wrong Reasons To Outsource

Like most things in life, there are right reasons to do something and wrong reasons to do something.  Anybody considering outsourcing needs to examine their motivation.  Stories abound of failed outsourcing ventures due to three common problems, and if you guessed dollars enter into the equation, you are correct. The potential for cost savings is one of the alluring factors of outsourcing; however if the promise of saving money is the singular goal, without regard to quality, disappointment will likely follow.  Cost savings must be coupled with quality improvement initiatives.

How much savings is realistic when outsourcing?  Obviously, that depends on how efficient (or inefficient) your portfolio is currently operating. It’s always easier to take a low performing operation and improve it to the point of average performance.  It is however, quite difficult to take an average performer and turn it into a world-class operation.  According to a survey conducted by the Outsourcing Institute, outsourcing partnerships averaged a nine percent reduction in costs.  Identify your potential for savings, be realistic and avoid becoming intoxicated with the cost savings.  Demanding more than reasonable is a certain path to failure.

A second wrong reason for outsourcing is to rid yourself of a job you don’t want to take responsibility for.  Take for example, the new push for environmental compliance.  If management decides to outsource strictly on the basis of “hiding” from responsibility, problems are bound to arise.  Client management should always be involved and aware of what steps the provider is taking to satisfy compliance and life safety issues.  Shame on the client if they plead ignorance after an incident has happened.  They still bear the ultimate responsibility for compliance and life safety issues.  Having issued the above warning, it is also fair to make a clarification.  It is perfectly acceptable to outsource because your department lacks the specific expertise or head count to take on issues of compliance and life safety.  Rules of compliance can be difficult to understand and they might be subject to frequent change.  An outsourcing provider with this expertise can solve these problems; however, as warned, do not look at this opportunity as a way to hide from responsibility.

The third reason for failed outsourcing ventures is the mis-belief that major changes will happen overnight.  Some clients tend to have a very shortsighted view of outsourcing and its benefits.  Providers must also be careful not to oversell the immediate benefits of outsourcing.  Always remember that outsourcing is a strategic move that if set up and maintained correctly, will provide numerous benefits over the life of the contract.  As you might imagine, poorly defined goals and a lack of communication are two of the major obstacles of a successful outsourcing alliance.  Realistic and attainable goals should be established prior to signing a contract.

7 Reasons Why You Should Consider Outsourcing

Outsourcing allows you to concentrate on your core areas of responsibility.  For instance, a utility company’s primary responsibility is to produce and distribute power.  Facility management within this type of business is often viewed as a “necessary evil” and does not add to the company’s core objectives.  By outsourcing non-core activities, the utility can now concentrate on what it does best.

We’ve all heard business leaders preach that employees are a company’s most valuable asset. Often times these valuable assets find themselves working in a facility department when their training indicates their skills would be used better elsewhere.  In many facilities departments a computer programmer is now a facility manager who reports to an ex-procurement agent who, in turn, reports to a Director with a marketing background.  We are not saying this type of arrangement won’t work, but often time, people with real estate and engineering backgrounds make the best facility people.  If the business does not have these types of employees, it may be very hard to attract such talent.  An outsourcing provider can solve that problem.  Additionally, those valuable employees with non-real estate backgrounds, working in the facility department might be better utilized helping the company achieve their core goals.

Here is another angle.  Suppose the existing facility management department has been fortunate enough to attract good, solid facility related personnel.  These employees might be frustrated with the lack of a true career path if working for a large non-real estate entity.  The real estate department might consist of twenty people and unless your boss leaves, you are faced with limited opportunity for advancement.  For those of you who might be dreading the prospect of outsourcing, this scenario might just change your mind.  Employees who have left “the big company” to join an outsourcing provider, have often found their careers re-energized due to the prospect of a real career path.  Working for a company that understands real estate and values its importance often results in increased employee moral.

