As a non-core activity support services used to be a dead end job. But there is a growing number of companies which live or die by providing such services, and there the sky is the limit.
Barry Spence, managing director of Pitney Bowes Management Services, says the idea that you can move from the mail room to the managing director's office is a myth. He should know. PBMS, a subsidiary of the US-based mail equipment company Pitney Bowes, was set up just over a year ago to take over UK companies' mail rooms, records management and other business support services. It has already recruited seven major clients, including Merrill Lynch and three big law firms. One of its strongest selling points is that it can significantly improve things such as mail distribution because its staff are highly motivated. What puzzles people at first is that PBMS's staff are precisely the same people who previously did the job in-house for its clients. So what's changed? The difference, says Spence, is that PBMS can offer them wider horizons than they had before. By and large, had they remained with the bank or the law firm they would have had nowhere to go but sideways. PBMS offers them a career ladder which they didn't have before. They might not make it to the top floor of a merchant bank, or anywhere near it, but they can get to the top of PBMS.
'They're often the forgotten community,' says Spence. 'There's a ceiling on their opportunity for personal growth and development. What we try to do is take away that ceiling.' His UK employees can look to the States to see what might be in store for them. PBMS's US company, set up eight years ago, has 900 clients and 9,000 employees, some of the most senior of whom started at the bottom. 'In America,' says Spence, 'several of the general managers running cities started by pushing a mail trolley around the building.' John Stacey, human resources director for Gardner Merchant, the business services company perhaps best known for its catering expertise, says the crucial point is that in contracting out services you're contracting to an organisation whose raison d'etre is the provision of that service, so all its procedures, its practices, its training and career development are geared up to providing the service. 'Most client organisations are providing training or career development for their core staff, whereas our core staff are our catering, cleaning and housekeeping staff.' Facilities management, or at least the bit of it concerned with those basic peripheral services such as cleaning, catering, security and mail, which enable a company to tick over effectively on a day-to-day basis, is to a large extent about finding ways of getting consistent, high-quality performance out of comparatively low-paid staff. It can be done in-house but increasingly non-core support services are being outsourced to specialists such as PBMS and Gardner Merchant. Companies farm out their catering or their security so that their own staff can concentrate on the company's main line of business, whether it be banking or oil. The deal on offer, a seductive one, is that the specialist company will cut the cost of the peripheral service while maintaining or improving the quality of service.
The $64,000 question for the client company, of course, is whether the motivation or remotivation of staff and the other techniques used do indeed pay off at the bottom line. Is it getting the same or better service at lower cost? The company doing the outsourcing and the specialist provider both have a vested interest in knowing the answer - the client because that's what he's paying the specialist for, the service provider because quality of service is what it lives or dies by. The usual procedure is to agree a contract which specifies the service to be provided, the quality of performance required, the cost of the service and the penalties that will be incurred if the specialist provider fails to deliver. Once the agreement is in place both parties, outsourcer and provider, will usually monitor performance very closely. Gardner Merchant, for instance, has a quality assurance procedure built into each project.
'We agree standards of operation with the client,' says Gardner Merchant's Stacey, 'and those standards of operation are then audited by a Gardner Merchant person external to the establishment on a quarterly basis and that result is discussed with the client.' Spence of PBMS uses high technology not just to improve services such as mail delivery but to provide the customer with hard evidence that agreed targets are being met or even exceeded. PBMS has developed software based on bar-coding which can track mail through the building. 'We can record very accurately for our client the length of time it's taken for every accountable item from the moment it arrives to the moment it's delivered to the individual.' The next logical step beyond measuring supplier performance against mutually agreed targets, is benchmarking - measuring individual service-suppliers against their peers, or taking individual buildings and comparing the provision of services in the building against the norm.
Procord, which was the property arm of IBM UK before it was bought out by management in 1991 and which now belongs to the US corporation, Johnson Controls, claims to be able to match any building and its services against similar properties from a database containing information on more than 250 million square feet of buildings worldwide.
'We run a comparative check of the cost-performance of each of the facilities functions of the building and compare it to an appropriate sample drawn from our database,' says Barry Varcoe, international performance manager for Procord. It looks at each facility on a cost-per-occupant and a cost-per-square-metre basis and compares them against the average and the upper and lower quartiles of the comparative sample.
'If you've got a building of 100,000 square feet and they're spending, say, £100,000 a year on cleaning, then the cost per sq.ft would be £1. It might be that the comparative sample would show an average of 60p a sq.ft, an upper quartile of £1.20 and a lower quartile of 50p. What that would tell a client is that their cleaning costs are comparatively high. So there's room for improvement. If they're £1 a sq.ft, the lower quartile is 50p and the average 60p, then there's at least 40p per sq.ft to save or £40,000 for the building.' The next step, says Varcoe, is to find out why the costs are higher and what can be done. 'If you're paying £4 an hour for a cleaner and everyone else is paying £3.50, that's obviously part of the problem, or if your cleaner is only cleaning 1,000 sq.ft an hour and everyone else is getting 1,500, you've got to find out why.' Life has been complicated for the specialist providers by TUPE, the Transfer of Undertakings (Protection of Employment) Regulations, a piece of legislation which lay more or less dormant for many years but has recently been taken up with a vengeance by the courts here and in Europe. The purpose of the law is to protect the jobs and conditions of employees when the 'undertaking' they work for changes hands, as, for example, when a function such as catering or security is outsourced, but the practical impact has been that it is more difficult to make cost savings. The upshot, says Spence of PBMS, is that outsource specialists are now having to lay even greater stress on performance. 'It's a balance between some degree of cost saving - but primarily being able to do things more efficiently and provide higher performance standards to the client.'
The change in emphasis may be no bad thing. John Crawshaw, director of the facilities managers' professional body, the British Institute of Facilities Management, says that one danger of contracting out is that companies may become so preoccupied with cost that they lose sight of quality. Ultimately, he believes, there might be a backlash. 'As time goes on and these people continue to go for low cost I foresee a cyclical effect in which some of the activities may well be brought back internally, because if the quality isn't maintained it may be better to go back internally and do it yourself.'.