Planning and Managing the FM Role: Outsourcing, Strategic Change, and Efficiency

1. Unit 3 Planning and Managing the FM Role • Discusses issues that the facilities manager will require to undertake - whether the FM services that they provide (or manage) are delivered using an in-house, an outsourced, or a “mixed economy” approach. • Examines the strategic planning method for deciding on issues such as :- • the outsourcing of FM services, • the return to in-house provision of previously-outsourced FM services • the manner of streamlining FM provision • the role of FM in strategic change management.

2. Planning and Managing the FM Role • Unit deals predominantly with issue of outsourcing • Outsourcing responsibility lies with FM • FM responsible for planning, management, appraisal and review • This involves both operational & strategic management

3. 5 models of FM(Peter Barrett & David Baldry) • The office manager model- wherein FM is not usually a distinct function, and is undertaken as part of general duties e.g. office manager • The single site model- wherein a separate FM department occurs, but is located at just one site • The localised site model - wherein the FM function is decentralised to a number of sites • The multiple site model - which occurs with large organizations. The FM function is centrally organised with the strategic issues being dealt with at the head (FM) office • The international mode - which is similar to the multiple site model.Here the FM policy is made at a single location and applied globally. Otherwise local FM departments may be quite autonomous.

4. 5 Models for FM

5. 5 Models for FM

6. 5 Models for FM

7. 5 Models for FM

8. Planning and Managing the FM Role • Service Level Agreements – cost formulae and performance evaluation criteria • Understand the rationale for in-house, outsourced or combination arrangement for FM • Examines the issues involved and how to manage arrangement effectively.

9. Modes of FM organization • Contract incorporating SLA formalised the outsourced arrangement • SLA enables client to monitor the quality of the service as identifiable and measurable facets of performance are specified. • The client able to plan for and take remedial action if the agreed service level is not achieved or sustained. • Useful to include an appropriate audit framework for the service as part of this management cycle.

10. Planning for Managing FM • Essential to distinguish between core capability and non-core capability. • Because of uncertainty (difficulty) on the identification of core competencies – approach this from general principles. • Note the act of strategically planning & developing of the FM business is rather rare. More demand led than planned for- reactive. • No general or standard practices or processes across industry – presence of variations in approach. • The processes have not yet been defined to a level of repeatability across the profession and the industry. • Result of the above - limitations on how generalised any management principles for FM can be.

11. A model of strategic management Enterprise strategies Internal Comparative Adv Consider Altn strategies Resource & Structure Policies & Admin Eval of results & strategy Env threats & opportunities Choose strategy Enterprise Objectives feedback

12. Linking Strategies and Core Competencies(Schoemaker) • Phase 1: Generating broad scenarios of possible futures that your firm may encounter. • Phase 2: Conducting a competitive analysis of the industry and its segments • Phase 3: Analysing the company’s core capabilities • Phase 4: Developing a strategic vision and a set of strategic options • Phase 5: Implementing strategic vision or strategic options

13. Linking Strategies and Core Competencies(Schoemaker) • Phase 1: Generating broad scenarios of possible futures that your firm may encounter. • Identifying possible scenarios for changes • Establish the time frame for each change • Consider the scope and stakeholders’ views • Consider company focus for each scenario – SWOT and Trends. • Gauge level of risk and uncertainty & build level of confidence in overall analysis

14. Linking Strategies and Core Competencies(Schoemaker) • Phase 2: Conducting a competitive analysis of the industry and its segments • Company focus competitive analysis – market size, product strength & organizational strength • Examine distinct market segments where issues arises • Considers other stakeholders’ perspectives (clients and suppliers)

15. Linking Strategies and Core Competencies(Schoemaker) • Phase 3: Analysing the company’s core capabilities • Identify each core competency • Analyse one by one vis-à-vis market competitive analysis & its segments and the scenarios identify under Phase 1.

16. Linking Strategies and Core Competencies(Schoemaker) • Phase 4: Developing a strategic vision and a set of strategic options • Rank the set of core competencies identified • Develop a strategic vision and a set of strategic option

17. Linking Strategies and Core Competencies(Schoemaker • Phase 5: Implementing strategic vision or strategic options • Implementation plans for the strategic options identified • Consider the potential blocks and opportunities • This approach useful for demonstrating value eg. • Useful tool for appraising changes in FM service provision (e.g. extent, source, disposition and sourcing strategy, or interfacing management); business process change; and streamlining/integrating of support which can used for decisions on procurement options – useful for decision making

18. Case For Outsourcing • Scope for the following improvement: • increased efficiency • service quality • accountability • value • decreased head-counts, cost and risk

19. The case for outsourcing summarised • Reduced overheads, variable overheads • Transfer of overheads from fixed to variable status • Removal of non-core operations allows management and investment focus on the primary business activity (the core process) • Savings in office space and equipment provisions • Staff cost reductions possible • Removal of uncertainty about future costs of maintaining effective and competitive business support • The risk of costly errors arising from ignorance of the non-core practices should be reduced • Investment risk transfer • Continued benefits on the core organization by transferring the overhead costs from a fixed cost for the core company to a variable cost which is bought in from the outsourced service provider on demand • Excellence of service can be achieved immediately • The service provider will be dedicated to that activity (no learning curve or division of interests)

20. The case for outsourcing • Access to market competitiveness and technological currency in the service provision • Outsourcing could allow a downsizing of the property commitments • Opportunity to get the company service provision out of a rut • If properly managed, can stimulate new solutions to problems from the mixing of different approaches • Scope for downsizing • Increased options for organizational re-structuring through property and HRM flexibility • Access to specialist knowledge • Wider career scope for staff • Good in a fast-developing and/or highly technological area • Increased efficiency • Decreased headcount • Decreased cost of service • Access to world class support • Transfer of worry and risk

21. Case Against Outsourcing • 1997 BIFM study found in 1997 found reports of inefficiencies, and shortfall in the anticipated cost savings and the problems with benchmarking the performance of FM • Risk of supplier’s failure and other performance create vulnerability to client’s core business. • Sell-offs of capital equipment, space, or other specialist provisions could create a financial barrier to the re-absorption of the outsourced operation.. • Possibility of over-reliance on support services that are critical to the core process – subject to manipulation by supplier to advance his interests • Concerns on possible leaks of sensitive business information. Suspicion creates a gap • Clash of priorities situation where provider may not accord right priority to clients operations. • Contractual arrangement also creates uncertainty which has impact on the risk to the competitiveness and security with regard to client’s processes.

