MSc Facility & Environment Management The Bartlett School of Graduate Studies MSc Report

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1 MSc Facility & Environment Management The Bartlett School of Graduate Studies MSc Report Matt Woodhouse 15 September

2 If outsourcing sells, is anyone buying? Table of Contents Abstract... page 4 Section1: Introduction.. page hypothesis. page what is outsourcing? page a short history of outsourcing. page why outsource?... page 6 Section 2: Literature review page main introduction to literature review.. page literature review part one - introduction page outsourcing - the argument for.. page 9 (i) cost: how outsourcing saves you money. page 9 (ii) service quality page outsourcing - the argument against page 10 (i) cost.. page 11 (ii) organisational issues. page 11 (iii) security and confidentiality. page literature review part two - introduction.. page 12 (i) a growing trend toward outsourcing... page 12 (ii) outsourcing bundled services versus out-tasking page 12 (iii) relationships between client and provider page 13 (iv) size and length of contracts. page 14 (v) reasons for using an outsourced provider page 14 (vi) control of contractors page 15 (vii) sector trends page 16 (viii) outsourcing versus in-house. page literature review conclusion. page 17 Section 3: methodology. page main introduction to methodology page survey outline page survey main body.. page 21 2

3 3.4 survey discussion page 40 (i) conclusion to the hypothesis page 40 (ii) additional findings not set out in the hypothesis page 41 (iii) problems encountered with the survey method. page interviews outline page interview with Jeff Shaw page interview with Steve Cross. page interviews discussion page 53 (i) conclusion to the hypothesis. page 53 (ii) additional findings not set out in the hypothesis page 54 Section 4: Summary page main conclusion to the hypothesis page further research.. page 56 Section 5: references... page 57 Section 6 Appendix page 60 Figure 1.. page 60 Figure 2.. page 60 Figure 3 page 61 Figure 4.. page 61 Figure 5 (a) page 62 Figure 5 (b) page 63 Figure 5 (c) page 64 Figure 6 page 65 Figure 7. page 66 Figure 8. page 67 3

4 If outsourcing sells, is anyone buying? Abstract Since its inception in the 1980s the FM industry has rapidly grown, and continues to do so through the global recession. The reason this is happening appears to be in line with an increasing trend to outsource FM. In parallel to this has been an enormous growth of HSE and environmental issues. My own experience has been with both in-house and outsourced FM teams, in both the public and the private sector. It was through this experience that an interest in the outsourcing market grew. It is for this reason that I chose to study the outsourcing market in the UK, with particular focus on its growth, and the reasons behind it. 4

5 Section 1: Introduction 1.1: hypothesis There is a growing trend with large UK companies to outsource and bundle their FM services across multiple regions, with increased focus on HSE and the environment in the selection process. 1.2: what is outsourcing? Outsourcing can be defined as: The strategic use of outside resources to perform activities traditionally handled by internal staff and resources." (1) 1.3: a short history of outsourcing An oft-cited example of the first instance of outsourcing (using the above definition) occurred in 1989, when Eastman Kodak enlisted the help of IBM to assist them with their IT systems. In so doing, a new strategy was born, in which companies invited third parties to carry out non-core business activities. This approach to business was considered revolutionary at the time, yet in reality the fundamental notion of a business looking for cheaper or more efficient resources in order to give itself a competitive edge and increase profits is itself nothing new. Up until the late 20 th Century the prevailing business practice was for a company to own, manage and directly control its entire assets and operations. This model began to change in the 1950s and 1960s, during which time there was a rallying cry for diversification to broaden corporate bases and take advantage of economies of scale (2). Such economies of scale encouraged companies to look outside the confines of their own business for a better deal. In 1963 Electronic Data Systems, (EDS), signed an agreement with Blue Cross of Pennsylvania for the handling of its data-processing services, part of its core business. EDS realized a crucial factor - that it did not matter who carried out their business (or indeed where) - as long as it was performed to maximum efficiency and with minimum cost. By farming out any aspect of the business that could be provided for a significantly cheaper price, EDS gave themselves a competitive edge. 5

6 Yet it was the development of the Kodak / IBM partnership that really began to change the market. As competition for market domination increased, a new strategy for outsourcing non-core business activities emerged. For the first time, companies began to realise the advantages to be gained by turning to external agencies to handle non-core services such as internal mail distribution, security and plant maintenance. Doing so, it was argued, enabled these companies to focus on their core business while also saving money. Outsourcing has developed at such a rate throughout the late 20 th century and into the 21 st century that it is now argued that `as a tool of management, it has moved from the margins to the centre. (3) At first, the prevailing practice was to outsource these services one at a time. As time progressed, the smarter Facilities Management Providers (FMP) realised they could make themselves a more attractive proposition by offering more than one service: cleaning companies would offer catering, then mailroom services. This type of vertical expansion was paired with a horizontal expansion, whereby the third party provider would expand its geographical coverage. For a client to turn to one company to provide all these services in one easy-to-manage package would be the next stage in the evolution of FM outsourcing, a logical progression. Figure 1 in the appendix is a presentation slide shown by one FMP (Eurest Services) to potential clients (including Shell, to whom they now provide worldwide FM services). The slide highlights the benefits that bundling FM services together, to one FM provider, can bring. 1.4: why outsource? In an economic downturn, outsourcing is a smart way to get your organisation moving forward. Managing processes internally can distract an organisation from growing its business and from being flexible. It can (also) contribute to missing out on growth opportunities. (4) This notion of distraction appears to be a recurring theme. Many business journals today cite the financial benefits to be gained by venturing down the outsourcing route, as is noted in the 2005 Global Outsourcing Report, Few companies would outsource at all if doing so didn t save them money. (5) 6

7 And so it is that the two-fold mantra of focus on core business, save on cost has developed and worked its way into the psyche of businessmen and business journalists alike, until we have reached the point today where it is cited as being the driving force behind any company s decision to outsource. If outsourcing FM can provide you with this edge, the logical question that should then surely be asked is: to what extent is this happening? Perhaps of equal importance are questions such as: what problems can outsourcing present your company with, and are there instances where the safer option is to keep FM services in-house? 7

8 Section 2: Literature review 2.1: main Introduction to literature review While the profession of FM is relatively new, the academic research into the subject has an even shorter history. A little over a decade ago, it was noted that The field of FM remains underresearched (6). These words still ring true. Although a general understanding of FM is becoming more widespread, comparatively little academic work is being produced on the subject when viewed alongside the volumes written about other industries. Outsourcing FM has rapidly moved from alternative to a mainstream business practice. Clearly it has its appeal. It is the aim of this report to discover why this is the case and also to examine if outsourcing, as a business practice, will continue to dominate the FM market in the future. In researching this report, the main area of interest was to discover any growth patterns the FM outsourcing market is currently experiencing in the UK, and what factors are affecting this. Also of interest was to determine any client-side trends in the outsourcing-experience. Finally, I was also keen to ascertain the importance both HSE and environmental performance play in the UK outsourced FM market today. This review is divided into two parts. Part one looks at the fundamental reasons companies turn to outsourcing, examining this from a business or trade perspective. As such, the main points of reference used are business literature and trade journals. Specific FM and HSE websites also played an important role. The second part of this literature review takes a more academic approach by examining two models already studied in greater detail: one in Finland, the other in the US. 2.2: literature review part one - introduction The overall aim of this report is to examine the role that outsourcing plays in today s Facilities Management (FM) market. Much hyperbole is currently being created in the trade press about the subject. A recent edition of The Engineer, for example recently ran an article: To Outsource or Not to Outsource, (7), while a November 2009 edition of FM World ran an article To have and to Hold (8). 8

9 As will shortly be examined, there are many benefits to be gained by outsourcing; yet as a business practice, it is not without its detractors. 2.3: outsourcing - the argument for (i) cost: how outsourcing saves you money Those companies that genuinely look to outsource do so in an effort to achieve what many inhouse FMs fail to provide: value for money (9) Those who argue in favour of outsourcing point to the many ways in which a large service provider can offer significant cost savings that a company keeping its FM services in-house may not achieve. Eurest Services, for example, is in the fortunate market position of having Compass the largest catering company in the world as its parent company. The strategic dominance of a monolith such as Compass ensures that it has significant purchasing power and is in a position to demand significant savings on goods (and services) from its suppliers, which it can then pas to its clients. This power to negotiate cost-effective deals is particularly attractive to clients who have an open book contract with their provider rather than fixed price. This is because the client is able to see immediately and with clarity where their savings are being made. Using a large provider for all services significantly reduces the risk that the supplier of your goods and services will cease trading, thereby interrupting your FM supply and potentially disrupting your business. A client s business can be put under threat if it ties itself too closely to the financial success of another company, especially if that company is providing more than one service. With 1,542 businesses failing in the UK in July 2010 alone (10), this is an important factor to consider. A large provider that sub-contracts any of its established services to a third party will always be in the position to turn to another third party should the original sub contractor, for whatever reason, no longer be able to supply goods or services as requested. After the global financial meltdown in 2008, large organizations started to use this situation as an excuse to off- load staff and facilities to third parties. Leading large organizations no longer had capital to invest internally yet maintained committed to maintaining their market leadership. This could only be achieved by outsourcing non-core areas (11). 9

