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Testing times ahead for FM

15 July 2008

FM Faculty Briefing No.9: Vice-Chair of RICS FM Faculty Michael Cant and Lucy Jeynes, past Deputy-Chair of BIFM, consider the more pressing issues facing the FM sector as it is about to be tested as never before.

For the last decade or so, FM has never had it so good. Our profile in the boardroom, in government and in the public eye has risen significantly. FM associations and business events have flourished, our ‘profession’ is becoming recognised with its own RICS chartership, qualifications from a variety of sources are well established and even its own SIC code.

But it’s easy to do well in a boom time. It’s the next economic phase that will really test us as a sector – and this test will be as a profession and as a contributor to business and society, rather than as a trade association or informal corporate club. How much of this progress will we be able to maintain when times get tough?

Perhaps our first challenge will be to demonstrate that we have the flexibility to respond to changing economic and social circumstances. This will hold for both the client and supplier side of the equation.

Interestingly, the majority of outsource contracts are fixed and relatively inflexible. The ability to adjust budgets is often minimal relative to need. In practice and at strategic (board level) change programmes in FM, our consultancy over the last decade has addressed the de sire of successful organisations to see top quality, innovative FM services, and the challenge of the market to deliver this without a lot of pushing and pulling.

Cutting cost as the single, and most pressing need, was one measure, but not necessarily top of the agenda. Now, however, many of the ‘charisma clients’ in FM (banks, Times Top 250 companies, retailers, leisure) are going to be tightening their belts, and the market will have to change its style and approach to suit. No prizes given for doing it exceptionally well, but exceeding the budget will be met with a rapid and negative response.

In these uncertain times, one thing we can be sure of is that energy costs, along with investment in more sustainable approaches, will take up an everincreasing proportion of the FM budget. Core property asset costs will again take the limelight, as noted in a recent and highly informative survey on the Impact of Property on UK Business (GVA Grimley 2008) suggests.

Security and terrorism remain important concerns, and are perhaps moving further up the agenda for firms based outside the major cities due to recent activities beyond the traditional high-profile targets. Property prices will likely fall due to a decrease in demand, but many organisations already tied into existing lease arrangements may not see the benefit of this.

FM may well slip into the ‘also ran general management’ category – and merely following property portfolio management as a percentage reduction target.

A 'New Austerity'
Some social commentators are predicting the advent of a ‘New Austerity’. This could mean more environmentally-friendly cars changed less frequently; less food waste; holidays in the UK and Europe rather than longhaul; less conspicuous luxury consumption and more ethical, sustainable and second hand products. If this is to happen as a general social trend, workplaces will likely follow suit. For FMs this could mean less frequent redecoration and furniture-replacement cycles; lino rather than carpet; a retreat from ‘top-end’ services such as luxury concierge provision; new travel and hotel policies to arrange.

Other commentators feel that this ‘New Austerity’ will not happen, and there will instead be an ever-widening divide between the ‘Haves’ and the ‘Have-Nots’. Perhaps, but we are not convinced. Successful companies will continue with their high-status, hi-tech, hitouch environments - and in a recession, these things are often cheaper if you’ve still got the money to spend. Businesses finding it tough will be looking for cost savings - and as we know from previous hard times, FM is frequently one of the first ports of call.

Much of the above is know to FM practitioners. But for the last few years, it’s not necessarily been placed into such a severe test as we are about to face. Despite our best endeavours and all the progress we’ve made in the profession, there’s still a feeling in many boardrooms that FM spend is a cost rather than a value-add. This was supported by the Aberdeen Real Estate & Facilities Management Report this time last year, which found that the average organisation spends more than 30 per cent of non-payroll costs on real estate and FM; and that nearly 40 per cent of organisations report poor or no visibility into this significant category of spend and related business processes.

There’s a vulnerability for the FM teams in those 40 per cent of organisations - if they haven’t been able to communicate the value that they add when the going is good, it will be harder to justify overall a significant net spend increase in this climate. And taking into account the rising cost of property occupancy and energy, this will leave many of us needing to make significant reductions in other areas. It’s not just a time for hard decisions and hard negotiating, it’s also about using our soft skills and being expert marketers and listeners as we make our budget pitch to the board, and work out what service reductions our customers can accept without impacting core business performance.

It’s going to be a delicate balancing act. The very best FMs will sail through, drawing on their strong multidisciplinary skills, excellent communication range and ability to multi-task. Times like these do sort the wheat from the chaff though, or to use the memorable Enron quote “it’s only when the tide goes out that you can see who’s been swimming without their trunks on”.

Based on our overview of the UK FM market across a wide range of organisations (and having been in the sector for a good long time with the experience to match our grey hair and bald spots!) Larch’s predictions for the next few years are in the panel (left). Cut this out and keep for ten years to see if we’re right!

● Property asset management will take centre-stage in FM sector decision-making - FM may well have to accept a ‘follow-on’ status.
● A significant move to bring some key FM services back in house – but driven by management necessity.
● Re-bundling of contracts will intensify to achieve cost reduction.
● A social trend towards ‘New Austerity’ having an impact on the style, look and feel of many companies and their FM services.
● Less people studying on top of their jobs as they are stretched financially at home.
● A focus on healthier working, reflected in different lunchtime habits.
● Sourcing strategies becoming more ethical, sustainable and holistic including more work with local, smaller suppliers.
● Even more pressure on churn, management and maintaining quality standards in operational FM services (cleaning, night security) as people take these roles as second jobs.
● Pressure on membership organisations where subscriptions and sponsorship are part of discretionary spend.
● A continuing skills shortage as good people are reluctant to move from their existing role.
● The management echelons of FM becoming much more diverse as the prevailing culture of the industry changes

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