john cooper mba dissertation
TRANSCRIPT
STAFFORDSHIRE UNIVERSITY
RESEARCH INTO THE KEY DRIVERS FOR AN
ORGANISATION TO OUTSOURCE ITS FACILITIES
MANAGEMENT PROVISION AND THE MEASURE
OF SUCCESS
PRIVATE & CONFIDENTIAL
Submitted by John Cooper
May 2004
This dissertation is submitted in partial fulfilment of the requirements of Staffordshire
University for the award, Masters in Business Administration
Executive Summary
Page No 1
Executive Summary
Outsourcing describes a fundamental shift in activities from their previous location
(either geographically or metaphorically) within an organisation to outside that
organisation, In essence, it is where the company has decided (for a number of reasons)
to buy in services or have tasks performed on there behalf that they would have
previously carried out themselves.
How well organisations plan, maintain and operate facilities / assets directly impact on
the organisations bottom line and shareholder value.
The purpose of this research project has been to investigate the key drivers for
organisations to outsource their Facilities Management, to what extent and to what
level of success.
This has been achieved by researching theoretical and conceptual views within
literature relating to Facilities Management - practice and processes, the study of
outsourcing as addressed in professional journals relating to Facilities, Estates and
Building Management and field research through the development and distribution of a
questionnaire targeted at senior management across a number of sectors of UK
commerce and industry.
Outsourcing Facilities Management is a relatively new discipline within both the
private and public sectors. As with any contracted discipline there is both successful
and less success experiences and is generally seen as in need of development. In order
to improve the provision of services and management to meet customers' requirements,
specific attention should be paid to the following key areas by suppliers and clients in
order to in increase the likelihood of a successful experience of outsourcing:
Standards of service delivery
Customer satisfaction
Anticipated v actual savings
Executive Summary
Page No 3
It has been observed that outsourcing, driven by central policy and cost reduction
policies, as the primary drivers, does not produce acceptable results. However,
outsourcing Facilities Management that has a more business driven approach, with a
greater level of local ownership is likely to have a greater opportunity for success.
Contracts are also proven to be more successful if they are developed in partnership
with specialist consultants.
The obvious conclusion therefore, particularly for public sector organisations, is that
in considering an outsourced solution, a far broader view of reasons should be
examined than central policy driven by cost reduction. This view should include the
specific and integrated involvement of the management who will be responsible for
managing and delivering the services.
Literature searching promotes a 'partnering' approach between parties over a greater
period than 3 years, however research results indicate that if this approach of contract
review / period is taken then there is a greater likelihood for contract failure. This
leads the author to conclude that the optimum period for a Facilities Management
contract is no greater than 3 years with the possibility to extend the contract following
a successful review.
Major market opportunities still exist for Integrated Facilities Management companies
in the area of outsourcing, but cultural barriers and a general lack of Facilities
Management strategies within organisations can represent constraints on the market
development.
Acknowledgements
Page No 2
Acknowledgements
For all the support and encouragement during this undertaking, The author would
especially like to thank his Company, Areva T&D UK Ltd. Paul Bryne who originally
showed the faith and subsequently to Tom Hughes, Peter Spratt (Do you really need to
go on the residential?) and Andy Ellis.
Secondly, in achieving the end objective the camaraderie and motivation derived from
all my fellow students cannot be understated. So, thank you everyone. the author
would also express my gratitude to all the lecturers’ full time & part time at the
Staffordshire University who inspired me to prove that it could be done. Without their
understanding, and for whom the author would not have survived the four years that it
has taken to complete this MBA.
My thanks to my supervisor Mike McHugh for his help & guidance, and a special
mention to all the people who completed the questionnaire the majority of whom the
author had never met previously, for setting aside time in their busy schedules to
support me in my endeavours,
The author would especially like to acknowledge the support from his family, through
thick and thin, re-locating first from Indonesia then subsequently from the North East
to Staffordshire, hospitalisation, birth and countless lost nights and weekends during
these four years of study. Thus enabling the author to complete a journey which
originated five years ago whilst sitting around a swimming pool in Bandung,
Indonesia.
Finally, for those who read this who are, and are considering, tackling an MBA, the
rewards for your endeavours will far outweigh the difficulties that you will encounter
on its course.
Index
Page No 3
Index
EXECUTIVE SUMMARY 1
ACKNOWLEDGEMENTS 2
CHAPTER 1 - INTRODUCTION AND OBJECTIVES 7
1.1 Project Background 7
1.2 Aims and Objectives of Research 8
1.2.1 Objectives 9
1.3 Dissertation Structure 10
CHAPTER 2 – LITERATURE REVIEW 11
2.1 Outsourcing – A Definition 11
2.2 Facilities Management – A Definition 12
2.3 The UK Facilities Management Market 14
2.4 History 15
2.5 The Outsourcing Decision 17
2.5.1 Williamsons Transaction Cost Model 17
2.5.2 Pfeffer's Political Model 18
2.5.3 Key Drivers 20
2.5.4 Compulsory Competitive Tendering (CCT) 23
2.5.5 Core versus Non-Core 24
2.6 Outsourcing Problems 26
2.7 Organisational Culture 26
2.8 Flexibility 28
2.9 Management of Change / Motivation 29
2.10 Managing the Contract 33
2.10.1 Performance Evaluation 33
2.10.2 Performance Measurement Systems 34
2.10.3 Benchmarking 36
2.10.4 Management by the Client 38
2.10.5 Management by the Supplier 41
CHAPTER 3 - RESEARCH METHODOLOGY 42
3.1 Data Requirement 42
3.1.1 What Data is Required and its Location 42
3.2 Research Philosophy 43
3.2.1 Positivism 43
Index
Page No 4
3.2.2 Phenomenology 44
3.3 Research Design 44
3.3.1 Chosen Research Methods 45
3.4 Research Strategy 46
3.4.1 Experiment 47
3.4.2 Survey 47
3.4.3 Case Study 47
3.4.4 Grounded Theory 47
3.4.5 Ethnography 48
3.4.6 Action Research 48
3.4.7 Cross-Sectional and Longitudinal Studies 48
3.4.8 Chosen Research Strategy 49
3.5 Methods of Data Collection 49
3.5.1 Questionnaire 49
3.5.2 Distribution Methodology 50
3.5.3 Private sector 51
3.5.4 Public Healthcare (NHS) 51
3.5.5 Local Government 52
3.6 Methods for Data Analysis 52
3.7 Methodological Review 53
3.7.1 Justification for research methodology chosen 53
3.7.2 Literature searching 53
3.7.3 Field Research 54
3.7.4 Credibility of Analysis 54
CHAPTER 4 - EMPERICAL FINDINGS 57
4.1 Organisational Overview 57
4.1.1 Level of Response 57
4.1.2 Analysis of Private Sector Questionnaire 58
4.1.3 Job Role 59
4.2 Organisational Analysis 60
4.3 Analysis of Facilities Management Information – Questionnaire Section Two 63
4.3.1 Question 1 - Would the type and length of tenure influence the FM decision? 63
4.3.2 Question 2 - What FM services are provided? 63
4.3.3 Question 3 - What is the total annual cost of FM services? 68
4.3.4 Question 4 – What is the approximate split of costs for the FM services. Does
the organisation consider the services outsourced to a single service provider
to be an Integrated Facilities Management (I-FM) organisation? 68
4.3.5 Question 5 - How recently have you outsourced your FM? 71
4.3.6 Question 6 - How would you consider a decision for outsourcing FM? 72
4.3.7 Question 7 - If FM providers are used, how were they chosen? 73
4.3.8 Question 8 - Reasons for outsourcing? 74
4.3.10 Question 10 – How was the performance of the contract services measured? 76
4.3.11 Question 11 to 12 - What were the key factors in the success/failure of
outsourcing? 77
Index
Page No 5
4.3.12 Question 13 - What would be your organisations review period for
outsourcing? 80
4.3.13 Question 14 - Would you keep your outsourced activities as they are? 81
4.3.14 Question 15 - What is your view of outsourcing FM support services? 82
CHAPTER 5 - CONCLUSIONS FROM THE RESEARCH 84
5.1 Introduction 84
5.2 Private Sector Organisations 84
5.2.1 Drivers 84
5.2.2 Contract Measurement Tools 85
5.2.3 Levels of Success 85
5.2.4 Other Research Findings 87
5.3 Public Sector Organisations 87
5.3.1 Drivers 87
5.3.2 Contract Measurement Tools 87
5.3.3 Levels of Success 88
5.3.4 Other Research Findings 89
5.4 Summary 89
5.4.1 Summary of Conclusions 89
REFERENCES AND BIBLIOGRAPHY I
APPENDIX IV
1 Covering Letter vi
2 Questionnaire vii
FIGURES & TABLES
Fig 2.1 The Outsourcing Concept 12
Fig 2.2 The Five Decades of Outsourcing 15
Fig 2.3 The Core Periphery Workforce Model 16
Fig 2.4 Transaction Model of the Outsourcing Decision Process 17
Fig 2.5 Pfeffer's Political Model 19
Fig 2.6 Premises and Business Support Costs 24
Fig 2.7 Analytical Outsourcing Decision Model 25
Fig 2.8 Breakdown of the Problems Associated with Outsourcing 26
Fig 2.9 Needs of the Environment 27
Fig 2.10 A Behavioural Model - David Hughes 32
Fig 2.11 Typical Facilities Management Structure for Outsourced Solution 39
Fig 4.1 Response Rate per Sector 57
Fig 4.2 Response Rate 57
Index
Page No 6
Fig 4.3 Questionnaire Distribution by Sector 58
Fig 4.4 Questionnaire Returns per Sector 58
Fig 4.5 Private Sector Returns 58
Fig 4.6 Private Sector Organisations - Analysed by Headcount 60
Fig 4.7 Public Sector Organisations - Analysed by Headcount 60
Fig 4.8 Total Organisations - Analysed by Headcount 60
Fig 4.9 Private Sector Organisations - Analysed by Turnover 60
Fig 4.10 Public Sector Organisations - Analysed by Turnover 60
Fig 4.11 Total Organisations - Analysed by Turnover 60
Fig 4.12 Private Sector Organisations - Analysed by Portfolio Size 61
Fig 4.13 Public sector Organisations - Analysed by Portfolio Size 61
Fig 4.14 Total Organisations - Analysed by Portfolio Size 61
Fig 4.15 Private Sector Organisations - Analysed by FM Provision 63
Fig 4.16 Public Sector Organisation - Analysed by FM Provision 63
Fig 4.17 Total Organisations - Analysed by FM Provision 63
Fig 4.18 Private Sector - Activities Analysed by Service Type 66
Fig 4.19 Public Sector - Activities Analysed by Service Type 67
Fig 4.20 Private Sector Organisations - Split of FM Services by Cost 68
Fig 4.21 Public Sector Organisations - Split by FM Services by Cost 68
Fig 4.22 Total Organisations - Split by FM Services by Cost 68
Fig 4.23 Private Sector Organisations - Analysed by Services by an IFM Provider 69
Fig 4.24 Public Sector Organisations - Analysed by Services by an IFM Provider 69
Fig 4.25 Private Sector Organisations - when was Outsourcing Undertaken 71
Fig 4.26 Public Sector Organisations - when was Outsourcing Undertaken 71
Fig 4.27 Total organisations - When was FM Outsourcing Undertaken 71
Fig 4.28 Reasons for Outsourcing 73
Fig 4.29 Private Sector Organisations - How successful has Outsourcing been 75
Fig 4.30 Public Sector Organisations - How successful has Outsourcing been 75
Fig 4.31 Overall Organisations - How successful has Outsourcing been 75
Fig 4.32 How was the Performance of the Contract Measured 76
Fig 4.33 Successful Experience Factors 78
Fig 4.34 Failure Key Factors 78
Fig 4.35 Private Sector Organisations - Policy review Period 80
Fig 4.36 Public Sector Organisations - Policy review Period 80
Fig 4.37 Total Organisations - Policy review Period 80
Fig 4.38 Organisational Views on Outsourcing 82
Table 1 Reasons for Benchmarking 37
Table 2 Contract Expectations versus Reality 40
Table 3 Comparison of Deduction and Induction Research Design 45
Table 4 Sample Sizes for Population at a 95% Level of Certainty 55
Table 5 Break down of Questionnaires 57
Table 6 Key Success and Failure Factors 79
Chapter One
Introduction and Objectives
Page No 7
Chapter 1 - Introduction and Objectives
1.1 Project Background
According to Drucker (1993), the first duty of a business manager is to strive for the
best possible economic results from the resources employed or available.
As companies respond to the hyper-competitiveness of today's global marketplace, the
traditional nature of work relationships changes as well. These companies identified
by Goldsby (2002, p2) are increasingly delayering the organisation and forging more
permeable boundaries by turning to contingency work forces, downsizing and
outsourcing.
Mintel (2001, p4) further observed that due to the increased global competition, the
facilities management strategy for most UK organisations was becoming ever more
important to get right. The increased use of development and application of
technology and the internet has also meant that organisations have to develop better
Facilities Management policies. Micklethwait (1999, p95) reminds us that managers
should, "start with the presumption that in business, the only constant is change."