10 An outsourced company can also provide the degree of flexibility that their client may not otherwise get from in-house staff. By using a good provider, a client can increase or decrease staffing levels at their discretion with little concern for redundancy payments, pensions, sickness or holidays (although it should be stated that a wise FMP may build these factors in to the price of the contract). Thus a client can have the freedom to experiment with different ways of working, or may carry out various projects without worrying about the financial implications of hiring too many staff, then having to lay them off once the project has ended. (ii) service quality The strict demands imposed upon PFI contracts has ensured that many of these now lead the way in benchmarking many aspects of Facilities Management, providing best practice in some. Having a provider that is able to transfer these standards from one client in the PFI sector to another client in the private sector is of course an attractive proposition. Outsourcing staff can also provide continuity of company culture across the board. If the right culture is established, a large contractor will have no problem in establishing the same culture across multiple territories. This continuity of culture may be extended across many aspects of Facilities Management. Health and safety, for example, is one of the most important and politically charged topics on the agenda today and many outsourced FM contracts are now being won and lost on proven continuity of HSE records. 2.4: outsourcing - the argument against Despite all the positive publicity for FM outsourcing, many companies still express a reluctance to commit. Those arguing against outsourcing claim there are hidden costs which mean outsourcing could ultimately cost you more money. They also point to a possible loss of management control, especially if there is a clash of business or management objectives. 10

11 (i) cost Detractors of outsourced FM argue that the initial cost provided / quoted by the provider to the client is not the actual cost, and that there are hidden costs in the procurement and selection of the contractors, as well as the mobilization of the contract. Using the Shell / Eurest partnership as an example, certainly costs for Eurest were significant in the first year (HSE purchases, mobilization staff expenses). However, subsequent demands made by Shell for Eurest to reduce annual expenditure (by 2% p.a.), have largely compensated for this initial outlay. Details of this arrangement are explored in greater detail in the interview section of this report (section number 3.7 and 3.8). Additional or unexpected costs can also be incurred in out of scope, project, or managed contingency works. Such costs are usually not within the remit of an annual budget as they are difficult to forecast. As a result any works that fall under this can add to an annual budget, providing some unexpected surprises to an unprepared FM. Control measures for this issues are also discussed in the interviews section of this report. (ii) organisational issues Also to consider are the problems that a centralized FMP may bring to a contract. In 2008, Napo the union and professional association for family court and probation staff carried out research into their outsourcing practices. The results, published in 2009 were so damning that the title of the report itself left little to the imagination. Waste and Excessive Bureaucracy (2009) noted numerous examples of contractors travelling hundreds of miles to fulfill simple asks where previously the job would have been completed by a company from round the corner. (12) (iii) security and confidentiality It is often argued that too much outsourcing can cause a threat to confidentiality and security. An apparent link with this theory is the fact that Security is one department that clients often keep inhouse, or outsource to a separate provider other than the main bundled provider. For some this is seen as a calculated control measure, yet the reality may simply be that the main provider is unable to offer this specialist service, forcing the client looks elsewhere. A capability matrix for Eurest Services is included in the appendix (figure 2) to help explain this. 11

12 2.5 literature review part two - introduction The second part of the literature review examines academic research into the area of outsourcing. While the UK market remains largely uninvestigated, data is available for other countries. This review focuses primarily on three reports: for a European perspective, Lehtonen and Salonen s 2006 study of the Finnish FM market, Procurement and management trends in FM services is examined in detail. For a greater understanding of the US market, two IFMA reports are examined: Outlook on Outsourcing (1999) compares a 1999 survey with data taken in This was followed by a 2006 report by An inside look at outsourcing (2006) a report also published by IFMA. The salient points of all three reports are summarised below. (i) a growing trend toward outsourcing Lehtonen and Solonen based their research on a questionnaire sent to the buyers in the 50 most important companies in the Finnish Market (ranked in terms of turnover and square meterage of real estate owned). Their primary findings highlighted a growing trend toward outsourcing (14), with 67 % of buyers having already established, or aiming to establish a close partnering relation with one or more FM service provider. IFMA data (collected from a random selection of 487 companies) appears to indicate the US is undergoing a similar experience: the 1999 report noted that the percentage of FMs outsourcing their services had increased slightly compared with 1993 levels (12% in 1999 compared with just 3% in 1993), and that this trend continued into 2006 (15%). (ii) outsourcing bundled services versus out-tasking IFMA data from 1999 showed that although the outsourcing experience was gaining in popularity the biggest market was in out-tasking (the hiring of individual, specialized vendors, often for one-off requirements). The average amount of out-tasking vendors used per company was 20. This figure appeared to be stabilizing, with 60% of buyers using the same amount of vendors as they did two years previously, 33% using more vendors and 8% using fewer vendors. By 2006, this trend appeared to have reversed. Levels of out- tasking in the US had declined from 91% (1993) to 77% (2006). This was matched by a five-fold increase of bundled out-sourcing (3% in 1993 compared with 15% in 2006). 12

13 The 2006 study highlighted a growing overall trend toward using one provider across multiple sites, with 77 % of those companies conforming to this standard. The Finnish model indicated a general preference to bundling one specific service across multiple sites (67% of buyers acknowledged doing so), compared with bundling different services to one provider (15%). 39% of the top 50 Finnish companies who returned the questionnaire claimed to have formed partnerships that provide multiple services across multiple sites. (iii) relationships between client and provider As companies continue to outsource non-critical activities, and seek to reduce and trim their supplier bases, existing outsourcing contracts have been expanded. With this has come a need to embrace the partnership method. (15) The Finnish study identified two distinct approaches that clients tended to adopt with their FM providers, these being: adversarial (where the provider is kept at arm s length and is chosen on a site-by-site basis, with price being the determining factor) or a partnership approach, (where a close relationship is formed between client and provider, creating a feeling of trust, and allowing the client to free up their time to focus on core business activities). Their survey noted that 68% of those who adopted the partnership approach used multiple services on multiple sites, whereas only 27% of those who adopted the adversarial approach bundled their services. This appears to suggest that partnership relationships work best in large property portfolios, where a strategic approach may be the key to success, and trust between the two parties becomes increasingly important. Other research appears to support this theory. A 2004 study by Ventouvouri, Lehtonen and Miettinen noted that clients enter into partnerships with providers when high service is strategically important for the client s business. (16) The authors of the Finnish report suggest that companies who develop a separate strategy for sourcing FM services could see service levels improve, therefore improving their core business. 13

14 (iv) size and length of contracts The increasing Finnish trend toward outsourcing bundled services across multiple sites is not necessarily reflected in increased contract lengths. Only 33 % of buyers reported increased contract periods, and 66 per cent reported no change. No companies reported shorter contract lengths. Lehtonen and Salonen suggest that because FM is still in its infancy, there is still a novelty factor in terms of the buyer s relationship with their providers. The boundaries are still being explored, contributing to a reluctance to commit to a longer-term contract relationship. In the US, the majority of contract lengths (60%) remained the same between 2003 and With 25% stating these had increased and the remainder (15%) saying they had decreased in length. The 1999 IFMA report predicted outsourcing levels to increase in the following five years. The 2006 report confirmed these predictions, also revealing that over one half of companies had consolidated their vendor base that is to say they were outsourcing more services to fewer companies. The end result is that service providers are in a position to receive substantially larger contracts than just two to five years previously. (17. (v) reasons for using an outsourced provider Lehtonen and Salonen noted a varying strategic approach to outsourcing according to contract length and frequency of service required. A client looking for a customized service over a longer period of time will naturally be more inclined to select a provider who is financially more stable than his competitors. In these situations a larger, better established provider will be the preferred option. This contrasts with a standardised service that has a low repeat frequency (out-tasking). Finnish clients tend to adopt a best man for the job approach, when the client will be interested in the providers efficiency issues, as well as their price. In these instances smaller providers will be considered, thus the type of service impacts upon the nature of exchange. (18) The twofold reasons for choosing an outsourcing partner in Finland are firstly cost and secondly prior experience with the supplier in question. Interestingly, there is little mention that the ability to focus on core business is influencing key decisions. Aspects such as HSE performance or environmental management are seemingly not as significant in the contractor selection process. 14

15 Despite the cost savings that have been acknowledged by Facilities Managers in all three studies, nearly two-thirds (64 per cent) of those surveyed in Finland did not have a separate sourcing strategy for FM. That is to say, they employed exactly the same strategy for FM as they do for other services - a reflection, perhaps that FM is still in its infancy, and that the procurement processes of FM services are still under transformation phase. (19) IFMA research indicates that the underlying strategic reasons companies outsource their FM remain predominantly cost-driven, with 65% percent rating this as the most important reason. 57% of respondents rated quality of service as an important reason to outsource. The overall decision to outsource is overwhelmingly strategic. Similar to the Finnish study, focus on and investment in the success of our core business dropped out of the top five reasons why companies choose to outsource: in 1999, 93% of facility managers rated this attribute as important. By 2006, this figure stood at 79%. The IFMA authors also note that bundling FM services is an increasing popular trend. In the US, the reasons companies choose to bundle services remains more operational than strategic (strategic here being defined as the client needing the relationship to be competitive in the industry ) (20). The authors of the 2006 IFMA note that: little attention is paid to the management of FM partnering relations in the strategic overall management of the company. (21) (vi) control of contractors US FMs tend to exercise control over their provider by one of two means: they will either specify everything in the contract that the vendor is to do, with the vendor providing the function only, and the client managing the function (59%), or they will maintain an overall management of the FM function, with the provider having a small degree of managerial responsibility (40%). Only 2% of clients acknowledged giving the provider full managerial responsibility. Most respondents to the US survey acknowledged that outsourcing helped conserve their budgets and that this has been instrumental in improving overall performance. The typical arrangement is for in-house FMs to manage the outsourced provider s expenditure (such as subcontractors and purchase). Typically an annual budget is prepared with individual expenditures above a certain limit requiring approval. According to the IFMA study, barriers to outsourcing include the possibility of a culture clash (27% of FMs thought this was a significant issue), and a possible lack of commitment from the outsourced provider s employees (31%). 15