22. Case Against Outsourcing • Service provider may fail to invest in improving technology because of contractual arrangement and commercial reasons. • The removal of non-core operations can lead to a divorcing of the support provision from the core process which may result in a divergence in company culture, ways of working, and business objectives and inhibit the harmonic co-operation of the core and non-core operations. • More complicated if there are multiple outsourcers. • There will also be a reduced strategic input available from an external support company. • Fragmentation of services and loss of economy of scale and synergy • Accountability and assessment standard depends on SLA which is subject to difference in interpretation. • Difficulty in assessing outcome value of outsourcing.

23. Outsourcing and the Core Business • Issue depends on significance of outsourcing for the wider business. • Hence the more widespread it is the more is its significance • Operational significance as well as strategic significance depends on the robustness of the current core process and the scope for changing this • There will also be the perspective of the FM business as a whole – whether interpreted as a free-standing strategic business unit (SBU) or whether as a TFM service provider business. Note: Rare for core business managers to recognise FM as an SBU, or even to recognise the strategic value (or alternatively its opportunity cost) of FM for the core business process.

24. Technical facilities management function Planning the Procedures and Strategically Managing the Technical FM function – operation management • Determine the service boundaries and nature of work to be outsourced • Specify the service specification • input & output specification • Implementation plan for managing the outsource provision • A review provision to be incorporated in the plan • Planning for the end of contract • Contingency plan

25. Technical facilities management function Strategically managing the Technical facilities management function: Adler et al 3-element cycle

26. 4 Stage organizations • The stage 1 organization – typified by outdated facilities and equipment, fad acquisitions, the absence of adequate budgeting of training requirements and the use of capital allocation fixing as a (financial) limiter. This is the isolated FM organization. • The stage 2 organization – Strategically unimportant, but labour-oriented facilities acquisitions, with facilities-related considerations made in an isolated or reactive manner without consultation. This is the reactive FM organization. • The stage 3 organization - The proactive organization that considers facilities using detailed implementation planning, long-term justification of facilities portfolios based assessment of the tangible and intangible benefits. This type of FM organization could make a strategic input to the core business – but only if the core business is proactive. • The stage 4 organization – The integrated organization that builds ahead of demand, looks to the competitive advantage when planning and purchasing facilities and uses facilities to enhance the business process (including business communications).

27. Posture/ Direction

32. Alder et al 4th Refective Stage • Collect and Analyse Feedback • Purpose – to use in the cycle assessment and refinement of policy and the technical function ability of the FM Service • Issue raised – how to measure functional and managerial performance (to be covered in another unit)

33. The Elements of Strategic Management (Alder et al) Posture/Direction Mission Objectives Strategic plan Policies Processes Resources Linkages Feedback Adjustment Process Opportunities/Threats Strengths/Weaknesses

34. FM of the Service Control Team Function • At high level, role of team is same for in-house, partially outsourced or fully outsourced • Detail of role differs and dependent on organizational culture

36. FM of the Service Control Team Function • Planning & managing the Relationship • Technical provisions including personnel requirements – tendering, service requirements etc • Handover provisions form in-house to outsource/one provider to another – objective seamless/minimum disruption • Planning and managing the financial & administrative aspects

37. FM of the Service Control Team Function • Overseeing the Ongoing management • Planning the service quality level and specification • Linking measurement of performance to payment • Mechanism for revision and operating the service specification

38. FM of the Service Control Team Function • Setting, monitoring & updating quality measures • Setting up of monitoring protocols and procedures and set the stage for audit

39. FM of the Service Control Team Function • Auditing the process Involving identifying the: • Service parameters • Criteria and the selection of metrics • Monitoring & data collection mechanisms • Design of review & response mechanisms • Auditing of the results and the monitoring process itself

40. FM of the Service Control Team Function • Retaining the control of activities Not Devolved • Boundaries between functions outsourced & retained in-house are well defined & managed to ensure • Responsibilities are adequately covered • No conflict of technical operations or with policy planning • Allows performance to be assessed appropriately

41. FM of the Service Control Team Function • Overseeing the handover at the end of the contract • Important to consider the possibility of taking over or handing over provisions due to: • Failure or shortfall in performance • Business continuity planning may change requirements – step up service provisions may create problem

42. FM of the Service Control Team Function • Overseeing the handover at the end of the contract – Options to smoothen the process: • Allowing new FM provider pre-contract access to the process (2 months prior to commencement) • Contractual arrangement for existing FM provider to train incoming FM provider • Transferring of staff to incoming fm provider • Option to future re-absorption of the FM service function • Ensuring the primacy of both the core business & wider FM objectives are retained and concomitant with the service procurement option

43. FM of the Service Control Team Function • Managing any partnering agreement involved • Important to understand the intent of the partnering and the role of the partners in the partnering arrangement • Expects a more cooperative and harmonious working relationship

44. FM of the Service Control Team Function • Managing a relevant level of expertise in the management team • Critical to establish, monitor & revise the service level specifications in accordance with changing business needs • Allows managing the specialist service from the a position of knowledge.