Becker (1990, p1-16) identified that the growth of facilities management is linked to
the need for organisations to manage change. Today, the riskiest of all strategies is
“inaction” (Wind & Main, 1999). How well organisations plan, maintain and operate
assets / facilities directly affects the environment and productivity of it’s largest
expense, their workforce. The British Institute of Facilities Management (BIFM) state:
After pay, Facilities Management for most businesses is the
second largest expense.
(BIFM Bulletin 186, 2004. p.7)
Therefore the ability of an organisation to manage assets efficiently will in turn
directly impact on the organisations bottom line and shareholder value.
Chapter One
Introduction and Objectives
Page No 8
The purchasing of contracted services or goods is not a new concept; it arises from the
recognition that there are certain areas where the use of specialised skills or expertise
is better bought-in from outside of the organisation, rather than be performed by an in-
house function. This could include the traditional support services such as catering,
cleaning etc. plus purchasing of components within an engineering environment, and
contracting out Information Technology Systems.
The purpose of this research project has been to investigate the key drivers for
organisations to outsource their Facilities Management, to what extent and to what
level of success.
This has been achieved by researching theoretical and conceptual views within
literature relating to Facilities Management - practice and processes, the study of
outsourcing as addressed in professional journals relating to Facilities, Estates and
Building Management and field research through the development and distribution of
a questionnaire targeted at senior management across a number of sectors of UK
commerce and industry.
1.2 Aims and Objectives of Research
The primary aim for this research project is to identify the key drivers that lead an
organisation to outsource its facilities management provision and to ascertain the
success levels of such initiatives.
Although, initially, this appears to be a narrow area of research, it actually
encompasses some fundamental issues relating to how organisations structure and
operate not only their core business, but also the vital support services and activities
that enable the company to deliver its products or services.
Chapter One
Introduction and Objectives
Page No 9
Due to the possibility of differing corporate strategies, the research area for this
project covers both Private and Public organisation sectors. Those in the Public sector
were local government and public health (NHS).
1.2.1 Objectives
1. What is happening generally in the FM Market?
The initial part of the process would survey the general area of FM service provision
within organisations in the UK, to determine the present picture of service delivery
and outsourcing. This survey would be pan-sector and be designed to give an
overview of the current general FM approach, enabling more sector specific data to be
framed against a high-level of understanding of how organisations are generally
behaving.
2. Understanding the organisations sector
It is important for any organisation considering change to understand what other
businesses within their sector have done, or are doing. This information should assist
an organisation understand all recorded benefits and problems that have been
previously experienced by others and any applicability to the clients organisation
3. Understanding the client organisation
Any management decision is based on an understanding of the needs of the
organisation, both at a site specific and corporate level. In respect of Facilities
Management, this understanding concentrates on the subject of the delivery of and the
skills necessary for the efficient and effective delivery of these services.
Questions must also be answered with regard to the identification and the demarcation
between what is considered by the organisation as "core and "non-core" activities to
the business.
Chapter One
Introduction and Objectives
Page No 10
4. Advantages / Disadvantages
Obviously, any organisation considering change management will need to understand
what the potential advantages and disadvantages of outsourcing and identify methods
of measuring the service delivery.
5. Survey findings
The resultant findings at the end of this process will identify the key drivers for an
organisation to outsource its Facilities Management provision.
1.3 Dissertation Structure
This project is aimed at identifying the key drivers that motivate an organisation to
outsource its Facilities Management provision. In order to do this, the dissertation is
structured according to several chapters, each identifying one or more areas for
discussion. The content for each chapter is as follows:-
Chapter Two contains a critique of the available literature on the subject.
Chapter Three contains a review of the research methodology undertaken to address
the research and provides the rationale for the research project itself.
Chapter Four contains the empirical study and findings, undertaken on the basis of the
resultant findings of a questionnaire.
Chapter Five presents the research conclusions and recommendations arising out of
the data collected in the previous chapters.
Chapter Two
Literature Review
Page No 11
Chapter 2 – Literature Review
2.1 Outsourcing – A Definition
Outsourcing describes a fundamental shift in activities from their previous location
(either geographically or metaphorically) within an organisation to outside that
organisation, In essence, it is where the company has decided (for a number of
reasons) to buy in services or have tasks performed on there behalf that they would
have previously carried out themselves. Outsourcing is the buying in of services from
external suppliers with a view to a long-term relationship to add value to the
product/service and to improve productivity. In essence, outsourcing is the transfer of
an internal service function to an outside vendor.
Goolsby defines outsourcing as:-
One company (buyer) contracting for another company
(outsourcing supplier) to provide service of a particular
business process of the buyer, with the supplier having
ownership or control over the process. The buyer
determines what results it wants the supplier to provide,
and the supplier uses its economies of scale and expertise
in determining how to achieve those results. The purpose
of outsourcing is to create value for the buyer’s company
(that value Is frequently to reduce or control costs, but
there are many other reasons).
(Goolsby, 2002. p1)
Meanwhile the IFMA1 definition states:-
1 International Facilities Management Association
Chapter Two
Literature Review
Page No 12
Outsourcing refers to a full transfer of the facility
management functions to an outside firm. The corporation
then manages the outsourcing contract rather than the
entire facility management function.
(IFMA, 2004. p5)
A typical outsourcing transaction will consist of two parts. First, there is the transfer to
the supplier of some or all of the assets – usually comprising the transfer of staff, fixed
assets and the transfer of other third party contracts from the service area to be
outsourced. However suppliers are not bound to take on the assets, in this scenario the
assets are not transferred but the buyer grants the supplier use of the assets for the
term of the contract. Second, there is the provision of services to the organisation by
the supplier. See fig 2.1
2.2 Facilities Management – A Definition
Facilities Management, as a term was probably first coined by Ross Perot in the USA,
in the mid 1960’s, initially linked to the supply of services by, and to, the fledgling
I.T. industry. The concept of co-ordinated service delivery for organisations
developed through the 1970’s from specific areas such as space planning and office
Host / Client
Company
Function / Service
to
Be Outsourced
Vendor /
Contractor
Fig 2.1
The Outsourcing Concept
Chapter Two
Literature Review
Page No 13
equipment system integration, to the broad range of building and organisational
support service management that we recognise as current comprising the scope of FM.
Professional bodies description of Facilities Management:
1. International Facilities Management Association (IFMA)
A profession that encompasses multiple disciplines to ensure
functionality of the built environment by integrating people,
place, process and technology.
(IFMA, 2004. p3)
2. The British Institute of Facilities Management (BIFM)
The integration of multidisciplinary activities with the built
environment, and the management of their impact upon
people and the workplace.
(BIFM, 1997. P1)
3. Franklin Becker
Facility Management is responsible for co-ordinating all
efforts related to planning, designing, and managing
buildings and their systems, equipment, and furniture to
enhance the organisations ability to compete successfully in
a rapidly changing world.
(Becker, 2004. p.2)
Facilities Management is therefore seen, to deal with property, people, processes and
systems, and is becoming more recognised as the active, co-ordinated management of
the FM functions in accordance with the Corporate Strategy.
Chapter Two
Literature Review
Page No 14
2.3 The UK Facilities Management Market
Defining the Facilities Management market in the UK is problematic. No single FTSE
listing or SIC1 code applies, however from a major survey in 1999, the Building
Services Research and Information Agency (BSRIA) stated from their research that:
The potential market is put at £21.7bn, based on five key
ancillary services that are most often contracted out
(cleaning, catering, security, gardening / landscaping,
mechanical & electrical maintenance).
(BSRIA, September 1999. p26)
However, MINTeL state in a 2001 Facilities Management report:
The FM market is buoyant and has increased since 1996
by 57% to reach a value of £137bn.
(MINTeL, May 2001. p26)
Meanwhile, the British Institute of Facilities Management (BIFM) according to
research carried out in 2002 stated:
Today, the FM sector is large and complex, made up of a
mix of in-house departments; specialist contractors;
large, multi-service companies; and consortia delivering
the full range of design, build, finance and management.
Estimates vary widely, but the latest figures suggest that,
in the UK alone, the sector is worth £96bn per annum.
(BIFM, March 2003. p.2)
Clearly, then, whichever measure is used, the Facilities Market is a significant size in
the UK, with the indication that there is still considerable growth potential.
Chapter Two
Literature Review
Page No 15
2.4 History
As stated previously the origin of outsourcing is generally accepted to be in
information technology (IT), being seen as an outgrowth of professional services and
timesharing in the 1960’s. The term Outsourcing being used by US company EDS as
early as 1962. In the 1980’s, organisations, initially in the US, expanded the Facilities
Management concept of the supplier managing a function (for which it received a
straight management charge) to one where the outsource provider would purchase the
functions assets at a market value, and committing to reducing the charge year on year
over the life of the contract. See fig.2.2
The key concept of outsourcing is the idea that a company should concentrate on what
it supposedly does best, this idea being promulgated by Peters and Waterman (1982),
who promoted the idea of “sticking to the knitting”. This was furthered by Prahalad
and Hamel (1990), who introduced the notion of “core competencies”, whereby
companies sought to define, nurture and protect business focus through concentration
on the company’s main raison d’etre.
1 Standard Industrial Classification
1960s The quick fix
1970s The long term relationship
1980s The mega contract
1990s The strategic partnership
2000s Risk and rewards
The Five Decades of Outsourcing
Fig 2.2 Source: Thorpe, 1999
Chapter Two
Literature Review
Page No 16
Miles and Snow (1986), introduced the concept of the “network organisation” where
the core focused on its main activities whilst contracting out and co-ordination
activities of third parties. Reich (1991), developed a theory stating that western
companies would have to concentrate their efforts on ‘knowledge based’ activities
forming elements of an “enterprise web”.
Handy (1992), subsequently produced a similar form of employment relationships in
his “Shamrock” organisation. This consists of the professional core, plus contracted-
out activities and the numerically flexible workforce. In this modal, he has suggested
that the permanent core of highly skilled staff may carry out as little as 20% of total
activity with the rest accounted for by companies outside the organisation. This model
assumes that virtually any functions, rather than the fundamental core activities, are
essentially support functions that can be outsourced. See fig 2.3
EXTERNAL
PERIPHERAL
CORE
The external workforce
(Outsourced activity)
Can be adjusted to meet
changing market demands
Highly skilled, knowledgeable
personnel
The Core Periphery Workforce Model
Source: Reilly and Tamkin, 1996 Fig 2.3
Chapter Two
Literature Review
Page No 17
2.5 The Outsourcing Decision
Whilst reviewing numerous Outsourcing / FM related articles it became apparent that
there are two main theories relating to the outsourcing decision. These are:
Transaction cost theory - Oliver Williamson, 1975
Political model - Jeffery Pfeffer, 1981
2.5.1 Williamsons Transaction Cost Model
The transaction model concentrates to a high degree on the premise that organisations
make the outsourcing decision based on sound economic principles. Williamson,
(1975) observed the increased prevalence of supposedly specialised companies that
were large and bureaucratic but produced many functions internally. From this he
proposed that costs had two elements:–
Production costs
Transaction costs.
Transaction costs include the costs of monitoring, controlling and managing
transactions. Hence, managers should consider the sum of production and transaction
costs when making the decision to make or buy (insource / outsource). see fig 2.4
Managers generate
at least two
alternatives
Transaction costs
and production
costs assessed
Transaction is
produced internally
Transaction is
produced externally
(outsource)
(based on least cost)
Fig. 2.4
Transaction Model of the Outsourcing Decision Process
Chapter Two
Literature Review
Page No 18
This model was further reinforced by the work of Zhu Zhu Z, Hsu K & Lillie J,
(2001). The authors describe how outsourcing has become an important strategic tool
in today’s competitive business environment. The article matches the work of Elliot
(1998) and Lackow, (1999) who surveyed 176 US corporations and identified the
primary motives behind outsourcing. These findings where then matched with
Deavers (1997) who identified a board-based strategic role of outsourcing in
improving the long-term competitive advantage. The drivers being:-
Cost saving – 54 per cent
Ability to focus on core business - 46 per cent
Ability to access outside expertise - 40 per cent
(Lackow, 1999)
2.5.2 Pfeffer's Political Model
The political model is intuitive, based on personalities, power and politics. Pfeffer,
(1981), assumes that power allows the stakeholders to influence the decision to
outsource and that political strategies adopted during the decision process can alter the
balance of power within the organisation, or part of. From this, it follows that the
decision to outsource is not necessarily rational because the decision comes from
‘dynamic political processes’. An example of Pfeffer's political model in practice is
the decision of the Conservative Government in 1998 to implement Compulsory
Competitive Tendering (discussed in section 2.5.4), on all governmental departments
and authorities.
An analysis of power can help the reader understand how the stakeholder can
influence the decision. Understanding politics means getting to know how those
stakeholders put the necessary wheels in motion to alter or sway the decision one way
or the other.
Chapter Two
Literature Review
Page No 19
Pfeffer (1981), recognises four main types of power and the associated methods of
political tactics. These are summarised in fig. 2.5
To summarise Pfeffer’s opinion on power, it is not an absolute or fixed term. Instead,
it is relative, and is only meaningful in the context of one division’s power relative to
another’s. These sources of power are:
Authority: Power is structural, created by a division in labour and
departments, this is legitimised through the codes of the organisation.
