Will you pay extra for the Living Wage?

Fundamentally most of us believe that the reward for a fair day's work should be a fair day's pay, so why is it taking so long for the Facilities Management industry to embrace the UK Living Wage? People tell me that it's because no one wants to pay extra, but what most don't realise is just how much that decision costs. In this blog I argue that the Living Wage is a lot more commercially viable than is popularly believed.

For those not familiar with it, the Living Wage is quite simply the hourly-rate a person needs to earn before they no longer qualify for state benefits. It's a little more complex than that of course, but that's the synopsis. If you're interested in learning more check out  the Living Wage Foundation (livingwage.org.uk) which promotes a scheme of accreditation for employers who voluntarily agree to pay these rate. The UK Living Wage (LW) is calculated to be about 20% above the National Minimum wage (NMW). In London it's approximately 40% due to the cost of living in the capital.

Though I promised that this blog would be about the commercial aspects of the LW, rather than the moral justifications, it's still worth saying that in 2014, we should all feel a little outraged at the idea of employers earning a profit whilst paying people less than they need to live on and passing on a burden to the tax payer. Some might think that statement evocative, but in an age of Corporate Social Responsibility(CSR), there's a growing expectation on employers to act responsibly towards both their own staff and the communities they are part of (it's why tax evasion gets so much press) and the above demonstrates neither. Ok, moral-rant over, let's get commercial.

I'm going to start building my case with a simple statement: Good, well motivated, loyal employees are more reliable, more productive and less likely to be absent. I'm not going to bother backing most of that up with facts: it's not exactly controversial stuff. But there is one statistic from the Living Wage Foundation that I do want to quote: 80% of LW employers have noticed around a 25% reduction in absenteeism. Let's talk about that for a second shall we?  It is generally agreed that high rates of absenteeism are indicative of poor workforce motivation and loyalty. They're not the only indicator, but they are more quantifiable than others like productivity, dedication and time-keeping and are therefore considered good leading indicators.

The FM industry is full of low-paid service jobs; no pun intended, but you might say they are ten-a-penny, particularly in services like cleaning, catering and porterage. At the low-end of the wage scale, loyalty and motivation are low, churn is high and as a result there is poor consistency in productivity and quality.  How many times, have you found yourself telling someone or being told by someone that quality issues are the result of changes in personnel or difficulty attracting and retaining the right people?  This is the reality of a low-pay workforce: managing them to ensure good standards of quality and productivity isn't at all easy.  It takes a lot of time, it takes a lot of effort and (most importantly to my case) it takes a lot of money.

It's not controversial to say that absenteeism costs money – it's a foundation stone of Health & Safety principles. When staff are absent, there are overtime costs, temp labour, lost productivity, time and effort wasted on ringing around to sort things out, etc. It's also agreed that employee churn costs money too: there are recruitment costs, training cost and supervisory time amongst others. Finally, managing poor performance can really drain resources too: It's not just the money credited back to customers or the time spent dealing with complaints, it's the supervision, the retraining, the formal meetings, the letters from HR, etc. Basically, choosing to pay low wages, is also choosing to incur a lot of additional costs. Now some will argue that; wages are direct costs and the costs I've descibed are indirect and therefore difficult to quantify in any meaningful way. In one sense they're right, but in another they're wrong. They are hard to quantify, but the total cost information can usually be found in the service tender proposal: Its the line item on the breakdown identified as “management costs”. 

In low-wage service contracts, management costs are often one of the largest cost areas (after wages). Depending on whether things like training & recruitment (and sometimes profit) are included in them or listed separately, they could account for a significant proportion of the total contract cost. I've even once or twice seen proposals with combined management costs that almost equal the wages costs! The point here is that management cost are built into the contract delivery cost at the commercial tender stage.

