Transitions are challenging for most nascent outsourcing relationships. But how do you survive a global transition where geo complexities and cultures are part of the process of transition?
CA and Jones Lang LaSalle (JLL) survived this challenge, forging a profitable and valuable outsourcing relationship in the crucible of tough change. Here is the story of how to build a partnership.
In 2005 CA had 138 locations worldwide housing 14,500 employees. Managing its five million square feet became a challenge since each property manager ran his facility his way. The company created a centralized global facilities organization in 2005 to standardize operations.
An internal survey a year later discovered "little emphasis on strategy and no emphasis on performance measurement or financial planning," according to Ken Bell, senior vice president, global administrative services. Even worse, he says the staff's "primary focus was on day-to-day operations instead of strategic direction."
The bottom line: the best opportunity to create process efficiency was to outsource. "We liked the cost savings outsourcing produced. We also needed scalability as our business needs change. We wanted consistent reporting capabilities, more granular and better financial accountability, and value-added expertise in other areas such as energy management and sustainability," he reports.
How Jones Lange LaSalle won the work
Geoffrey Gatling, vice president, Global Administrative Services for CA, worked in the procurement department at the time. He says CA invited seven facilities management outsourcing companies to bid on its RFP. "But only three were viable," he says.
No. 1 on its list for supplier selection: a provider with a global delivery model. Technology and competitive pricing were next on the list. "Jones Lang LaSalle wasn't the largest firm, but it was the most competitive when you considered all aspects of what CA was looking for in a service provider," says Gatling.
"We liked JLL's ability to scale," adds Bell. In today's economy there are acquisitions and divestitures. "We needed to allow for that ebb and flow in our real estate properties," he continues.
Gatling notes CA was impressed with JLL's implementation approach. "It was much more defined than the other contenders," he reports. JLL has a dedicated 10-peson team that focuses on implementations. "We then expanded the core team with our account people and the CA transition team," explains Don Dowden, JLL's global client relationship manager for CA.
But a real defining moment was the fact that JLL brought to the table its actual implementation team as well as the proposed global account lead. "We gained insight into who we would be working with. We appreciated the opportunity to have the people that would actually be executing the program answer our questions. We were looking for a group to partner with and one that would also be able work together as a team with us," says Bell.
Bell was impressed that the JLL team honestly told them what their strengths and weaknesses were. "They shared what they were struggling with. This was the beginning of an honest and open relationship."
Europe: the transition challenge
EU employment laws make the transition to outsourcing challenging under the best of circumstances. CA had to have agreements with each country to comply with local laws.
CA and JLL faced a difficult challenge because facilities management outsourcing was new to Europe and not as mature there as it was in Asia and North America. "Outsourcing was challenging for the stakeholders to reconcile the long-term value when the short term did not show the value as in other geographies," Dowden explains. He says JLL had to demonstrate outsourcing's value to the skeptical. "We brought in technology and best practices and started the process of consolidating third-party providers to leverage spend."
Fortunately the spirit of partnership prevailed. "We learned to manage expectations in Europe," says Gatling. When communication miscues arose, JLL acted quickly to replace an out-of-step account executive and relocate the global procurement position from the United States to Europe.
The benefits of a supplier transition team
Everywhere else on the globe, Gatling says "the transition process went better than we expected. I have only seen a few outsourcing implementations that went as well as this."
Bell reports there was continuity across all geographies on the approach. CA linked the JLL HR specialist with CA's HR people. Together the teams established a communications program that identified when they communicated to the people who were impacted, the organization as a whole, and the executive leadership team.
"We identified the projects and linked the people on both sides to work through it. They reported on a weekly basis, discussing the challenges they had or barriers they faced at CA to get things done to stay on track," he says.
The ease of this transition was remarkable given that CA was in the midst of its budgeting process at the same time. "Transitioning all the elements of the outsourced services required a substantial amount of work, which reduced the number of hours available to work on the budget," explains Bell.
CA asked JLL to provide some budget information for the current fiscal year while planning for the coming year. "We partnered to understand the issues surrounding budget preparation and worked collaboratively to set priorities, make compromises, and establish reasonable deadlines," reports Bell.
In today's economy every penny counts. CA restructured more than 30 offices worldwide in just 90 days. "We couldn't have done this if we hadn't partnered with a facilities management company," Gatling says. "JLL responded at a moment's notice." This was important to CA because those savings found their way to the bottom line when the company reported its year-end results.
Technology is just as important as scalability. JLL's financial and work order systems provide much more granularity than CA previously had. "We now have the financial and operational visibility we need to better manage our facilities," says Gatling. "In addition, all work orders and service tickets are now visible on one system worldwide."
CA appreciates JLL's expertise in category management. "They have subject matter experts on sustainability and data center infrastructure," notes Gatling. Specifically, Dowden says JLL is helping CA implement green initiatives. For example, there is a software application that allows users to identify applicable strategies from a comprehensive list of sustainability initiatives. JLL also has a centralized call center in Pittsburgh. "This was something CA couldn't afford to do before," says Dowden.
Of course, CA likes the cost savings. "Now we need far fewer people to manage our facilities and finances more tightly," he reports. Dowden says this is a key pillar in the relationship's success. "Keeping a large number of in-house employees in place is a big mistake because it makes the operation inefficient. CA structured its retained organization properly from the beginning."
Why this outsourcing relationship works
JLL puts CA's interests first. CA originally wanted "unit pricing" for move/add/change (MAC) work. Dowden evaluated JLL's original proposal and determined that this model would cause CA to overpay for the service. "I suggested we use a new model," says Dowden. Under the old plan, unit prices kicked in every time CA did an internal move. Dowden's new model used hourly labor rates for MAC labor and leveraged other dedicated account labor who weren't assigned to the MAC function; JLL then could do it for no incremental cost.
"Their suggestions took out a substantial amount of cost. We appreciated their openness to come to us with a recommendation to improve our costs," says Bell.
JLL recommendations saved CA a considerable amount of money. "We have to make a profit but only if it's fair," says the JLL executive. He says JLL makes decisions based on the long-term effect on the relationship. "We want to manage CA's facilities in perpetuity," he says.
"We feel comfortable having a totally transparent partnership. I routinely bring issues to them before they even know they exist," Dowden says. Adds Bob Paul, vice president, Global Facilities at CA, "This fiscal year CA and JLL leaders jointly created a business plan that provides a road map for annual improvement."
He praises CA's approach to the relationship. "From day one they had a spirit of partnership. We don't see that in every relationship." He says some buyers don't want to take advantage of what a supplier can offer. "CA is open to evaluate everything JLL has to offer," he says.
Gatling says JLL "does what it says it will." And the firm's executives take responsibility when things go wrong. One example occurred when a JLL subcontractor performed in a manner that put a CA critical environment at unnecessary exposure and risk. "We were impressed that JLL took total responsibility for the error. There was no finger-pointing, just timely and expert resolution." Bell says "the focus has been on the solution to the problems, not the problems. Blame does not enter the discussions."
The teams are co-located; Dowden says visitors "can't tell who works for JLL and who works for CA."
Lessons from the Outsourcing Journal:
- Suppliers can gain an edge in the bid process by including the implementation team and the proposed account lead in the negotiations. It allows the buyers to get to know and feel comfortable with the people they will be working with.
- Outsourcing helps companies survive tough times by allowing them to respond to economic conditions quickly.
- Keep the retained organization small.
- Buyers benefit when they take advantage of the knowledge suppliers offer. This is particularly true in new areas like green technology.
- Focus on the solution to the problem, not the problem, and don't let blame enter the discussion.