Resource Acquisition: Power allocated through budgets and external
sources. The more resources a member brings to the organisation the more
power the individual accumulates.
Dependency: Power comes from the dependency of others from
individuals / departments that owns something of value that few others can
provide. For example IT. Departments.
The political
domain
Selective use of decision criteria
Selective use of information
Use of outside experts
Building coalitions Uncertainty
absorption
Dependency and low substitutability
Resource acquisition
Authority
THE
DECISION
The power
domain
Pfeffer’s Political Model
Fig 2.5 Adapted from: Pfeffer, 1981
Chapter Two
Literature Review
Page No 20
Uncertainty Absorption: Pfeffer (1981) argues that a division that may be
outsourced that is able to provide information to others they could not
otherwise gain access to, will take away some of the decision uncertainty
for them and so influence the decision.
Selective use of Decision Criteria: A stakeholder may be able to select
the decision making criteria, which will favour the stakeholders position.
Selective use of Information: Individuals within the organisation can
present information weighing up the case for or against outsourcing by
presenting data to suit their own ends.
Use of External Consultants: Use of external consultants could legitimise
the decision making process because the consultant is held as independent,
impartial, knowledgeable, though this may not necessarily be the case.
Coalitions: temporary alliances as a form of strength in numbers could be
utilised , these could either be of the internal kind or a coalition between
client and a preferred vendor to contribute to the decision making process.
2.5.3 Key Drivers
A key “driver” with any business is its cost base:
The business world of the 1990’s shaken and stirred by
the dramas and failures of the 1980’s, is looking to
become lean and mean. One of the first places,
probably, the first place that savings are looked for is in
the facilities departments. We should not be surprised at
this, since in most cases the cost of premises and related
services are second only to staff costs.
(O’Keefe, 1992. p6-8)
Other key elements that organisations have sought to address are manning levels,
particularly within middle management, the effect of increasing technological
Chapter Two
Literature Review
Page No 21
developments in the field of communications, and the advantage that the cost element
of the services moves from the variable column to the fixed column. Investment risk
can also be extremely high due to a host of external factors which can all change very
quickly. Providers can help alleviate this risk through making investments on behalf
of a number of their clients, which helps to share the risk borne by one company.
As Cotts and Lee noted in the USA:
One of the greatest staffing issues is the use of
consultants and contractors – the in-house v out-house
debate. The great impetus to farm out facilities services
came from the desire to eliminate staff positions. In the
Federal Government it was a major office of
management and budget initiative; in the private sector
it occurred as organisations tried to eliminate middle
management
(Cotts & Lee, 1992. p32)
The recession of the early 1990’s, in creating a pressing need to introduce change into
commercial practices, brought the issue of “core” and “non-core” activities into sharp
focus for many people. The recession was, therefore, in many cases seen as an
opportunity to effect significant corporate change without the level of staff resistance
that could have been expected in more buoyant commercial conditions.
Williams (1990), observed that:
In most parts of the Western World the recession of the
early 90’s has encouraged very many private and public
concerns to latch eagerly, nay desperately, on to the
“non-core” activity concept. Sometimes this is for
genuinely philosophical grounds but too often it is an
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excuse to overcome internal problems of staffing levels
and, even worse, it can be used to justify the killer blow
to end internecine management struggles.
(Williams, 1999. p9)
These situations could be construed as an opportunistic application of good business
acumen, or a cynical manipulation, particularly of people in a vulnerable situation, to
achieve what might have otherwise been, at worst, some unattainable or, at best,
organisational change achieved with difficulty. However, a view from a specific
sector with a large Facilities Management support requirement, the National Health
Service, while supporting the earlier discussions about outsourcing, raises a word of
warning:
Outsourcing will become an accelerating trend –
because it is seen as a way reducing costs (in the NHS).
An integrated FM service itself is seen as an attractive
add-on, which can make a Trust more marketable. But
there is a huge danger that the balance between cost and
quality will be distorted by the cost cutting drive.
(FM World, April 1998. p9)
A further “driver” for outsourcing is often an overall reduction in organisational size,
or “corporate downsizing”. To highlight an example of this inter-linkage, the Building
Services Journal (1998, p44) observed that, in relation to companies occupying high-
tech buildings, " Corporate downsizing can leave clients stretched to operate complex
controls, forcing them to outsource."
The Outsourcing Institute (1998), published the following findings from a survey of
current and potential outsourcing end users :-
Reduce and control operating costs
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Improve company focus
Gain access to world class capabilities/resources
Free internal resources for other purposes
Resources are not available internally
Accelerate reengineering benefits
Function is problematic or out of control
To make capital funds available
Share risks
Cash infusion
Redeploy internal resources
React more quickly to business drivers
Make capital expenses/fixed costs more flexible
Overall, then, it would appear that outsourcing, for one reason or another, is likely to
be an integral part of many modern companies business plans.
2.5.4 Compulsory Competitive Tendering (CCT)
The system of Compulsory Competitive Tendering (CCT), was introduced by the
Conservative Government in 1998 to implement best value initiatives within public
sector organisations. CCT encourages private companies to bid for public sector work.
Direct Service Organisations (DSOs) were established which represented in-house
service providers who were placed in direct competition with private firms for the
provision of public services. However, MINTel (2001,pg 11.), reported that CCT was
to be replaced by Best Value due to the inherent problems in the CCT system which
force councils or local authorities to contract out most of its services without regard to
what is the more cost-effective productive or competitive procurement method, ie to
outsource or use in-house provision.
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2.5.5 Core versus Non-Core
Whilst it is obvious from earlier discussions, that facilities and facilities related
expenditure is a significant part of business costs, these should be put into context
relating to the overall dimensions of an organisations performance. Typically
facilities costs and premises costs are approximately 5% respectively of turnover,
similar to IT costs of 5%. This is represented at fig 2.6.
Adapted from: Williams, 1994
However, when it is realised that, frequently, companies net profit also falls in the
region of 5%, it becomes obvious that any savings achievable on the premises and
support spend, could have a marked influence on the organisation`s “bottom line”
performance measure.
The issue that requires initial consideration, for those organisations considering the
outsourcing route, is which services could (or should) go out. This relates to the
earlier view of a determination of what is, from an organisational point of view, core
and non-core business.
Fig. 2.6
PREMISES AND BUSINESS SUPPORT COSTS
85%
5%5% 5%
TURNOVER BUSINESS PREMISES I.T. COSTS
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By using the models put forward by the Reilly and Tamkin (1996) (see fig. 2.7), a
matrix map is capable of being produced in defining core and business critical
functions thus facilitating the outsourcing decision.
Skills easily supplied for
standard function
Skills easily available
but critical
Specialist skills
required but
infrequently
Critical skills that are
vary rare
The point that is illustrated by this approach to organisational activities is that it
provides an opportunity to assess:
(a) whether an activity is core (raison d'etre) or not
(b) if not core, where on the core/non-core continuum the activity sits.
Depending on where the organisations deem the activities lie in relation to the core /
non-core interface, it should be possible to make an informed decision on whether or
not a particular activity is a potential candidate for outsourcing.
Core Non-core
Non - commodity
commodity
Adapted from: Reilly and Tamkin, 1996
Analytical Outsourcing Decision model
Fig. 2.7
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2.6 Outsourcing Problems
Of course, outsourcing brings problems and the potential for these must be considered
as part of making strategic outsourcing decisions.
Its easy to assume that outsourcing is a well trodden path, but many relationships go
wrong, quite often, apart from poorly specified requirements, communications and
relationships between organisations and suppliers can remain undeveloped, leading to
operational difficulties, unrealistic expectations and apparent failure to deliver.
Research by 3I (1994) identified the following relative problems with outsourcing (see
fig.2.8)
2.7 Organisational Culture
Organisational culture is an often-used term, but is rarely defined, Draft (2001) states:
Culture is a set of values, guided beliefs, understandings
and ways of thinking that is shared by members of an
Breakdown of Problems Associated with Outsourcing
Long term
commitment
1%Redundancy costs
13%
Quality of service
41%Communication
with suppliers
16%
Dependance on
few suppliers
7%
Extra training
1%
Loss of flexibility
10%
Coordinating
various suppliers
5%
Other
6%
Source: 3I, 1994 Fig. 2.8
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organisation and taught to new members as correct.
(Daft, 2001. p314)
According to Armstrong (1992) an organisation’s culture manifests itself in a variety
of ways:
Norms: The unwritten (often unspoken) rules of behaviour.
Values: Beliefs about what is important and good for the organisation.
Management Style: The ways in which managerial authority is exercised.
Artefacts: Layout of buildings, corporate image.
Culture can have a great influence on a company, behaviours and attitudes are both
effected by the culture of a company. It impacts on internal integration (how members
interact with each other) and external adaptation (aiding an organisation in it’s ability
to adapt to the external environment).
Work on culture and it’s fit with strategy, structure and the environment, indicate
there are four categories as shown below fig. 2.9
Source: Daft, 2001. p319
Needs of the Environment
Flexibilit
y Stability
External
Internal
Mission Culture
Clan Culture Bureaucratic Culture
Str
ate
gic
Fo
cus
Adaptability/Entrepreneurial
Culture
Fig. 2.9
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Adoption of these cultural principles depends heavily on physical proximity to the
core. Daily shared experiences and circumstances further strengthen these
relationships. Therefore, once the organisation redefines its working relationship from
an employer to a contracted customer, the nature of the relationship changes
irrevocably. By Outsourcing its Facilities Management requirements an organisation
can in effect (if required) move the culture of the employees of the outsourced
services, to one which is more responsive to changes in the external environment and
flexible to the needs of the client.
2.8 Flexibility
The need for flexibility and a concentration on core business competencies is a key
facet of any modern business. Handy (1992, p76), in his “Shamrock Organisation”
noted that, " Increasingly, the core will be composed of well qualified people,
professionals or technicians or managers."
However, some argue that, in attempting to gain flexibility by disposing of some parts
of the organisation, flexibility in terms of awareness and understanding is lost. In
other words, as the company concentrates more and more on the core, it becomes less
aware of events going on in the periphery. Changes in circumstances can become
manifest in different ways and impact on the organisation in different ways and at
different times. Provided the function affected is connected in the informal sense,
therefore awareness of, and response to, can be effected through these informal
communication channels.
Hendry (1995), also argues that outsourcing can lead to less ‘robustness’ to outside
shocks. It is argued that less formal, looser organisations can respond better to
"something going wrong". He states:
Organisational slack absorbs the impact and the store
of knowledge helps provide a solution. If this knowledge
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base is eroded through outsourcing, then previously
simple problems can become major ones leaving the
company more vulnerable.
(Hendry, 1995)
2.9 Management of Change / Motivation
As with many other aspects of outsourcing, there are two sides to the argument of
employment security. One view is that job security breeds complacency and
inefficiency, where as contractors are meant to be more energetic and efficient.
However, from a psychological perspective, insecurity does not always mean a happy
workforce.
Change is a pervasive influence. We are all subject to continual change of one form or
another. Change is an inescapable part of both social and organisational life. As
Mullins (1999, p825) said, " The effective management of change must be based on a
clear understanding of human behaviour at work."
When employees join an organisation, they make an unwritten psychological contract
with it. This contract is in addition to the economic contract where time, talent and
energy are exchanged for wages, hours and reasonable working conditions. These
contracts help people organise their lives. Research by Robson, (1996) indicates that:
Workers suffering a breach of their psychological
contract were not only likely to lower their
organisational contributions but also to that of
employee expectations of job security.
(Robson, 1996. p574-599)
Organisations are complex social systems with dynamic environments and all parts of
the system are interdependent. The interdependence of the organisations components
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creates a situation in which the effect of outsourcing cannot be confined to individuals
directly impacted by the decision to outsource.
Workers will look to their outsourced colleagues and
wonder when it will happen to them. These perceptions
will foster feelings of insecurity among remaining
employees and have a psychological impact similar to
that of being outsourced.
(Garaventa, E. et al. 2001. p31)
To this Gilsdorf, (1998, p173-201) adds, " Many mistakes in change management
programmes can be linked directly to, and have casual connections with, breakdowns
in communication."
To minimise the effects of this Mullins (1999), identifies the basic objectives of
change management to be:
1. Modifying the behavioural patterns of members of the
organisation
2. Improving the ability of the organisation to cope with
changes in its environment.
(Mullins, 1999. p822)
A programme of planned change and improved performance developed by Lewin
involves the management of a three-phase process of behaviour modification:
Unfreezing
Movement
Refreezing
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French, Kast and Rosenzweig (1985) expanded on this and listed eight components of
a planned-changed process.
Initial problem identification
Obtaining data
Problem diagnosis
Action planning
Implementation
Follow-up and stabilisation
Assessment of consequences
Learning from the process
There is a need to develop and establish change agents at an early stage during the
outsourcing process, as illustrated on the Behavioural Model developed by Hughes
(1986). (See fig 2.10)
Motivation is a decision making process where the individual puts in appropriate
behaviour to achieve a goal or objective. Bearing this in mind, motivation of an
individual or workforce is purely subjective which cannot be explained by one theory
or attributed to one specific cause.