Let's talk about commercial tendering for low-wage contracts. Most tenders are calculated using pre-defined formulae. If we over simplify it: some basic volume data (such as square footage) is entered to give an idea of hours required. This figure is multiplied by a wage rate and other costs are calculated as percentages of that resulting figure and added together to generate a total contract cost. There's a little “commercial” wiggle room of course, to give the sales-person something to play with, but in a nutshell, that's how it works. So here's the issue I have with that: Surely the management costs should be calculated using a sliding scale which significantly decreases as the wage rate increases?  We've just established that if wages are increased 20% absenteeism reduces by 25%. We also accept that recruitment & training costs will decrease. We accept that less time will be required to supervise and manage both performance and customer dissatisfaction. There will be higher quality, less refunds and fewer complaints. Yes, many of these things are difficult to quantify, but let's not mistake difficult to quantify for unquantifiable or non-existent.

In fact, a move to higher wages creates a lot of potential for cost-saving, especially when combined with good people management practices. So surely the correct way of considering LW commercial viability is to (at least partially) fund increased wages, using management cost savings? Should customers pay extra to support the Living Wage? I don't believe customers should accept a pass-through uplift on wages, but I do believe that there are alternative solutions which are not just palatable for customers, but commercially viable or even, commercially advantageous, for suppliers too.

And here's one final point to consider. In the fiercely competitive world of FM Services contracts, real commercial viability comes not from undercutting to win volume, but through retention of business. During a re-tender process motivated,loyal staff and happy customers, are worth their weight in sales-people and corporate hospitality.

Peeking Over Fences

Once upon-a-time Facilities Management was largely an in-house function, but the growth of the outsourcing market has led to an increasing number of facilities professionals following career paths that never lead them to acquire client-side experience.  As someone who has always worked client-side, when I meet a peer who has only ever worked on the supplier-side, I find they quite often want to ask me the same thing – what’s it like over on my side of the fence?  This blog is the result of one such request for information and gives my thoughts about what you might see if you were to peek over that fence.

I’m part of a minority in FM networking circles: I started off ‘in-house’ and despite making a number of career moves, somehow I’ve managed to stay there.  It’s been more by chance than by conscious design, though I have tended to express a preference towards in-house opportunities because I think they suit me fairly well.  In fact, I’d even go so far as to say that I’m something of an advocate for in-house FM.  But this blog is not about whether it is better on to be client-side or the supplier-side: this blog is about the differences that matter to an FM professional. And it started with an email. 

The email was from a respected industry peer. In contrast to me, their background is supplier-side, but they had an opportunity to interview for an exciting client-side role.  It was one of those too-good-to-resist opportunities with a very well known brand name and as they didn’t know much about how in-house FM worked, they thought it would be a good idea to reach out to their network and ask? They wanted to understand how things get done.  Things like; how in-house FMs deal with budgets, KPIs, planning, etc?  Who the stake-holders are and what interactions are expected, who ensures compliance, do we get audited, how do we support culture, how is success measured, etc?  These are all excellent and fundamental questions I replied and you should definitely ask them at the interview because I really can’t answer how they might do it.  I can tell you how my organisation does it, or how any of my previous organisations do it, but each of them do it differently.  You see the thing about in-house FM is that it can vary significantly.
At its core of course, in-house FM is interested in all the same things that outsourced FM is: the basic need to provide safe and comfortable work environments and the amenities that support the work activities taking place. Things like budgets, SLAs, risk management, legal-compliance, etc, all derive from this. But what is really different is the way in which business needs are determined, defined and met.  The outsourced FM industry is well established and as a result of learned best practices, good procurement principles and supplier convenience the basic framework of most outsourced contract arrangements are broadly similar.  Now that is not to say that there isn’t a great deal of variation in the way that outsourced FM is delivered, but just to say that a supplier-side FM moving from one contract or employer to another will generally feel like they are on familiar ground, because the framework behind the service set-up is broadly similar.

In-house FM is different.  It has more flavours than a well-stocked ice cream parlour.  An in-house FM moving to a new employer could well find themselves feeling like they’ve tumbled down the rabbit hole and ended up in wonderland: the basic needs are the same but there are no hard and fast rules about how they are met.

