Strategický pohľad na Facility management
Bratislava, 1. júna 2011
Richard Maraček Principal, A.T. Kearney
Konferenčný príspevok
A.T. Kearney 43/09.2010/18449p 2
Agenda
Introduction
Selected trends in Facility Management
Key success factors of building of strategic partnerships
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Introduction
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Introduction
Source: A.T. Kearney
Our global presence
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Our problem solutions are generated through combination of market know-how and functional competence
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finance
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supply chain(1)
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and change
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Source: A.T. Kearney
Introduction
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Types of projects
• Strategies & Restructuring
– Business strategies
– Pricing
– Support of M&As, PMI
– Performance benchmarking
– Process re-engineering
• Operations
– Procurement organization and strategic
sourcing, incl. facility mgmt
– Production strategies
– Supply chain
• Strategic IT usage
– IT compliance with business targets
– IT security and competitiveness
– CRM strategy
Selected clients
Also in the Czech and Slovak markets we worked for major companies across various industries
Selection Client examples from the Czech and Slovak market
Introduction
Source: A.T. Kearney
A.T. Kearney 43/09.2010/18449p 7
Selected trends in Facility Management
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Current trends encompass moving from FM to growing IFM services based on changing outsourcing models and more complex pricing
Selected trends in Facility Management
Source: A.T. Kearney
FM category tree
Selected trends in FM markets
• FM industry is moving towards Integrated Facilities Management (IFM), which comprises internal and outsourced facility and maintenance services
• IFM industry is expected to grow in Europe at slower rate than NA, with the UK representing about 46% of the total market (see below)
• European IFM industry is moderately consolidated, top 3 players in the European IFM industry account for 28% (see below)
• Outsourcing models change while playing more and more importance
• Price models are getting more complex - shared incentive pricing model is gaining popularity as it rewards the IFM SP for superior performance and results in cost savings for the customer
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14.315.5 15.9 16.5
17.6 18.6 19.9 21.022.6
7.4
7.1
4.3 3.7
5.9 6.5 6.2 6.0 6.3
2007
2008
2009
2010
2011
2012
2013
2014
2015
Revenues Growth Rate (%)
Market Overview – Europe
European IFM industry is expected to grow at a slower rate than NA, with the UK representing about 46% of the total market
Integrated Facilities Management Services Market,
by Value ($ B)
Europe Integrated Facilities Management Market
Share, by Country (%)
100% = $15.5 B
Notes: 1) All currency conversions are at 1 EUR = 1.33 USD as on January 18, 2011
2) Some of the figures in the graph may not match due to rounding off; Base Year is 2008 Source:‗European Integrated Facilities Management Markets‘, Frost & Sullivan (June 2009)
6%
5%
France 8%
Italy Benelux
UK 46%
Germany 23%
IFM services market in Europe
(2) (2)
Selected trends in Facility Management
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Competitive Landscape – Europe
Top three players in the European IFM industry account for 28% of the market share, making it moderately consolidated
Europe IFM Market Revenues, by Players (%)(2)
100% = $15.5 B
Notes: 1) All currency conversions are at 1 EUR = 1.33 USD as on January 18, 2011 2) Some of the figures in the graph may not match due to rounding off; The base year is 2008 Source:‗European Integrated Facilities Management Markets‘, Frost & Sullivan (June 2009)
Carillion FM 14.0%
Johnson Controls 9.0%
Gdf Suez 5.0%
Dalkia 5.0% Others
67.0%
Selected trends in Facility Management
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Key success factors of building of strategic partnerships
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To build a strategic IFM partnership we recommend to follow a structured well-defined approach
Illustrative Building of strategic partnerships
Key success factors of building of strategic partnerships
Assessment (current & future status)
Selection and negotiation
Transition Partnership
mgmt
• Business and FM Strategy
• Opportunity potential
• Processes and interfaces
• Organization
• Existing contracts
• Budget and resources
• Scope
• Outsourcing requirements / SLA
• Analysis of cost, benefits, risks
• RFI long-list of service providers
• RFP short-list of partners / service providers
• Evaluation criteria
• Negotiation strategy
• Contract structure
• Pricing models
• Interfaces and governance
• SLA bonus/ penalty systems
• HR / asset transfer
• Transition
• Communication
• Change mgmt
• Governance boards and interfaces
• Performance reviews
• Periodic bench-marking
• Renegotiations of contract
Assessment of current status
Definition of future status
RFI/ RFP process
Business Case
Contract negotiation
Implemen-tation
Partnership Mgmt
• Evaluation of proposals
• Business case
• Risk analysis
• Selection of service provider
Note: IFM – Integrated facility management Source: A.T. Kearney knowledge database
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To ensure successful realization several imperatives need to be fulfilled
Selected key success factors (KSF)
• Assess what are the potentials of outsourcing of FM service provider
• Identify and mitigate early on the corresponding risks, keep on managing risk continuously
• Assess the current status (strategy, processes, organization, contracts, budgets)
• Define the future status based on requirements on the FM service provider
• Create flexible platform for long-term FM partnership building
• Develop a state-of-the-art SLAs
• Enable effective and efficient management of the SLAs
Key success factors of building of strategic partnerships
Business case and risk mgmt
Current and future status
Partnership mgmt
Contract structure
1
2
3
4
Source: A.T. Kearney
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At the beginning diagnose your current status and outline the future strategy and concept
Current and future status
KSF area Typical client questions
1
Tactical considerations
Strategy definition
Optimization of ROA
• Which tactical topics need to be taken into account?
