Hi there,

This week we’re continuing to examine facilities management outsourcing by taking a look at the advantages of outsourcing FM services.

Before we get started, our new website is nearly done and once it goes live, we’ll be publishing all of our previous newsletters online, so if you’ve only just joined us and missed the previous parts of this series don’t worry – you’ll be able to catch up soon.

But before we get into the nuts and bolts, it’s worth taking a brief look at where the concept of outsourcing originated.

Contrary to popular belief, outsourcing was not invented as a cost saving measure.

It was first introduced in America in the 1980s in an attempt to increase the earnings per employee for organisations that were listed on the New York stock exchange.

To explain further, if an organisation has 100 employees and turns over £100 per year then the earnings per employee are £1.

If the organisation outsources some or all of its support services and so reduces its headcount to 80 but its turnover is still £100 then its earnings per employee rises to £1.25 per employee.

This makes the company appear more successful and the value of the shares increases.

Note, however, that it is turnover, not profit. The cost of outsourcing may be more expensive than retaining services in house and therefore profit could go down.

This largely depends on how well the balance is achieved between cost and efficiency savings (see below) and the profit margins of the outsourced contractor.

The advantages of outsourced Facilities Management

Leaving aside the improved revenue per employee, there are also some key operational advantages to outsourcing services. These became apparent over time as the popularity of outsourcing increased.

  1. Focus on the core service 

As we’ve touched on before, generally speaking we would not outsource our core services. Rather we would consider outsourcing our support services – those, such as FM, which support the core business activities.

If an organisation is growing, or wants to grow, the support services will also need to grow in order to continue supporting the core service.

This can be costly both in terms of finances and human resources and may take the focus away from the core service.

Outsourcing essentially puts the responsibility for providing these support services in the hands of a specialist contractor, leaving the management team better placed to focus on their core activities.

It is important to note that management don’t get to wash their hands completely and will still bear ultimate responsibility for the effectiveness of their support services, particularly where legal compliance is involved. Outsourced contracts will therefore need to be carefully monitored and managed.

However the ultimate cost in terms of time, resources and, depending on the terms of the contract, money can be significantly reduced by a well managed outsourcing arrangement.

  1. Cost and efficiency savings 

Outsourcing support services to an organisation that specialises in providing these services can utilise economies of scale.

If a company is providing a service across their entire business, supporting multiple contracts for a range of clients, they are likely to be buying materials in far greater volumes than any of their clients.

Take a cleaning company, for example. They will be buying cleaning materials in bulk in order to provide the necessary resources for all of their contracts, and therefore will be able to obtain far better prices than any of their individual clients.

These cost savings can be passed on to the client, in full or in part, in order to reduce the overall cost of delivering the service.

  1. Operational control 

By outsourcing some or all support services it is possible to prevent costs spiralling out of control. Departments may be poorly managed or may be managed by people who do not have the skills to run them efficiently.

An outsourcing company, who specialise in delivering the required service, are likely to have better systems in place to prevent issues such as these, along with appropriate training provision both for technical and managerial skills.

  1. Staffing flexibility 

This is a big one.

Outsourcing will allow operations that have seasonal or cyclical demands to bring in additional resources when you need them and release them when you’re done.

Maintenance of buildings and physical assets would be an example. This is not required on a day to day basis and so you would not need to keep maintenance engineers employed ‘just in case’.

In addition, outsourcing companies are better placed to deal with staff absences brought about by holidays or illness. They are able to pull in staff from other contracts in order to cover absences where necessary, rather than rely on expensive agency staff.

Even if they do have to use agency staff, they will need to swallow the cost. So long as the contract reflects this, the cost to the client shouldn’t change.

This will also help with continuity of service and risk management.

  1. Develop internal staff 

Bringing in external expertise through outsourcing will enable internal staff to work alongside them and learn new skills. Organisations whose core business is maintenance, for example, will be more likely to stay up to date and bring innovative ideas into the organisation that your staff can benefit from through shadowing.

Of course, it’s not always so simple

Considering all of the above, outsourcing sounds like a no-brainer, right?

Of course, as with all such initiatives, not everything is simple. Next week, we’ll take a look at some of the disadvantages of outsourcing Facilities Management services (or any service, for that matter).

Hopefully by the end of this series, you’ll be better placed to make an informed decision on whether outsourcing some or all of your FM services is the right decision for you.

In the meantime, if you can think of any further advantages to outsourcing, we’d love to hear from you so we can share with the rest of our subscribers. Simply reply to this e-mail with your ideas.

For now, have a great week!

Chris and the Xenon Team

P.S. If you haven’t already studied or started studying for an IWFM qualification, which will cover topics like this in depth and fully assess your understanding, you may want to have a look at our guide to the IWFM Qualifications which will give you a full breakdown of how they work and what’s involved in the different levels. You can download it here.

P.P.S. If you’re already considering taking a qualification but don’t know which level to go for, a good starting point is our One-Minute-Leveller tool, which will ask you a few questions and give you a recommendation based on the result. You can access it here.