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The Third Way and How to Save Costs: A Must Read for CEO’s & CFO’s

Whether your business operates from a single large facility or numerous sites across the country, you will likely be responsible for determining your organisation’s approach to Facilities Management, or FM as it is commonly known.

FM can be described as an interdisciplinary field that is devoted to the coordination of space, infrastructure, buildings and people in organisations and the provision of services in support of such.  
Services provided often include buildings and asset management, reactive and planned preventative maintenance and technical services, space planning, relocations, security, cleaning, washroom services, pest control, landscaping, catering, indoor plants, and other support services.

Over the past 30 years, many businesses have evolved from performing these functions ‘in-house’, to outsourcing them, as they focus more on their core business functions.

Traditionally there have been two ways to approach the procurement and management of FM services.  The first involves a company’s own employees who are involved in the scoping of service requirements, procuring services and then managing the resulting plethora of service providers and deliverables as they go about their business.  This allows an organisation to maintain an element of ‘perceived control’ over service provision and ensure that it is in line with their unique requirements and business culture.

This approach does have its drawbacks however.  Due to the wide range of specialist skills that are required in the delivery of a professional FM solution, many companies find that their own staff lack the skills that are required to scope, procure or manage all the services effectively.  What CEO’s and CFO’s are looking for are commercially compelling proposals from suppliers, who are able to demonstrate innovation and improved efficiencies, which ultimately lead to cost savings.  Unintended consequences of this approach are often a poorly written scope and service providers who are appointed purely on the basis of price and compliance as opposed to capability and approach.
 
Organisations then have to intensively manage service providers themselves and enter a cycle of terminating apparent under-performers and replacing them through the same ineffective process.
Arguably, this first way is at odds with the principle objectives of outsourcing. Not only do you have to employ your own procurement staff (with the associated fixed costs), but a huge amount of time and resources are spent managing these service providers, in the provision of services your staff may not fully understand, against often meaningless KPI’s which add little value to the business.

The second way involves finding a solution to the above through the use of a specialist Facilities Management company.  Such companies employ specialists in the procurement and the management of service delivery and are able to source, deploy and manage service providers against a technically sound scope of services.  The aim of this approach is to allow you to focus on your core business practices and reduce the number of employees you would otherwise require to manage such processes internally.  Whilst this approach allows you to outsource FM in its entirety, it is not a silver bullet and cannot guarantee success.

Traditional FM companies do not self-deliver the majority of services that you may require.  Instead, they become the ‘middle man’ between you and the suppliers that your own staff would have appointed if you had followed the first way.  Arguably, the selection and management of them would be more effective, but a management fee will need to be paid for the privilege.  The perception may be that savings can be realised by adopting this approach, but it is important not to forget that both the FM company and the service providers also have profit margins.

Ultimately, there are still multiple layers of margin in the value chain – most often unseen.  Additionally, the use of an intermediary creates a gap between the service provider and the client.  This can result in poor communication down the chain and a lack of ownership.

As FM has evolved globally, a third way has been developed.  This has been in response to customers demanding greater value, seeking trusted partners as opposed to service providers and ultimately the realisation of true cost savings, without the risk of compromising service levels.

In the third way, forward thinking organisations have come to the fore. They have systematically acquired FM companies, other service providers and skilled individuals, bringing a full range of FM and specialised skills under one roof.  This has positioned them to ‘self-deliver’ up to 95% of the services that their clients require.  The real value has been created with this approach in that a layer of margin is able to be removed from the value chain, with the bulk of profits being made in the delivery of the specialised services, as opposed to the charging of management fees. Furthermore, an improvement in the performance of the service provider has invariably resulted.
 
The third way can only be achieved by an organisation that is structured for true self-delivery, with integrated management structures, common objectives and a single platform to measure performance delivery and provide meaningful feedback and business intelligence to customers.

This approach has become accepted as the norm in Europe and the US.  In contrast, very few South African companies have benefitted from the 3rd way by partnering with a strategic outsourcing partner.

The Servest Group is the largest, majority black owned Facilities Management company in Africa and is uniquely positioned to manage and self-deliver a full range of both hard (technical) and soft FM services to meet your requirements.  As the economy places external pressures on organisations to realise savings in order to maintain shareholder value, why not try the 3rd way?

Servest will review your current FM portfolio and advise on how we can engineer greater value for your organisation. Contact us on 0860 225584, or at www.servest.co.za

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