[box type=”shadow” ]The success of the outsourcing model much depends on the ability to plan and execute an effective transition. This could be two-fold – transition from the outsourcing seeker to the outsourcing provider or transition from one outsourcing provider to another. What does happen in most outsourcing transition cases in India? What are the issues that surface and could these be prevented? Clean India Journal explores[/box]
Transferring processes to an external service provider is complex, as it involves transitioning the entire maintenance operations and requires due diligence in matters pertaining to documentation, planning, defining of roles, communication flow, evaluation process, knowledge transfer and other processes.
‘Having a transition plan is important because changing from one service provider to another, or transitioning from internally provided services to an outsourced contract, can be overwhelming due to the number of details, the expense, and sometimes emotional process. Unfortunately, many transitions fail. That can leave the owner and facility manager in an undesirable relationship for years, while a service provider can discover it has committed to a contract that could damage it financially and possibly harm its professional reputation.
In either case of transition, “sustainable and productive partnership needs a mutually beneficial and respectable relationship between the outsourcing seeker (client) and the outsourcing provider (facility service provider-FSP)”, says Jolly Kochery, Chief Executive Officer, Blue Bells Facility Services Pvt. Ltd.
Transition from the client to the FSP
In India, the very foundation of outsourcing has been based on a faulty model of L1 (lowest bidder). While the basic expectations from the FSP are put on paper, the cost of engaging them depends on the bargaining power of both the client and the FSP. Many fall out in the process and the contract is awarded to the lowest bidder, who in the pursuit to bag the deal, compromises on quality, delivery, standards and malpractices to meet ends.
The client requirements and the FSP selected to fulfil these requirements do not match. “Right from the salary and other costs are cut to the bone and the FSP merely becomes a manpower supplier. This is the bane of this industry in India. The good and ethical players do not get fair playing field. The L1 cannot invest in training; they pay nothing more than unskilled minimum wages. However, the client expects them to provide quality services. Is this really outsourcing? The best results are obtained when one moves from Input based contract to Output based contract,” says Jolly.
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Right from the salary and other costs are cut to the bone and the FSP merely becomes a manpower supplier. This is the bane of this industry in India
– Jolly Kochery
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Hence, in the long run, due to faulty transition, the contract fails. “Failure occurs because both parties do not do the necessary due diligence and just hope for the best. In the end, there is finger pointing when in reality it was perhaps just a combination of several things, including lack of coordination between procurement and the business unit, weak program scope or lack of due diligence in understanding full client expectations.
At the time of signing the contract, “it is imperative that the client declare expectations regarding service levels. Additionally, this is the time when both management metrics and key performance indicators (KPIs) should be determined to allow the bidders to fully understand how their performance will be measured. In the actual transition stage, the KPIs will help in developing an effective operational plan. Some examples of typical KPIs include: operating budget to actual performance variance, preventive maintenance (PM) compliance, response time compliance, and preventive-to-corrective maintenance ratio. Often a balanced scorecard of management metrics and KPIs linked to the organization’s strategy leads to successful long-term performance”.
“Selection of the right partner and not just a vendor, is the first step to a successful outsourcing model. Share the expectations on the service level and allowing the partnership to grow, innovate and create value for all stakeholders, is another step,” adds Jolly. Even a well-coordinated and planned contract can take months to complete the transition process.
Treating people with respect is a forgotten act, just because the workers engaged are outsourced employees. Moreover, a faulty contract hits those in the grassroots level the most. It is actually the workers who bear the brunt. In a sustainable and workable model, it is essential there are rewards, recognition of innovation, training and career options for outsourced employees. Fulfilment of training program in a calendar year must be one of the criteria for increment and promotions, says Jolly.
The facility manager at the client end plays a vital role in the contract and transition. “The facility manager should drive the transition process and therefore lead the team, working in concert with the procurement group. The facility manager may be required to explain some things to the procurement group, including the fact that facility service contracts are very different than purchasing contracts and therefore the purchasing techniques will be different.
Selection of the right partner and not just a vendor, is the first step to a successful outsourcing model.
– Vinay Deshmukh
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“The most vulnerable aspect of the transition is the “people” aspect. Lack of understanding, poor follow-through, resistance to change, lack of buy-in, and insufficient training can derail even the most comprehensive set of processes. A carefully thought-out and implemented change management engagement process can mitigate potential service interruptions related to the transition.
Successful transitions intentionally incorporate the “people” process (or change management engagement process) into overall contract transition management. Intentional incorporation means the various stakeholders (procurement, HR, C-suite, facility management team, and possibly others) are effectively engaged through agreed-upon communication processes and mechanisms for internal discussion, debate, and feedback; and receive the support they need to roll out the transition plan to staff, clients, and others.”
Transition from one FSP to another
The famous statement: ‘Change is the only incessant thing in life’ could not have been more apt in the changing environment. The needs, the means to satisfy the needs and the methodology are under constant stress to make the outsourcing model better and more efficient, says Vinay Deshmukh, CEO, Forbes Facility Services Pvt. Ltd. Customers change their service providers at some time or the other for varied reasons. “The laws of physics stated the concept of inertia. This is true for any change and the resistance could be from all quarters – internal as well as external. This is inextricably complicated by the expectation of the smooth and seamless transition. The business is an ongoing establishment and the difference between the core and non-core activities, ceases to exist in an attempt to make it possible.
