When it comes to sourcing, Real Estate and Facilities Management (RE/FM) teams oversee some of the biggest line items on the corporate balance sheet. But for too long, they’ve been largely viewed as back-office specialists. More recently however, forward-thinking RE/FM leaders have placed new emphasis on strategic concerns and direct alignment to core business objectives. In doing so, they have raised their profiles and come to be viewed as thought partners capable of making significant value contributions to the business. At other companies, however, RE/FM teams still struggle to shift upward toward more and higher-value engagement with the business.
In either case, RE/FM leaders must bear in mind a number of critical enabling ideas and lessons learned in building highly productive and mutually beneficial supplier relationships. Applied thoughtfully, they can free RE/FM leaders to invest more time in consulting with their internal clients, brainstorming solutions and other value-adding tasks and activities. This article will highlight seven proven ideas for driving transformation within RE/FM groups and assuming a more strategic role across the business.
1. Focus sourcing decisions on the WHY and HOW as much as the WHAT.
Too many companies start with a laundry list of services that they currently provide and start to seek ways to lower delivery costs. Such an approach skips over the necessary and high-value work of building a business case. Outsourcing a broken or inefficient process is not the solution to addressing why that process was not working in the first place. A better way is to start with a clear vision of why outsourcing can be beneficial to addressing the underlying process/service and identifying the benefits the business will derive in ways that transcend cost cutting. Then, you can focus on the how. A strong and effective sourcing process can be built on best practices for RFPs, clear evaluation criteria and other factors that allow suppliers to bring their A-games and suggest ways to build high-value relationships.
2. Recognize that best practices and benchmarks vary by industry, facility type and other factors.
Like snowflakes, no two companies are exactly alike. That’s why there are no simple, one-size-fits-all answers to questions of optimal cost targets, service delivery models or partner incentives. Those will vary by industry, geographic footprint, facility portfolios and workforce composition (age, skill level, union vs. non-union, etc.). Corporate culture matters, too. Further, the maturity of delivery capabilities will determine the various cost and performance targets that make sense for companies seeking new sourcing relationships or refined service delivery models. In other words, companies should take the time to review and define the precise role to be played, and services to be offered, by RE/FM organizations. Once these are well understood, an “apples to apples” comparison can be effective.
3. Use change management for the duration of sourcing shifts to ensure successful adoption.
Let’s face it, few companies excel at changing. Experience tells us that changes to RE/FM sourcing models can be highly disruptive events. It’s no wonder that achieving full ROI requires effective organizational change management (OCM). Optimally, such OCM is embedded into the sourcing strategy well before it is rolled out, not bolted during implementation (as is often the case). From senior leaders to individual employees, people impacted by the change must understand the near-term implications and longer-term business case. “What’s in it for me?” “Why is this an important change for the business?” “How will specific processes be impacted?” “How will we treat our employees?” These are among the key questions that must be answered.
4. Start building great sourcing relationships during the RFP process.
We’ve seen too many cases where the RFP process becomes a default strategic planning exercise. That is, companies figure out what they’re looking for once they start asking suppliers about their capabilities. Optimally, the RFP process can be used to refine a strategy, with suppliers making value-added recommendations to facilitate the achievement of core objectives that are clearly articulated in advance. External suppliers can provide valuable input throughout the RFP process, if they are encouraged to do so. Engaging with the suppliers well in advance of launching the RFP (and the RFI) will add significant value to the process. It will also establish the foundation for a true partnership, rather than a lowest-common-denominator relationship characterized by strict interpretations and constant revisiting of the small type on the contract.
5. Focus on collaboration and information sharing from day one.
In our experience, most effective RFP processes are truly two-way conversations. They are also notable for their transparency and two-way dialogue. That’s how sourcing relationships can get off to a strong start and build a foundation for ongoing collaboration. Regular reviews of relevant metrics and incentives can help service levels and cost performances stay on track, while ensuring alignment to big-picture goals. An additional benefit: a smoother process when KPIs need adjustment over the life of a contract, as they invariably will.
6. Negotiate with the relationship in mind.
The goal of contract negotiations is not to create the perfect contract, with the ideal terms and the last nickel of savings captured up front. The old British maxim about being pennywise and pound foolish ¬comes to mind. The focus should be on creating a foundation for success based on a reasonable contract that has the flexibility for course corrections and appropriate modifications as business conditions change or unexpected events take place. More importantly, how you treat the relationship during the RFP process and through negotiations can set the stage for a either a mutually beneficial, long-term partnership or tense, transactional and potentially antagonistic dealings.
7. Think through the optimal, future state organizational structure.
Designing the future state organizational model is a critical – and often underestimated – enabler of sourcing performance. Conversely, getting the organizational structure wrong can be a big inhibitor of success. The optimal design will bear in mind a number of factors – from executive, to operational, regional or global governance models to the sizing of “stay-behind” teams in outsourcing contracts. Additionally, how will this future state organization coordinate and interact with the other enabling functions (HR, IT, Finance, Sourcing, Legal, etc.). Finally, forward-thinking leaders will carefully consider how to balance the integration of their end-to-end processes with the appropriate technology tools to enable their people to achieve peak performance in the new operating model.