Hard Times
In the fifth of a series of industry roundtables arranged in association with BDO Stoy Hayward 13 voices from the sector share their views on the question of how FM is adapting in the current recession
by David Arminas
Cathy Hayward (CH): In these difficult times are “nice-to-have” services being cut?
Iain Murray (IM): Planned preventive maintenance is moving to reactive maintenance, in retail especially. Sainsbury’s has cut its PPM completely.
Jeremy Waud (JW): In the 80s economic situation office greenery, plants, were seen as unnecessary. Now, clients are even asking if all that security is needed. Things taken for granted are being questioned, such as two receptionists.
Leigh Carter (LC): We should be telling our clients what can be cut and what the consequences will be. Otherwise, the tail wags the dog.
JW: Consultants and service providers should have cost-cutting conversations before the client asks them. Otherwise, a client lays off 10 per cent of their workforce and we are asked to do likewise. They are saying ‘we are in pain, you should have some too’. FMs should ask how they how can their client. The answer may lie in the supply chain and not in cutting FM staff.
Jamie Reynolds (JR): Procurement have had a go at cutting FM before and before you know it there’s a health and safety issue.
CH: Perhaps well-run business see this financially difficult time as an opportunity for acquisition?
Ian Fielder (IF): History tells us yes and I imagine those discussions are going on discreetly because FM suppliers are posting healthy results.
IM: This is the time for the FM profession to go to traditional professions such as Rics, Riba and construction to ask talent to come over to FM.
Ian Ellison (IE): In the past firms which have invested in talent have triumphed in the upturn market. We have a young developing industry that must invest in its education. Look at the ageing NHS senior management problems.
CH: Will there be more partnering where client and supplier sit down to cut costs?
Peter George-Jones (PGJ): We are talking with all our clients, including BT. Without exception we have a savings plan including delivery, nature of the contract, the length and cash arrangements. But unlike the last recession, clients are more sensitive about balancing cost reductions with high customer service to maintain your own FM credibility. Before there was almost no consideration of customer impact.
CH: But surely you don’t want your workplace to be so miserable that your best people leave for the competition?
JR: True, but they still expect excellence. It is just that that excellence is different from 15 months ago.
IE: The way to succeed is with scenario planning. Consider the best then assume the worst so you can map out strategies.
IF: It would be interesting to see if those clients not talking to their FM suppliers are actually doing it within their own businesses.
LC: Another difference from the previous recession is that client-provider discussions have a wider scope. A client may wish FM to take on fleet management to save money.
CH: Will the recession reduce the importance of sustainability?
LC: Clients want to cut nice-to-have aspects of sustainability but still show they are responsible. There may also be fewer wind turbines and biomass plants because of too-long payback times.
Luke Saunders (LS): I have had some clients picking up on our ideas that they shelved two or more years ago, such as CCTV, security, default second-class postage. Now, suddenly, senior management is looking at it.
JW: A lot of client are now saying ‘just do it’ without having long discussions about how to do it.
IE: But that may be desperation or a short-term reaction. It must be considered well and not a knee-jerk reaction.
CH: Will there be more consolidation of FM providers?
Iain Lowson (IL): I see an opportunity for deals but a lack of money. I know a client wanting to broaden their activities but can’t finance it.
IM: You can build businesses internally more easily than buying them. If you want to get into fire safety, it is easier to start from scratch than go out and pay five to 10 times the profit margin on a difficult-to-finance deal in the first place.
LC: Yes, don’t buy a poorly performing company but recruit their people into your organisation.
JW: I don’t think there are even many bargains. As a service industry we are in a relatively strong market compared to other sectors and so FM firms want the same price now for their business as a year ago. Also, the big acquisitive groups of the past don’t have as deep pockets any more, even could be in trouble themselves.
JR: Cash is still king and vultures will hover over distressed firms.
IL: Yes, opportunity exists where the distressed business has been run badly or they simply run out of cash. Maybe their core business is not that great but their assets and people are.
CH: We used to talk about doing CSR to attract the best people. Do employers now have the upper hand when it comes to hiring?