• How shall we operationalize the IFM strategy?
• What are the key strategic considerations for building an IFM partnership?
• How shall we derive the IFM strategy from the business strategy within the context of our organization?
• We strive for maximization of ROA? How shall we proceed?
• What are the main levers to optimize ROA?
Source: A.T. Kearney project experience
Key success factors of building of strategic partnerships
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A number of strategic and tactical initiatives form part of the Integrated Facilities Management Strategy
Note: Colours in tactical circles reflect link to strategic question Source: A.T.Kearney
Strategy definition – Model of Integrated Facility Management
Corporate Strategy
Organization Implications
Integrated Facilities Mgmt
Strategy Achievement of financial goals (e.g. return on
assets)
HR Strategy
Provision of the best cost-
service combination
1. Formally engage the
supply market – RFP process 2. Short Term
Facility Rationalization
3. Employee Facility
Infrastructure
4. Unique Asset
8. RE Sales and Acquisitions
9. Special Projects
7. Leases
6. Tele-commuting
5. Facilities Management
Which functions should Client retain in
house and which should be
outsourced? How can Client
consolidate and rationalize
lease space to reduce
costs?
What is the
optimal facility
strategy to
support Clients
resource
requirements
How can Client
obtain the highest
yield or best use for
the Facility?
What is the optimal
level of cost-service?
How can Client provide flexible
arrangements for employees to
enhance quality of life while at the
same time reduce Facility costs?
How can
Client
maximize
revenue and
reduce cost?
How can Client
maximize
revenue, be
responsive to
operational
needs and seek
sustainable
incremental
revenues?
How can Client ensure it continues to focus on Projects that provide economic value?
Who should deliver the services?
Where should employees be located?
How can the optimal return on assets be achieved?
Strategic
Tactical
Key success factors of building of strategic partnerships
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A number of levers were identified to maximize return on assets
De
live
rab
les
Be
ne
fits
K
ey C
on
sid
era
tio
ns
Decreasing Costs Increasing Revenues
Corporate Location Strategy Real Estate Financing Operations Sales and Leasing
• Cost savings
• Increased revenues
• Use of assets to smooth
earnings • Increased revenues
• Savings
• Focus on core business
• Corporate logistics
Alignment with Corporate and HR strategy
• Surplus land and buildings
How to maximise revenue opportunities
• Departmental Needs Assessment
• Alternative locations analysis
• Current lease analysis
• Relocation strategy
• Identification of potential revenue opportunities
• Quantification of value-in-use
• Own vs. lease
• Sale/leaseback
• Run-rate/financial engineering
• Real Estate Investment Trust
• Monetization of revenue stream from key assets
• In-house vs. outsourced service
• Internal process improvement (sourcing, vendor mgmt, project mgmt)
• Asset data - Asset locations, types, square footage, equipment values, preventative maintenance, market/book values, etc.
• In-house performance benchmarking
• Outsourcing strategy and quantification of opportunity
• Sourcing (RFIs and RFPs)
• Governance plan
• Implementation plan
• Business case
• Options analysis on core assets
Highest and best use
• Identification of ownership options
• Owned assets
Lease-up potential—land vs. buildings
Alternative revenue sources—signboards, parking, etc.
• Leased assets
Rationalization of space requirements allowing sublet at current market rates
• Identification of revenue opportunities
• Benchmarking of current performance versus market
How can we achieve the optimal return on assets (ROA)?
Key success factors of building of strategic partnerships
Source: A.T. Kearney
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To make a qualified decision assess thoroughly the alternatives, incl. their corresponding risks
Business case and risk management
KSF area Typical client questions
Business case
Financial and risk assessment
Risk management
• How shall we structured business case in case of building a strategic IFM partnership?
• How can I leveraged my IFM strategy, incl. maximization of ROA?
• How shall we get an assessment of the IFM partnership in the most efficient way?
• Is the corresponding business case not enough? Why?
• Everybody speaks about the risk management shall I really invest in it?
• We did identified risks, how should we maximize our efficiency in managing and mitigating them?
2
Source: A.T. Kearney project experience
Key success factors of building of strategic partnerships
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When assessing outsourcing alternatives we consider a combination of financial and risk indicators
Outsourcing possibilities
NPV (€ mil.)