It all goes back to the basic agreement between client and supplier for the provision of services.  In an outsourced arrangement we refer to this as a contract, in an in-house provision we might generously call it a strategy, although it could just as easily be based upon the attitude of key players (including the FM), policies, financial organisation, organisational hierarchy, culture, history, attitude to risk or a multitude of other factors.   It’s an important difference: at the heart of the client/outsourced-supplier relationship, there is a (legally) binding agreement that defines the client’s needs, the required services, expected quality standards, the principles of measuring success, etc.  If these needs change, they get re-negotiated.  In an in-house arrangement, the agreement for the provision of services between client and the FM function is much less tangible. It might be documented, though partially documented or undocumented are equally, if not more likely.  But regardless of how well defined the agreement might be, the chances of it being binding are slim to none. This can be something of a double-edged sword: the existence of a contract can shield an outsourced-FM from the worst excesses of whimsicality and prevent goalposts from unexpectedly getting up and moving around the pitch, but absence of that very same binding agreement gives a canny in-house FM an inherent flexibility. An In-house FM can re-write policy, define new standards and bend, flex or even change the rules completely if they can exert sufficient influence on those that define needs, set standards or determine budgets. 

So what does this mean in practice?  Well take KPIs and SLAs as an example.  In an outsourced arrangement, performance measures and success criteria are usually defined by the contract.  The outsourced FM at least knows and understands the rules of the game and the rules cannot be changed without their agreement. The downside being that sometimes this can lead to slightly farcical situations, such continuing to report SLAs which have ceased to have relevance or carrying out unnecessary actions simply to serve the needs of an SLA or even being able to demonstrate success despite it being evidentially obvious that a service is failing.

Most In-house Facilities functions will also have an interest in SLAs and KPIs and may report on both internal and external ones.  However in-house FM is a lot more “personality-driven” and the rules around performance measures and success criteria (particularly the internal ones) may be much less clear.  They will often be based on what a senior executive deems to be of importance or interest and they can change as quickly as the weather during Wimbledon.  Half a dozen complaints could be enough to see a new KPI established and a change of personnel might completely change the landscape overnight.  In a personality-driven landscape, requirements can vary depending on the role of those further up the hierarchy: whilst it would be grossly over-generalising to say that a Finance director would only be interested in cost saving and a HR director in colour-schemes, it is obvious that the FM function would be influenced by the objectives and priorities of the role to which it reports.  Of course the great thing for an in-house FM is that personal influence cuts both ways:  An FM who is able to exert sufficient influence can make quite sweeping changes. 

Now although I’ve focussed my explanation on performance indicators and success criteria, the situation is very similar for most of the other areas my peer was asking about: budgets, interactions, standards, etc.  In general the big difference between in-house and outsource is that: the outsourced arrangement is inherently stable and is great for delivering a standard (which in many cases can be very high) and ensuring compliance.  Whilst in-house FM is inherently flexible, which provides potential opportunities for FMs to take a more direct role in needs definition, specification and method of delivery.  FM’s working in the outsource-sector usually have access to a level of support, resources, expertise and knowledge from within their own organisations that in-house FMs in all but the largest organisations would give their right arms for and are protected to a certain degree from flights of fancy and sudden changes of direction. But on the other an in-house FM is playing without binding rules (legal compliance aside) and the only real barriers to increasing funding, services or changing the culture are the extent to which the FM can exert their influence.  And FMs are excellent influencers. 

SLAs: A help or a hindrance?

A report from the debate at the 32nd FM Forum in Stansted

There was a sharp intake of breath from across the room as Liz Kentish posed her opening question in the debate about the usefulness of SLAs.  The assembled delegates looked around the room to find only two half-raised hands in response to the request about who would consider getting rid of their SLAs altogether.  One of those hands was mine, although I had only half-raised it – I’ll get to that bit later.

To be honest, our expectations going into the debate were quite modest. Being on as the last show of the day (and after the bar has opened) is not traditionally the best slot, but I’ll admit we were pleasantly surprised by the turnout and even more pleasantly surprised by the extent of audience participation. It would appear that SLAs are a contentious topic. In fact, this very report is a product of the ongoing interest we received after the debate.

I think it was a strong and diverse panel – that’s something that always helps a debate go well.  With myself (Jason Gurd) providing the client-side view, Robert Cunliffe the service-provider perspective, Adeyemi Adeboye providing expertise of operating PFI contracts. The debate was chaired by the BIFM Deputy Chair, Liz Kentish.