Given the large size of a typical outsourcing company, savings can be achieved through economy of scale.  Outsourcing providers have established strong relationships with vendors and can pass these savings on to their clients.  Of course, we want to avoid basing our decision to outsource solely on cost savings, but these vendors usually maintain millions of square feet and they certainly don’t want to risk losing that business by delivering a sub-par or overpriced product.  As a singular entity, it is unlikely that you would be able to achieve the same type of relationship.  By partnering with an outsource provider, you can leverage this economy of scale to your benefit.

Partnering with an outsourcing provider also allows you to painlessly adjust to work fluctuations.  We all experience ups and downs in our workloads and staffing levels.  This process is never a pleasant one.  It’s very difficult to find dependable personnel and at the end of a project, it is always painful to cut back.  An outsourcing provider can provide relief.  They have a pool of qualified employees who are available for both short term and long term projects. Outsourcing providers also have a natural in-house data bank of employees of which to draw from.  These employees comprise a wide range of skill sets and may be called upon on a temporary basis or they may be available to fill an open position on a permanent basis.

Outsourcing of facility management can actually improve customer satisfaction.  The improved processes and functions that an outsourcing provider can bring coupled with cutting edge technology can equate to increased customer satisfaction. Quality improvements such as centralized call centers and computerized maintenance reporting can also serve to increase quality. 

Even though you might be outsourcing only the facilities side of your corporate real estate department, the outsourcing provider will likely be able to offer expertise in real estate acquisition & disposition, leases, construction management, space planning and much more.  These value-added services will come at a cost, but having quick access to this kind of expertise can be invaluable.

Outsourcing vs. Out-tasking

Two common terms are used to describe the completion of work by others.  They are “out-tasking” and “outsourcing”.  Most facility managers are familiar with the practice of out-tasking.  As an example, we might out-task our janitorial services while all other tasks are performed by our in-house staff of maintenance technicians.

Outsourcing, on the other hand, is the hiring of a single source vendor who supplies all of the services.  Facility managers have long used out-tasking to effectively manage their portfolios; however, In recent years, outsourcing has gained acceptance.  In fact, according to IFMA’s Outlook on Outsourcing Report #20, “85 percent of facility managers hire individual, specialized vendors to provide one or more facility management functions” (Out-tasking), furthermore, “12 percent contract a full service, single source vendor to provide a package of services” (Outsource) Finally, “Only 3% handle all FM services internally.”

Out-tasking keeps the management function in-house and may provide the benefits that you are looking for.  If the thought of re-bidding or re-writing specifications seems painful or you don’t believe you have the resources or expertise to take your operations to the next level, the expertise of an outsourcing provider might just be the answer.

Benchmarking Your Operations

How do you measure up when compared to other similar business operations?  If you find your costs higher than average and achieving these savings looks to be a difficult proposition, the expertise of an outsourcing provider may be the solution.  It certainly helps to draw on the experience and resources of a company that’s done it successfully before.   

Benchmarking can be defined as  “The ongoing comparison and study of functions, products and cost of services against other similar business institutions with a goal of measuring these costs and then using this data to make improvements in your own operations”.  Ultimately, the goal of benchmarking is to achieve improved efficiency coupled with cost savings.

It is best to concentrate your efforts on just a few functions at any given time.  Some services will be easy to benchmark, while other services will be clouded with many variables.  For ease of illustration we will use janitorial services as an example.

To begin a benchmarking exercise, you must first determine the rentable square footage of your building.  If you manage a retail building with 30,000 rentable square feet and you pay $35,000 in janitorial costs at that site, your average cost equates to $1.17 per square foot  ($35,000 / 30,000rsf = 1.17).  Next, if you refer to your benchmarking data and you find that janitorial costs for retail facilities averages $.91 per square foot, you’ve got work to do.

Benchmarking need not be time consuming or expensive.  A simple benchmarking exercise may occur on a localized format.  Valuable date can be gathered by comparing the cost of operations in one building to the cost of operations in another building within a single portfolio.