Internal challenges
For clients, their people are the most important asset. While for the service providers, the very meaning of `Service’ is embedded in their people who are the interface to the client, explains Vinay.
“The daily service delivery, hence, is a dynamic concept of interactions and experiences. This poses a challenge to initiate as well as to implement a change in the service provider. It ranges to many aspects of business – the way the daily routines are maintained, the manner in which the invoices are submitted and the support supporting given to that the sequence of checking and follow up.
FSP perspective
“For the FSP as well, it is a new way of entry or training and at times, new range of consumables and machines or new set of people to deal with. The demands from the internal departments for tasks completion, timelines, method in which to do it, dates for attendance, invoices, submission – everything is a little or more different for each new customer. We do remember a particular service provider who used to crave, and at the same time, cringe from the thought of new customer. With good reasons probably.
External Challenges
Customer Perspective
“We can hardly imagine a client who, in turn, does not have visits from their clients – the end customer e.g. for a hotel as a customer to the FSP, the guests staying are the end customers. The SOPs laid down to attract, impress and please these end customers is in itself, an ever-changing process. The means to deliver them is through another system of the service provider and this change is feeding to the inertia. Apart from this, there are many external licenses, registrations involved which have to be done anew. The other part is the on-site trainings, drills, the specifics of the site and do’s and don’ts need to be shared, implemented with the new set of people.
FSP Perspective
“The similar sets of licenses, registrations exist for the FSP. It also entails deploying the bench-strength and recruitment, training of the new team. The logistics of supplies and monitoring is different and has its own challenges. There are dealings with a new system with unknown challenges waiting to unfurl with the operations starting at a new site.
These four factors, intertwined with the regulatory bodies and authorities, pose a formidable challenge for the inevitable change taking place. However, the fact is, the two parties involved here – the customer and the service provider, both have equally pressing needs economically, ecologically, politically and socially, that they work in tandem and deliver a superb performance. We do hope to grasp the gamut of activities, number of entities involved would really impress the change masters! Both the teams, however, only emerge stronger, more innovative in so doing, so all the best!
Successful Transition Processes
“The magic of challenges faced by both the customer and the FSP are interesting. When we turn the page to see the check list of what all needs to be done, it turns out to be a process that calls for a concerted effort from both the teams.
The customer has to ensure that all the necessary information and well-articulated expectations are shared with the FSP. This would enhance the understanding of the FSP and help them to have a better planning. These could be divided in four categories –
Statutory: Modification to be done in the list of FSPs as mentioned for the Registration Certificate (RC) of the customer. The information required from the FSP has to be clear, elaborate and updated. Apart from this, the necessity of the Form V, documents required, responsibility matrix of who has to do what would be better if drawn in advance.
a. A sub-section of this is the daily attendance, records and registers, clarity in terms of whether daily or periodic monitoring is required by the customer for this.
b. The submission dates, authorities and documents need to be specified.
Commercial: What is the rate agreed upon dependant on, if at all? What would entail any deductions or which services or products would be charged extra? What are the taxes, margins etc.? All needs to be clear.
People: Any kind of specifications need to be pre-defined as well as the on-site documents, trainings and mode of payment has to be clear. The shift timings, if any, need to be understood.
Legal: Both the entities are getting into a legal agreement. The exit formalities, indemnities, liabilities and covenants need to be very clear from the beginning. This process, ideally takes about 30 days’ time for all involved to be completely and correctly satisfied.
“Here the challenges happen in many formats. They could be in the signing of the legal document – there are cases where they are just not signed and instances where the tenures have been very short lived. This causes heartburns, issues.
“There are cases where the definition of scope from the customer is so pithy that the FSP is told, for example, your scope of left to right and top to bottom. It would be tremendously frustrating for the FSP to try and deliver to the expectations of such a client.
The statutory requirement is supposed to be very clear and open for all to follow. However, there are cases of either misrepresentation or withholding of information which could lead to problems for both the sides.
“One of the arcane systems with customers is the methodology and execution of a broadly defined two-page note in the agreement which addresses `Penalty Clauses’ – yes, do not be surprised.
“It is not unheard of for a client to ask the FSP to start the services at a day’s notice. So much for the seamless expectation and to do the tango of meeting the challenges of the transition!
“On the part of the FSP, there are equally ludicrous examples. These could be taking a contract at a value that does not even meet the requirements of the minimum wages defined. They are also to blame for assuring the client ‘a miraculous transition’ and awe-inspiring difference. “There are FSPs who have ventured to mend their ways to an extent that it is barely within the legal framework being adhered to.
“However, honestly, the changes on both sides are welcome and in the right direction. The new generations are bringing in new exposures, expectations and a constant drive to improve. These are trending the industry to grow robustly and also to keep converting the shares of un-organised to organised. The future looks bright and beckoning for a global competition,” concludes Vinay.
(Inputs taken from article published Building Operating Management magazine www.facilitiesnet.com)