16 (vii) sector trends IFMA identified that industries such as manufacture and service are more likely to out-source their FM, whereas educational and governmental institutions are more likely to perform FM functions in-house. Of the non-governmental institutions, single-use buildings are least likely to out-source FM functions. In terms of area of real estate owned or leased by companies, those with larger areas of real estate (500, 00 sq ft or larger) are more likely to outsource. The top 20 most commonly outsourced services in the US Market Outsourced Service Percentage Outsourced in 2006 Percentage Outsourced in 1999 Architectural / interior design 90% 86% Housekeeping 77% 77% Property appraisals 72% 69% Roads, parking, garage 70% - maintenance Landscape maintenance 69% 69% Exterior building Maintenance 68% 58% Utility system maintenance 67% 44% Building Security 64% 56% Major Space redesign 61% 61% Construction management 60% 47% Cafeteria services / food kiosks 59% 60% Indoor air quality 55% 41% building maintenance 54% 44% CAD drawings 49% - Reprographic Services 43% 39% Leasing/subleasing 43% 32% Recycling program 41% 42% Environmental permitting 40% 31% Site acquisition/disposal 38% 29% Site selection (land/building) 37% 23% (viii) outsourcing versus in-house The 2006 IFMA study revealed that help desk and energy management (notably absent from the above table) were among the services that tend to be managed in-house. Reception services also do not make the top 20. This may be because this is often a service companies like to run 16

17 with their in-house staff in order to promote their corporate identity. Yet it may also be simply to do with the fact that the above table is not anglicised : reception services may stealthily sit under such categories as housekeeping or building security. 20% of US FMs who returned the questionnaire reported that they now handle services in-house that were previously outsourced. Reasons for doing so were: improving quality, reducing costs and regaining control. Most of the FMs surveyed claimed that outsourcing is good for some services but not for others. Data from the 1999 report also identified concerns that staff from a facilities contractor are less likely to integrate and identify with in-house core business staff, and that benefits offered by providers do not necessarily match those of the organisation. In Finland, cost-saving was also the main reason FM work was brought back in-house, with quality of work also being an important factor. Despite this, only 39% of managers had brought at least one service back in- house. The remaining 61% are satisfied enough to not do so. 2.6 literature review conclusion My original hypothesis was that There is a growing trend with large UK companies to outsource and bundle their FM services across multiple regions, with increased focus on HSE and the environment in the selection process. Part one of the literature review, which primarily focused on UK business journals, appears to give conflicting opinion not only of the current state of outsourced FM, but also its future direction. While some companies appear to be embracing the notion of outsourcing as a method for reducing costs, staying afloat and for staying one step ahead of your competitors, others appear to be feeling the pressure (of, among other things, the current recession) and are so caught up in the drama of it all, (they) are not even prepared to listen to advice. (13) Part two of the literature review, which concentrated on more academic studies, indicated a general approval toward outsourcing FM in the US and in Finland. The 2006 US report indicated 88% of respondents were either very satisfied or somewhat satisfied. 56% of respondents reported cost savings. Both markets studied (in Finland and in the US) hinted at a growth in outsourced FM in recent years, both also indicated a growth in bundled FM, with the US tending to use one FMP across multiple sites and Finland tending to outsource one service across multiple sites. 17

18 . Neither the Finnish study nor the US studies explore the nature of HSE and environmental practices on outsourced FM contracts. The studies so far have examined both the US and Finnish markets. In section three this report turns to the UK market to examine trends in FM outsourcing, and to investigate whether there is a growing trend among large companies to use one single outsourcing partner. The key questions this report aims to answer can be summarized thus: Is there a current trend for large UK companies to outsource (and bundle) their FM services? if companies are not universally committing themselves to long term, multi-service contracts, what is the reason for this? Are there occasions when it pays to stay in house, for all or part of your services? The report will also examine the extent to which both HSE and environmental performance play when clients select an FM contractor. It will also look at what place the future holds for outsourced FM in the UK. Put simply, if outsourcing sells, is anyone buying? 18

19 Section 3: methodology 3.1: main introduction to methodology The initial intention was for this report to examine outsourcing FM on a global scale. However, it became apparent very early on in the research process that this was a mammoth task to undertake. While the results would have made interesting reading, the scale of operation involved in undertaking such a study would not be practical given the time and resource available. Having read through reports and case studies of both Europe and the United States, the decision was made to focus on UK-based companies. In part this was in driven by the fact I could find no information available on the UK market, providing me with a unique opportunity to uncover previously unavailable data. Having decided the geographical parameters, an industry sector was required. My initial intention was to carry out a detailed case study of one particular industry. As I currently work in the oil business, my plan was to survey this industry. On a personal level, this would help me understand if the company I work for was typical or atypical of the industry norm. However, after finishing the details of my questionnaire, I concluded it would be more worthwhile to broaden the scope. The benefits of this would be twofold: the survey would be bought into line with both the US and the Finnish studies (both of which have a broad sector base), secondly, it would help me to understand where the UK is positioned in terms of its outsourcing practices. For ease of reference and classification, and to avoid any possible confusion as to what the selection criteria was based on, I consulted the FTSE 100 index (figure 3 in the appendix). Obtaining suitable contacts at these establishments proved to be the most problematic and timeconsuming exercise in the entire process of researching and writing this report. It was my aim for the survey to reach key-decision makers in the FM process at the companies I targeted. Wherever possible, this would be the senior FM or FM director, occasionally it would be the head of the Purchasing department (who dealt with FM contracts). Obtaining the names was extremely difficult. Some names were available on LinkedIn (for the uninitiated, this is a kind of facebook for business contacts). Yet these still are only names. I still had to then follow this up with a call to the switchboard, asking to speak to that particular person. As a result, I would sometimes be directed to speak with more junior facilities managers rather than key decision makers. 19

20 Otherwise, I Googled, I searched my business-card collection (all those years of networking at BIFM events finally paying off ). As a last resort, I cold-called reception desks, asking to speak to the Facilities Manager (never a good idea. - a polite refusal is a refusal none-the less). From a total of 100 companies phoned, 83 addresses were obtained, of which 15 were eventually returned, an 18% response rate. 3.2: survey outline From the outset, it seemed that a survey sent out to FM departments would be the most practical and appropriate method for capturing the data I required. Both hard (paper) and electronic (a document sent via mail) methods were considered but were soon dismissed as being too impractical, too time consuming and relying too much on the end user being willing to take an active interest in the goals of the survey. SurveyMonkey is a widely-used (and widely known) website that enabled me to get the data I needed. Respondents merely had to click on a link directing them to a web page containing the survey. The questions were framed in such a way that in order to record an answer, respondents merely had to click their mouse in the appropriate boxes. The initial idea was to limit the survey to 10 questions. The reason being that I believed that the shorter I could make the survey, the higher the response would likely to be. A short survey would be quick and painless to answer. However, after many attempts, ten questions did not provide me with sufficient information. It was expanded to 15, then finally an even 20. For ease of analysis, the first three questions have been amalgamated in to one in the results section of this report. The original SurveyMonkey survey can be found in the appendix to this report (figure 8). Before sending the survey out it was tested on work colleagues to gauge their opinions on the content of the questions and the general usability of the system. Based on their feedback, some fine-tuning was made before a definitive survey was met with approval. During these checks, I recorded the average time for filling out the survey as being just less than six minutes, a short enough time that I believe worked in my favour when trying to persuade FMs to give up their valuable time to answer a survey that had no apparent benefit to them. I attempted to address this notion of what s in it for me? by highlighting the benefits in the prequestionnaire . (figure 4 in the appendix). 20

21 What is the size of Under 100, , , ,000-1M Over 1M don t know How large (approx) 1-10 people people people 51+ people What is your annual Under 5M 5-10M 11-20M Don't know 3.3: survey main body 1. a) What is the size of your UK facilities (combined total in m²)? b) How large (approximately) is your in-house management team? c) What is your annual spend on FM? Percentage Number The results show that the majority of companies (40%) have a footprint of between 100,000 and 500,000 m². A significant amount (26.7%) have a footprint in excess of 1M m². The majority of companies (60%) have a small in-house management team. A small but significant amount (6.7%), have a management in excess of 50 people. The majority of companies (33%) have an annual spend on UK facilities of between 5 and 10M. 26.7% have an annual spend in excess of 50M. Using the above date as a reference source, the mode average company in the UK has facilities between 100,000 and 500,000 m², managed by a team of 1-10 people, with an annual spend of 5-10M. 21

22 2. Have you outsourced any of your FM services in the last five years? 13.30% Yes No 86.70% Results to this question were perhaps as predicted, with 86.7% of those returning their survey confirming that they have outsourced at least one aspect of their Facilities Management services in the last five years. The companies surveyed represented various sectors: finance, oil/gas, travel and entertainment. There was no particular sector that showed a bias towards outsourcing. Only a small amount of those surveyed (13.3%) did not outsource their FM. These were from the travel sector and the private finance sector, so an industry-specific practice of not outsourcing was also not identified. 22