The panel put forward their cases and invited input from the audience.  There was some initial discussion about whether SLAs served any real purpose, with myself suggesting that most of us just settle for supplier’s out-of-the-box SLAs anyway. I’d already made the point that, getting to me in 4-hours wasn’t really all that impressive when you considered how far I could get from Stansted in 4-hours.

It was debated whether SLAs offer more protection to the client or the supplier, with cases being made for both sides. There were suggestions that SLAs were more often stick, than carrot, a get out-clause, if you like and the practicality of actually using that stick was also discussed. 

 Adeyemi and Robert both made strong cases for SLAs being a way to manage expectations and although there was a general consensus that they couldn’t replace a good client/supplier relationship, Adeyemi was able to use his knowledge of PFI to demonstrate that there are times when the client is significantly removed from the delivery.  This led to the almost inevitable question about whether FM is too procurement driven, followed by an equally inevitable round of “procurement-bashing”.  It was light-hearted, but I did step in to support our procurement colleagues by pointing out that it was down to FM’s to demonstrate leadership and influence in specifying services, but that we also need to make use of procurement functions to help us buy more effectively.

There was a lot of discussion about whether drawing a “line-in-the-sand” was a good thing when it came to service standards or not. I argued that, whilst there is a case for KPIs, continuous improvement demands that we seek to improve. Adeyemi countered by talking about the mechanisms which can allow SLAs to develop. 

There was also a great deal of discussion about whether SLAs could really enhance the client/supplier relationship, with Robert providing one of the most interesting examples of the night about how SLAs could be used to support organisational objectives, such as offering Local Authorities SLAs relating to creating local employment.

It was a pretty heated debate and I think most people were genuinely disappointed when it came to a close. I don’t think we managed to resolve the question, but I do think we managed to make a room full of FMs decide to think a lot harder about what SLAs they will ask from their suppliers in the future. 

To wrap this report off, I’d like to leave you with the closing thoughts of each of our panellists & chair;

Robert Cunliffe       
@robertcunliffe 
http://fmfuture.blogspot.co.uk/


“SLAs should be intertwined with KPIs and penalties or credits to ensure that the service provider has a framework to understand the quality expectations of the customer.  SLAs  & KPIs should not get in the way of building a good relationship between supplier and customer to further improve or enhance services so the customer is genuinely happy, however they provide a safety net should the relationship deteriorate.  To provide a true partnership SLAs and KPIs should focus on outcomes or the customer’s business priorities, as only then will the supplier really understand what the customer really, really wants.”

Adeyemi Adeboye 

@Yemmycornelius


“Forums like these, which bring the provider and the client together to discuss how the equilibrium of demand and supply of service agreements could be improved upon, is not only a necessity but a requirement for an enhanced and positive experience.  SLAs in this modern business age are here to stay: Whether you achieve your strategic goals and objectives will be down to how you structure your service level objectives in relation to your organisational goals."

Jason Gurd 

@jgurd

http://everythingfacilities.blogspot.co.uk/

“Even I’m not enough of a maverick to completely dispense with SLAs all together, but I do think FMs should give serious thought to what SLAs they ask for and whether they really need to be accepting all of those out-of-the-box ones.  I would suggest you might get a better service if you dispensed with the majority of your SLAs and focussed on the ones that are really important to you.”

 

Liz Kentish (Chair)  

@FMCoach   

http://www.lizkentishcoaching.co.uk/

“I love it when FMs get together and talk about what works!  Our debate at the FM Forum demonstrated that there is of course a place for SLAs, but they must be regularly reviewed and amended when services change.  Key to service delivery and managing expectations is the relationship between the service provider and the client, whether in-house or not.  One of the courses we run is influencing skills and managing relationships, and the feedback is always that this is what really makes a difference - get it right, as an FM, and your life will be an awful lot easier!”

And the survey says.........

We asked one hundred Facilities Managers what the golden rule of FM was? And they said......... “keep your customers happy”.  Then we asked..... how did they know how happy their customers are, or, if they were more or less happy than they used to be?

And they said......... “Um, well, I’m not sure really. I mean they don’t complain as much for a start. I suppose you could always do a workplace satisfaction survey of some kind, but what sort of questions would you ask? And do they really tell you anything useful anyway?”
 

