FM Clinic: What lessons can FM clients take following the demise of Carillion?

THE BIFM CEO’S VIEW
LINDA HAUSMANIS,
CEO, BIFM

“When America sneezes, the rest of the world catches the cold.” This was famously said of the 1929 stock market crash. Almost ninety years later, in January this year, Carillion collapsed fatally; but the metaphor survives and the impact on the construction and services giant’s customers, suppliers and clients is profound.

What lessons should the facilities management industry learn from this episode?

Since the collapse, BIFM has established an ‘experts group’ to help us to understand the issues and to build a cogent and evidence-based case for a value driven model of FM service provision, however sourced.

The conclusion of the Group’s recent meeting ahead of the current PACAC Inquiry into public services delivery sourcing, neatly sums up the key issue: “While it appears that most of Carillion’s loss-making contracts were not facilities management contracts, the company’s collapse has highlighted the problems which very low margins and outsourcing to a small number of large contractors can cause.”

The Group added that the Government can and should reduce risk by changing buying patterns and reducing reliance on megaliths.

In my experience, if something is going wrong with an FM contract then the seeds of the problems may well lie with the procurement of the service. The boards of many astute client organisations recognise this but more needs to be done to reduce risk by raising the competence of the hiring teams in an ever-changing landscape.

Prevention is always better than cure, so one of the most important lessons already being learned from this devastating episode is an overarching need to upskill and professionalise those who procure and then manage contracts. This is particularly important for those in Government managing public service contracts on a scale so extensive that their work has had a profound effect on our industry’s development and the continuing downward pressure on FM operational costs. This obsession with cost has failed the industry since it has led to systematic under-appreciation of the value which excellent FM contributes.

Growing expertise in procurement and contract management are key workstreams in BIFM’s plans to professionalise further the FM industry. Developing expertise in strategic sourcing and understanding methods such as collaborative partnering are just two examples of approaches to this subject that might mitigate risk in service delivery. These skills are intrinsic to the professional standard which BIFM expects all professional facilities managers to achieve.

In the immediate aftermath of Carillion when so many were asking why the giant continued to win government contracts despite the warning signs, we learned a great deal about the Government’s own risk mitigation strategy. This is based on spreading risk via a partnership model, so that a contract’s delivery won’t fail in the event of a major suppliers’ failure. This has saved many jobs and while we must be thankful for that, UK organisations need to learn the key underlying lesson – they are dependent on FM services not only to improve their productivity, but to continue to operate at all. The time has come to invest in good FM, not just to seek lowest cost.

Prevention is certainly better than cure and we need to make the case for a value-based approach and we must advance our case robustly for a better focus on professional procurement practices and skills. 

THE WORKPLACE EXPERT’S VIEW
ANDREW MAWSON,
FOUNDER OF ADVANCED WORKPLACE ASSOCIATES

For years I’ve been hearing FM’s say “that as long as there are no complaints about FM, we are doing a good job.”

Sadly, that is the articulation and perception of FM value that has pervaded the world of FM. Worse still, FM as a term has become synonymous with basic services and outsourcing. Consequently, big corporations and public sector organisations have let their procurement people rule the roost in the procurement of facilities management services and let the whole thing become about pure cost, often without considering value, ‘employee’ experience or service resilience.

Organisations like Carillion have become accomplices in the whole downward spiral of value, fighting each other on ever lower and lower margin contracts with longer and longer payment terms, many hoping that they can make a buck on projects and changes, mostly without success.

All of this has led to an overall perception of ‘FM’ being the poor relation to ‘Corporate Real Estate’ CRE, which is dragging the FM industry down.

On the client side, the more enlightened FM and Real Estate leaders have been complaining for years about lack of innovation from the FM suppliers. Whereas the supply side has tended to focus on ‘operational innovation’ the businesses they have been serving have been looking for game changing workplace innovation that can change their business fortunes.

But the news is not all bad because many leaders in client organisations are beginning to wake up to the workplace experience as a source of untapped value and in organisations where the ingenuity of bright brains matters, the workplace is a new battleground for the recruitment of talent and its productive deployment.

This game isn’t about FM or CRE it’s about designing and managing workplace experiences that align to organisational personality, respond to business drivers and enable individuals and communities to do their best work every day wherever they are. It’s a holistic business led process….This is where FM companies should be putting their investment in order to deliver higher order business value, but to do this they are going to have move up a gear recruiting and training professionals who can make a difference.

Right now, FM Companies are all ‘talking’. About ‘workplace’, agile working, Internet of things, Big-data. But talking isn’t going to fix the problem. What’s needed is a radical shift into higher order service that companies will be prepared to pay more for. We have to change the mood music.

What can we learn from Carillion’s demise:

• FM companies are going bust soon if all they focus on are basic commodity services and are seen as ‘just deliverers of low grade services and labour’ whilst fighting to the death with each other for low value contracts.
• In company FM’s need to assert themselves in the procurement process to stop procurement functions (dominated by cost alone), driving the industry to oblivion, which will only lead to less choice.
• FM is tarnished and needs a make over. I wonder if even the name FM is too tarnished to ever be synonymous with higher value services?
• Supply organisations need to build on their operational roots to develop higher order, higher quality services. This may mean totally re-positioning those companies or setting up subsidiaries with very different skillsets, branding and positioning. The CRE companies are net winners if they don’t.
• We need a new generation of leaders in FM with cross disciplinary skills, business understanding with the confidence to play at senior level. We need new university and business school courses to generate these.
• We need a new professional approach, like the IT industry which has ITIL as a cornerstone of its professionalism. The ‘Workplace Management Framework www.wmframework.com which is being adopted in the US is needed to create a new language with for a new kind of relationship with client organisations.

A lot to do! But who is taking the lead?