23 3. What are the reasons you have outsourced (you may list more than one)? Focus on core business Improve quality of service FMP can more easily adjust to work fluctuations FMP has specialised knowledge unavailable with in-house staff Cost 0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % At the heart of the outsourcing debate lies the reason to turn to a provider in the first place: why is the increase in demand for provision of outsourced services so high? The dominant reason yields little surprise. Over two thirds (69.5%) of all those surveyed acknowledged that cost reduction was at the heart of the growth of outsourcing. Sharing equal footing with cost reduction is specialist knowledge (69%), while the ability to adjust to staffing levels was also deemed to be important (53.8%).The flexibility that an FM provider can provide to a client s demands for project-based staff fluctuations may therefore prove to be an invaluable asset. Perhaps more surprising is the seemingly dwindling importance that companies place on focussing on their core business. While the proportion of respondents who acknowledged this as a motivating factor was still reasonably high (46.2 %), it was not, as predicted, one of the top two significant contributing factors. A surprisingly small amount (7.7 %) turned to a provider to improve quality of service. This is something to consider by FMPs who use service quality as a significant selling point of their business. 23

24 4 (a). How important is HSE performance of an FM provider when selecting one now, and how important do you think it will be in the future? 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% HSE performance now HSE performance future This was the question that yielded perhaps the least surprising of all the survey results. Evidently, HSE performance is a factor which cannot be ignored. 76.9% of those surveyed exclaiming that the HSE performance of their shortlisted providers was a very important contributing factor in the tendering process. This figure increased (to 84.6 per cent) when predicting to what extent this factor was going to a play in the coming years. 24

25 4 (b). How important is environmental performance of an FM provider when selecting one now, and how important do you think it will be in the future? 80% 70% 60% 50% 40% 30% 20% 10% 0% Environmental performance now Environmental performance future While not as many of those surveyed believed environmental performance to be as important as HSE in today s FM market (53.8%), there does appear to be an acknowledgment that it will be play an a very important role in the future (69.2%). Interestingly, 7.7 % of those surveyed said that environmental performance was neither important nor unimportant in today s marketplace, but this figure dropped to zero when examining the FM market of the future. It has become increasingly clear that the design and operation of the built environment is both a problem and opportunity a problem to the extent that it is a major source of greenhouse gases but an opportunity in that we know that we can take realistic and practical steps to reduce those emissions. Awareness of this fact is growing. The increasing emphasis on green rating systems for buildings - initiated by both government and industry - gives witness to this development. (22) 25

26 5. Do you use the same FM provider across more than one UK region? 23.10% Yes No 76.90% At the heart of this research is the desire to discover if companies are using one FMP across multiple regions, and/or for more than one service. It appears that this is true. Over three quarters of those surveyed (76.9%) confirmed that they use the same provider across more than one region. 26

27 6. If you do use the same FM provider across more than one region, which regions are these? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% London is by far the most likely region in which a company will outsource it s facilities (88.9%), the next most popular being the South East (77.8%), the South West (66.7%) and the North West (also 66.7%). 27

28 7. Do you use more than one FM provider? 23.10% Yes No 76.90% Over three quarters (76.9%) of those responded used more than one provider, many of the respondents who do so also indicated (in question 3) that cost was the main reason they outsourced their FM. It would be reasonable therefore to conclude that the reason FM is outsourced to more than one provider is cost. 28

29 8. Do you use the same provider for more than one FM service? 23.10% Yes No 76.90% The hypothesis put forward in this report, that companies are outsourcing more than one service to the same company (that they are bundling services together) appears to be true. 84.6%of those surveyed acknowledge that this is a business practice they are following. Again, cost appears to be the deciding factor, with comments from the correspondents including: Based on value we also have bundled Security with Chauffeurs and plan to bundle maintenance and cleaning. One of the respondents replied that they have outsourced most services to individual companies. This company had by far the largest facilities across most regions (of those surveyed) and believed the way to get best results was for individual ownership of these sites, where local knowledge specialised could bring about better results. 29

30 9. Thinking about your largest provider, which FM services do you use this provider for? Other Fleet Management Reprographics Environmental / energy managment Landscaping / Groundskeeping Waste Management Receprion Helpdesk Moves and Changes Maintenance M&E Security Catering Cleaning (including window cleaning) 0% 10% 20% 30% 40% 50% 60% 70% 80% The most popular services to be outsourced to a large provider are cleaning (69.2%) and M&E (61.5%). Maintenance, catering and waste management all scored the same (53.8%) with security and reception services following closely behind (38.5%). The score for Security was perhaps surprisingly high (38.5%), given that not all FMPs provide this service. This issue is looked at in greater detail in the interviews section. The other (7.7%) in this survey refers to pest control. The services companies are least likely to outsource are Fleet Management (7.7%) and Moves & Changes (15.4%). Landscaping / grounds keeping, environmental / energy performance and reprographics all scored significantly lower than the rest of the other services (each at 23.5%). 30

31 10. What are the reasons you have NOT outsourced? Threat to in-house jobs Loyalty of staff to company Avoid a clash of culture Loss of control Service quality might deteriorate Staff levels met by in-house staff All FM skills met by in-house staff In-house is more cost-effective 0% 10% 20% 30% 40% 50% 60% 70% The main reason companies show reluctance to commit to an outsourcing program appears to lie with a fear that they would in turn lose control of this service (70%). Concerns that service quality would deteriorate was also cited a significant reason (50%), as was a belief that in-house is more cost effective (50%). 31

32 11. In general, how satisfied are you with the FM at your organisation? The survey results appear to indicate that the FM industry as a whole is providing a satisfactory service, with slightly more approval rating of FM services that are supplied in- house. Results for satisfaction of in-house FM 0% 0% 0% Very Satisfied Somewhat satisfied 64.30% 35.70% Neither Satisfied or dissatisfied Somewhat dissatisfied Very dissatisfied Results for satisfaction of outsourced FM 0% 0% Very Satisfied 21.40% 21.40% Somewhat satisfied Neither Satisfied or dissatisfied Somewhat dissatisfied 57.10% Very dissatisfied When given the choice ranging from very satisfied to very dissatisfied, all those surveyed indicated they were either very satisfied (61.5 %) or somewhat satisfied (38.5%). When asked about their satisfaction with outsourced FM, results were slightly different % indicated they were very satisfied, 57.1 % were somewhat satisfied and 21.4 % were neither satisfied nor dissatisfied. No one surveyed indicated that they were less than satisfied (somewhat dissatisfied, very dissatisfied) with the FM services at their company. 32

33 12. In general, has outsourcing FM saved you money? 15.30% 15.30% 69.40% Yes No Stayed the same Results appear to confirm that outsourcing FM can cut costs. Nearly two thirds (64.3%) claimed that outsourcing their FM has led directly to cost savings. 33

34 13. In general, has outsourcing FM improved quality of service? 33.40% 50.00% Yes No Stayed the same 16.60% Opinion appears to be divided as to whether outsourcing FM has directly led to an improvement in service quality. While half of the respondents claimed that service quality had improved in line with outsourcing, the remaining half claimed that it either hadn t improved (16.6%) or had stayed the same (33.4%). 34

35 14. Have you bought any FM services back in-house which were previously outsourced? 7.10% Yes No 92.90% Nearly all of those surveyed (92.3%) have decided not to return any practices in-house once they have been outsourced: A cycle of changing from outsourcing to in-sourcing is not productive for any business there is a tremendous amount of work involved and the costs can be substantial. (23) 35

36 15. If you have brought any FM services back in-house, which services were these, and what were the reasons? Cleaning (including window cleaning) Reduce Costs Contractor unable to provide specialized knowledge Service no longer needed Improve service quality Regain control Culture clash Lack of loyalty from outsourced staff X X X Catering X X X Security M&E Maintenance Moves and Changes Helpdesk Reception Waste management Landscaping / Grounds keeping Environmental / energy management X X X X X Reprographics X X X X Fleet management Other (please specify below) Other: Other The results from this question indicate that once again, cost is a deciding factor when bringing a service back in-house, with service quality being equally as important. 36

37 16. In general, have contract lengths with your FM provider(s) changed over the last five years? 50.00% 28.60% Longer Shorter Stayed the same 21.40% The fact that over half of those surveyed (53.8%) have not altered the length of the contract with their providers over the last five years perhaps suggests that we now reached a point where we are at the optimum contract length. Jeff Shaw, site services manager for Eurest Services at the Shell Centre believes that this optimum length is three to five years: The ideal contact is probably three to five years. Most of the IFM contracts are five years. It takes one year...two years to get it right, a year or two years to run it (at optimum efficiency), then one year to get ready for tender. (For further details, see interview section 3.7). 37

38 17. What change do you see occurring with FM outsourcing in the next five years? 20.00% 40.00% More outsourcing Same ammount Less outsourcing 40.00% The majority of those surveyed (42.9%) believed that the practice of outsourcing FM will increase over the next five years, with 35% believing we are now at optimum levels and that outsourcing FM will remain unchanged. Less than a quarter (21.5%) believed that the market would turn and that we would see less outsourcing. While this figure is low, it is not insignificant, and perhaps suggests that more promotional work needs to be done by FM providers if outsourcing is to continue to dominate the FM market. 38