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A Behavioural Model – David Hughes 1986
Initiation of Change
Perceived
Outcome Of
Change
Reaction
Past Experience
Group Influence
Information
Trust
Influ
encin
g F
actors
Infl
uen
cin
g F
acto
rs
Destructive
Threatening Useful
Doubtful Uncertain
Resistance
Opposition Tolerance Passive
Acceptance
Active
Involvement
Support
Beneficial
Participation Personality
Evaluation Of
Outcome
Fig. 2.10 Source: Hollings, 2000
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2.10 Managing the Contract
Recent evidence suggests that some companies that have gone down the outsourcing
route are finding themselves increasingly disillusioned with the process. There seems
to be two main reasons for this:-
The initial reasons for outsourcing were tactical and not strategic.
Management of the contract was poorly planned, or adversarial rather
than co-operative.
This statement is verified by Corbett (1997, p2) in his paper – Outsourcing : The US
Business Revolution, " Over the last two years, the attention has shifted from doing
the deal to managing the relationship."
Therefore, outsourcing requirements must be carefully matched to organisational
requirements and managed against organisational expectations. The tool that achieves
this matching must be the specification for the service(s) required, this being best
achieved if the “users” or customers of the service(s) have an input into the
specification development. This is known as the Service Level Agreement (SLA) and
should be agreed prior to the signing of any contract.
In practical terms this means that a close working relationship needs to be developed
within organisations between the Facilities Manager, the user groups, the procurement
department and the supplier to ensure that any specification produced meets the
criteria of the involved (and interested) parties.
2.10.1 Performance Evaluation
One of the main areas of risk for an organisation outsourcing any service or activity is
a loss of control. In line with most modern management techniques, risk
management, assessment and controls are a vital part of everyday life.
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The relevance for this monitoring is twofold:
1) To demonstrate that the services delivered meet the requirements of the
contract and the organisation, within the financial parameters determined. The
information gathered and trends analysed will provide vital decision-making
support material for further strategic and tactical reviews.
2) To demonstrate to internal and external auditors, customers and suppliers, that
the organisation is in control of this aspect of its business.
The measurement of performance against targets, however, is only one part of the
equation. The aspect that must also be included is a comparison of what the
organisation and suppliers are doing, in relation to best industry practice. By
aggregating these two factors together, organisations should be able to develop an
understanding of the quality of the services being delivered, by their service suppliers.
Two main tools from quality management systems are usually used to achieve the
measurement and assessment process.
These are:
Performance Measurement Systems
Benchmarking
2.10.2 Performance Measurement Systems
For performance to be measured, the measurements must be against a measurable
targets. Clearly, to be meaningful, any target needs to be based on an agreement
between the organisation and the supplier, as Scroxton (1998) noted:
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For performance measures to be most effective as a
reflection of the value provided by the contacted service,
they should:
Be appropriate
Be meaningful
Be measurable
Have appropriate coverage
Be agreed
(Scroxton, 1998. p15)
These targets, when agreed, should then be set within the contract, at negotiation
stage, as Service Level Agreements (SLA’s). Service level specifications play two
vital roles in an outsourcing agreement. They ensure accountability on the part of the
provider, and they determine the price of the service.
As Kennedy (1996) identified:
The construction of a service level agreement is required
between the parties to determine the standard of service
required and how conformance will be measured. It
provides a mechanism for determination, and for both
parties to the agreement to audit satisfactory delivery
and receipt of services.
(Kennedy, 1996. p140)
In an outsourced situation – where the buyer gives control of an important business
function to another company – the only way to ensure a comfort level for the buyer is
to set required service level specifications and then regularly measure the provider’s
performance to determine whether it has achieved those levels. So that a buyer will
know it is getting what it is paying for, a service level specification should be
established for every important component of a process. Each component focuses on
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one of the buyer’s desired results (such as accuracy, timeliness, customer satisfaction
or ensuring regulatory compliance), these are commonly known as Key Performance
Indicators (KPI's).
Law (1999) noted:
A strong SLA defines clearly what the service delivers,
when it delivers it and where it delivers it to. It should
not be allowed to deviate into a description of how the
service is delivered..
(Law, 1999. P103)
2.10.3 Benchmarking
All Facilities Managers, whether in the private or public sector, require information in
order to help them make strategic decisions that are in the best interest of their
organisation. There is clearly, therefore a need to understand how different skills,
knowledge and processes impact upon the organisation's ability to meet the needs of
their customers or users. The use of benchmarking can provide management with
detailed data and a reference point, which will enable them to look critically at their
performance in comparison to others and to make informed strategic decisions.
Benchmarking is a process of determining an organisation's performance, in selected
activities, defining who is the best, who sets the standard, and what that standard is.
The start of benchmarking is credited to the Xerox Corporation in the United States
who, because of competition by the Japanese in the 1970's, experienced a substantial
reduction in their market share of the sale of photocopiers. The Chief Executive at that
time, David Kearns, decided that he could learn from the very people he was
competing against. This concept was gradually cascaded down the organisation,
through engineering functions to management and its business practices. The author
feels it is pertinent at this stage to examine Xerox's definition of benchmarking:
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The continuous process of measuring products, services
and practices against leaders, allowing the identification
of best practice, which lead to sustained superior
performance.
(Xerox Corporation, 2003.)
It can be seen from this definition that benchmarking, is concerned not with
performance against contract obligations (SLA’s), but with performance compared
with current best industry practice.
The advantages of utilising benchmarking as a management tool as identified by the
Croner. CHH Group (2003) is shown in Table 1.
Objectives Without Benchmarking With Benchmarking
Becoming competitive Internally focused
Evolutionary change
Understanding of
competition
Ideas from proven
practices
Industry best practices Few solutions
Frantic catch up activity
Many options
Superior performance
Defining customer
requirements Based on history or gut
feeling
Market reality
Objective evaluation
Establishing effective
goals and objectives Lacking external focus
Reactive
Credible, arguable
Proactive
Developing true measures
of productivity Pursuing pet projects
Strengths and weaknesses
not understood
Route of least resistance
Solving real problems
Understanding outputs
Based on industry best
practices
For any benchmarking exercise comparison data is the vital component. Generally,
this is found in 3 areas:
Table 1: Reasons for Benchmarking
Adapted from: Croner's Facilities Management: Records and Procedures, 2003
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Published data
Facilities auditors database
Peer-group consultation
Performance measurement, by benchmarking, can also be a useful method for testing
the value of suppliers’ service delivery, without going through the work involved in a
contract re-tendering exercise.
As Scroxton (1998) further notes:
An alternative ……is to demonstrate best value through
performance benchmarks. These must be both internally
derived, and (particularly important) externally derived
from published research or internally-managed external
benchmarking programmes, such as industry norms.
(Scroxton, 1998. p15)
However, Amaratunga et al (2000) further argues the benefit of using
benchmarking as a measurement tool:
This technique can also offer the realisation that better
ways of doing things do exist and that the employment of
new techniques can make a huge difference to the
effectiveness of the contract and the organisation.
(Amaratunga et al, 2000. p68)
2.10.4 Management by the Client
Within all management there exists some kind of structure, or hierarchy. An
outsourced or contracted out activity is no different; a structure for lines of reporting,
determining management responsibilities, and performance monitoring must exist to
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ensure that the objectives of the task are being met, and that factors of influence are
being identified and acted on accordingly.
Typically, structures for outsourced Facilities Management often follow the model
shown in fig 2.11
One of the main issues relating to outsourcing is the reduction of in-house
management time, spent on managing internal service provision, which can
subsequently be diverted into the core business. This element will be, in fact, a
function of how effectively the contract has been specified, the selection of the best
supplier and a joint understanding of the contract requirements. Management time
saving is deemed by most outsourcing organisations to be a vital part of the process,
but the reality quite often does not live up to the expectation, as shown in Table 2:
Typical Facilities Management Structure for Outsourced Solution
Fig. 2.11
Client
Helpdesk
Site Facilities
Manager
Hard Services Soft Services
Supplier
Contracts
Supplier
Contracts
In - House
Outsourced
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Benefits of Buying FM
Services
Ranking of Benefits
Expected
Ranking of Benefits
Received
Reduce Costs 1 1
Save management time 2 4
Concentrate on core business 3 2
Improve on in-house quality 4 8
Gain access to best practice 5 5
Greater flexibility 6 2
Buying efficiencies 7 6
Reduce in-house staff 8 7
Adapted from : A Market Audit of the UK Facilities Management Market, 1997/98
As with all management, communications is paramount in ensuring that all parts of
the system are functioning to their expected efficiencies. Curiously then, in light of
the importance of this simple issue, the value of communications is often overlooked.
A key factor in successful communications is a two-way flow of information. This is
where a mature “partnering” arrangement can add value to the overall process, by
opening up the appropriate channels of communication, in order to allow sensible
decisions to be reached and enable goal congruence to be achieved.
The second issue, that of management expertise, is particularly pertinent. As
managers turn back to concentrating on their core business, and the complexity of
areas such as environmental standards compliance and Health & Safety at Work
legislation develops, it becomes increasingly difficult for in-house managers to keep
abreast of the requirements.
The final important part of the client management process, when the “hard” issues of
expertise, monitoring and measurement have been considered, are the “softer” areas
where management occupies an “enabling” role. This could take on many facets e.g.
problem resolution, constraint identification, change notification and management etc
– all issues that, whilst minor in themselves, collectively could represent a risk to the
success of the exercise, if unanticipated or unaddressed.
Table 2: Contractual Expectations versus Reality
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It has been seen that organisations outsource their FM for a number of key business
reasons. Organisations that lose sight of these reasons, or fail to plan and manage the
process in an effective way, run the risk of failing to benefit from the advantages that
outsourcing can bring, whilst still exposing themselves to the risks that inevitably
arise from passing control for certain elements of the business, out of the organisation.
2.10.5 Management by the Supplier
Many of the issues relating to the management of services by the service provider are,
from the client`s viewpoint, a mirror image of the clients own management matters.
However, the supplier’s view of the service management process takes a broader
approach.
While the level and standard of service provided is of vital importance to the client in
support of his business, the level and standard of service delivered by the supplier, IS
his business. The future viability and success of the supplier`s organisation is clearly
dependant on getting this “core” aspect right.
It is interesting to note that a customer organisations “non-core” business is very much
the “core” business of the supplier.
It is generally understood that businesses offering specialist services should have a
high level of relevant expertise. It will also be expected, by clients, that where there is
an “expertise gap”, the supplier will be experienced enough to know where to go to
buy in any required knowledge identified. However, many client organisations, as
indicated in the literature search, require the supplier to bring a greater depth to
management knowledge, that is over and above technical expertise.
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Chapter 3 - Research Methodology
3.1 Data Requirement
The purpose of this research project has been to investigate the reasons why
organisations outsource their Facilities Management, to what extent and to what level
of success.
Although, initially, this appears to be a small area of research, it actually encompasses
some fundamental issues relating to how organisations structure and operate. This is
in relation to not only their core business, but also the vital support services and
activities that enable the company to deliver its products or services.
3.1.1 What Data is Required and its Location
To greater understand the project matter the author deemed it necessary to get an
understanding of what had been happening in the market place, realising from the
outset of research, that information relating to the study subject area would be likely to
be contained within the following main areas:
Published books relating to either the research subject, or as part of a larger
remit on Facilities Management.
Published research work that covers the research subject or Facilities
Management e.g. Professional market research data, Professional bodies,
Case Studies etc.
Published journals that represented both Facilities Management and
associated professional fields.
In respect of research information published by Research Organisations, in some
cases, executive summaries were the only level of documentation available without
incurring significant expenditure for full report papers. However a number of
Chapter Three
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organisations forwarded copies of their reports due to the nature and subject matter of
the research, with a view to future publishing of the author’s research findings.
The field related data gathering was split into three sectors, as previously discussed in
Chapter 1.
Private Sector
Local Government
Public Healthcare
3.2 Research Philosophy
Your research philosophy depends on the way that you think
about the development of knowledge. This seems rather profound,
and not something about which you would normally give much
thought. Yet the way we think about the development of
knowledge affects, albeit unwittingly, the way we go about
research. Two views about the research process dominate the
literature: Positivism and Phenomenology. They are different, if
not mutually exclusive, views about the way in which knowledge
is developed and both have an important part to play in business
and management research.
(Saunders et al, 2000. p84 –85)
3.2.1 Positivism
The Positivism approach relies on being objective and analytical, making decisions
from quantifiable data using a highly structured methodology that will enable
replication. As Remenyi et al (1998, p32) states, " The end product of such research
can be law-like generalisations similar to those produced by the physical and natural
scientists."
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Easterby-Smith, (2001) identified seven implications with regard to Positivism
research methodology:
Independence – the observer is independent of what is being observed
Value-freedom – What & how to study is determined by objective criteria
and not human bias of the researcher
Hypothetico-deductive – hypothesise fundamental laws first then deduct
observations to prove or disprove the hypotheses
Operationalisation – concepts operationalised to enable facts to be
measured quantitatively
Reductionism – problems better understood when reduced into the
simplest possible elements
Generalisation – sufficient sample size crucial to ensure generalisation
Cross-sectional analysis – comparison used for identifying regularities
3.2.2 Phenomenology
Resistance to Positivism lead to the rise of Phenomenology, the task is not to measure
how often things occur and place fundamental laws in place to explain their
behaviour, but to appreciate the different constructions and meanings people place on
them.