OK, so I admit the opening part of this blog is somewhat fabricated, but it is a situation that many FMs will recognise.  The consensus of opinion seems to be that surveys are a good idea in principle, but the results don’t often tell you that much.  I disagree.  What the results usually tell you is how well the survey was planned out before it was published.

The whats, whys and wherefores

The problem is that most surveys start life in exactly the way described above.  Someone makes the decision that we need to find out how happy our customers are, someone else suggests a survey, then everyone starts brainstorming the questions, someone writes them down, they get circulated and a load of junk comes back.

For a survey to be an effective tool, you need to break the process before the brainstorming, wind it back a few notches, accept a few universal truths and put a little thought into the whats, whys and wherefores. 

The truth?  You can’t handle the truth!

One of the first things you need to establish is why you are measuring satisfaction.  It sounds obvious, but it’s not.  If we’re honest about it, many surveys don’t set out with the altruistic objective of simply finding out how happy people are, cynically, many are sent out as a way of trying to prove that a certain standard is being delivered.  If your objective is more cynical, you should be warned that it could well back-fire. The people most likely to respond are those who have something to complain about. 

Of course if your goal is to find out what is wrong so you can try and fix it, well..... you’ll rarely have a problem finding people who will tell you what is wrong. Fixing these things of course is down to you and you should be aware that if you’re the one asking the question, then you’ll be setting an expectation that you will act on the information you’ve asked for. 

Great expectations

Sometimes there is an assumption that survey results can tell you how well the service is being delivered. Usually they can’t. The customer’s response to the survey depends on how well their expectations are being met.  But expectations are a slippery business and they should not be confused with truth or fact. They’re not always fair, logical or reasonable and they can change based on experience. You may be delivering gold-standard service, but if the customer expects platinum-standard they will mark you down.

A survey can be a useful  way to gage and measure your customer’s expectations and as we’re all fond of saying in the world of Facilities Management: if you can measure it, you can manage it. Expectations are no exception.  My recommendation is that you actively invite comment and welcome discussion. The information and engagement you get in return will often teach you far more about service performance than the actual statistics. It also shows you customers that you value what they have to say.

iPads and holidays

Something very important to understand about your workplace satisfaction survey, is that the only people really interested in it, are you, maybe your boss, and everybody with an axe to grind.  Think back to the last survey you filled in – it was a pain right?  Why did you do it? Oh that’s right, you wanted to win an iPad ..............

I’m presuming your facilities survey budget probably doesn’t even stretch to a year’s supply of post-it-notes, so do try to accept the fact that most people will not want to fill it in.  Sorry - that’s just how it is.  But if you do want to maximise your returns, the most effective way is to make it really quick to do and really, really, easy. Think pretty hard in advance about the format and agree a few principles up front.  Here are some of my suggestions:

Keep the number of questions to a minimum
If you can, aim for less than ten. If it takes more than 60 seconds, most people will be turned-off from doing it.

Use a simple scoring system. 
I like 1-to-4 rather than 1-to-5. It stops people sitting on the fence – Is it good or not?  If you do use 1-to-5 then personally I suggest you treat 3 or below as a failure. Are you content that your customers are satisfied with your service?  You shouldn’t be: the golden rule of is to keep your customers happy, not satisfied.  

Phrase your questions exactly the same way
Keep your question and answer format the same for every question.  If you know that 4 is always the top score and 1 the lowest, it’s much easier to answer the questions. If your question change polarity half way through, people often won’t notice and will score it in the same manner as the one above. You may have to rephrase a question to switch it from positive to negative to do it (i.e. instead of how dissatisfied, how satisfied). If you don’t you may get anomalous results in your data.  Remember most people are just scanning through it as quickly as possible to try and win that iPad.
Use simple language
Use everyday language and avoid jargon. This is true of all good communications and your survey is no exception.

Be realistic
Finally, be pragmatic about what you can realistically learn from your survey.  It’s a useful tool for continuous improvement and gauging the general feeling, but if you want to know the ins and outs of how your service is performing or perceived to be performing, well I’m afraid you’re just going to have to do it the old fashioned way: get up from the desk every now and again, take a walk around the building and ask your customers what they think.  And to be honest, if you do that, your survey statistics will look a lot friendlier too.