When costs are gathered and compared, you will find some legitimate reasons for differences.  Target the areas where costs are higher for no apparent reason.  What is the procuring cause of the cost differential?

Of course, statistics can be misleading, and this is true even of benchmarking.  The assumptions you base your decisions on are only as good as the data supplied in the study.  Make certain you are measuring comparable data.  If you are the facility manager of a Class “A” high rise building in Manhattan and you are using data derived from a factory in Iowa; you are likely to find the data misleading.  A good benchmarking study will have a large number of respondents and be broken down by facility type.  For more detailed information on benchmarking, be sure to read IFMA’s Benchmarks III, Research Report #18.  This report is based on an exhaustive study of costs and practices from other IFMA members and covers a cross section of industries and services.

After The Transition – Tracking Success

Of course, signing a contract with an outsourcing provider is only the beginning.  The next ninety days will be critical to the success of the partnership.  This transition period will not be without its obstacles, but how both client and provider handle the obstacles will set the stage for the partnership.  A true partnership exists when both client and provider are able to work in harmony and achieve their goals.  Realistic expectations coupled with ongoing benchmarking and open communication are the cornerstones of an alliance that works. 

Unfortunately, some client – provider relationships leave a lot to be desired.  A relationship clouded by suspicion and mistrust is not a healthy relationship.  Both parties must realize that they are on the same team.  The client must work with the provider when they experience resistance from other business units within a company.  This occurs when other employee’s believe their jobs are at stake.  They mistakenly believe that an outsourcing exercise is synonymous with downsizing.  Even if they don’t lose their job, they are concerned about losing their tenure or benefits.  The key to calming these fears rests on the client’s management.  These key players should be actively advertising the victories of the partnership.  From an early stage, even before these victories materialize, management should be touting the advantages of outsourcing.  If upper management has not bought into outsourcing or the reception is lukewarm, the outsourcing venture is likely to fail.

Upper management must be known as raving fans.  They must champion the decision to outsource certain functions of the company.  Outsourcing is not something that can be hidden under the rug.  It’s something different, it’s out there and people will talk about it.  Without the buy-in of senior management the outsourcing venture will not be able to achieve the success promised or expected.  The provider will spend the majority of their time fighting through the roadblocks laid before them by others, instead of meeting the objectives they are capable of and have promised.

How will you measure success after an outsourcing venture?  Will success be based solely on budget savings?  If so, identifying the savings will be a relatively easy task.  If other initiatives played a role in your decision to outsource, how will they be tracked?  For instance, if your desire is to improve customer satisfaction, what would it take to notice improvement?  Have you preformed customer satisfaction surveys in the past?  What are your current areas of weakness?  What are your strengths?  This information, if you have collected it, will prove beneficial towards meeting your goals.  As an example, if 80 percent of your customers conclude that your operation provides adequate service, but your goal is to reach a 90 percent satisfaction rate, how will the outsourcing company achieve that level of service?  Obviously the provider must know of your goal to increase customer satisfaction.  This service level should be written into the contract, with periodic customer surveys to identify the service level being delivered.

The responsibility of building a successful alliance belongs to both the client and provider.  They will not successfully meet their objectives without reliance on one another.  As discussed earlier, poorly defined goals and a lack of communication are two of the major obstacles of a successful outsourcing alliance.  Roles and responsibilities of each partner must be established during the contract stage.  Dispute resolution procedures must be ironed out and agreed upon.

Is outsourcing the magic potion that will solve all of your management woes?  Not likely, but a properly managed contract certainly can make like easier and corporate goals more attainable.  Outsourcing is here.  It is not a passing fad.  If you have not yet outsourced, chances are great that you will at least look at it in the future.  Why not understand what it is and what it is not?  Embrace it and use it to its full advantage.  You can build an alliance that works.

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