3.3 Research Design
The extent to which you are clear about the theory at the beginning of the research
raises an important question concerning the design of the research project. Saunders
(2000) et al.. identifies the two approaches
Tthe Deductive approach, where you develop a theory and
hypothesis and design a research strategy to test the hypothesis,
or the Inductive approach, where you collect data and develop
theory as a result of your data analysis.
(Saunders et al, 2000. p87)
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Table 3 : Comparison of Deduction and Induction Research Design
Deduction Emphasises Induction Emphasises
Scientific principles Gaining an understanding of the meanings
humans attach to events
Moving from theory to data A close understanding of the research context
The need to explain casual relationships
between variables
The collection of qualitative data
The collection of quantitative data A more flexible structure to permit changes of
research emphasis as the research progresses
The application of controls to ensure
validity of data
A realisation that the researcher is part of the
research process
The operationalisation of concepts to
ensure clarity of definition
Less concern with the need to generalise
A highly structured approach
Researcher independence of what is being
researched
The necessity to select samples of
sufficient size in order to generalise
conclusions
3.3.1 Chosen Research Methods
The authors research methodology is not tied down to either Positivism or
Phenomenology, but to which one/combination of the two best suits the required
research area, as Easterby-Smith et al.. (1991) suggests:
There are many researchers, especially in the management field,
who adopt a pragmatic view by deliberately combining methods
drawn from both traditions.
(Easterby-Smith et al, 1991. p22)
For this dissertation the author has decided that the methodology listed below will be
most suited:
Source: Saunders, 2000. p91
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The positivism philosophy is the chosen approach as the author is independent from
the research hypothesis whose theory has been tested through objective methods as
opposed to reflection or intuition.
The deductive method of data collection has been chosen as the author is independent
from the research used a relatively large sample size, 80 organisations, the split for
sampling in the identified sectors was:
Private Sector 35
Local Government 25
NHS 20
The author considers the use of questionnaires and review of case studies was the
correct method of research as this provided more meaningful and consistent results,
with which to answer the areas of research.
3.4 Research Strategy
The research strategy is a general plan of how the individual will go about answering
the research question. Saunders et al, (2000, p92) identifies six basic research
strategies:
Experiment
Survey
Case study
Grounded theory
A Positivism philosophy using a deductive research
methodology, using a questionnaire and a review of case
studies.
Chapter Three
Research Methodology
Page No 47
Ethnography
Action research
3.4.1 Experiment
Experimental research is concerned with the control of a sample of individuals / group
via the introduction and control of planned change variables. This method was not
considered suitable, as the research topic, the author did not have control of or was
able to introduce planned changes into organisations.
3.4.2 Survey
The Survey is usually associated with the deductive approach and often involves large
surveys using standardised questionnaires. This approach gives greater control of the
data a great deal of time was taken in designing and piloting the questionnaire. This is
discussed at greater length in section 4.5.
3.4.3 Case Study
Robson, (1993, p40) states, " The development of detailed, intensive knowledge about
a single ‘case’, or a small number of related cases." It became clear whilst studying the
journal works, that this area of research was rich with information regarding
organisations that had outsourced either all or part of their Facilities Management
services. This has proved to be of significant interest as it provides a view of the
whole process from strategic organisational planning through procurement and
employment issues to mobilisation, implementation and operational management,
together with the successes and constraints experienced within the process.
3.4.4 Grounded Theory
The grounded theory method, is based on ‘theory building’ through a combination of
induction and deduction. A theory is developed from the initial gathering of data, this
theory is then re-tested through further observations. The nature of the research area
does not require further theory development and testing, so was discounted.
Chapter Three
Research Methodology
Page No 48
3.4.5 Ethnography
The purpose is to interpret the social world the research
subjects inhabit in the way in which they interpret it. This is
obviously a very time consuming process.
(Saunders et al, 2000. p95)
This method appears to be data intensive and due to the time constraints placed on the
dissertation process was not adopted.
3.4.6 Action Research
The action research method according to Easterby-Smith et al..(1991)
1. A belief that the best way of learning about an organisation
or social system is through attempting to change it, and this
therefore should to some extent be objective of the action
researcher.
2. The belief that those people most likely to be effected by,
involved in implementing, these changes should as far as
possible, become in the research process itself.
(Easerby-Smith et al, 1991. p34)
This method did not hold any relevance to this dissertation research, so was
discounted.
3.4.7 Cross-Sectional and Longitudinal Studies
This element of research methodology refers to the time in which the study will take
place.
Cross-sectional studies are carried out over a short period of time, as Saunders et al
(2000, p96) explains, " Many case studys are based on interviews conducted over a
short period of time."
Chapter Three
Research Methodology
Page No 49
Cross-sectional studies is the study of change and development over a period of time
The author believes that there was a case for both of these within the research, as the
questionnaire provided results with regard to a snap shot in time, but the
organisations used historical data (gathered during the length of the outsourcing
contract) to complete various sections of the questionnaire.
3.4.8 Chosen Research Strategy
The authors methodology is not tied down to any one research strategy but a multi-
method which best suits the required research area.
3.5 Methods of Data Collection
3.5.1 Questionnaire
The field research aspect of the research project was deemed to be of key importance
by the author. This endeavoured to form a view, from a cross section of organisations,
of what level of FM outsourcing currently exists, where it exists, why it exists and
how effective it has been for the organisations that have chosen the FM outsourcing
route, balanced with the information gathered by the literature searches.
The questionnaire was designed following the study of research methodology
publications and advice received from the University at the Business Research
Methodology lectures, together with a number of questionnaires that the author
collected, to identify any type and style that appeared more effective than others.
The questionnaire was designed in two sections:
A research strategy using Questionnaires and utilising
a Cross- Sectional methodology.
Chapter Three
Research Methodology
Page No 50
The first section was intended to gather information about the organisation, asking
quite specific and closed questions such as organisational operating sector, size by
turnover, size by headcount, property portfolio information etc.
The second section was intended to gather information relating to the provision of
Facilities Management within the organisation. This comprised a number of closed
questions in relation to issues of services provided, spend and outsourcing reasons,
success and failure rates, etc, with open questions regarding the split of provision –
inhouse/outsourced, the main cost areas, performance measurement tools and issues
that organisations felt that suppliers need to address.
To encourage the return of completed questionnaires, respondents were offered the
option of being supplied with a copy of the executive summary from the completed
research work.
The questionnaire, in draft form, was circulated to a small number of the author’s
professional colleagues, for comment regarding the composition of questions, format
and length etc.
The questionnaire was subsequently modified to reflect the comments received and
“piloted” to a group of 6 senior managers within industry. This exercise was
successfully completed, with a 55% return rate, exceeding the authors expectations
and the questionnaire was distributed to identified personnel within the sectors
previously described
3.5.2 Distribution Methodology
As the database information that was developed contained all of the necessary contact
addresses, the author decided to use a number of methods to distribute the
questionnaire. The method primary used was that of email, 80% of all questionnaires
were forwarded using this method. A more traditional route of post was used for
identified contact whose email addresses could not be established, 15% of all
Chapter Three
Research Methodology
Page No 51
questionnaires, the remaining 5% were delivered by hand through the authors
professional contacts. The questionnaire “pack” sent out contained:
Questionnaire
Covering explanation letter from the author
Stamped self-addressed envelope for returning questionnaires (emailed
exempt)
A note of receipts against database was kept, with follow up telephone calls being
made during the first and second weeks following distribution to confirm that those
who had not replied had received the questionnaires, and also to “remind” those who
had not replied.
A copy of the covering letter and questionnaire is attached in Appendix A and
Appendix B respectively.
3.5.3 Private sector
This sector proved to be the most fragmented in terms of gathering reliable contact
names. To achieve the 35 names required the author used a number of different
sources: Included in this were also Academic Institutions.
British Institute of Facilities Management – list of corporate members
Through FM providers
Enquiries within local / national industries
3.5.4 Public Healthcare (NHS)
Initially, the prospect of finding 20 accurate contacts within this sector seemed an
ambitious task. However, following research through the internet, the author was able
to contact HEFMA(1)
and its key regional chairmen to distribute the said
questionnaires, to the relevant NHS Trusts.
(1)
Health Facilities Management Association
Chapter Three
Research Methodology
Page No 52
3.5.5 Local Government
With the public healthcare sector, the prospect of accurately finding reliable sources of
information within local government also seemed an ambitious task. Once again, the
research identified key contacts within County Councils through the internet. The key
contacts usually being identified as FM Directors or Estate Managers.
3.6 Methods for Data Analysis
The data contained in the returned questionnaires was analysed to provide a macro-
view of the FM outsourcing question, positioned against a broad background of
information. The key points of the organisational analysis were:
Sector of operation
Size of organisation by turnover and headcount
Size of property portfolio
Use of range of buildings within portfolio
Types of property tenure
The key points for organisational Facilities Management were:
Type of FM management provision
FM annual spend value
In-house/outsourced activities
“Drivers” for outsourcing, levels of success or failure
Service measurement tools
Looking ahead to future reviews and policies
The data collected was analysed providing a linear interpolation, to identify any trends
that appeared relating to portfolio size, operating sector, Facilities Management spend
Chapter Three
Research Methodology
Page No 53
value etc, together with the type of service provision method chosen; in-house or
outsourced.
This capture of “hard issue” data was reconciled with the findings of “soft issue” data
relating to the organisations experiences of outsourcing, the reasons for any
outsourcing decisions, an overview of success and failure factors, any policy review
periods and likely “in-sourcing” decision areas. It also considered an overview of
what areas of improvement within FM are seen, by organisations, as requisite for the
future, as well as problems, comments and ideas as to which areas and issues should
be addressed by FM suppliers to provide better customer satisfaction.
3.7 Methodological Review
3.7.1 Justification for research methodology chosen
The justification for the research methodology that the author chose has been
considered as subsets of the two main areas:
Literature searching – Secondary data
Field research – Questionnaires – Primary data
3.7.2 Literature searching
Literature searching was a fundamental part of the research process. The study of
published book material is a traditional and relatively straight forward exercise.
Research of journal articles was deemed to be useful in respect of the current thinking
and experiences of organisations represented. The time consuming aspect of this part
of the work though was studying the journals for relevant articles and sorting these
into the categories, together with other relevant articles, reports and items of interest.
The author also undertook some information searches on the internet. The British
Institute of Facilities Management maintain a web site, as do the Centre for Facilities
Management at Strathclyde University and Sheffield Hallum University and these
Chapter Three
Research Methodology
Page No 54
produced some useful information. There are a number of commercial resource FM
centres on the internet, though it must be noted most are of American descent.
3.7.3 Field Research
Due to the constraints of balancing studies, a professional and family life, the author
determined that his preferred method for field research would be by the development
and distribution of a carefully designed and piloted questionnaire. As the hypothesis
being studied could not be intrinsically applied to one organisation – it covered a
breadth of organisations and sectors - a widely distributed questionnaire was deemed
to be the most appropriate method of capturing the data required for the research.
The author did consider the use of personal interviews, but concluded that, the
arrangement of interviews, with the wide geographic spread of the survey population,
would be difficult to arrange and maintain. This method of data collection was,
therefore, not pursued.
3.7.4 Credibility of Analysis
To ensure credibility in the methods of research and subsequent interpretation of the
data, the author is aware that particular attention has to be given on research design
and data collection, ie reliability and validity.
Researchers normally work to a 95% level of certainty. This therefore equates to out
of a sample of 100 at least 95 samples must be returned and analysed to be certain to
represent the characteristics of the population. Table 4 shows sample sizes for
different sizes of population at 95% level of certainty.
Chapter Three
Research Methodology
Page No 55
Table 4: Sample sizes for population at a 95% level of certainty
Population Margin of Error
5% 3% 2% 1%
50 44 48 49 50
100 79 91 96 99
150 108 132 141 148
200 132 168 185 196
250 151 203 226 244
300 168 234 267 291
Adapted from: Saunders et al, 2000. p156
As can be seen from Table 4 the smaller the sample, the greater the margin for error,
therefore it is important to obtain as high a response rate as possible.
With all survey, in reality, there is likelihood in having non-responses. The number of
non- respondents as identified by Saunders, et al (2000, p157) falls into three inter-
related problems:
Refusal to respond
Ineligibility to respond
Non-contact
To assess how representative and valid the data sample collated is, the application of
the formula for estimating response rates and actual sample size quoted by Saunders,
et al (2000, p158) is to be used :
na = n x 100
re%
Where na the actual sample size required, n is the minimum and re% is the estimated
response rate expressed as a percentage.
However, as this is a postal / email survey Owen & Jones (1994), states, " For postal
surveys a response rate of approximately 30 per cent is reasonable."
Chapter Three
Research Methodology
Page No 56
Therefore the minimum sample returns form a research sample size containing 80
email and postal questionnaires is calculated as follows:
80 = n x 100
30%
n = 80 x 30
100
n = 24
As 28 (35%) responses were received the author was satisfied that the sample was
statistically valid.
