It’s sometimes easy to see why outsiders might condemn the facilities management industry – with its recent high-profile failures and talk of government watch lists, you’d be forgiven for thinking it’s all doom and gloom in our sector. However, the broadsheet headlines relating to FM are mostly backwards-looking, and
as such don’t offer anything particularly constructive to the debate around how we can take our industry forwards to the benefit of everyone involved. And that’s what we should be focusing on.
Admittedly, for the past 15 years our sector hasn’t been exemplary in its governance. Creative accounting has veiled the true extent of the practices which undermine the stability of the organisations employing them, while toxic contracts and squeezed (or non-existent) margins are endemic, to the detriment of provider, client, and end user alike.
But it really doesn’t have to be like this; we can implement fresh thinking and build something better.
FM is an industry with a service offering that’s central to the positive experience of our clients’ staff and customers – clients which represent a significant number of valuable sectors. The work of FM professionals does matter, and we not only have an opportunity to better support the UK economy, but we have the tools at our disposal. We just need to be smarter, and think carefully about how to disrupt the status quo. To even begin to do that we need to look closely, carefully and honestly about what got us into this mess in the first place, and work out how to tackle each challenge.
Firstly, there needs to be a significant mindset change. Prioritising shareholder interests above everything else must no longer be acceptable. CFOs should not be under pressure to make commercial decisions which support growth at the expense of sustainability – or client objectives – in order to spin the most positive financial figures in their annual report.
Ultimately, providers need to stop working for a pitiful, unsustainable 3-4% margin (or, in some cases, 0%, as the tendering ‘race to the bottom’ reaches its most extreme outcome), and start operating contracts with realistic figures. It’s not only unsustainable to take on contracts at such a low margin, but it undermines the professionalism of our industry, and scuppers any initiative to attract the brightest and best new entrants to the sector.
This will not only enable the delivery of a quality service – raising client satisfaction and ultimately benefiting their business – but it will also will ease cash flow. This will reduce, if not avoid, the need for invoice discounting, which is often used to ensure that huge monthly or fortnightly wage bills can be paid – after all, it doesn’t take much of a mistake to
lose those three or four pennies on the pound. More responsible, more realistic behaviour would also have the effect of leaving other pots of money – including pension, sick pay, holiday pay, training and uniform budgets – unmolested. It’s currently not unusual for these to be plundered to ease cash flow and shore up profits.
Providers should also focus more on seeking out the kind of contracts that suit their strengths and capabilities, so that quality and value can be delivered more efficiently, rather than chasing large integrated or fixed-price contracts (which some providers have found they are compelled to take on, in order to ‘feed the beast’). The latter approach may lead to growth, but it’s not the strategic variety; this kind of growth leads to operational issues once the impact has trickled down. The increasing influence of the accountancy function on governance (with operational experience not being a common feature at C-suite level in many FM providers) means that it’s unfortunately not unusual to discover that contractual obligations are impossible to fulfil at the agreed cost.
Procurement processes, too, require closer attention going forward. Procurement teams ought to focus more on tallying up aspects such as culture and partnership, specialism and requirement, and less on hourly rates. This enables a much more satisfactory business relationship, built on trust and mutual objectives. To date, it’s not been uncommon to find that large contracts are actually awarded using a desktop exercise, with an unrealistically aggressive approach to the productivity rate. This can only result in a first year characterised by firefighting and dissatisfaction, a second year of regrouping, and it takes until year three before they’re back on an even keel. Of course, procuring organisations also have to factor in any consultant fees, which delays any ability to turn a profit – I’ve even seen these costs hidden within capex budgets, written off over the life of a contract.
There is a common factor in these sorts of challenges – they are all characterised by a lack of understanding about what it’s really like to be at the coal face. We need to get this invaluable asset – experience – back into the C-suite, to ensure that problem-solving isn’t just a paper exercise that revolves around making the numbers work.
To illustrate this, consider the real-life example of a train operating company, which was having a problem with the Right to Work documentation of 126 cleaning operatives. To replace these employees wasn’t a quick or easy job, and it certainly wasn’t cheap – but to simply lay them off without replacement would have brought the network to a standstill.
To replace each employee, the company would have to recruit someone willing to work early mornings, doing a low- status job for minimum wage, and then it would have to pay roughly £3.5k per person for trackside safety training (a three-day course, plus staff pay and accommodation costs), before that employee would even begin work. And of course, frequently these staff would not like their work, so would move on as soon as they could. The churn rate was significant, and so was the outlay on training and recruitment.
The solution was simple, yet involved the sort of lateral thinking that’s not often the norm in FM, and it was as a direct result of front-line experience. Firstly, we allocated a decent wage – something along the lines of £11-12 per hour. Each job became much more desirable, since that put annual salaries somewhere in the mid-twenties. This was made possible by bringing in 21st century cleaning technology and reducing the number of operatives by two thirds. The advertised vacancies attracted a higher calibre of applicant, which led to the roles being filled by a more committed workforce – people with nous and drive to succeed – which not only led to reduced churn, but to a more effective service delivery, too.
But what’s stopping organisations from coming up with this sort of solution without calling in a consultant? In a word, it’s a lack of operational experience.
We need more front-line staff rising to the ranks of the C-suite, bringing their knowledge with them to help inform decision-making at the highest level. If we get the model right – with providers focusing on profit, rather than turnover, and clients focused on value not cost – then the industry can start to move to a more sustainable footing.
Ultimately, an investment in people is what’s needed. We need to invest in attracting the right calibre of person to our industry (and into the right roles); we need to invest in educating staff, clients and supply chain partners on how to work more closely in partnership; and we need to invest in more effectively supporting people within their roles.