Mitie recently released a report demonstrating that the FM sector will change dramatically over the next ten years as clients increasingly look to FM for advice on business operations. Martyn Freeman, MD of Mitie FM, discusses the sea of change in FM.
Outsourcing has become big business: it is now almost as big as the financial services sector, generating around 8 per cent of the UK’s total economic output and employing roughly 10 per cent of the British workforce. Despite this, it is still a relatively young industry, with many of the main service providers less than 40 years’ old. One of the earliest targets for outsourcing was the management of complex IT estates, but in the last three decades it has become received wisdom that hiring in a specialist to deal with most of the non-core issues of a business is both commercially and operationally more viable.
However, since the crash of 2008, corporate thinking has turned a sharp focus on every aspect of business operations, including whether the best value, as opposed to cost is being achieved. This spotlight is also raising questions among customers as to what is the most effective approach for FM – should multiple services be bundled together by a single provider, or is better value achieved by having a group of single service specialists who are best in class? And more importantly, what does the future hold for our industry?
Last year, Mitie commissioned an independent qualitative research programme among 30 senior property and FM directors of some of the biggest estates in the UK, to develop a closer understanding of the issues and opportunities they face, and what the future holds, particularly over the next ten years. What came back from that research went far deeper than we had anticipated.
For perhaps the last 20 years, companies have turned to outsource service providers primarily to help them to reduce costs, although, as many admitted, this has often meant outsourcing a problem rather than solving it. The decision to outsource is not always strategic and therefore, not surprisingly, neither is the solution that follows. Consequently, the FM industry as a whole hasn’t yet made it to the top table. Unlike large professional firms, management consultants, and even IT providers, FM has long been seen by its customers’ senior management as a commodity service that can be procured on a tight service level agreement and least-cost basis.
So what has to change to make the future different for FM? Almost without exception, interviewees in our research programme expressed a major concern that the current, procurement-led approach to letting outsourcing contracts is in danger of becoming outdated. Several of those we interviewed have recently let contracts, and in the words of one “decided to get away from counting the number of times the loos were cleaned, and focus instead on keeping the toilets clean”. This is moving the goalposts significantly from the current approach of detailing service levels and key performance indicators to the nth degree, and moving the discussion towards an outcome-based approach that encourages the best performance from the service provider.
Likewise, there was also a desire among our interviewees for a much higher level of involvement during the tender process between sales teams from services providers and their potential customers, to improve understanding of their businesses and how to best work with them. Many interviewees admitted that by focusing on least cost provision, ‘we get the services we deserve’. This heralds a potential opportunity for FM providers to drive a significant re-shaping, not just of the engagement and tender process, but the way we deliver services.
There is also a growing realisation that FM providers increasingly represent the ‘feet on the ground’ of an organisation. They are the people who deal with planned and unplanned maintenance, have to respond to the comments and complaints of the staff at operational level, and have their fingers on the pulse of their customers’ enterprises.
This gives facilities management providers and specialists an unrivalled opportunity to increase their value to organisations by using a mix of experience and feedback from customers’ sites and using the wealth of data they capture about operational costs and premises efficiencies.
By analysing this information and using it to identify opportunities for improvement and increased efficiency, FM providers can fill the gap between what is happening on the ground and the management information needed by the board to ensure effective operations. For example, FM providers can now use data about occupancy rates and how premises function and operate on a daily basis, to help property directors to realise the most effective strategy for property rationalisation and use.
This in turn will change corporate perceptions of FM as a simple commodity service to an integral part of business operations and effectiveness. It will also help break down the traditional silos that exist in many organisations between property and FM. The two are intrinsically linked, not just through the use of data, but also in how the workspace is used and managed. Combined with the increase in integrated contracts that encompass facilities and property management, as well as energy, this breakdown of silos is set to continue.
With factors such as technology, mobility and agility, driving an overall reduction in the amount of space per capita required by organisations, it’s also being recognised that these are just as cogent to the FM industry as to its customers. But the industry needs to examine how it can add genuine value rather than just deliver to an agreed service level. To achieve this, the FM industry needs to change its focus from the minutiae of contract terms and conditions to building programmes based on delivering a quality of services that goes beyond basic commodity delivery.
One trend is becoming very clear: FM providers have an unrivalled opportunity to demonstrate their increased value to organisations. It’s up to us to take these opportunities and prove we can have a beneficial effect on the strategic direction and profitability of organisations as a whole.
To download the research paper visit: www.mitie.com/themitiedebates