Australians understand the need to be a part of the global economy but because of its isolation it often has troubles reaching those goals. As an island in the middle of the Asia Pacific, Australia sits in not only an economically volatile region, but it is also a long way from its trading partners, says Roger Fisher, general manager, corporate, Australian Department of Finance and Administration. Outsourcing has lengthened the country’s reach because organizations are teaming up with world-class outsourcers like PricewaterhouseCoopers to share in the global riches that these large vendors gather as they travel the world offering solutions to other organizations. Leading Australian organizations also realize they must be adaptable and flexible and concentrate on core business to succeed in the future.
It is especially true for the Australian Department of Finance and Administration (DOFA), Fisher says. As a small government department in Canberra, the inland capital city of Australia, the department’s best option for getting a global perspective was to partner with large, respected organizations with an overseas presence.
“As PricewaterhouseCoopers shares floor space with us they share ideas that they have brought from other assignments, or that they bring in because of their global reach,” Fisher says. “So they bring the experiences that they might have picked up in the United States, Japan, South America or Western Europe, which enormously enriches our organization and strengthens our ability to do our core business. We are not simply looking for an organization that can process our transactions faster and cheaper than we can; we are looking for partners that can add value to our organization.”
The Strategic Advantages of Outsourcing Property Management
DOFA is an organization that provides budget management for the federal government; provides financial services for senators, members of the parliament and staff; and manages the federal government’s property portfolio. It is an organization that is going through rapid change, Fisher says.
The first large business process that the department outsourced was office services, which consisted of things like internal office management, registry services, record management and internal couriers. The second large business process that it outsourced was property management to the joint venture of PricewaterhouseCoopers and Knight Frank, a leading property management corporation in Australia.
Besides facilities management, the department is also receiving strategic advice on the management of the department’s real estate requirements. There are huge opportunities to rationalize DOFA’s use of accommodations to ensure that property decisions are made concurrent with people decisions and other resourcing decisions, Fisher says. This is critical for DOFA because of its rapid change. Consider that two years ago the department had about 2,000 employees and have reduced that number to 850 because of outsourcing ventures.
“One of the issues to manage in a process like this is the real estate overhead,” Fisher says. “We simply don’t need the same amount of space as we used to. PwC has been very good at helping us through that process because of their knowledge of the domestic real estate market in Australia. And because the joint venture has deep property experience and a very good understanding of the state of the domestic market, they have been able to manage property for us in much more strategic way.”
For example, in Canberra, the department previously had two high quality buildings that were fully occupied. As DOFA downsized, it increasingly concentrated its operations in one of the buildings. Because of huge overhead the department planned to progressively concentrate its locations around core activities, but it was conscious of the high cost of dead rent in doing that.
Working with PwC, the department was able to find, initially, tenants to sublet, and eventually, a lead tenant who is prepared to take over the contract. Over a seven-year period DOFA will save $11 million by simply exiting the building and handing over the long-term lease to another organization. “That it is pure gain for the department,” he says. “The story is repeated Australia wide, and I think part of the issue is around seeing property as a strategic asset to be managed rather than just real estate.”
The Crown Jewel of DOFA’s Business Process Outsourcing Portfolio
DOFA also outsources its Human Resources (HR) to PricewaterhouseCoopers. From the department’s point of view the HR outsourcing is the crown jewel in terms of its business process outsourcing ventures, Fisher says. He says that few organizations or government agencies in Australia have outsourced the entire HR function to a partner.
Some people hold onto HR management because they see it as a very critical function, which is exactly why DOFA decided to outsource it. “We saw it as critical to our future business success and we saw that PwC had a comparative advantage over us in providing that service,” he says. “Our philosophy has been to partner when we identify an area of our business that someone else can do better than we can.”
PwC provides the department with strategic HR advice, as well as HR processing services, including payroll and processing, compensation case management, and recruitment services. But Fisher says that the department sets no limits on what PwC undertakes for them. The department’s view is that outsourcing works best when an organization places the responsibilities of the entire business process into the hands of its outsourcing partner.
“It works better because it gives the partner the opportunity to look at the entire process and reengineer and leverage off various parts of the activities,” he says. “It also puts the partner in a better position to help drive change downstream or essentially drive change back into the core business.”
Rubbing Shoulders With a World-Class Provider
Most of the PwC people are at the shared service center in Canberra, but some of the staff is actually on the department’s site. There are a couple reasons for that. One is to assist in the transition, and also because Fisher says there is a benefit for DOFA employees to rub shoulders with the staff of the outsourcing providers.
“PwC and other organizations bring parts of their culture into ours,” Fisher says. “They bring their behaviors and work ethic with them and our people see it everyday. Having PwC people on our premises, working along side our people, sets an example and it helps us move our people along a path that we would like to see them go.”
Fisher is aware of his department’s pioneering ways and cutting edge ideas and is proud of the results they have received so far. DOFA is exceeding its expectations in cost† savings, but is quickly finding that savings are the least of the benefits.
“Outsourcing provides a huge opportunity to partner with people who are good in providing things that may not be core to their own business. It’s also an opportunity to get faster and more agile,” he says. “The biggest benefits are in significantly improved services and access to much deeper and broader thinking in areas than we were able to produce ourselves.”
Lessons From the Outsourcing Primer:
- Australian organizations are turning to outsourcing to expand their global reach.
- Global vendors can share their experiences from other assignments with their clients.
- Organizations are beginning to understand the advantages of treating property as a strategic asset rather than just real estate.
- Placing the responsibility of an entire function into the hands of an outsourcer gives the vendor the opportunity to reengineer and leverage the process more efficiently.