39 18. Finally, please use this space to expand on any issues raised in this questionnaire, or to detail any experiences you have had with FM outsourcing that you believe might be relevant to this study. This section was used as a free text section, in which managers could expand on any issues raised in the questionnaire, or to mention any points they thought were important, but which were not raised in the questionnaire. Some of these comments are reproduced below. As it becomes clearer that responsibility for HS&E cannot be outsourced then more functions are likely to be in-sourced. Outsourcing is likely to see a continued upward trend as organisation try to ensure they obtain best value. Access to contractors expertise is another key benefit. More outsourcing may occur due to companies not wanting to take on liabilities e.g. M&E etc. Outsourcing is fine where there are clear benefits whether those are efficiencies (cost), service improvements (quality) or effectiveness gains (skills and adaptability). I think most professional FM's are wise to the fact that outsourcing doesn't equal saving money and the mistake that is made is not spending enough time up front or to get the contract or spec right. More often than not costs spiral out of control as all the extras previously done in house and perhaps not measured or captured become chargeable under an outsourcing model and fall outside the main body of the contract. Cultural considerations and the extent of outsourcing in your organisation have a bearing on the success. I think a little more transparency by organisations as to why they are outsourcing would go a long way to legitimising the concept and remove the stigma of the word itself. 39

40 3.4: survey discussion The results of the survey can be summarized thus: (i) conclusion to the hypothesis My original hypothesis was that There is a growing trend with large UK companies to outsource and bundle their FM services across multiple regions, with increased focus on HSE and the environment in the selection process. The results of the survey appear to confirm this. 86.7% of companies responded they had outsourced at least one FM service in the last five years (chart 2), with only one company (7%) having bought their FM services back in-house in the last five years (chart 14). Of those companies who had outsourced their FM in the last five years, over three quarters (76.9%) confirmed they use the same provider across more than one region (chart 5). The same amount also confirmed they use the same provider for more than one service (chart 8). HSE performance is rated as very important when selecting an FM contractor today (76.9% believed this to be the case), with an increased amount (84.6%) believing this factor will be very important when selecting future contractors (chart 4a). Environmental performance is also playing an increasingly dominant role: 53.8% confirmed this is very important when selecting a contractor today, with 69.2 % believing it will be very important in the future (chart 4b). 80% of respondents confirmed they will do equal or greater amounts of FM outsourcing in the future (chart 17). Of course this statistic also means that 20% believe they will be doing less. This quite significant figure should perhaps be viewed in line with satisfaction levels of in-house FM being higher than outsourced FM (chart 11), as well as the view that outsourced FM has not always improved service levels (chart 13). More importantly, outsourcing FM has not always saved proved to save a company money (chart 12), which is one of the dominant reason companies initially entered into partnerships with FMPs (chart 3). 40

41 (ii) additional findings not set out in the hypothesis What follows is a précis of findings not specified in the hypothesis: Reducing cost is a key factor when deciding whether or not to outsource FM services, with the majority of FMs reporting that outsourcing their FM has saved money. Significantly, focusing on core business is not in the top two reasons. Thus, the mantra of focus on core business, reduce cost does not appear to hold weight. Also deemed not to be a significant contributing factor is quality of service. The main reason companies choose not to outsource appears to be a fear for loss of control of services, yet this fear does not appear to be too significant because once a company decides to go down the outsourcing route, the majority of them will not elect to bring back these services inhouse afterwards. If a company does decide to bring a service back in-house, cost and a reduction in service quality are the two underlying factors behind any decision to do so. Despite the popularity and dominance of outsourced services on the FM market, in-house FM meets with a slightly higher approval rating. This is perhaps one of the most significant findings of this report. (iii) problems encountered with the survey method A significant issue I experienced with the survey was in the data collection: it would have helped enormously had the return rate been higher. It must therefore be taken into account that this survey may not provide a balanced view of the UK industry as a whole. Also for consideration is the fact that this survey was conducted in the summer, traditionally a time that a significant amount of annual leave the bulk of annual leave is taken. This may in some way have contributed to a lower return rate than I hoped for. None the less, the companies that returned the surveys represented a broad cross-section of UK businesses, including hospitality, finance, mining, travel and tourism as well as the oil industry, some degree of comfort can be drawn from this. 41

42 Future studies may also elect to measure company size in a different way from turnover. There are some very small companies (in terms of staff levels or area of facilities) which make vast sums of money that are included in the FTSE 100. It may have been more revealing to review the FM outsourcing practices of the top 100 companies rated in terms of combined size of facilities or number of staff employed. The issues I encountered with the content of the questions themselves can be summarized thus: Question 1 (a): What is the size of your UK facilities (combined total m²)? The upper limit set by this question was too low. Future studies should increase the maximum limit imposed by this questionnaire, either this or ask respondents to specify an exact figure. Question 1 (b): How large (approximately) is your in-house management team? As noted in the analysis of this question, a small number of companies have an in-house management team in excess of 50 people. Future reports should reflect this in the wording of the question and should also include the amount of operational staff, so a ratio between the two figures can be obtained. Question 1 (c): What is your annual spend on FM? Over a quarter (26.7%) of respondents reported an annual spend in excess of 50M. Future studies should increase the upper limit in the answer to this question that might better reflect this. Question 5: do you use the same FM provider across more than one UK region? This question is not without its flaws. What it neglects to show is if the company has property / facilities across more than one UK region. The 23% per cent than answered no may therefore simply have done so because they have only one single property in one UK region. 42

43 Question 6: if you use the same FMP across more than one region, which regions are these? Again, this question may be slightly flawed in that it does not ask the respondents to specify what these particular properties are used for (i.e. London for head office, North West for manufacturing); so that this data is open to speculative interpretation. Question 12: in general has outsourcing FM saved you money? Future surveys should include the option Outsourcing FM has led to an increase in spending in the possible answers, as the results are otherwise slightly misleading. Question 13: in general, has outsourcing FM improved quality of service? Much of this is subjective opinion and further investigation is required to determine what these opinions are based on: surveys of staff, KPI and SLA performance, or the opinions of a lone facilities manager. There is also no provision for commenting that service has deteriorated. 43

44 3.5: interviews outline In order to gain a further insight into the current trend in FM Outsourcing, I sought to get the opinions from both sides of the fence. A set of broad-reaching questions was initially prepared for a large (but unspecified) FMP examining how many FTSE 100 companies they provide services for, and their experiences with these contracts. From the client side, interviewees would be grilled on how their general experience with FMPs has developed over the years, and how they see this continuing to develop in the future. As a student at UCL, I was fortunate enough to be visited by many interesting lecturers from the field of FM. It was my initial intention to approach prospective interviewees from this resource pool. However, soon on in the research process it became apparent that perhaps the answer lay closer to home and that the best profile study would be to pair off two managers (one a client, the other from a provider) working on the same contract. With this in mind I decided to focus on the contract I currently work on, Shell Oil. The other benefit to this arrangement was logistical both managers work in the same building as me, arranging interview times was therefore unproblematic. To this end, this section contains two interviews: for a Provider s perspective, the first interview is with Jeff Shaw, Site Service Manager for Eurest Services at the Shell Centre. Jeff has been involved with support services for the past 18 years. For the client s perspective, the second interview is conducted with Steve Cross. Steve has worked in a senior role with Shell Real Estate for a number of years. His current role is Head of Functional Excellence. 44

45 As well as specifics about the Shell contract, both client and provider were asked general questions about the shape of the outsourcing industry as a whole. They were also asked about the importance of HSE and environmental issues when tendering and winning contracts. The questionnaires as they were originally intended to be asked can be seen in the appendix (figures 5 (a), (b) and (c)). Interviews were recorded on a digital dictaphone before being transcribed and edited down. I believe the results make interesting reading. 3.6: interview with Jeff Shaw Have you noticed a growing trend / preference (over the last five years) toward clients requesting a provider that is able to bundle together multiple FM services? I think the way the whole industry is going is definitely towards bundled FM. This means moving more from the old FM providers who would take on the contract and then sub-contract everything. Now providers have internalised their building maintenance - everything really - and are managing the Real Estate element directly as well. So in answer to your question, without a doubt clients are looking more toward bundled services and TFM. (Both integrated) How did Eurest first expand - horizontal (one service across multiple territories) or vertically (multiple services across many territories)? It was market driven. Compass, up until 4 or 5 years ago, was the largest catering company in the world, and that was their aim. Now, it s definitely moving toward catering and support services and this is because clients would come to us asking us to provide more services. So we had a choice: we could either partner with someone as some of our competitors chose to do - or we could expand our services. So definitely once a firm has confidence in us providing one service, it allowed us to expand into other areas. How has the expansion into multiple services across multiple territories been managed? Well across the globe it has been managed by the Compass Service Framework (CSF) which is global framework under which all Eurest services are carried out to the same set of rules so what the Board said is if we're going to go into support services we're going to do it right because there's too much of a risk. And the way to do that is to deploy the CSF. 45

46 Thinking about your contract with Shell, was it your ability to bundle services across many territories that won you the contract which one in particular was the most important (if any) for Shell? The fact that we were global player helped. The other thing that worked was that we had already worked with Shell at one of their sites in Thornton Heath. We had already worked in oil and gas, so we understood the Health and Safety and we understood what Shell wanted. Our business is more mature in the UK than it is anywhere else in the world. In America as an example we partner with other FMPs because we don t have the capability, but we are still very much in the driving seat. There is only one name on the contract in the US and that is Compass. Other FMPs provide the services as sub contractors. How important was your HSE record for winning the contract with Shell? Was environmental performance a factor? How important do you believe these factors will be when tendering for future contracts? HSE was the no.1 reason for winning the contract with Shell, I believe. Eurest had won a couple of awards for how we managed HSE and I think that helped enormously. But also the fact that we were happy to work with them was also a plus because some contractors will say we have our own policies and procedures, and we'll be following them. (A slide highlighting the importance of HSE in the relationship between Shell and Eurest is shown in figure 6 in the Appendix) There is now talk of environmental issues being important It don't think it played an important part in winning the contract with Shell, because we would have been tendering for this about five or six years ago and so environmental performance wasn't the biggest thing. Whereas now, if you look at what we do in terms of food provenance, driving and waste oil to go to bio-diesel, all of that has happened in the last five years and part of what we're doing to the environment. So you've seen a growth of the last five years? Yes, definitely. But there are a lot of things, that as an organisation we do, that large companies will say 'well, that's a given.' We may sweat blood and bullets to get it right, but the expectation is that it's already there. Is it more of a challenge to find a new angle that isn't already a given? A couple of things: one, you always gets new companies asking for innovation, so you need to demonstrate innovation. And for me, innovation isn't about new ideas; it s how you implement them. So it's not what you've got, it's how you package it that makes it an innovation. So that's one thing. 46