It must be noted that this research is merely a snap shot of the current feeling and
understanding of the populous at this current time. Therefore it is felt by the author
that the conclusions and recommendations would be verified and justified at a later
space and time
Chapter Four
Emperical Findings
Page No 57
Chapter 4 - Emperical Findings
Part One
4.1 Organisational Overview
4.1.1 Level of Response
The survey was conducted by a self-administered questionnaire completed by relevant
management within each organisation. The invitations to complete a questionnaire
were sent to 80 organisations between August 2003 and January 2004. Of the 80
questionnaires sent, returns totalled 28, or 35% overall. The highest response rate was
from the private sector who returned 23%. The overall response rate was pleasing with
many organisations contributing useful additional comments with the answers.
Table 5: Breakdown of Questionnaires
Response Rate Private Local Govt Healthcare Total
Number sent 35 25 20 80
Number returns 18 5 5 28
This is graphically percentage shown in Fig. 4.1 - 4.4.
Fig. 4.1 Fig.4.2
Response Rate
23%
6%6%65%
Private Sector Government
Public Healthcare Non Returns
0
10
20
30
40
P rivate Lo cal Go vt H ealthcare
Response Rate per Sector
N umber sent N umber returns
Chapter Four
Emperical Findings
Page No 58
4.1.2 Analysis of Private Sector Questionnaire
As previously stated within the private sector 35 questionnaires were sent and 18
returns received. An interesting result from this is that of the original 6 identified
Educational institutions there was not one reply.
These returns can be further broken down in sectors as shown in Fig. 4.5.
PRIVATE SECTOR RETURNS
32%
16%16%
10%
6%0%
10%10%
Manufacturing Petrochemicals Pharmaceuticals
Banks Insurance Education
Air Trav. Shop. Centres
Fig.4.3
Fig. 4.5
Questionnaire Returns by Sector
51%
20%
25%
Private Sector Government
Public Healthcare
Questionnaire Distribution by
Sector
44%
31%
25%
Private Sector Government
Public Healthcare
Fig.4.4
Chapter Four
Emperical Findings
Page No 59
4.1.3 Job Role
As part of the research, the author was interested to investigate the job titles that are
used in relation to managers who have responsibility for FM within their
organisations. This was covered in Q2, part 1, of the questionnaire, the results being:
Private sector organisations
Several titles appear to exist across the organisation sampled, with 17 usable
responses sorted from the 18 replies. Within these 17, two main titles appear,
unsurprisingly, as:
Facilities manager 10
Facilities director 3
Technical services manager 2
Property manager 2
What is considered interesting is the relatively low numbers of director posts that
occur within the management of facilities in this sector, although all posts claim to
make or influence strategic FM decisions. This indicated to the author two issues:
1) The management of facilities tends to be fragmented by job role and title
within organisations, suggesting that it’s real value and importance to
organisations as an integrated activity, is not yet fully recognised.
2) In the private sector, it would appear that organisations are generally
content to allow strategic decisions for facilities and facilities related
matters to be made by senior management, below board level.
Public sector organisations
Of the 10 replies from the public sector, the categories were:
Facilities director 6
Facilities manager 3
Chapter Four
Emperical Findings
Page No 60
Estates manager 1
The public sector appears to make its decisions with regard to FM outsourcing
generally at a higher level. This is shown in the percentage comparative differences
between directorships attributed to the Public sector in Facilities Management than
those in the private demain.
4.2 Organisational Analysis
Questions 5 & 6, section 1 of the questionnaire, were intended to collect information
on organisational size by staff numbers and turnover, respectively. The results for
each sector and consolidated values are shown in Fig 4.6 - 4.11.
PRIVATE SECTOR ORGANISATIONS -
ANALYSED BY HEADCOUNT
6%17%
11%
17%21%
11%
17%
25 -50 51 - 100 101 - 500 501 - 1000
1001 - 2500 2501 - 5000 5001+
PUBLIC SECTOR ORGANISATIONS -
ANALYSED BY HEADCOUNT
0% 10%
30%
30%
20%
10%
25 -50 51 - 100 101 - 500 501 - 1000
1001 - 2500 2501 - 5000 5001+
TOTAL ORGANISATIONS - ANALYSED BY
HEADCOUNT
3%
10%
25%24%
14%
14%
25 -50 51 - 100 101 - 500 501 - 1000
1001 - 2500 2501 - 5000 5001+
PRIVATE SECTOR ORGANISATIONS -
ANALYSED BY TURNOVER
6% 11%
17%
17%17%
11%
21%
0.5 to 2 2 to 10 11 to 50 51 to 100
101 to 250 251 to 500 500+
PUBLIC SECTOR ORGANISATIONS -
ANALYSED BY TURNOVER
0% 10%
30%
30%
20%
10%
25 -50 51 - 100 101 - 500 501 - 1000
1001 - 2500 2501 - 5000 5001+
TOTAL ORGANISATIONS - ANALYSED BY
TURNOVER
3%
10%
25%24%
14%
14%
25 -50 51 - 100 101 - 500 501 - 1000
1001 - 2500 2501 - 5000 5001+
Fig 4.6 Fig 4.7 Fig 4.8
Fig 4.9 Fig 4.11 Fig 4.10
Chapter Four
Emperical Findings
Page No 61
As can be seen from Fig 4.6 & 4.9, of the private organisations sampled, over 49%
employed more than 1000 people while over 34% had a turnover of more than £250m
per year.
Analysis of the data shows that the majority of the organisations in the public sector
fall into the mid to upper area for staff numbers, i.e. 60% of organisations employ
more than 1000 people, which correlates reasonably closely to the results in the
private sector.
Question 7, 8 & 9 was an attempt, within the questionnaire to gather data relating to
organisations property portfolios. These questions however, produced only limited
response from both sectors. Surprisingly the only quantifiable data that was useable
was that regarding the portfolio value as shown on the organisations balance sheet
2003. The analysis is shown on Fig 4.12 – 4.14.
Question 10 sought to identify the type of tenure that organisations use for their
holding property.
Private Sector
The results from this sector showed:
PRIVATE SECTOR ORGANISATIONS -
ANALYSED BY PORTFOLIO SIZE
6% 11%
17%
17%17%
11%
21%
0.5 to 2 2 to 10 11 to 50 51 to 100
101 to 250 251 to 500 500+
PUBLIC SECTOR ORGANISATIONS -
ANALYSED BY PORTFOLIO SIZE
0% 10%
30%
30%
20%
10%
25 -50 51 - 100 101 - 500 501 - 1000
1001 - 2500 2501 - 5000 5001+
TOTAL ORGANISATIONS - ANALYSED BY
PORTFOLIO SIZE
3%
10%
25%24%
14%
14%
25 -50 51 - 100 101 - 500 501 - 1000
1001 - 2500 2501 - 5000 5001+
Fig 4.12 Fig 4.13 Fig 4.14
Chapter Four
Emperical Findings
Page No 62
65% of organisations hold greater than 50% of their property as
leasehold,
44% of organisations holding greater than 75% of the property at
leasehold
This tends to confirm that private sector companies in the main attempt to avoid tying
up capital in property ownership.
Public Sector
68% of respondents hold greater than 75% of their property as
freehold.
This is seen as indicative of the traditional method of holding property in the public
sector, sitting as a considerable contrast with the way in which the private sector holds
property.
Chapter Four
Emperical Findings
Page No 63
Part Two
4.3 Analysis of Facilities Management Information –
Questionnaire Section Two
4.3.1 Question 1 - Would the type and length of tenure influence the FM
decision?
Question 1, was to identify any correlation between the tenure with which
organisation hold their property i.e., freehold, leasehold or sublet, and any policy with
regard to FM and outsourcing
Private Sector
Of the 18 responses to this question 15 indicated that there is no linkage between
tenure and method of FM delivery.
Public Sector
Of the 9 replies, only 2 indicated that tenure would have an influence on the method of
FM service delivery.
4.3.2 Question 2 - What FM services are provided?
Question 2 identified the services provided within the organisations and as to whether
these were provided in-house, outsourced or a combination of both. The outcome of
this analysis is shown in Fig 4.15 - 4.17.
Fig 4.15
PRIVATE SECTOR ORGANISATIONS -
ANALYSED BY FM PROVISION
48%
48%
4%
In-House Outsource Both
PUBLIC SECTOR ORGANISATIONS -
ANALYSED BY HFM PROVISION
61%
33%
6%
In-House Outsource Both
TOTAL ORGANISATIONS - ANALYSED BY
FM PROVISION
54%41%
5%
In -House Outsource Both
Fig 4.16 Fig 4.17
Chapter Four
Emperical Findings
Page No 64
Private Sector
This identifies, that 48% of the organisations outsource some of their FM provision
and a further 4% use a combination of in-house and outsourced provision for certain
services. A detailed analysis of the data received from this question was undertaken to
identify the level of outsourced/in-house provision across the activities. These results
are shown in Fig 4.18, Page 66.
This result, however, is almost identical to the BSRIA(1)
research in 1997, which
stated that 49% of organisations surveyed outsourced some or all of its facilities
management provision. The author is, therefore, content to take from this a
confirmation of the quality of the BSRIA research and an indication, for validation
purposes, of the accuracy for the methodology utilised for this research study.
Results from this analysis clearly shows that a number of perceived core /high risk
services under current management thinking remain within the remit of the business
management teams. These cover for example, human resources, health and safety and
statutory and legislative compliance.
Public Sector
This shows a slightly different picture to the private sector, with a large proportion of
the services 61% still being provided in-house.
A more detailed analysis of the outsource/in-house/both provision method, split by
activity is shown in Fig 4.19, page 67.
The graph clearly indicates that, despite the large levels of change that public sector
organisations have experienced over the last 10 years, with the government lead
initiative of Compulsory Competitive Tendering they still appear to provide the
majority of their support services in the traditional, in-house way. Similar to the
(1)
BSRIA field research reported in the Building Services Environmental Engineer Sept 1997
Chapter Four
Emperical Findings
Page No 65
private sector human resources, health and safety, statutory and legislative compliance
remain wholly within the management of the public sector.
It is interesting to note the similarity of services outsourced to FM providers between
both private and public sector even though the level of outsourced services in the
public sector is significantly lower.
Chapter Four
Emperical Findings
Page No 66
Private Sector - Activities Analysed by Service Type - Figure 4.18
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
M &
E
Cater
ing
Clean
ing
Secur
ityPos
t
Rec
eptio
n
HS&
E
Hum
an R
esou
rce
Payro
ll
Occ
upationa
l Hea
lth
Stat. Com
p.
Portera
ge
Fabric
main.
Project M
anag
emen
t
Rep
ro.
Statio
nery
Telec
oms
Fleet
Man
agem
ent
Vending IT
Trave
l
Reloc
ation
Outsourced In house Both
Chapter Four
Emperical Findings
Page No 67
Public Sector - Activities Analysed by Service Type - Figure 4.19
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
M &
E
Cater
ing
Clean
ing
Secur
ityPos
t
Recep
tion
HS&E
Human
Res
ourc
e
Payro
ll
Occ
upat
iona
l Hea
lth
Stat.
Comp.
Porte
rage
Fabric
mai
n.
Project
Man
agem
ent
Repro
.
Statio
nery
Telec
oms
Fleet
Man
agem
ent
Vendi
ng IT
Trave
l
Reloc
ation
Outsourced In house Both
Chapter Four
Emperical Findings
Page No 68
4.3.3 Question 3 - What is the total annual cost of FM services?
Question 3, tried to identify the contract values of FM service across the research
sample. The results are shown in Fig 4.20 - 4.22
Private Sector
The result shows 50% respondents, have an FM “spend” above £4m per annum and
78% have a spend up to £9m per annum.
Public Sector
In comparison with the private sector equivalent, the research shows that a smaller
proportion spend between £1 - £4 million, however, this increases in the £4 - £9 million
sector to 40% versus 28% in the private sector.
4.3.4 Question 4 – What is the approximate split of costs for the FM services.
Does the organisation consider the services outsourced to a single service provider
to be an Integrated Facilities Management (I-FM)(1)
organisation?
Question 4 tries to identify whether organisations tend to outsource Facilities
Management to a single / specialist FM provider or a number of independent specialist
(1)
I-FM - several different services are outsourced to the same supplier through the same contract
PRIVATE SECTOR ORGANISATIONS - SPLIT
OF FM SERVICES BY COST
17%
33%28%
22%
100k -1m 1m - 4m 4m - 9m 10m+
Fig 4.20 Fig 4.21 Fig 4.22
PUBLIC SECTOR ORGANISATIONS -
SPLIT OF FM SERVICES BY COST
20%
20%
40%
20%
100k -1m 1m - 4m 4m - 9m 10m+
TOTAL ORGANISATIONS - SPLIT OF
FM SERVICES BY COST
19%
27%33%
21%
100k -1m 1m - 4m 4m - 9m 10m+
Chapter Four
Emperical Findings
Page No 69
service providers and if this is the case to what percentage. The results are shown in Fig
4.23 - 4.24
Private Sector
Taken in context with the results from question 2 further analysis show that for the
48% of organisations that outsource Facilities Management services:
17% outsource between 0 - 25% of these service cost to an I-FM
28% outsource between 25 - 50% of these service cost to an I-FM
33% outsource between 50 - 75% of these service cost to an I-FM
22% outsource between 75- 100% of these service cost to an I-FM
Not one organisation outsources 100% of its FM to an I-FM
The main cost areas identified were:
Cleaning
Security
M & E – Building Fabric maintenance etc.
