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Deals & Dealmakers

Outsourcing giving real estate firms purity of purpose

By Richard J. Hayes, managing director,

North America, Mace Macro
The decision to outsource services is an admission that your organization will be better served by securing services from best of breed providers rather than internal resources.

RICHARD HAYES
RICHARD HAYES

This decision underscores the need to focus on core competencies in order to stay true to your mission statement while coming to the realization that survival depends on staying “ahead of the curve” regarding “mission critical” business services.

The ability of an organization to attract and retain top talent to focus on these “non core”, but critical, business services is dependent on many factors which often compete with the organization’s ability to stay true and relevant in the marketplace.

The relinquishment of these critical services to a third party provider takes many shapes and forms. The focus of this article is to discuss the various outsourcing models and the need for clarity on the roles and responsibilities of the FM team members.

Before we analyze the outsourcing models, it is important to highlight the services which are candidates for outsourcing.

In general, any service that is outside the scope of an organization’s focus should be considered an outsourcing candidate.

These services can be further broken down into “soft” (not affiliated with the real estate asset; mail/print, office management, janitorial and security services) and “hard” (affiliated with the real asset; mechanical, electrical and plumbing) service categories.
What outsourcing model best suits your organization?

There are no “one size fits all” models when it comes to outsourcing. Even when an organization chooses to outsource, there may still be a number of services that are retained in house. It is imperative to the success of any business to honestly determine which services can be delivered more cost-effectively when outsourced versus being provided in house.

Quite often, this “honesty” can only be achieved by engaging the services of an unbiased, third party consultant. Although there are many variations on the outsourced models presented in this article, the basic two models are as follows:

Self Managed: In the self managed outsourcing model, internal resources are responsible for managing the vendors that perform services on their behalf.

These internal resources must have a thorough understanding of these services in order to manage the vendors effectively.

They must have the capacity to understand the contractual scope of services provided by the vendor and should have clear Key Performance Indicators (KPIs) and Service Level Agreements (SLAs) established in order to provide metrics against industry benchmarks.

Their involvement in the vendor selection process, whether through internally developed Requests for Proposals (RFPs) or RFPs generated in conjunction with a FM consultant, is instrumental in the success of the outsourced model.

In addition to selecting the most qualified and cost-effective vendor to perform services, it is equally important to have “chemistry” between your organizations in order to establish a collaborative work environment.

Technology compatibility must also be considered, as it is often inefficient working with multiple work order and FM software platforms.

Managed: In the managed outsourced model, the organization relinquishes the day-to-day control of the outsourced service providers to a third party that specializes in the services provided. The relinquishment of these responsibilities may be direct (outsourced management provider makes all decisions autonomously) or indirect (organization instructs outsourced provider who executes on behalf of the organization).

Quite often, as part of the managed services agreement, the management firm will be required to interview internal candidates of the organization and, if qualified, allow them first right of refusal regarding employment. Typically, the management firm will charge three to four percent of the cost of the contracts they manage. In addition, the organization is required to pay for the employees dedicated to managing their account.

The intent of this model is to engage dedicated FM professionals whose sole focus is to monitor and administer contractual FM services on behalf of the client organization. Through their expertise, knowledge and singular focus on FM services, it is assumed that they will provide additional value by assuring best practices are being employed. In addition, they will enforce the KPIs and SLAs established as part of the contract. In many instances, a portion of their management fee may be “at risk” if certain benchmarks are not obtained.

Customized Approach: There is no silver bullet approach to providing FM services. Each FM services approach is as unique as the organizations that deploys them and, more than often, requires a combination of self-managed and managed services.

Typically, soft services are self managed by organizations because they are more closely aligned with their core business. Hard services are rarely performed in house because they require specialized expertise and knowledge of local laws, ordinances and requirements that impose additional liability.

These specialized hard services should be carefully assessed in order to mitigate liability to the organization. Organizations that have a diverse portfolio of real estate assets and locations should develop a holistic FM Services strategy that addresses the unique needs and resources available to their disparate locations whether owned or leased.

Regardless of the FM strategy employed, it is imperative that organizations instill a purity of purpose in their FM services approach.

FM services require specialized, dedicated resources so organizations must carefully weigh the cost-benefit associated with incorporating best practices into these FM disciplines.

Packaged management services, that include leasing and lease management services, should be carefully evaluated to see if they provide dedicated, focused resources to carry out the agreed upon FM strategy.
Quite often, management firms utilize their FM services teams as “loss leaders” in an effort to engage clients in more profitable services.

By employing resources who are dedicated to their craft and solely focused on delivering best of breed services, organizations can be assured of delivering FM services to their employees and clients that will foster a positive work environment that will be instrumental in employee retention, productivity and satisfaction.

Regardless of the FM strategy employed, it is imperative that organizations instill a purity of purpose in their FM services approach.

FM services require specialized, dedicated resources so organizations must carefully weigh the cost-benefit associated with incorporating best practices into these FM disciplines.

Packaged management services, that include leasing and lease management services, should be carefully evaluated to see if they provide dedicated, focused resources to carry out the agreed upon FM strategy.
Quite often, management firms utilize their FM services teams as “loss leaders” in an effort to engage clients in more profitable services.

By employing resources who are dedicated to their craft and solely focused on delivering best of breed services, organizations can be assured of delivering FM services to their employees and clients that will foster a positive work environment that will be instrumental in employee retention, productivity and satisfaction.

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