47 I think our sales team are always looking for that unique selling point (USP) and at the moment the Compass Service Framework is a USP. So we've got a platform from where we operate services globally in the same way. And I don't think anyone else can do that, so if we're looking at Global contracts like GSK or Shell...the fact that we can offer one solution that fits the globe, I think is a USP. What practices do you follow when as a provider; you are unable to supply a service in one territory that you are able to in another (for example, M&E in USA) The Capability Matrix we share with clients (shown in figure 2 in the appendix) has all the services and all the countries and you will see the others. In China, for instance, we do catering and cleaning...very little else. Depending on the size of the business - if the support services business in China is huge we may well partner with someone to provide M&E or security or mailroom. The capability matrix will show you that...and we share that with the clients...there's no reason not to really. How have the structure and length of contracts changed over the years? What in your mind is the ideal contract length and structure in terms of optimising performance, value for money and also optimising client / contractor relationship? It's client relationships that make or break a contract as well as the money. The ideal contact is probably three to five years. Most of the IFM contracts are five years. It takes one year, two years to get it right., a year or two years to run it (at optimum efficiency), then one year to get ready for tender. That's probably about right. And all of that really comes down to contract negotiation. So: we can do this deal at three years, we can do this deal at five, we can do this deal with a five plus two So our profit margin will be negotiated, if you like, on the strength of the term. So it's a case of the longer the contract, the better deal we can offer you? Yes. It s exactly the same as if you buy one bag of peas or a case. And is it better to have a fixed price, or an open book contract? As an organisation we run everything from a fixed price to cost plus, where there isn't a cap. Most clients want some sort of guarantee in terms of cost, and it depends on the client and it also depends on the maturity of the business. They will usually want some guarantees so they will anything from totally fixed cost to totally cost plus. Usually they will want something in between. So the contract that we have here with Shell is cost reimbursable. Which means there's a fixed fee. Shell pays all of that until a 'cap'. We've always had a cost book. The fee has always been 47

48 fixed. So the 6 per cent or 8 per cent was on project work, which is over and above. So there's a schedule of services and this is what we want you to provide, and if you provide anything over and above that work then you can apply the six per cent. That s all in the Service Agreement, where it's detailed what we can and can't charge. Are FMPs now in a healthy enough position to dictate to the market (i.e. Eurest only offering contracts where the client takes on catering?) The reason that we will only do food plus is because our FTSE aim is to be Is to be: food services no.1 and support services no.2 so we wouldn't provide stand alone services to anyone. We wouldn't provide stand alone cleaning to Waterloo Station, we wouldn't provide stand alone anything to anyone. Catering is no.1 and it's always food plus. I don't know if that s necessarily us dictating to the market it s just that we wouldn't bid for it. Do you think Compass is unique in that aspect? One of the main reasons is that if you have bundled services, for example catering plus, you can have on-site management to manage these. Whereas if you ve got a cleaning contract with no on-site management they're always difficult to manage what we also do is offer these services at a lower margin. So it s a higher turnover with a lower margin. The market expectation in terms of catering is low but we offer low risk to go with it. The Shell contract is a low margin but there is no risk with it because whatever it costs is whatever Shell pay. If it was a fixed price contract we would probably build into our profit line an element of risk so you may add on 10 per cent 20 per cent as a risk factor. So if we buy lots more light bulbs than anticipated then you need to build in to a contingency for that and that would be in your fee. So the higher the risk the higher the margin. Has having Compass as your parent company contributed toward Eurest winning FM contracts? Does using a large company such as Eurest minimalise the risk of going out of business? I don t think so. I think they would have done their due diligence on us as an organisation and I think we were a large company we have got a global footprint. And it was a GFMP so because it was global, they were only dealing with global players and most global players are big enough to stand on their own two feet Finally how do you see the outsourcing market in the next five years do you think there will be more outsourcing., less outsourcing, do you think companies will be bringing more in house? 48

49 I would say probably more outsourcing. But when money gets tight they tend to bring it back in house. Shell for instance, see our margin... and they say well actually if we ran it ourselves we wouldn't have to pay that margin. But probably the market's going more towards outsourcing...i would hope so anyway! I think that a lot of big people like Shell...it was all in-house ten years ago, But by bundling services together you're going to get a better price than have separate cleaning, catering contractors etc. Some of the contracts we've bid for and won, you ve got 20 different cleaning contractors all around the UK.We can take all of that 20 or 30 per cent margin out and we can offer one supplier for all of those for a single digit margin nine or ten per cent, which is bound to be a better option. 3.7: interview with Steve Cross Persuading a business like Shell to take this location as its headquarters location was a strange but brave decision. It must have been great at the time. I think that when Shell Centre was built it was also an opportunity to consolidate Real Estate (RE). So Shell had many offices in London, and they all compacted into Shell Centre. It pulled in around 12 locations that were in and around London. So there were several bars around Shell Centre, there was a shooting range, there are other facilities that we've kept going, but at the time of opening, my understanding is that everything was in-house. So that gives you quite a long-stop on the transition programme. If we look at the history of the Shell Centre, we ve gone from most or all of it in-house to most or all of it outsourced. Yes, and I think that story is reflective of other major locations in the UK -so that is Aberdeen, the Thornton Technology centre...other locations. Around 50 years ago there were several oil refineries all around the UK and I expect the story there is very similar. The majority of those places would have been self-sufficient at the time. There has been a general migration toward outsourcing. It has only been in very recent times that the RE team and some of the refinery operations have looked to integrate the FM operations. When you say recent times? I mean the last three years. So I think Eurest are working with Shell (not SRE) up at Stanlow, which is right next door to the technology centre. The two run entirely independently by different parts of the business, but you have the same contract the GFMP contract has been put in place there. 49

50 Different businesses within the Shell Portfolio have generally operated and managed their own real estate. So the current RE organisation has gone from being around staff to around 400, and that organisation has grown organically, where businesses have transferred the existing organisation - Shell Oil for example into a Real Estate team. How did services become bundled together at the Shell Centre? The expertise in the company going back 20 years...perhaps not so much now would have been high capability, technology and engineering and hard services...and for Real Estate to outsource that bit, when you've got a whole (bunch) of staff.that are in sourced...you've got caterers...so you look around this building, there is so much wood...there was an army of French polishers so those were all in house...cleaners, caterers, tea ladies...all those things would happen in a great big office complex which was the biggest office complex in Europe at the time, when you advertise internally for engineers to come and work on quite a complicated building... I find it really odd. Well this is one aspect I'm quite keen to find out and discover why these decisions are made and there doesn't seem to be one universal answer at all. The only universal answer I'm getting is just cost. Other than that, answers are different Indeed. And I think the main driver in most corporate organisations is to focus on core business. So a significant FM population is quite expensive anyway and we really want to focus on our core business then the cost savings not necessarily in the overall cost and delivery. When people started to outsource their focus was on: why am I recruiting cleaners? Why am I recruiting catering people? For the HR department to do that they need the knowledge of how they select people. If they stop doing that it takes out resources all the way through the organisation. We don't have to do that anymore. We can just say to a service provider we want lunch! That is a huge benefit to organisations. I guess what I m trying to understand is what exactly that means. If you've got a caterer that works for Shell, or a caterer that works for Eurest...how does that affect the core business? I don't think it does. There might have been a concern a while back about integrity and culture. But those things have gone now and I think the key thing is to ensure that degrees of service level are identified and built into the contract so the service provider does what it says on the tin. Looking at the contrast lengths, what in your mind is the ideal contract length and also what type of contract? I think 5 years is the best approach, because we're talking about big buildings and high value 50

51 costs. Then Shell globally...we're spending just light of a billion dollars on FM which is one of the biggest property portfolios that I know of. That's one billion dollars on FM? That's right. So the contract we have with you is 'reimbursable, maximum price, with risk and reward'. So we agreed with yourselves a target cost book, and we also agreed some incentivisation around the scorecard and some cost challenges were factored in. So the first couple of years Eurest guaranteed to give us cost savings of two per cent per annum year on year, cost indices are built in to allow for inflation, but measuring like for like we were getting cost reductions, but then once you delivered the first three years of cost reductions, you were then incentivised to make further cost savings on the basis that you would have the reward of sharing 50 per cent of the cost reductions. The contract we have with you is 'capped, reimbursable, target cost plus risk and reward' Capped reimbursable so we pay you what you incur but at a fixed level, a capped level, which is in the target cost book. If you overspend on that without our approval - say cleaning you estimated 1M but in actual fact you ended up spending 1.2, and we haven't agreed the 0.2 with you, then that 0.2 is at your risk. And that's why we have the scorecard, which is our way of measuring how well you are achieving. It is very easy for you to overspend on some of the engineering services if you aren't managing that closely and then come back and say 'oh, we've done all this extra work' well, if we haven't approved it, you have to pick up the cost. Looking at the facilities that have remained in-house... We have chauffeurs, and in various other locations around the world we have anomalies, but our intention is to standardise on the way that we have outsourced. The chauffeurs are limited in their existence. I think mainly in the UK and I think that the intention is that as those guys reach retirement age then they won't be replaced and we will use a third party to provide that service. What does that mean exactly? There is no strategic reason to keep the chauffeurs in-house. We're looking to be consistent in the way that we've outsourced. So our business itself is focussing on standardisation and by ensuring that we have outsourced pretty much all the same services in each territory then we can have a fairly simple blueprint in the way that we manage our real estate services. Looking at outsourcing to another supplier, for example security is outsourced (to G4S) is there a reason for this? By getting a third party to partner with another organisation you build in a whole load of other 51

