Procter & Gamble Takes Outsourcing Global
By Mike Lobash - October 2005 - Equipment Rental & Tools
William Reeves gets as much feedback on the facilities he oversees as his company gets from consumers who spend billions annually on products such as diapers, toothpaste and soap.
The difference is that building occupants don’t call a toll-free number if they have comments or questions. They call Reeves directly.
“I get the calls,” says the director of employee and workplace design and delivery services for The Procter & Gamble Co. “If something is wrong, they will find me.”
Reeves is in the midst of overseeing a five-year contract that has handed over Procter & Gamble’s facility management, project management and strategic occupancy services to an outside provider. The scope of the contract is mind-boggling because of its sheer size, the detail required to execute it and the diligence necessary to keep things on track.
“At the time we switched, people were pretty jittery and nervous,” Reeves says. “It was a huge deal with expansive parameters.”
Few corporations the size of P&G, a $57 billion company in fiscal year 2005, have outsourced facility management functions on such a scale. P&G’s service provider, Jones Lang LaSalle, oversees 14 million square feet of real estate at 165 sites in 60 countries. Fifty of those sites are in North America. Sites include the company’s corporate headquarters in Cincinnati, plus sales offices and research facilities around the world. Limited services are supplied to manufacturing facilities.
“The relationship is working very, very well,” says Reeves, who has overseen the contract since it was inked in June 2003. “It has progressed over the past couple of years and I expect it to get better.”
The agreement between the two companies covers three distinct areas: facility management, project management and strategic occupancy services. Facility management services include such things as building operation, security, mail delivery, dining and car fleet operations. Under project management services the contract gives Jones Lang LaSalle oversight of a $70 million annual capital budget and responsibility to deliver more than 1,000 projects, including construction of a new country headquarters in Moscow and an office building in China. Strategic occupancy services cover such issues as maintaining data for occupancy cost and utilization reports and development of occupancy options for P&G’s real estate master plan.
Jones Lang LaSalle’s spending on real estate operations came in $1 million under budget during the first year of the contract.
The impetus for P&G’s outsourcing strategy can be traced to the formation of the company’s global business services department in 1999. One of the largest and most far-reaching shared services organization in the world at the time, Global Business Services (GBS) consolidated more than 70 services, including facility management, real estate, accounting, information technology and human resources.
The restructuring allowed P&G to centralize certain management functions, as well as budgeting, Reeves says. Four regional real estate managers — one each in North America, Latin America and Asia/Pacific and a fourth overseeing Europe, the Mideast and Africa — were positioned to report to a global manager. The structure allowed the company to outsource various facility functions, including things such as dining. Still, the reorganization left P&G managing many vendors supplying different services to widespread locations.
“The core of P&G is consumer goods. Our main mission is to develop superior brands at superior value for our consumers,” Reeves says. “We wanted to reduce the effort that we were putting into running our facilities so we could focus more on our core work.”
So, two years after the restructuring, P&G began searching for a single provider to manage a majority of the services — including facilities, accounting and information technology — being provided by GBS. An eleventh-hour change, however, had the company shift gears, looking instead toward a collection of “best in breed” outsourcing providers capable of meeting a set of service needs.
At first, Reeves says, he wasn’t sure P&G would find a provider that could operate on P&G’s global scale as well as take on the company’s strategic planning initiatives. Any potential provider would have to supply a level of service at all of the company’s facilities that met or exceeded the existing service levels, be right for the business, be a good employer for P&G’s facilities employees, provide global account management and be a good cultural match for P&G.
“We know from operating shared services that you can have a very good global structure but that you have to execute very, very well locally,” Reeves says.
Although Reeves didn’t find a provider able to immediately step into the role P&G had outlined, he did find one willing to try and one that was honest about its strengths and weakness.
Bill Thummel, the account executive assigned to P&G, says Jones Lang LaSalle was upfront during the bidding stage about what it could do immediately and where it would have to build additional strengths.
“We were perfectly transparent on the structure we had in place,” he says.
