The Insourcing Revolution and Implications for the FM industry
The FM industry has always been turbulent, yet the past several years has been particularly volatile. Socioeconomic and political influences have shaken up the market, with a number of a major players either having to overhaul their operations, or withdrawing from the industry completely (e.g. the likes of Carillion, Interserve and more recently the Kier Group). The recent political landscape has been one of the key drivers behind this instability, particularly the trend towards an insourcing framework for local government. Andrew Gwynne, Shadow Secretary for Communities and Local Government, recently launched ‘Democratising Local Public Services – a Plan for Twenty-First Century Outsourcing’, which proposes legislation that would increase pressure on councils to return services to in-house provision. This could obviously have major implications, both positive and negative, to operators within the FM industry.
Is Outsourcing Broken?
Labour Ministers have cited “Cost overruns, disappointed expectations and missed targets” as some of the pitfalls associated with outsourcing at a local government level. From our perspective as specialist Facilities Management recruiters, there have certainly been instances where we would agree with this viewpoint, however it is important to make the distinction as to whether this is a failing of outsourcing as a whole, or failings of individual organisations. In our experience, these service failings can more often than not be attributed to one thing…money! This is particularly true of government and public sector contracts considering the budgetary pressures and constraints placed on government spending. This cost-saving approach is obviously good for the bottom line, yet can leave a lot to be desired in terms of service levels.
Middle to lower management inadequacies
Following on from the previous point, one of the most common grievances associated with outsourced services is the apparent lack of organisational or management structure, particularly middle and lower management tiers. This could be attributed to a relatively high level of staff turnover, which is a perfect breeding ground for hierarchical confusion. In some cases, cost efficiencies are such an overriding factor that junior staff on the ground are just “left to get on with it” without proper management or direction, inevitably leading to lower service standards. This highlights one of the key differences between insourced and outsourced options, with insourcing incorporating employees into a well-established hierarchical structure.
The psychological impact of Brexit
Now we can’t talk about government legislation without mentioning the ever-present storm cloud which is Brexit. A lot has been said about the impact on corporate spending due to Brexit uncertainty, however from a recruiter’s perspective, we often hear about the psychological impact it has had on EU workers within the UK. We have actually found that some EU workers find the concept of Brexit unwelcoming, making the UK a less attractive location to work and in some cases being the cause for moving out of the country. This could be particularly damaging for sectors with a higher proportion of EU workers such as FM related industries (Hospitality, Construction, Manufacturing – Financial Times, April 2019), and even more so for service providers who may rely on migrant workforces for more junior or temporary positions.
Possible barriers to insourcing
Outsourced services exist for numerous reasons such as filling urgent gaps, acquiring skills and talent not available internally, or simply corporate restructuring. In situations such as these, an insourced approach may not be the best option due to time constraints, emergency requirements etc. Insourcing requires recruitment, training, established management structures and so on, all factors which may alienate employers who need a solution to their problems yesterday. These factors also bring with them a perceived rise in costs, however in our opinion – if you fully assess the balance sheet – the long term savings and benefits from insourced options far outweigh the initial expenditure.
There are both threats and opportunities which can arise from an increased shift towards insourcing frameworks, however in our opinion it all boils down to striking the right balance between cost and service. Being in the sector for over 13 years has given us an unrivalled knowledge and insight into what you should be looking for, and if you need help traversing the minefield of insourcing vs outsourcing, we are here to help!