52 overheads. Eurest would charge us for managing the G4S relationship - 4 per cent 5 per cent, 10 per cent if you could. Why would we want to do that? I don't think that would get the benefits. So it's cost-driven more than anything else? Well the cost is an obvious answer but you'd think that G4S probably wouldn't want to be managed by you guys anyway! They've got the organisation to run that contract. Are there any facilities you would consider bringing back in house? Probably not. Peter Voser (Shell CEO) talks about the complete customer experience, I think (this can only be achieved) if the contractor is well managed and encouraged. I think the client has a responsibility, and what I get is that if they really want quality service then a client has to really work hard with the service provider - not just police them -they've got to coach them. Jeff Shaw s job is to make me look good, and my job is to prevent him from falling over. There is a style whereby you just wait for the service provider to fail. Then I think that everybody has failed. a) Do you think there will be more outsourcing in the future? b) Is the way to manage these contracts to work together, rather than a hands-off approach? I do think there will be more outsourcing. I think the capability of service providers is getting better. I think the role of the client is to make sure it organises itself into an effective management team, to work hand in hand with the service provider. It has got to be a collaborative approach, more of a coaching approach. I also think where too many service providers fail is that they don t get close enough to the client to understand what is important. Who do you think that's down to, because in some ways they are just doing the clients bidding anyway? Not really, I think the service provider's main job is to make money for their business and for their shareholders. I think they could be more effective in doing that by organising their own capability to be more effective in managing their customer relationships. (for an ideal relationship between client and provider, figure 7 in the appendix shows a model drawn up between Shell and Eurest, indicating the balance of strategic power, and the importance of partnering in such a relationship). 52

53 Part of this report looks at is HSE and environmental performance. Do you believe contracts will be won and lost on environment performance in the future? I think the smarter organisation will go for the complete value chain. From the supply of materials, and understanding their complete carbon footprint, to managing all the way through to the point at which they are consumed and the way the waste is managed. You see some work happening with that. I know that in London, for example, there are inner city farms to which food waste is given. I think that the more organised providers make this part of 'business as usual' rather than an additional cost or service, the more they will be the serious candidates for contracts in the future. So in London for example businesses are being challenged with achieving the carbon dioxide targets and I don't think it's raised its head enough at the moment because I think the current economic climate has moved it down the agenda. However, I think that when recovery comes - whenever that is - these are the things that will resurface because we are all committed as a country and the Government has us committed to reduce our carbon emissions. Perhaps they are not being driven as hard as they could be but it will come again. Is having a commendable HSE record now a given? Yes. You wouldn't get on our tender list with a poor HSE record. It has to get in to the psyche off all who work for you. 3.8: interviews - discussion (i) conclusion to the hypothesis My original hypothesis was that There is a growing trend with large UK companies to outsource and bundle their FM services across multiple regions, with increased focus on HSE and the environment in the selection process The interviews took on a less specific scope than that covered by the survey, as such answers were not qualified or quantified by facts or figures and answers were more generally subjective and opinionated. None the less, the general experience and opinions of both client and provider appear to support the hypothesis. 53

54 Both client and provider are both of the opinion that outsourcing today is a growing trend, that is today more popular than ever. Both also appear to share the opinion that outsourcing FM will increase in popularity in the next five years. The interviews also confirm there is a trend in today s FM market that appears to be growing towards bundled services provided across many regions: The goal for Eurest is to move into bundled services...we start from catering, our core. And then move into soft services such as cleaning, font desk and grounds. Our goal is integrated FM (24) Eurest won their contract with Shell on the basis of their HSE record. Shell s collective attitude was summed up succinctly by Steve Cross when he simply stated: you wouldn't get on our tender list with a poor HSE record. This confirms the hypothesis that HSE performance is important when tendering for an FM contract today. Both client and provider also believed a company s environmental performance will play an increasingly important role when looking to secure future contracts. However, we are almost at the stage now were an impeccable HSE record is almost a given, and FMPs are looking for a new unique selling point (USP). This will be an underlying factor behind the increasing importance of environmental performance in the near future. Whereas five years ago, this aspect was low enough on the agenda for it not to factor at all into Eurest winning the contract with Shell, the Corporate Social Responsibility (CSR) of a contractor is today a topic of much debate and is set to play a significant role in the future. It should also be noted that from an FMP s view, different aspects of their company s performance may be emphasised to win different contracts. This is not to say that they would let their HSE performance slide, it is more a case that different clients emphasise the importance of different aspects of a contract. In order to win these contracts (and make money for its shareholders), the FMP must reflect and acknowledge the client s needs in the tendering process. Cost, for example is more important to some clients than it is to others. (ii) additional findings not set out in the hypothesis There is a general agreement that the ideal contract length between client and provider is five years. There are many different types of contract and many different aspects of relationship between client and provider, with no one size fits all approach that works for everyone. The case study at Shell where the provider is micro managed by the client is not typical of all relationships. Some argue that this type of relationship is a self fulfilling prophecy: they are bound to find something wrong. (25) 54

55 Section 4: Summary 4.1: main conclusion to hypothesis My original hypothesis was that There is a growing trend with large UK companies to outsource and bundle their FM services across multiple regions, with increased focus on HSE and the environment in the selection process. From the results gathered in this report, which are based both a general survey sent to Facilities Managers across the UK and also on interviews with senior management of both client and provider ; it appears this hypothesis is true. The majority of companies (86.7%) have outsourced at least some of their FM in the last five years (chart 2). 80% think this figure will increase or stay the same in the next five years (chart 17). It also appears that this trend is leaning towards bundled FM services (76.9%, chart 8) and across multiple territories (76.9%, chart 5), although there are exceptions to this rule. Although the survey does not confirm without a doubt that the trend toward bundled services has grown across all sectors in recent years, the case study (Shell Oil) confirmed they had gone from almost all in-house to almost all outsourced within the last ten years. However, with opinion divided (chart 17) as to whether or not outsourced FM will increase in the next five years, it will certainly be worthwhile carrying out a future study in which comparisons with this study are made. In effect the research in this study provides a year zero baseline for any future studies. The research also confirms the hypothesis that there is an increased emphasis on both HSE and environmental performance in outsourced FM contracts today. Importantly, it is not only the environmental credentials of a company, but their promotion of these credentials that may hold the key to contracts being won or lost in the future: This increased focus on carbon reduction is likely to create significant business opportunities for the FM sector forward-thinking FM businesses are already picking up work (26) 55

56 4.2: further research This report was very far-reaching and no one subject could be covered in any great detail Many interesting points or discoveries were made on which further research would be beneficial. This study looked mainly at the outsourcing and bundling of FM services. There was little examination of out-tasking (a matter that was examined in close detail in the Finnish Model), and the role this plays in the third-party FM market in the UK today. Comparing the UK market with other climates would be a worthwhile subject. The service quality paradox was an interesting aspect uncovered by this report. Reading through trade press, and also the interviews in this report, it would appear that service quality is high on the agenda. Yet when asked for their reasons for outsourcing FM, most clients placed this low down on their list of priorities. To further confuse matters, one of the main reasons to bring services back in-house was a drop in service levels by the FMP, thus emphasizing its importance. Evidently, further research in this area would be useful. As mentioned in the survey summary, in-house FM is met with a slightly higher approval rating. This is perhaps one of the most significant findings of this report, and worthy of further research. As stated in the conclusion, the data from this report provides a year zero with which future data can be compared. A significant amount of the questions in this report ask for opinions on where the market will be in five years time. It would be worthwhile to revisit certain aspects of this report five years from now, to check if any of the predictions have held weight. Worthy of greater investigation would be a study to ascertain if there is an ideal ratio of for management to operational staff. The relationship a client has with its partner was in issue that was frequently mentioned during my research. An examination of when to adopt either a hands-off or alternatively a partnership approach is an interesting subject, worthy of greater academic study. It became clear during my study that providers were not always offering the client what it wants - either this, or the client sometimes believes that they are not receiving the service they would like. The communication between client and contractor is obviously a subject that needs to be addressed. On this subject, further investigation is needed. 56

57 Section 5: References 1. Handfield, Rob: A Brief History of Outsourcing: Introduction to Current Trends in Production Labor Sourcing. Supply Chain Resource co-operative, NC State university Press 2. Handfield, Rob: A Brief History of Outsourcing: Introduction to Current Trends in Production Labor Sourcing. Supply Chain Resource co-operative, NC State university Press 3. Butler, Patrick: Special report: outsourcing in the public sector: Society Guardian 15 April Stanley, Kevin: To have or to hold, FM World November FM-World.co.uk 5. Minevich, Going and Dr. Frank-Jürgen Richter, Global Outsourcing Report Going Global Ventures Inc., New York, Geneva Nutt, Bev Linking FM Practice and Research, Facilities, vol 17 issue 1/2, Mackley, Tony: To outsource or not to outsource. Engjineeringtalk.com. November 16 th Stanley, Keven To have and to hold. FM World November FM-World.co.uk 9. Terzza, Phil New year, new openings. FM World vol 7, issue 1, p January Firth, Max Fewer companies going bust. FM-world.co.uk 20 August