IM: Not really. A small trend is for people to migrate from really big organisations to small ones to feel more comfortable. In a small firm of only 10 or 20 people the chances of you getting cut are a lot less.
IF: As in the last recession, as soon as firms let their employees know they’ll be cutting staff, the best employees are out there networking fast before the axe falls.
IE: FMs who realise their own worth are benefiting from the current climate. But how many FMs are in that bracket?
IM: Not enough. Unless you offer good training people will flit jobs for five grand here, five grand there… some markets have money to buy talent, such as Abu Dhabi and Saudi. It’s a talent drain. But people go because they feel their jobs here are threatened.
JW: The challenge is to recruit people into the FM sector and then train them to a very high level, which is a BIFM challenge. Traditionally graduates have gone into the property business thanks in part to their milk round. But property is now in a pickle while FM is a growth market. Bigger FM firms still fear that the graduates they take on will, after their training, wander off to a competitor.
IF: We are, though, doing something about it. The diploma in the built environment teaches FM to children at 14. And a level 3 NVQ is coming soon so people who thought their career was in catering will have an entry into FM.
CH: That was certainly the case with the FM salary survey a few years ago. But increasingly respondents say FM was their first job choice.
LC: Good people in other professions, such as IT and HR, are getting laid off by banks and retailers. We should encourage them into FM.
IF: Yes, two of the recent ‘Under-35s’ highlighted in FM World magazine are from different sectors.
CH: Will more firms in-source during this recession believing this can save money?
LC: It’s a big risk taking on additional labour right now.
IF: Bad outsourcing will drive in-sourcing.
JW: Yes, but I suspect that bad outsourcing has and always will be with us.
IL: Maybe the issue is not really about choosing insourcing or outsourcing, but rather the number of suppliers you take on. Do you or don’t you bundle contracts for a single supplier?
Mark Rogers (MR): As a service supplier we are meeting customers more and more, to review FM costs. It’s also about us as supplier being a lot more intelligent about how we deliver services. But some big FM clients are opting to self-deliver cleaning services. One gave two weeks notice on a £2.4 million contract. In such a case the integrated FM supplier might have been looking at the margin they were losing to their contracted supplier.
Ismena Clout (IC): It might be that more clients will get an in-house FM and then set up an outsource department. This way the client has an in-house FM who understands what they are then paying £100,000 for when it comes to an outsourced service.
IF: You’re describing an intelligent client.
IM: But it’s also a risk for the client. A good in-house FM could then be taken on by the service provider.
IC: That would be a real loss for the client, especially with morale now so low. In-house FMs can ensure that morale of in-house staff is high.
LC: Maybe the intelligent client function is getting smaller?
Greg Davies (GD): The current rationalising of property, say, going from three buildings to one, means an in-house FM has a lot less to manage.
IM: What is pushing that rationalisation is the fact that you can get a very nice deal on a month-to-month rent in a building. You couldn’t a few years ago.
IC: I know that the empty property management business is doing very well right now.
CH: Many people work flexibly. But if we’re worried about our jobs do we want the boss to see us working at our desks more often?
LC: It depends on the maturity of the sector. A lot of businesses are now so performance-driven that there’s no going back on flexible working.
IE: It’s more the maturity of the management than the sector. Corporate culture must be trusting rather than risk averse.
IL: But a lack of profile because of home working could be an issue. Remaining with the firm often comes down to very personal things if you are senior management in charge of keeping or letting go people. How well do I know a person or see them? If two people deliver the same productivity but I know one better and other people know them well, shall I keep them rather than the person not so well known who’s away more often?
CH: If you know that redundancies are coming might you want to be in the office more, and also do less hot-desking? And would this affect the FM function at all?
JW: FMs are out and about anyway. Most of my people work at home, coming to the office once a week. It’s important they feel part of an organisation through good communication and their performance can always be gauged in part by client happiness.
LC: The recession will encourage more, not less, flexible working because organisations want to rationalise their estate.
GD: For some functions it’s different. Security guards need to put those little cards on doors to show they’ve been by. Still, as redundancy rumours go round, you may always wonder just a little bit whether your best talent, when working from home, is also networking for their next job.
