A decade and a half into the millennium our dependency on computers and technology continue to intensify and yet we are increasingly the world at war, addicted to fossil fuels that are choking our lungs and our oceans. Our citizens are deeply concerned about corruption and whether the economic system that has been with us since the industrial revolution is still relevant. All you have to do is look to the recent mistrust in our political system that has seen the rise of the EFF and a growing sense of unrest in our state and educational institutions. Even the so-called first world economies are not immune with the advent of a protest win for the Brexiteers and the election of the self-confessed ultimate outsider to the Oval Office. Populism is on the rise and set to challenge globalism as the doctrine of change.
Vulnerable present, uncertain future
Against this backdrop, the world of business is increasingly characterised by a vulnerable present with an uncertain future and we need to accept that this is a permanent condition. We are encountering change on a daily basis. This together with the growing burden of legislative and compliance frameworks, mean that companies increasingly do not possess all the skills or knowledge required inside their organisations to achieve all of their strategic objectives.
With more things to consider, additional workload, complexity, profound confusion and uncertainty in our lives, companies are realising that they cannot go it alone or keep doing what they have been doing and expect different results, after all, that according to Einstein, is the definition of insanity. For this reason, alone the demand for help, advice and innovation from outside the four walls of organisations will increase. In order to make full advantage this, organisations will need to develop a greater capacity for deeper relatedness and authentic partnerships with specialists that can help them achieve their strategic objectives.
Co-creation and Co-collaboration
This permanent vulnerability to change and uncertainty, demand a level of relatedness that is based on listening, authenticity, understanding and acceptance by enterprises that they may not have the requisite set of skills or knowledge inside their organisations to achieve their stated objectives. This strategic necessity should not be left solely to procurement to resolve.
Typically the outsourcing of FM is a complex issue, made more so by the need to transfer staff. Consequently, this needs to be treated delicately and with an understanding that the premier suppliers in the market not only have more knowledge of the needs but have more experience in these transactions. Our experience is that a cookie cutter approach to these transactions often involves a command and control behaviour that is born out of a lack of understanding of how to procure and manage service-based operations. The need to build long-term value based partnerships require companies to procure smartly. The all-too-familiar, master and slave behaviours that are so often involved in procurement led supplier relationships, will become increasingly obsolete.
To counteract this we need a realisation that a co-creation and co-collaboration mindset between the client and the outsourced entity is a necessity in order to meet these new challenges.
Companies that understand this new reality are rare but there is an emergent and necessary need to develop our capacity for a deeper relatedness and true partnership with players outside our organisations if we are to progress.
BS 11000 -Collaborative Business Relationships is already recognising this by providing a framework around how suppliers and clients can collaborate to find better answers to increasing more complex problems.
The world is getting smaller and globalisation is becoming more proliferate and as a result outsourced services will either become more commoditised or more highly differentiated. The good news for service providers is that all pointers indicate the rise in outsourcing over the next 10 years. Whilst many customer surveys indicate the primary reason for outsourcing is centred around cost savings, there is a growing school of thought that whilst important, price dominant procurement is applying an unhealthy commoditising pressure upon the existing service providers. Perhaps counter-intuitively there is plenty of evidence from surveys conducted in the USA, Europe and Australia that suggest outsourcing is also used as a strategy to achieve;
- Access to specialist skills
- Optimisation and Variablisation of fixed costs
- Innovation
- Process improvement
- Service differentiation
- Competitive Advantage
- Focus on Core Business
- Function out of control
- Liberation of resources
- Risk Mitigation
The FM outsourcing industry understands the need to reduce costs particularly in non-core services, after all, why would you want to pay more for those services? However, in order for price competitive tendering to be effective, it requires that the client has a degree of knowledge of FM to be able to list and define the assets, the maintenance philosophy, specification and service methodology in the tender documents in order to allow the tenderers to be able to submit prices. This is something that is becoming increasingly obsolete as companies struggle to deal with the challenges to their core business, let alone focus on the non-core elements, despite the magnitude of the costs involved.
We typically find that the non-core assets and those that service them have not received the funding the need nor the development or training. When precious investment is targeted at the core business it becoming increasing unlikely that these skills exist within most client organisations.
There is a need for organisation, therefore, to recognise that specialist skills exist outside and this means that there needs to be a more mature and collaborative approach to the procurement of complex service contracts such as Facilities Management. If this approach is adopted the result will be a far more transformational approach that will achieve a quantum leap in value generation than would otherwise have been achievable with a transactional approach. This approach would fully enable the Client to achieve their strategic objectives.
I will elaborate more on this approach in future blog posts.
This weeks Question; What has been your experience in the outsourcing of non-core services?