As part of the competitive bid process, Reeves says, the company asked Jones Lang LaSalle and other bidding companies to visit a sampling of sites they would be managing and to develop specific plans on how they would manage the location. In addition, Thummel says Jones Lang LaSalle asked if its people could view other P&G facilities and talk with more employees to develop a better understanding of the company and how the provider would work with its eventual partner.
Those meetings proved to be a key step in the process because they not only gave Jones Lang LaSalle the opportunity to develop management plans, but also allowed P&G to signal employees that changes were about to take place.
Although there were plenty of questions to be answered during that six-month period when Jones Lang LaSalle was visiting specific facilities, Reeves says the time gave him and others a chance to answer employee concerns and to see how their soon-to-be partner operated.
“By the time we decided to go ahead with the agreement, we had a pretty good level of confidence that it would work,” he says. “That process was very thorough, so that when we did make a decision, it made sense to people. Because we had open communication and tried to create transparency, the switch was easier for people.”
Reeves says nearly all of the 550 P&G facilities employees kept their jobs and became Jones Lang LaSalle employees once the company signed the outsourcing partnership.
Even now, a little more than two years into the contract, more than 98 percent of the people who had worked for P&G prior to the outsourcing agreement have chosen to stay and work for Jones Lang LaSalle, Thummel says. At the time of the transfer, 33 former P&G employees became site leaders; since the transfer, an additional 20 people have been promoted.
P&G and Jones Lang LaSalle settled on a parallel management structure. Reeves and Thummel have offices in the same building. P&G still maintains its regional managers, who now work with regional managers for Jones Lang LaSalle.
Reeves says each region has between four and six P&G employees in place to perform budget forecasts and oversee the outsourcing relationship, among other things. Jones Lang LaSalle has taken over the day-to-day management of the facilities and sets performance standards for subcontractors they hire.
Reeves says the intangible aspects of the contract — communication, honesty, trust and respect — are every bit as important as the quantifiable aspects.
“It’s important to have the right account manager,” he says. “This business is a people business. If you can sit next to the guy, if you can talk with him, then you have the makings of a very good relationship.”
P&G generated first-year operational savings of $800,000, a portion of which Jones Lang LaSalle retains, as agreed upon in the contract. In addition, P&G monitors key agreed-upon performance indicators. Some of the indicators monitored are system reliability, cleanliness, occupancy rate and population tracking data integrity, climate control, and move effectiveness and satisfaction.
“A portion of the Jones Lang LaSalle’s compensation is at-risk,” Reeves says. “We’ve found that it’s a good motivator to have money on the line. It’s really the same way that we operate with our customers – if we continue to provide superior, competitive products, they will continue buying our brands.”
What was unusual about the performance measures for Jones Lang LaSalle was the emphasis P&G placed on public relations and image. In fact, it was so important that P&G identified it as a critical performance indicator, placing it on par with asset reliability and corporate risk management. Reeves says P&G sees the consumer — the public that buys P&G’s products everyday — as P&G’s boss. Therefore, P&G’s public image is critically important globally and in the communities where it has facilities.
Thummel says that in his 18 years in the industry, he has never seen a company place as much importance on public relations — or punish breaches so severely.
“It’s one of the more important performance indicators in the contract,” Thummel says.
Jones Lang LaSalle has achieved 100 percent of critical performance indicators and 78 percent of key performance indicators.
For Reeves, his customers are those who work in and use P&G’s buildings. But in addition to seeing them as employees, business partners or colleagues, Reeves gauges the performance of his service provider by taking the pulse of P&G employees and visitors.
He points out that a P&G senior vice president commented during a recent review that the service level at facilities has improved. And that a series of in-house assessments have shown that employee ratings of services are higher than before the partnership.
“Everybody who walks in and out of a building is a monitor of services in one way or another,” Reeves says. “I’m not going to tell you we didn’t have our bumps and bruises along the road — we did have them — but our partnership continues to grow and strengthen and the overall the levels of service are up.”
Which means that those direct calls to Reeve’s office are down.
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