The truth is not completely divorced from the obvious image, but a new concept of ‘total FM’ includes not just the wastebaskets but everything from the mailroom to the premises. This can add up to about 15% of revenue and is the second largest expense after people, says Bernard Williams of BWA, facilities consultants to the CBI. It has bred an industry estimated at around £70bn in the UK. It is the glue that holds businesses together and like any good adhesive it should be invisible. But FM has become far more obvious in the last decade It jumped to prominence in the recession as companies sought to cut costs and even when profits returned, increased competition, high interest rates and a strong pound have forced further appraisal.
Hacking away at this glue can have dire consequences, however. Lionel Prodgers, managing director of ARK Facility Management, and one of the pioneer of total FM had a saying back in the mid-Nineties: ‘Any fool can save money by cutting costs. The real measure is increasing value,’
That has become even more true as facilities managers evolved from basket-emptiers to strategic planners. There is nothing new in outsourcing. Contractors have traditionally done the tasks like cleaning and catering, and big-ticket equipment like plant has been leased. But this has taken on a new dimension as the private sector watched the government had over total control of services like schools and hospitals through the private finance initiative [PFI]. The entire multi-million-pound DSS estate was taken on by Trillium, one of a new breed of giant groups created to provide comprehensive management. Abbey National teamed up with another called Mapeley to outsource its property services in a £460m deal and BT is now in the market with £1.8bn worth of property.
Not everyone is enthusiastic. ‘It is an incredibly wasteful process which has no chance of improving on the quality or economics of the bad old days,’ says Bernard Williams. In the private sector contractors have been brought in that often do not understand professional values and try to get jobs on the cheap.
But the trend is almost unstoppable as companies seek to concentrate on core activities and buy everything else. The theory is that widget makers get on with making widgets and leave the planning and procurement of cleaning, heating, security, even personnel to a supplier equally skilled in these areas.
The pioneers are inevitably household names with big turnover but this will gradually spread into smaller firms, says Michael De Styrcea, managing director of Chesterton Katalysis. Big suppliers will tack on smaller customers to the giant portfolios, spreading economies of scale downwards. SME directors are also beginning to realise that outsourcing can add value rather than just cut costs. For instance, a firm may be unable to justify investing in equipment such as reprographics or catering but can tap into the larger capital resources of suppliers.
At one end of the scale, new names like Regus and MWB are providing all-in accommodation packages for small office users while industrial and distribution firms are going to Saville Gordon for short-lease buildings. At the other, giant groups are looking to equally big outfits like Mapeley, Servus and Trillium. ‘They will gradually meet in the middle,’ says De Styrcea.
So why are there so many stories floating around about dissatisfaction among companies that have outsourced. Williams says this is because they have not understood the new concept. They opt out completely instead of maintaining an ‘intelligent client function’ which looks after strategy and monitors performance. Total FM should be more than outsourcing; it should be a partnership. Then the added value really begins to show.
Managing Abbey National House in Glasgow is equivalent to running a small town. There are not just 1250 people working there in the bank’s Life Division HQ but as many again employed by tenants such as BT and National Australia Group, plus a health club, swimming pool, shops, mortgage centre and bank. The catering facilities alone are awesome, with almost 300,000 meals served every year.
It is not something the company wanted to handle without expert advice, so it took on Stiell to provide integrated facilities management. But it was not so much the scale of operations. After all, Abbey is one of the country’s biggest banks and well used to coping with big projects. It wanted a trusted partner to take over these areas so it could concentrate on banking.
‘We wanted an organisation that would work with us, not for us,’ says Abbey National facilities manager Fred Morris. This concept of partnering is the new template for business service providers. Each side interacts rather than having a simple one-way flow.
It suited Stiell perfectly and has developed into a delivery package worth almost £4m a year for properties in Scotland and the north of England. The relationship also scooped the top prize in the Premises and Facilities Management Awards for 2000. It has helped shape the development of the privately owned group, which sees itself as a comprehensive ‘workplace solutions and services group’ rather than a simple supplier. More than a third of the 1200 staff work at the premises of clients across the UK . At the Abbey buildings they even wear joint uniforms.
‘The working relationships we have developed and the open-book approach we have taken with Abbey National are what we now strive to achieve at every level,’ says Stiell managing director Billy Allan.
The special challenge was to shape the facilities to support Abbey’s needs, which could constantly change in such a fiercely competitive market. Innovation and attitude were prime reasons why Stiell won the bid to provide services including maintenance, repairs, helpdesks, space planning, managing sub-contractors. This was subsequently extended to include other services such as window cleaning, grounds maintenance, management of leases held by sub-tenants and the needs of other Abbey businesses in the building.
Stiell feeds back reports covering areas including finance, contract performance, maintenance, energy management, legal requirements and internal audits. This partnership is sealed at personal levels through joint events like curry nights and golf outings. Abbey staff also provide feedback in the other direction through focus groups to help improve services.
The benefits have been obvious in specific areas like energy, where Stiell’s specialist contractors have produces savings of £56,000 a year. Overheads have also been cut for Abbey National Group Property by the outsourcing of management of cleaning and maintenance. Less easily defined is the improvement in quality but this emerges from measures such as reduction in emergencies through planned preventative maintenance and the fact that many Stiell staff have been nominated for customer service awards normally open only to Abbey National people.
These successes since the bank moved into Abbey National House in 1995 led to further contracts to refit the retail and banking centre, Elphinstone House, and then to run the building’s FM. Other properties in Glasgow and across the North of England were then drawn in.
‘We have worked hard to build a relationship based on mutual respect and understanding,’ says Billy Allan. But he, more than anyone, realises that no-one can sit on their laurels, pointing out that in such a competitive market continuous improvement will be crucial.