This move towards total outsourcing begs the question – are we giving away too much?
A decade ago, if you owned or leased a large chunk of corporate property you had a large internal team. Most companies these days have reduced internal property teams and outsourced almost everything including transactions, operations and capital delivery.
This move towards total outsourcing begs the question – are we giving away too much? What should be retained in house? And when do the risks of outsourcing start to outweigh the benefits?
Are we giving away too much? What should be retained in-house?
Outtasking is where you pay specialists to do certain elements of property management for you. This could include preparing your capital plan, scheduling estate works or the actual physical delivery by contractors. In an outtask model, internal teams typically retain governance and control and set the overall direction for the estate. Importantly, the internal team retains the data and control over where the money is spent – they drive performance and control risk.
In the outsourcing model the internal property team is cut to a bare minimum and most tasks are undertaken by consultants and contractors. Large elements of spend and risk are in the control of the outsource partner.
To outsource or outtask?
Most clients I speak to have found outtasking successful but outsourcing less so. The reasons for this include contractual arrangements and having the right performance metrics; commercial pressures with suppliers; loss of internal knowledge; ability to drive the outsource partner’s continuous improvement; and data and insight remaining with the outsource partner limiting the ability to identify risk.
Some firms have implemented a successful outtask model, only to move too quickly, or too far, to outsourcing and found themselves with an estate out of their control. Companies that have found the most success are those that have retained the core estate management elements while outsourcing tactical delivery.
As with many strategic decisions, there is a sliding scale of benefit and risk for outsourcing versus outtasking. If you move too far along the scale towards total outsourcing, you will experience increased risk and customer dissatisfaction. You could also see a dip in your estate’s performance.
Likewise, if you move too far towards doing everything in-house, you can also see the same but for differing reasons – you may lose the benefit of market knowledge and expertise, of specialist input and commercial edge.
So where is the optimum balance? I believe it sits firmly between the two, with a lean internal team that retains control of the strategy and planning and manages the consultants who make the delivery on the ground happen. The internal team can drive real value through strong, aligned KPIs and collaborative working with the suppliers while still being involved in the decisions and strategy. The key is to keep a close eye on estate performance, ensuring the balance always tips towards real benefit and high performance, and never towards high risk and low performance.
With uncertainty in the market, there is a lower risk appetite in most organisations and an increased focus on controlling property. This means increased pressure on getting the outsourced vs outtask model right, and ensuring companies retain control and direction while utilising the best expertise in the market to deliver.
Kevin Chrisp is head of corporate real estate at Faithful + Gould