Catering
PRIVATE SECTOR
ORGANISATIONS - ANALYSED
BYSERVICES PROVIDED BY
AN I- FM PROVIDER
17%
28%33%
22% 0%
0 - 25% 25 - 50% 50 - 75%75 - 100% 100%
PUBLIC SECTOR ORGANISATIONS -
ANALYSED BY SERVICES PROVIDED
BY AN I-FM PROVIDER
30%
20%
10%
0%
0%
40%
0 - 25% 25 - 50% 50 - 75%
75 - 100% 100% N/A
Fig 4.23 Fig 4.24
Chapter Four
Emperical Findings
Page No 70
This result was unsurprising, as generally, the top 5 of these activities are traditionally
outsourced and therefore show up as clearly identifiable costs within service budget
areas.
Public Sector
The results of this part of the research, for the 33% of public sector organisations that
outsource Facilities Management activities, were:
30% outsource between 0 - 25% of these service cost to an I-FM
20% outsource between 25 - 50% of these service cost to an I-FM
10% outsource between 50 - 75% of these service cost to an I-FM
0% outsource between 75- 100% of these service cost to an I-FM
40% believed they did not outsource to an I-FM
This result clearly underscores the overall picture that the overwhelming majority of
Facilities Management activities, for the public sector, whether service management or
service delivery, are being carried out in-house.
The main cost areas identified were:
Cleaning
Catering
M & E
The results for both sectors mirrors the findings of Frost & Sullivan (2002) which stated
the overall penetration of I-FM service providers was low and that the great majority of
outsourced work takes the form of single service contracts. However the report goes on
to state:
"The relative lack of I-FM can be put down ot a number of
weaknesses
Chapter Four
Emperical Findings
Page No 71
Lack of customer awareness of the potential of
outsourcing
Customer ignorance over who offers I-FM
Poor satisfaction levels with I-FM providers"
(Frost & Sullivan, 2002. p1-1)
4.3.5 Question 5 - How recently have you outsourced your FM?
Question 5 attempted to identify when organisations outsourced their Facilities
Management. The results are shown in Fig 4.25 - 4.27
Private Sector
The results indicates and confirms the relative “newness” of FM outsourcing, with only
5% of organisations indicating an outsourcing decision being made more than 10 years
ago. Another interesting observation from this question confirms that many
organisations, 42% while recognising that they use contracted services (Independent
Service Providers), do not consider that they have outsourced their Facilities
Management.
Fig 4.25 Fig 4.26 Fig 4.27
PRIVATE SECTOR ORGANISATIONS -
WHEN WAS FM OUTSOURCING
UNDERTAKEN
21%
32%5%
42%
0 - 4 years 5 -10 years 10 + years N/A
PUBLIC SECTOR ORGANISATIONS - WHEN
WAS FM OUTSOURCING UNDERTAKEN
20%
30%0%
50%
0 - 4 years 5 -10 years 10 + years N/A
TOTAL ORGANISATIONS - WHEN WAS FM OUTSOURCING UNDERTAKEN
21%
31%3%
45%
0 - 4 years 5 -10 years 10 + years N/A
Chapter Four
Emperical Findings
Page No 72
Public Sector
A similar result with the private sector in that no organisations outsourced FM more
than 10 years ago and 50% not considering that they have outsourced Facilities
Management, thus re-affirming the above points.
4.3.6 Question 6 - How would you consider a decision for outsourcing FM?
Question 6 wanted to understand how organisations saw any outsourcing decision;
whether strategic (taken centrally/corporate) or tactical (taken locally).
Private Sector
The results were:
Strategic 56%
Tactical 44%
This is an interesting result in that the results are fairly evenly split. However, without
further research it is difficult to ascertain as to whether the decision to outsource FM is
considered a strategic part of the business, not to be altered locally or simply that any
outsourcing decision is referred to central/corporate level for approval.
Public Sector
The results were:
Strategic 70%
Tactical 20%
Both 10%
It is interesting to note that 10% of public sector respondents claimed that any FM
decision would be the result of both a central & local decision making process,
indicating that whilst direction might come from the centre, local views and opinions
would be included. However, the other indication is that 70% of respondents felt that
Chapter Four
Emperical Findings
Page No 73
any FM outsourcing decision would be a strategic or central issue, which in terms of
public sector organisations must infer that the decision comes from central government.
This could therefore relate to the government policy with regard to Compulsory
Competitive Tendering and thus could be one of the drivers in the apparent perceived
failings of outsourcing in the public sector.
4.3.7 Question 7 - If FM providers are used, how were they chosen?
Question 7 asked how FM providers were chosen by organisations.
Private Sector
The results show that external consultants are used in 44% of cases, either solely,
which was rare at 11%, or with the in-house team at 33%.
In-house team 56%
External consultants 11%
Both 33%
Public Sector
In-house team 60%
External consultants 30%
Both 10%
There is a close match with the use of in-house teams between the public and private
sectors – 56% to 60% respectively; however it is the reverse in the other areas in that
the public sector is three times more likely to use external consultants than the private
sector.
This could be seen as a rather traditional approach that the public sector organisations
appear to take in respect of their Facilities Management and experience in procurement
policies.
Chapter Four
Emperical Findings
Page No 74
4.3.8 Question 8 - Reasons for outsourcing?
Question 8 attempted to identify why organisations outsource their Facilities
Management services. The results are shown at Fig 4.28
REASONS FOR OUTSOURCING
0%
10%
20%
30%
40%
50%
60%
70%
80%
Redu
ce c
osts
Conc
. co
re b
usin
ess
Ris
k re
duc
tion
Spe
cial
ist s
kill
Gov
ern. P
olicy
Loca
l org
. pol
icy
Par
ent
org
. polic
yO
rgan
isat
iona
l cul
ture
Private Public Both
The private sector results indicate that specialist skill requirements and concentration on
core business issues came before cost reduction.
However, the public sector clearly shows cost reduction aligned to central governmental
policy the key drivers, ahead of access to specialist skills. This confirms on previously
discussed research findings the role of central government policy with regard to local
government policy and strategy.
4.3.9 Question 9 - How successful has outsourcing been for your organisation?
Question 9 sought to identify the success levels of the organisations sampled, with their
outsourced activities. The results are shown in Fig 4.29 - 4.31
Fig 4.28
Chapter Four
Emperical Findings
Page No 75
In order to better understand if the outsourcing of Facilities management had been a
success, the above categories were grouped together as shown:
“Very successful”
“Good”
“Reasonable”
“Problem”
Private Sector
This shows that 62% of the organisations surveyed had a positive outcome against 38%
whom had a poor experience with the outsourcing process.
Public Sector
This shows an interesting result in that 40% of the organisations surveyed had a positive
experience whilst 60% had a negative experience, this is almost identical to the private
sector, but in reverse. Once again as previously stated this could be the result of the key
drivers in the public sector being driven from central government and not locally.
Fig 4.29 Fig 4.30 Fig 4.31
PRIVATE SECTOR ORGANISATIONS - HOW SUCCESSFUL HAS
OUTSOURCING BEEN
19%
43%
33%
5%
0%
Very Successful Good
Reasonable Problem
Failure
PUBLIC SECTOR ORGANISATIONS - HOW SUCCESSFUL HAS
OUTSOURCING BEEN
10%
30%
50%
10% 0%
Very Successful Good
Reasonable Problem
Failure
OVERALL ORGANISATIONS - HOW SUCCESSFUL HAS OUTSOURCING
BEEN
15%
36%41%
8% 0%
Very Successful Good
Reasonable Problem
Failure
Successful experience
Limited success / Poor experience
Chapter Four
Emperical Findings
Page No 76
Further research would have to be partaken in to satisfy these findings, however this is
beyond the scope of this research project
4.3.10 Question 10 – How was the performance of the contract services
measured?
Question 10 sought to identify the measurement tools favoured by organisations to
measure the performance of the Facilities Management contract. The results are shown
in Fig 4.32
HOW WAS THE PERFORMANCE OF THE CONTRACT MEASURED
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
KPI
Ben
chm
arki
ng
Sur
vey
Sel
f Mon
itor
Per
iodi
c Rev
iew
Hea
dcou
nt
Was
Not
Mea
sure
d
Private Public Both
Private Sector
What was clear from the responses was that the majority of organisations surveyed
used a combination of tools to measure the contracts performance, with Key
Performance Indicators (KPI’s) and customer survey / acceptance being the most
popular, closely followed in conjunction with a contractual periodical review. An
interesting response from one organisation in that the service was measured purely on
the reduction in headcount that the outsourcing process had created.
Fig 4.32
Chapter Four
Emperical Findings
Page No 77
Public Sector
Very similar results to that of the private sector, though KPI’s and periodical review
being favoured over customer surveys.
The author was surprised that benchmarking was not used greater as a measurement
tool, however during the course of research it must be noted that benchmarking data
with regard to FM was not available, merely only on a service by service delivery and
this was usually based on for example costs to clean a predetermined area and not
measuring the service delivery.
4.3.11 Question 11 to 12 - What were the key factors in the success/failure of
outsourcing?
Following from the analysis of successful/less successful experiences and methods on
contract performance measurement, question 11 and 12 sought to understand the main
issues that contributed to either a successful or less successful outcome. The results for
private sector organisations are shown in Fig 4.33 and 4.34
Chapter Four
Emperical Findings
Page No 78
SUCCESSFUL EXPERIENCE KEY FACTORS
0%
10%
20%
30%
40%
50%
60%
Sta
ndar
ds o
f ser
vice
del
iver
yIn
nova
tion
by s
uppl
ier
Ant
icip
ated
v a
ctua
l sav
ings
Dec
reas
ed m
anag
emen
t tim
eSta
ndar
ds o
f sup
plie
r sta
ffSup
plie
r com
mun
icat
ions
Cus
tom
er s
atis
fact
ion
Exp
ecta
tions
v rea
lity
Sup
plie
r int
egra
tion
Sta
ndar
ds o
f sup
plie
r man
agem
ent
Sal
es p
rom
ise
v ac
tual
ser
vice
Alig
nmen
t of s
uppl
ier w
ith c
lient
bus
ines
sSup
plie
r cus
tom
er fo
cus
Private Public combined
FAILURE KEY FACTORS
0%
10%
20%
30%
40%
50%
60%
Sta
ndar
ds
of s
ervi
ce d
eliv
ery
Inno
vatio
n by
supp
lier
Ant
icip
ated
v ac
tual s
avin
gs
Dec
reas
ed m
anag
em
ent t
ime
Sta
ndar
ds
of s
upplie
r st
aff
Sup
plie
r co
mm
unicatio
ns
Cus
tom
er s
atis
fact
ion
Exp
ecta
tions
v rea
lity
Sup
plie
r in
tegra
tion
Sta
ndar
ds
of s
upplie
r m
ana
gem
ent
Sal
es p
rom
ise
v ac
tual
serv
ice
Alig
nmen
t of
sup
plie
r w
ith c
lient b
usines
sSup
plie
r cu
stom
er fo
cus
Private Public combined
Fig 4.33
Fig 4.34
Chapter Four
Emperical Findings
Page No 79
By applying the Pareto principle to the above results a clearer picture emerges with regard to
the key success and failure factors. See Table 6
Factor Successful Failure
Private Public Private Public
Standards of service delivery 1 1 3 1
Customer satisfaction 2 3 = 2 2
Innovative approach by suppliers 3 = 8 = 10
Anticipated v actual savings 3 = 3 = 8 = 5 =
Standards of supplier staff 3 = 2 6 = 5 =
Supplier integration 3 = 8 = 5 =
Expectations v reality 7 6 = 5 =
Decreased management time 8 4 5 =
Supplier communications 9 3 = 5 3 =
Sales promise v actual service 1 3 =
Private Sector
It is interesting to note that there is a clear commonality of factors that either create a
successful experience of outsourcing, or cause the experience to be less than successful.
However the number one reason for failure in the private sector is the sales promise
versus actual delivery, the author finds this curious.
Further to this the indication would appear quite simple; attention by the suppliers to a
fairly tightly focussed set of considerations within the supplied activities e.g. standards
of service and staff, customer satisfaction and delivery of expectations will make the
difference, for customers, between a successful or less successful outsourcing
experience.
Public Sector
Here again the key success factors are nearly replicated as failures within the
outsourcing process.
Table 6: Key Success and Failure Factors
Chapter Four
Emperical Findings
Page No 80
When these results are analysed as a whole it is apparent that key success factors also
contribute if incorrectly managed to the key failure factors.
Standards of service delivery
Customer satisfaction
Promised contractual delivery versus reality
These result findings are mirrored by the research by plcUK (as discussed on page 18),
who indicate the key failure of outsourced contracts being the quality of service.
4.3.12 Question 13 - What would be your organisations review period for
outsourcing?
