Most in business probably now realise that outsourcing is not all about cost cutting. And most would also now realise that it is wise to retain some key functions and skills in-house. Companies having indulged in extensive outsourcing, even to the point of handing out strategy, have learnt to their dismay that service providers are unlikely to have the level of dialogue with business units necessary to really understand the key business drivers going forward.
So how can planning be done to align facilities portfolios with future business needs? Clearly, having no in-house technical capabilities or skills would require extreme faith and trust in service providers before adopting their new capital expenditure recommendations. There are many ways an integrated contract can be managed. There are numerous potential in-house roles, each requiring different attributes and skills. The nature of the portfolio will dictate the size and nature of the in-house facilities management functions and skills. These will be the key linkages between the business units and outsource service provider. The roles described in the following are one suggestion for a structure for a large portfolio to ensure the outsource service provider performs according to contract standards – and ultimately delivers value to the organisation.
Head of Facilities
This role, primarily about strategy and understanding the changing needs and priorities of the organisation at a corporate level, is responsible for the overall delivery of the portfolio strategic plan. The role has a strong ‘managing upwards’ focus, communicating how facilities support the delivery of company objectives. This role is where the facility management ‘buck stops’, particularly related to delivering the portfolio financial outcomes, including recurrent and capital expenditure. The head of facilities will usually be supported by a number of portfolio relationship managers and functional managers.
Portfolio Relationship Manager
Merging the prior roles of portfolio manager and customer relationship manager is creating an emerging discipline in the industry. This role requires an ongoing understanding of the evolving needs of customers and business units by coming to terms with changing business processes and how they will be impacted by external factors. This manager must also understand assets (owned and leased) and their limitations and suitability to deliver on business outcomes. Ultimately, it is all about responsibility for delivery of sub-portfolio objectives, with customer focus and planning for the future being essential attributes. Other key duties in the role include setting budgets, managing financial performance and liaising with – but not managing – the outsourced contractors. The number of portfolio relationship managers is dependent on the portfolio size, geographic spread and nature of the assets. For example, a global portfolio may require managers covering different parts of the globe.
Contract Management
In the ideal world of alliance contracting polite names such as alliance manager are used, but the key focus is managing the outsourced contractor. Hence the role is often known as the ‘head kicker’. Attention to detail in contract provisions and performance standards are useful attributes. The contract manager has ultimate say in the approval of incentive payments due to the service provider based on the contractual arrangement. However, the role does not operate in isolation, requiring close ongoing liaison with the portfolio relationship managers to assess the levels of service delivery and any remedial actions required.
Engineering Services Manager
Buildings are complex. In managing assets and portfolios, the experience and knowledge of an ‘engineering type’ manager can be useful. Often in outsource contracts the mistake is made that all in-house technical skills are lost and recommendations of the service providers need to be relied on – without the ability of being able to act as an informed client. Responsibilities of this manager include overall maintenance planning and related capital expenditure budget approvals as presented by the service provider and in liaison with the portfolio relationship managers. Understanding whole-of-life maintenance and building engineering services are key attributes.
Leasing and Acquisitions Manager
The ‘deal junkie’ has a role in most portfolios. Usually the lease (or freehold) acquisition function is outsourced; leasing generally occurs on a sporadic basis and therefore outsourcing this function makes good commercial sense. But in larger portfolios, with a forever revolving acquisitions program (and some pretty large deals), it makes sense to retain some lease negotiation capability in-house. The role is one of being an ‘informed client’ driving the negotiations, in conjunction with the service provider. An in-house ‘deal junkie’ is there to ensure service providers are not just ‘going through the process’ but delivering the best possible deals. Ongoing monitoring of the overall leasing strategy and premises acquisitions also helps negate unexpected surprises.
Risk and Compliance Manager
Risk, compliance and sustainability are now major issues. Outsource contracts will require that the service provider comply with all company policies. But how is this monitored? An in-house manager will have the role of understanding the real needs of the company and making sure it is not caught out. This role is there to support the portfolio relationship managers and service providers to ensure all risk and compliance initiatives are implemented. Additionally, the responsibilities involved in this role have now in many cases been extended to encompass the full corporate social responsibility agenda, including environmental and social impacts of the portfolio.
Strategic Projects Manager
Project delivery is usually outsourced – and so it should be. However the strategic decision-making and planning for major projects are usually of such importance that they should be retained in-house. Responsibilities of this role include strategic project briefs, project budgets and business case preparation. Project planning and delivery skills are paramount. As an informed client, the strategic projects manager will monitor projects and report on time, budget and scope-of works benchmarks.
Property Accounting and Finance
Ultimately, managing a portfolio is all about numbers. With integrated outsourcing contracts, the service provider is expected to have state-of the- art property accounting and management systems. Aggregated numbers will be reported and downloaded to agreed chart of accounts at regular intervals to the company’s main general ledger. An in-house property ‘bean-counter’, ensuring the service provider is accounting appropriately and providing internal liaison with the company finance department about accounting standards and protocols, always assists in supporting the credibility of the facilities group.
Up-to-date portfolio information is also crucial for good portfolio management. Updating all relevant asset information into property and lease management information systems should be a key service provider responsibility. Further, this information should be integrated into the property financial system to ensure integrity of accounting entries and data. With these disciplines in place, portfolio and financial performance can be reported against appropriate financial benchmarks and budgets with variances explained.
Summary
Of course, only the larger and more complex portfolios are able to support an in-house team of the above size and still make outsourcing work on a cost-effective basis. In smaller portfolios some of the roles may need to be collapsed. The main message, however, is that outsourcing is not all about cutting costs – the focus is on doing things better. Many outsource contracts – driven by aggressive competitive cost savings tendering – have failed to deliver on the expectation of improved portfolio service delivery. The key industry lessons learnt are two-fold. Focus on doing things better, and cost savings will result. Also, retain some in-house core skills, particularly strategy supported by sufficient technical and functional expertise.
