Going the distance
Five communication strategies to hold an outsourcing relationship together
The ink has dried on the prenuptial agreement, the knot is tied and the short, but sweet, honeymoon is over.
If facility executives expect the marriage between their organizations and outside service providers to last, they should be ready to maintain communication, making it the centerpiece of a solid relationship.
The importance of communication cannot be overstated. In a May 2004 study to assess experiences and opinions about outsourcing failures, the Outsourcing Center surveyed more than 300 buyers and providers around the world. Poor communication ranked as the third-most frequent cause of outsourcing failures. Both providers and buyers indicated that without well-conceived and structured processes and mechanisms for frequent and open communication between a customer and a service provider, an outsourcing relationship runs the risk of significant deterioration. When communication breaks down, the relationship is doomed.
Facility executives who have built favorable outsourcing relationships know that it takes grit and perseverance to establish good communication links — links that work effectively to preserve the integrity and accountability established by the agreement, plus links that create the flexibility needed to adjust to changes in the facility management business environment. Successful facility executives use the following as key communication strategies.
1. State Expectations Explicitly in the Contract
It is never a good idea to have an FM outsourcing agreement that is steeped in broad philosophical guidelines in an attempt to allow for flexibility. The contract needs to spell out expectations and how the provider will meet them. Discussions about how well the provider is performing, not what the provider should be doing, should be the basis for communication throughout the life of the contract.
2. Establish Multiple Layers of Management with Responsibility for the Outsourcing RelationshipThe relationship needs to be cultivated and monitored throughout the organization. There should be at least three levels of management with responsibility for nurturing the relationship and meeting regularly with representatives from the provider. These levels consist of a functional and customer advisory group, a contract manager, and a facility executive.
Functional managers, often times midlevel facility managers, are the day-to-day contact point for the service provider and are responsible for making sure the outsourcing agreement works on an operational level. These functional managers have multiple agendas for making sure the relationship succeeds, so this is where the most flexibility for communication is needed.
Functional managers usually establish a customer advisory group to stay informed about problems, issues and concerns with the service provider. The group also lets the functional manager know what improvements the service provider has made. Establishing such groups allows the functional manager, whose job might depend on the performance of the service provider, to obtain feedback, a critical link in the communication chain connecting the service provider and the organization.
In sophisticated organizations, functional managers are called relationship managers, highlighting the need for ongoing formal and informal dialogue between the organization and the service provider. These managers have daily, informal conversations with the provider’s on-site manager and weekly, formal meetings with the advisory group. Both the manager and the advisory group meet with the provider’s on-site operations team on a monthly basis, at a minimum.
Contract managers negotiate agreements with service providers and sign the contract. Contract managers meet periodically, about once a month, to make certain the agreement is working from a procurement standpoint. They manage by the contract. These managers rely on input from operational and senior managers for issues, problems, concerns and positive feedback regarding contract terms. The focus of their meetings with providers is on the contract terms and conditions that include such things as additions and changes to the scope of work, fees, payment structure, and requirements for reporting.
The final authority rests with the facility executive who is responsible for the ultimate success or failure of the entire deal. Facility executives receive periodic, usually monthly, management reports from functional managers and meet weekly with them for a live status report. Facility executives are the liaison to the provider’s corporate representatives, and they should make certain there are contractual provisions to meet with the provider’s senior executives on a quarterly basis. These quarterly meetings concentrate on strategic business issues that have direct bearing on the service provider’s ability to meet expectations and are used as the forum to air concerns about policies, processes and personnel.
3. Create an Open Environment
The best marriages work when both parties share information and feelings. This environment is the key to understanding the partner’s needs, values, goals and objectives. Similarly, a service provider must have access to certain business information maintained by the organization to understand and respond to needs, identify opportunities for strengthening value-added services and positively affect a facility department’s bottom line. The extent to which this information is available and communicated to the provider dramatically affects the provider’s ability to serve the organization. The goal behind this sharing is to stimulate initiatives of joint value that benefit both parties.
Contract documents stipulate how and when this information will be shared. Organizations often give the provider free reign to review the same information that the organization’s facility staff is using. In these cases, the provider has access to customer satisfaction survey data, project schedules and benchmarks, management directives, internal staff correspondence and other information that provides insight into the inner workings of the organization. Likewise, the provider should open its client books to the organization to share comparable information. Sometimes, the open-book concept extends to open-book accounting, which allows both parties to understand and monitor the cost structure of the other party.