58 11. Arminas, David: Out with the old. Volume 7, issue 8 FM World 22 April p Napo report (author uncited) Waste and excessive Beaurocracy, December p Stanley, Keven To have and to hold. FM World November FM-World.co.uk 14. Lehtonen, Tero J.T and Salonen, Anssi (YEAR??): Procurement and relationship management trends in FM services 15. Lehtonen, Tero J.T and Salonen, Anssi (YEAR??): Procurement and relationship management trends in FM services 16. Ventivuori, T., Lehtonen, T. and Miettinen, I (2004) Selecting relationship types in FM services Lecture notes from Hong Kong International Symposium. 17. IFMA report: An inside look at outsourcing Research report #27 (2006) 18. Lehtonen, Tero J.T and Salonen, Anssi (2006): Procurement and relationship management trends in FM services 19. Lehtonen, Tero J.T and Salonen, Anssi (YEAR??): Procurement and relationship management trends in FM services 20. Johnson, J.L. (1999): Strategic integration in industrial distribution channels: Managing the inter-firm relationship as a strategic asset Journal of the Academy of Marketing Science, v. 27 (1), p IFMA report: An inside look at outsourcing Research report # 27 (2006) 58

59 22. Quickley, J., P. Eichholtz and N. Kok (2009), Doing Well by Doing Good? Green Office Buildings, Working Paper at European Centre for Corporate Engagement 23. Whitten, Mark: (CEO, Area 21),To have or to hold FM World November FM- World.co.uk 24. Davies, S and Arminas, D: When times are tough, it s people you trust. FM World Interview, vol 7, issue 9, 6 May 2010p Crilly, Paul - Relliance FM s deputy chairman, Editors comment FM WORLD, 3 June 2010, volume 7 issue Davies, G Post-Copenhagen business climate will offer major opportunities to FM)FM World Volume 6, Issue 23, 10 December 2009, P.10 59

60 Section 6: Appendix Figure 1: presentation slide highlighting benefits of Integrating, or bundling FM Services Figure 2: capability matrix 60

61 Figure 3: list of FTSE 100 companies at time of writing report 1. 3i 2. Admiral Group 3. Alliance & Leicester 4.AMEC 5. Anglo American 6. Antofagasta 7. Associated British Foods 8. AstraZeneca 9. Aviva 10. BAE Systems 11. BG Group 12. BHP Billiton 13. BP 14. BT Group 15. Barclays Bank 16. British Airways 17. BAT 18. British Energy Group 19. British Land 20. BSkyB 21. Cable & Wireless 22. Cadbury Schweppes 23. Cairn Energy 24. Capita Group 25. Carnival 26. Carphone Warehouse 27. Centrica 28. Compass Group 29. Diageo 30. Enterprise Inns 31. Experian 32. FirstGroup 33. Friends Provident 34. G4S 35. GlaxoSmithKline 36. HBOS 37. HSBC 38. Hammerson 39. Home Retail Group 40. ICAP 41. ITV 42. Imperial Tobacco 43. InterContinental Hotels 44. International Power 45. Johnson Matthey 46. Kazakhmys 47. Kelda Group 48. Kingfisher 49. Land Securities Group 50. L & G 51. Liberty International 52. Lloyds TSB 53. London Stock Exchange 54. Lonmin 55. Man Group 56. Marks & Spencer 57. Wm Morrison 58. National Grid 59. Next 60. Old Mutual 61. Pearson 62. Persimmon 63. Prudential 64. Reckitt Benckiser 65. Reed Elsevier 66. Rentokil Initial 67. Resolution 68. Reuters Group 69. Rexam 70. Rio Tinto Group 71. Rolls-Royce 72. Royal & Sun Alliance 73. Royal Bank of Scotland 74. Royal Dutch Shell 75. SABMiller 76. Sage Group 77. J Sainsbury 78. Schroders 79. Scottish & Newcastle 80. Scot & Southern Energy 81. Severn Trent 82. Shire Pharmaceuticals 83. Smith & Nephew 84. Smiths Group 85. Standard Chartered Ban 86. Standard Life 87. Taylor Wimpey 88. Tesco 89. Thomas Cook Group 90. TUI Travel 91. Tullow Oil 92. Unilever 93. United Utilities 94. Vedanta Resources 95. Vodafone 96. WPP Group 97. Whitbread 98. Wolseley 99. Xstrata 100. Yell Group Figure 4: sent to potential respondents as part of survey process I am a facilities manager at Shell UK, also completing an MSc in Facilities and Environment Management at UCL. The purpose of this survey is to study trends in outsourcing facilities management with UK companies. Please kindly take the time to complete the survey, the results of which will hopefully contribute toward a better understanding of the UK FM outsourcing market, helping us better plan for the future. Completing the survey should only take a few minutes. All survey responses will be treated in the strictest confidence. I will be delighted to send you a copy of the report once complete. 61

62 Figures 5: questionnaires From a FM provider s point of view, it was my initial intention to ask a Provider about their involvement with FTSE 100 companies as a whole, and also of their historical development as a provider. The original questionnaire is shown in figure (a) below However, as the report progressed, and especially after my interview with the client, I became more interested in Eurest s relationship with Shell, as the first half of the interview with Jeff Shaw confirms. I also became more interested in how contracts were won and lost, especially the importance of HSE and environmental concerns. The second half of the interview reflects this. The revised questionnaire is shown in figure (b) It was always my intention to get some degree of perspective as to how the FM department developed at the Shell Centre. To this end I devised a questionnaire that I thought would catch as much information as I needed. The initial 13 questions were whittled down to a more manageable ten. The questions from a client s perspective are shown in figure (c) below. 5 (a): original questionnaire for FMP / Eurest 1. How many companies in your portfolio 2. Any from FTSE What is the average size of contract 4. How much square meterage does the average client have, across how many sites? 5. What is the average amount of services outsourced? 6. What are the most common to be outsourced? 7. What are the least common to be outsourced? 8. Are you experiencing any trends in services staying in house? 9. Are you experiencing any trends in services going back in house? 10. What have been the criteria for selection in the past 11. Is this changing? What are the current criteria? 62

63 5 (b): revised questionnaire for Eurest 1. Have you noticed a growing trend / preference (over the last five years) toward clients requesting a provider that is able to bundle together multiple FM services? 2. How did Eurest first expand - horizontal (one service across multiple territories) or vertically (multiple services across single territories)? 3. (Big question I know, but...) How has the expansion into multiple services across multiple territories been managed? 4. Thinking about your contract with Shell, was it your ability to bundle services across many territories that won you the contract which one in particular was the most important (if any) for Shell? 5. How important was your HSE record for winning the contract with Shell? Was environmental performance a factor? How important do you believe these factors will be when tendering for future contracts? 6. What practices do you follow when as a provider, you are unable to supply a service in one territory that you are able to in another (for example, M&E in USA) 7. How have the structure and length of contracts changed over the years? What in your mind is the ideal contract length and structure in terms of optimising performance, value for money and also optimising client / contractor relationship? 8. Are providers now in a healthy enough position to dictate to the market (i.e. Eurest only offering contracts where the client takes on catering?) 9. What in your opinion is the optimum contract length and type (fixed price / open book)? 10. How has having Compass as your parent company contributed toward Eurest winning FM contracts, does using a large company such as Eurest minimalise the risk of going out of business 63

64 5 (c): original questionnaire for Shell 1. How long has there been an official FM function at Shell? 2. What existed before this? I m thinking specifically of separate departments, separately managed, or was there any unification in terms of management. 3. What was the first department to be outsourced? What were the reasons for doing this (cost, expertise, ability to focus on core business)? 4. How did matters follow on from this what was outsourced next, why? 5. If not answered above, when was the decision taken to bundle all facilities together, why was this decision taken, who was this with? 6. How many providers have Shell had over the years, what has been the typical contract length? 7. Has the contract always lasted its full length, if not, why not. 8. What different contract types have you had over the years (fixed price, open book), which, in your opinion has worked best, why? 9. Are there any facilities that have remained in house if so, why? 10. Are there any facilities that you outsource to another supplier if so, why? 11. Are there any facilities you would consider bringing back in-house if so, why? 12. As a Senior Facilities Manager, how do you see the future of Outsourcing Facilities Management - do you think it will increase in popularity across the board, do you think the popularity of individual aspects of it will increase, while others will return / remain in-house? 13. It has been suggested that in future, Outsourcing contracts will be won /lost on environmental issues, much in the same way that they are on HSE issues in today s market. To what extent do you think this is true? What other issues do you think will play an important role when selecting an outsourcing partner? 64

65 Figure 6: original presentation slide highlighting importance of shared HSE values between Shell and Eurest 65

66 Figure 7: graphic Illustration highlighting ideal relationship between client and FMP Service Delivery Model SRES Strategic Tactical Compass Group: a strategic partner Operational *It should be noted that although in many ways this represents the ideal partnership, this balance of power, with the FMP as a strategic partner to the client is rarely achieved. Often the client is reluctant to let go', and the FMP, though perfectly able, is left with little strategic influence. 66

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