Question 13 was intended to identify the review periods that organisations used. The
results are shown in Fig 4.35 - 4.37
Private Sector
It is interesting to note, that in spite of the use by organisations of the terms
“partnership” and “long term relationships”, the majority of organisations – 59% still
operate on a 1 to 3 year review cycle. This could be for a number of reasons relating to
caution over longer term arrangements with suppliers, but could equally well underpin
the earlier literature search discovery that there is often a mismatch between
PRIVATE SECTOR ORGANISATIONS -
POLICY REVIEW PERIOD (Years)
59%29%
6% 6%
1 to 3 4 to 7 8 + Never
Fig 4.35 Fig 4.36 Fig 4.37
PUBLIC SECTOR ORGANISATIONS -
POLICY REVIEW PERIOD (Years)
40%
50%
10% 0%
1 to 3 4 to 7 8 + Never
TOTAL ORGANISATIONS -POLICY
REVIEW PERIOD (Years)
49%
40%
8% 3%
1 to 3 4 to 7 8 + Never
Chapter Four
Emperical Findings
Page No 81
organisations financial and procurement policies and regulations, and organisational
support services delivery requirements.
Public Sector
It is interesting to note here that public sector organisations which have outsourced, take
a longer term view than private sector organisations on any review period, with 40% of
organisations working on a 1 to 3 year review timescale and 50% compared to 29% in
the private sector on a 4 to 7 year review period. It is additionally relevant to observe
that this timescale is more consistent with the development of the longer term
commercial service or “partnership” arrangements that are frequently mooted as being
the future direction for outsourced Facilities Management.
4.3.13 Question 14 - Would you keep your outsourced activities as they are?
Question 14 asked respondents if they could keep their activities outsourced, bring them
back in-house, or bring selected activities back “in”. The results were:
Private Sector
Keep activities outsourced 61%
Bring back in-house -
Bring back selected activities 39%
These selected activities were mainly stated as M&E / Building Fabric maintenance and
cleaning.
Public Sector
Keep outsourced 50%
Bring back in-house -
Bring back selected activities 30%
This shows a similar trend to the private sector, which showed 50%, for “keep
outsourced” and 30%, for “bring back selected activities”. From this result, despite the
apparent limited success experienced with outsourcing in a significant number of cases,
it appears that the majority of those who have outsourced would continue to do so.
Chapter Four
Emperical Findings
Page No 82
This result would seem anachronistic in light of the other information gathered from
public sector organisations, but could be due to constraints of government policy not
allowing sufficient flexibility for local managers to change central decisions, if the
results of a centrally driven outsourcing exercise are poor. The study of this question is
outside the scope of this research, but it would be interesting to understand why, if the
outsourcing experiences have been as low as indicated there is not an overwhelming
motivation to take service provision back in-house.
4.3.14 Question 15 - What is your view of outsourcing FM support services?
In question 15, the author sought organisation’s views on the overall subject of the
outsourcing of FM services. The results are shown in Fig 4.38
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
In need of development
Here to stay
Provides for the
business needs
Provides the customer
with their wants
Passing fashion
ORGANISATIONAL VIEWS ON OUTSOURCING
Private Public Both
Private Sector
This analysis shows that organisations mostly agree outsourcing is here to stay, but that
it appears to be very much in need of development. That being said, a significant
Fig 4.38
Chapter Four
Emperical Findings
Page No 83
number of organisations obviously feel that their outsourcing provides generally both
for the business needs and customer wants.
Public Sector
Generally, the result shows a close correlation to the views of private sector
organisations, with the exception of further development, where in spite of the apparent
lack of success in the public sector with outsourcing, 80% state that there is a need for
future development as opposed to 94% in the private sector
Clearly, despite all of the apparent lack of success experienced, outsourcing is firmly
seen as here to stay, with very few organisations seeing it as a passing fashion.
Chapter Five
Conclusions from the Research
Page No 84
Chapter 5 - Conclusions from the Research
5.1 Introduction
The primary aim for this research project was to identify the key drivers that lead an
organisation to outsource its facilities management provision and to ascertain the
success levels of such initiatives. An additional intention of the overall research was
to gain an understanding of organisational views of outsourcing as a business strategy
and areas of weakness that need to be addressed by suppliers and clients alike.
Although, initially, this appeared to be a narrow area of research, it actually
encompasses some fundamental issues relating to how organisations structure and
operate not only their core business, but also the vital support services and activities
that enable the company to deliver its products or services.
This chapter is divided into the below listed sections:
Private sector organisations
Public sector organisations
Summary and future actions
5.2 Private Sector Organisations
5.2.1 Drivers
The research findings show that cost reduction is a prevalent factor within the private
sector, however both access to specialist skills and an ability to concentrate on core
competencies were seen as of greater importance.
This leads the author to conclude that organisations outsourcing decisions are driven
by the needs of the environment within which the business operates, in relation to
gaining access to specialist skills through the Facilities Management provider thus
empowering the organisation to concentrate on its core competencies to ascertain
competitive advantage. By then having access to a business whose core competencies
Chapter Five
Conclusions from the Research
Page No 85
are facilities management, organisations view this as an additional cost reduction
driver.
To a large extent this correlates with aspects of literature research and case studies
identified during the research of the dissertation that indicated outsourcing brought
specialist skills to organisations to cover non-core activities, thereby allowing the
organisation to concentrate on its core business and competencies.
5.2.2 Contract Measurement Tools
What was clear from the responses was that the majority of organisations surveyed
used a combination of tools to measure the contracts performance, with Key
Performance Indicators (KPI’s) and customer survey / acceptance being the most
popular, closely followed in conjunction with a contractual periodical review. It is
unclear how these measurement tools interacted with the financial performance of
individual contracts, though the research findings indicate the more successful
contracts were those using the above described tools. An interesting response from
one organisation in that the service was measured purely on the reduction in
headcount that the outsourcing process had created.
The author was surprised that benchmarking was not used greater as a measurement
tool, however during the course of research it must be noted that benchmarking data
with regard to FM was not available, merely only on a service by service delivery and
this was usually based on for example costs to clean a predetermined area and not
measuring the service delivery.
5.2.3 Levels of Success
The findings of the research, Indicate that within the private sector the decision to
outsource Facilities Management is a strategic / central decision. However, though this
was only marginally greater (12%) than that of a tactical / local viewpoint. What is
clear though is that these initiatives are taken by senior management and then managed
/ owned at a local level to implement and operate the contract. Also of note, is that the
Chapter Five
Conclusions from the Research
Page No 86
private sector is not immune to utilising the expertise of outside consultants (1/3 of
contracts are developed this way) in conjunction with themselves to draw up the
agreement and identify the SLA’s. This approach supports the relatively high success
rate of the responders, into the outsourcing process / experiences, as noted in the
previous chapter.
However it is interesting to note the commonality of factors which contribute to both a
success and less successful contractual experience.
Standards of service delivery
Customer satisfaction
Anticipated v actual savings
Research findings indicate a fairly high level of both management and services are still
performed by in-house teams. It was interesting to note in the analysis that a
significant proportion of organisations, whilst clearly using individual outsourced
services did not consider that they had, outsourced their Facilities Management.
The vast majority of Facility Management providers, as previously identified within
the literature have developed from a single service provider and therefore lack the
depth of knowledge to provide true Integrated Facilities Management.
From these findings it must be concluded that Outsourcing is now an established
business process, which although generally delivering business support and customer
needs, is clearly failing to provide appropriate levels of management standards, leading
to deficiencies in customer service, quality and innovation with poorly defined
contractual cost deliverables.
However, there is still a substantial market potential for outsourcing that has yet to be
developed, particularly in the area of Integrated Facilities Management (I-FM).
Obviously this will be subject to individual organisations willingness to allow
Chapter Five
Conclusions from the Research
Page No 87
managerial control for certain areas to pass from its in-house teams to supplier
managed teams and the suppliers ability to address the service delivery process to
match the customers expectations.
5.2.4 Other Research Findings
Contract review periods of between 1 – 3 years is the norm and does little or nothing to
encourage “partnership” and “long term relationships” developing, this is often, as the
literature searching suggests, caused through a mismatch between organisations
definition of financial, procurement and service provision required contractual
deliverables.
5.3 Public Sector Organisations
5.3.1 Drivers
The research findings show that central government policy and cost reduction are the
prevalent factors within the public sector, followed by access to specialist skills and an
ability to concentrate on core competencies.
This leads the author to conclude that public sector organisations outsourcing
decisions are driven by the needs of government and its Compulsory Competitive
Tendering policy to reduce expenditure and increase productivity and therefore
perceived value for money at a local level. This correlates with aspects of the literature
research and case studies identified during the research of the dissertation.
5.3.2 Contract Measurement Tools
What was clear from the responses was that the majority of organisations surveyed
showed very similar results to that of the private sector, using a combination of tools
to measure the contracts performance, with Key Performance Indicators (KPI’s) and
periodical reviews being favoured over customer surveys. The author was again
surprised that benchmarking was not used greater as a measurement tool.
Chapter Five
Conclusions from the Research
Page No 88
5.3.3 Levels of Success
It is rather alarming to note the relatively high rate of less successful (60%) Facilities
Management outsourced contracts within the public domain in comparison to the
private sector.
Through the outsourcing strategy being centrally driven and with little opportunity for
localised management to take ownership and drive the direction and strategy in line
with localised requirements leads the author to conclude that this is a major
contributory factor towards the apparent lack of successful contracts.
Also of note, is that 60% of all contracts are formularised with in-house team, however
unlike the private sector there is little evidence in a partnering approach between
localised governments and specialist consultants in drawing up the agreement and
identifying the SLA's.
Research also indicates a high level of FM management and services still being
performed by in-house teams, indicating a cultural barrier between accepting the
traditional drivers for public service and the realities and needs of the modern world.
These factors, including cultural indifference to outsourcing at a localised level, leads
the author to conclude that the failure or perceived success of the Facilities
Management contract within the public sector is almost inevitable unless both
governmental and local sector organisations re-evaluate current methods and practices
However it is interesting to note the commonality of factors which contribute to both a
success and less successful contractual experience being exactly the same as the
private sector.
Standards of service delivery
Anticipated v actual savings
Customer satisfaction
Chapter Five
Conclusions from the Research
Page No 89
This must also represent a significant market opportunity and challenge for Integrated
Facilities Management providers that have the necessary skills and confidence to
develop the current identified contractual weaknesses and to tackle the cultural
resistance that clearly exists regarding outsourcing in this sector.
5.3.4 Other Research Findings
Similar to the private sector, outsourcing Facilities Management is recognised as an
established business strategy, which is here to stay.
Contract review periods of between 4-7 years are common, thus helping with the
development of a partnership approach, this reflects the traditional procurement and
cultural approach which public sector organisations employ.
5.4 Summary
5.4.1 Summary of Conclusions
Outsourcing Facilities Management is a relatively new discipline within both the
private and public sectors. As with any contracted discipline there is both successful
and less success experiences and is generally seen as in need of development. In order
to improve the provision of services and management to meet customers requirements,
specific attention should be paid to the following key areas by suppliers and clients in
order to in increase the likelihood of a successful experience of outsourcing:
Standards of service delivery
Customer satisfaction
Anticipated v actual savings
It has been observed that outsourcing, driven by central policy and cost reduction
policies, as the primary drivers, does not produce acceptable results. However,
outsourcing Facilities Management that has a more business driven approach, with a
greater level of local ownership is likely to have a greater opportunity for success.
Chapter Five
Conclusions from the Research
Page No 90
Contracts are also proven to be more successful if they are developed in partnership
with a specialist consultants.
The obvious conclusion therefore, particularly for public sector organisations, is that
in considering an outsourced solution, a far broader view of reasons should be
examined than central policy driven by cost reduction . This view should include the
specific and integrated involvement of the management who will be responsible for
managing and delivering the services.
Literature searching promotes a 'partnering' approach between parties over a greater
period than 3 years, however research results indicate that if this approach of contract
review / period is taken then there is a greater likelihood for contract failure. This
leads the author to conclude that the optimum period for a Facilities Management
contract is no greater than 3 years with the possibility to extend the contract following
a successful review.
Major market opportunities still exist for Integrated Facilities Management companies
in the area of outsourcing, but cultural barriers and a general lack of Facilities
Management strategies within organisations can represent constraints on the market
development.
References and Bibliography
i
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Appendix
iv
Appendix
Appendix A
v
John Cooper,
2 Hawthorn Close
Gnosall
Staffordshire
ST20 0LY
O1785 823365
20/ 11/ 03
Dear Sir / Madam,
Re: MBA Dissertation Questionnaire
I am currently undertaking the field research stage for a Masters in Business Administration
(MBA) Dissertation, at Staffordshire University.
The subject area that I am researching is “To Identify the Key Drivers for an Organisation to
Outsource its Facilities Management Provision”.
I would be very grateful if you could spare a small amount of time to complete and return the
enclosed questionnaire. I am hopeful that, by collecting data related to the above, within a
broader view of motivations, I will be able to shed some valuable light on the reasons for
outsourcing decisions. This could also help, in the longer term, shape suppliers thinking
towards a better understanding of what organisations really want out of an outsourcing
exercise.
To enable the results of the survey to be analysed within the research programme, I would
request that the survey forms are returned by Friday 5th March 2004.
If you would like to receive a copy of the executive summary from my findings, please
indicate this in the appropriate place on the last page of the questionnaire.
Should this letter have reached you, and you feel that you are not the best qualified to
complete the questionnaire, I would be obliged if you could forward the questionnaire to
someone in your organisation who would be able to complete it.
Thanking you in advance for taking the time to help me in this research,
Yours faithfully,
John Cooper
Appendix B
vi