Studies Show Shifting Reasons for Facility Outsourcing
Reducing operating costs is now seen as the No. 1 rationale for outsourcing.
The road to outsourcing is paved with good intentions to provide quality facility management services — at least in the beginning. Typically, at the outset, there is a discussion generated either by the facility management organization itself or senior executives to consider externally provided services as a means to enhance or improve the quality of facility management services. In fact, looking back over facility management outsourcing history underscores the quality rationale as one of the most compelling reasons why companies elected to move to an outsource relationship. Over time, however, priorities have changed as corporate motives shifted to cost control and reduction as a driver for outsourcing. This apparent change in strategy has left many facility professionals wondering if quality facility management services are now completely off the corporate radar.
One of the early studies on the corporate rationale that found quality service as a compelling driver for outsourcing was the 1999 IFMA Research Report (#20). That study identified access to specialty skills as the number one reason to outsource. Quality also was an important consideration, although it fell a little further down on the priority list. But even at the time that survey was conducted, when the topic of quality was all the rage in corporate environments, reducing or controlling costs ranked second only to accessing specialty skills as a critical reason to outsource.
Shifting to the present, findings from a January 2018 KPMG LLP study show a slightly different picture of the factors that drive organizations to outsource facility management services. From the KPMG findings there appears to be no slowdown in outsourcing efforts as companies continue to look at outsourcing facility management services as a means to resolve many issues, but there are different priorities pushing companies to outsource in 2018 than there were in 1999. The KPMG survey shows that reducing operating costs has moved to the head of the list as the top driver for outsourcing decisions, and the report states that the operating cost motive has remained the top priority for the past three years. More of the priorities listed in the 2018 report have a financial basis than they did in 1999. Access to external skills and talent has dropped from the top of the list in 1999 to the next to last reason outsourcing is entertained. The topic of quality as a driver for outsourcing does not appear on the priority list in the 2018 report as a separate category, but the second and third items relating to improvements in delivery, operating models, and process performance all contribute to an end result of delivering quality facility management services.
Where does this leave the discussion about quality, which continues to be a pressing issue for facility managers? How do facility managers satisfy the growing need to use outsourcing as a mechanism to offset financial challenges, while still maintaining the customer service and quality orientation they have been striving for since the inception of the profession?
How the dialogue gets muddled
The conversation about establishing a strategic sourcing relationship typically commences with a focused discussion about maintaining or improving service delivery. The discussion usually evolves into the topic of how to improve the quality of service delivery, and hence the outsourcing suggestion is born. In the early days, when outsourcing first became a topic of consideration, facility managers sometimes faced a dilemma with respect to quality. Occasionally they faced a customer or executive population that was reluctant to outsource because they feared loss of quality service. On the flip side, all too often there was a big push from this same audience to improve existing quality of service delivery centered solely around outsourcing as the only option, without much thought about what constituted quality service delivery. Facility management organizations either had to educate customers and executives about how quality service delivery could be maintained or improved through outsourcing given the right framework for the relationship, or they had to make the case that without a clear description of the level of quality expected from an outsourcing relationship, the switch to an external provider might not be the desired solution.
The reality of the present is that, even though quality service is touted as the ultimate goal, as facility managers traverse the long road that actually leads to outsourcing, the tenor of the outsourcing conversation changes. What once was a discussion about improving or stabilizing quality service quickly shifts to one about cost reduction and cost control. This emphasis tends to overshadow the quest for quality that initiated the conversation. It is important for facility managers to craft a discussion around how improving delivery, operating models, and process performance — all sound components of quality — leads to the end result of better managed facility management costs.
If we read between the lines of survey data, the bottom line for outsourcing consistently has been about reducing costs, but that goal can be achieved in numerous ways. Outsourcing facility management services doesn’t necessarily have to be an either/or situation with respect to quality. There are approaches to the outsourcing process that allow facility managers to strike a balance between the desire for sustainable quality service delivery and the goal of controlling or even reducing overall costs. The strategy and process facility managers adopt to secure an outsourcing relationship is the critical element to striking the balance.