Not only does the open-book communication strategy strengthen the exchange of information between the provider and the organization, it also demonstrates the highest form of trust and confidence in the relationship. Facility departments want to give providers the tools they need to position the department as a leader in the company, which means facility executives and staff have to be open about sharing information. The provider also should give the facility executive data and information that demonstrate the success of the effort to senior management.
4. Establish Emergency-response Procedures
Facility executives and service providers should establish how both parties will handle emergencies. There should be a structured procedure that allows the facility executive to communicate the nature and severity of an emergency. There should also be a predetermined process according to which the provider can respond.
One tested approach is to establish a coding system that signifies the type of problem and an automatic course of action associated with that type of problem. One example is to use a color-coded system that identifies the nature of the emergency.
Code Red might mean an emergency condition, such as a fire or flooding, that could affect the health and safety of building occupants. The system should identify responses and how long the service provider has to carry them out. Code Blue might mean an urgent situation, such as a sanitation or restroom problem, that affects building occupants’ ability to perform their jobs.
The facility executive should identify an in-house staff member to be a single point of contact, with backups and alternates, through whom all emergencies are communicated. Facility executives should consider assigning a specific code designation to a particular contact. That way, providers know immediately the severity of the situation when somebody contacts them. The most expedient methods of communication should be used, including cell phones, pagers and other transmitters, followed up by land line or e-mail communication.
Likewise, the service provider should create a designated respondent using the same code classification system. Individuals from both organizations should meet periodically, perhaps quarterly, to review and update procedures. Once every six months, facility executives should test the system using an emergency drill.
Facility executives should publicize the emergency procedures internally for the facility staff and for the service provider’s on-site team. They should also post emergency instructions and make them available to building occupants and to the service provider’s corporate representative.
5. Establish Procedures to Resolve Disputes
At the onset of the agreement, the organization and the service provider should feel confident in the measures in place to resolve disagreements. The goal of any such system is to resolve disputes quickly, fairly and quietly. Dispute-resolution practices established in the contract by the organization and the service provider should include ways to solve conflicts using internal and external resources, if necessary. Effective communication channels are essential to solving problems before they reach crisis proportions. The process for resolving disputes with service providers is evolutionary, starting with internal alerts and ending with external arbitration.
Internal alerts, the first step, should be exchanged between the organization’s functional manager and the provider’s on-site manager through daily meetings. Such informal conversations provide ample opportunity for each to alert the other to problems, issues and concerns on an on-going basis. This informal dialogue can help correct small situations before they become big ones.
The second step in the process is to use weekly meetings to present more formal status reports on problems. The meetings are also the appropriate forum for documenting situations that are being resolved or need further brainstorming by the entire team. These meetings result in formal, written status reports that assign specific responsibility for corrective action to individuals or groups. These action plans are tracked by managers from both sides and reported on at subsequent meetings so they either can be crossed off the list when the issue is resolved or moved to the next level in the dispute-resolution process.
Problems that have not been solved in the first two steps should be documented in formal management reports prepared by the provider’s on-site managers and the organization’s functional manager. The reports are forwarded to senior executives of both parties’ organizations. Problems that have been resolved are reported and those that require senior-level intervention are identified.
The fourth step in resolving disputes is to have senior executives from both the organization and the service provider meet. Contracts establishing the relationship between the organization and the service provider should contain provisions for such meetings. The organization’s contract manager should be present.
If the problem is not solved after exhausting the first four steps, the final stage is to take the dispute to a mediator or arbitrator. This level requires outside, professional assistance. It is important to have contract provisions stating that both parties have agreed to mediation followed by binding arbitration intervention if internal, informal and formal processes fail to reach a mutually agreeable conclusion to a concern.
Facility management outsourcing is largely a knowledge-based relationship. As a result, complex human factors affect the way each side conducts business. Just as in a marriage, the organization and its service provider have to work together to build a relationship on a foundation that consists of shared values, a high degree of trust and respect, and the ability to air and resolve differences openly.
Stormy Friday is president of The Friday Group, a facility management consulting firm specializing in organization development, strategic sourcing alternatives, and customer service and marketing strategies.
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