Risks Opportu-
nities Present Optimi-
zed
Full 9,8 7,2
Partial 8,9 6,3
Assessment of outsourcing alternatives
Risks
Risk analysis
Opportunities
Net present value (NPV)
Costs of outsourcing
Financial assessment Risk assessment
Costs of in-house services
Final assessment
High
Low
Client example
Source: A.T. Kearney
Key success factors of building of strategic partnerships
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For every risk probability of occurrence and impact on the company has to be determined
Low Low
High
High
Potential Impact
Probability
R1
R3
R2 R4
Probability and impact of identified risks
Carefully monitor
Actively manage Register
Implement mitigation actions
Illustrative
Source: A.T. Kearney knowledge database
Key success factors of building of strategic partnerships
A.T. Kearney 43/09.2010/18449p 20
Monitor and report
• Monitor all risks and implementation of mitigation actions
• Support program/project mgmt in conduction of ad-hoc risk analyses
Risk management process
Risk management process is a continuous process with regular reporting
• Implement proposed mitigation actions and
• Dedicate responsible for every action
• Identify possible issues of the program/project that may become risks
• Consider three imperatives - quality, budget and time
• Propose actions that reduce the impact or the probability of the identified risks
• Plan and ensure their execution
• Assess the identified risks of its potential impact and probability of occurrence
• Prioritize among the identified risks based
Source: A.T. Kearney knowledge database
Identify
Risk management
process
Assess and prioritize
Implement mitigation actions
Propose mitigation actions
Key success factors of building of strategic partnerships
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Invest in development of the contractual terms and conditions based on sound SLA definition
Contract structure
KSF area Typical client questions
Performance targets
SLA definition
“Supporting” functions
• How to use KPIs in the most pragmatic way?
• How to set up performance targets, which are fact-based?
• How the performance shall be interlinked with pricing (bonus/malus)?
• There are different ways to defined SLAs, which do you recommend?
• The service catalogue is a nice piece of documentation. How can I leverage it? Do I need to have a service catalogue at all?
• There are many ―supporting‖ functions which are rather tedious (e.g. reporting, implementation of changes). How should I conduct them?
• How and where shall we defined the set of ―supporting‖ functions?
3
Key success factors of building of strategic partnerships
Source: A.T. Kearney project experience
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Well-defined ownership enables transparent (i.e. SMART) specification of SLAs
Nr. Service
specification
Service inputs/assumptions Service output KPI 1)
SLA 2) (incl. values of KPI)
Specification Responsible Specification Responsible Target Tolerance y/n3)
… …
… …
Description of selected items
(1)Key Performance Indicators (KPI) define measurable parameters, which indicates level of service
provided, usually in the following categories: quality/quantity, time, efficiency, backlog, etc.
(2)Service Level Agreement (SLA) is a formally negotiated agreement of two parties, service provider and its
customer. Its aim is to establish a unique understanding of the service quality (usually based on a set of
KPIs), priorities, responsibilities, etc. SLAs may cover many different aspects of a relationship between
service provider and its customer.
(3)Indication whether or not a given SLA is a part of the pricing mechanism, esp. the part related to annual
bonus/malus.
Specification of service level agreements (SLAs)
Note: SMART - Specific, Measurable, Aligned, Realistic/Relevant, and Timely.
Source: A.T. Kearney
Key success factors of building of strategic partnerships
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“Supporting‟‟ functions and activities – Examples & Principles
„„Supporting‟‟ functions and activities have to be treated in the same way as „ordinary“ services provided by SP
Examples of so-called “supporting” functions and activities encompass various testing, development and administration of documentation, participation on projects
Principles
Definition
Scope
Evaluation
• Has to be part of service catalogue
• Need to be underpinned by dedicated SLA (based on a set of KPIs)
• The scope of providing ―supporting― functions may not be reduce to the actual activity, it needs to encompass:
– Preparation
– Support of mgmt and control
– Monitoring & reporting
• Regular evaluation of reported KPIs, incl. ad-hoc/root-cause analysis
• Annual/Semi-annual analysis of customer satisfaction (interviews, questionnaire)
Note: SP – Service provider Source: A.T. Kearney
Key success factors of building of strategic partnerships
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Sound contracts, incl. structured SLAs are not enough, we all strive for efficient and effective long-term partnerships
Partnership management
KSF area Typical client questions
Long-term partnership
“SLAs are not enough!”
• How shall I sustain the long-term partnerships, while still keeping the control with the service provider?
• What are the efficient and effective ways to manage and nurture partnership?
• I did not have structured SLAs and the cooperation was not optimal. Now, I have detailed SLAs and I still do not feel comfortable…
• How can I ensure required flexibility in the contractual relationship with my service provider?
4
Key success factors of building of strategic partnerships
Source: A.T. Kearney project experience
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Establishing
Policy
Performance
Measurement
• Determination of IFM services strategy
• Provision of guidance regarding clear roles and responsibilities
Demand
Management
Supply
Management
• Identification of demand and prioritization of demand levels
• Resolution of conflicts (e.g. differences in interests of internal customers)
• Decision on functions provided by IFM SP or FM sub-contractors
• Definition of guidelines for continuous improvement of service delivery
• Determination of performance targets and approval of annual plans
• Supervision of regular monitoring and reporting of IFM SP
Service
Pricing
• Validation and approval of pricing mechanisms and budget changes
• Validation and approval of contractual changes
To ensure the efficient governance we recommend to create a Partnership Oversight Committee, with well-defined role
Source: A.T. Kearney
Typical roles of Oversight Committee
Key success factors of building of strategic partnerships
26
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