In this week’s edition of Magenta’s ‘building resilience in the built environment’ series, we spoke with Antony Law, COO of Churchill Group about his feelings towards the current economic crisis, and why he thinks transparency is the key to getting businesses of all sizes through these challenging times.
Tell me what happened to the built environment sector in 2008?
FM works in cycles. Back then, TFM really came to the fore, probably because the prerogative at that time was cost savings, and there was the assumption that consolidating services would save money. A lot of inhouse delivery was shifted to an outsource model, and so TFM outsourcing was the trend that followed the 2008 recession. In addition, investment in technology became a business priority. FM service providers were typically being asked to invest around 5% into a 5- to 10-year deal.
The recession helped charge FM into investing into solutions that would in turn deliver more value over time. That’s when the FM business model really came into its own. But the winners were the companies that could afford to take on an element of risk. In the process to drive down costs and dial up value, FM service providers had to weigh up the risk versus the rewards, and not all players could join the game.
What do you think will happen this time around?
There’s more choice than back in 2008, and a heightened focus on health, wellness, and experience, not to mention environmental sustainability, social value and a powerful sense of societal consciousness that demands business is used as a force for good. Perhaps that will result in more attention being placed on partnering with the providers that can deliver the tech, innovation, consultancy, expertise, and talent, all while supporting the ESG agenda and pushing much-needed change forwards.
To that end, we may see more joint ventures between inhouse teams and service providers – a close to 50/50 split, where there are lower returns for the FM service providers, but more stability with the long-term contracts that go with such ventures, some of which are up to 25 years. In addition, there may be a bigger push for a hub and spoke model. Whatever happens, it’ll be service provider led, but customer driven.
Value for money tends to come to the fore during recession. Do you agree? If so, what do you think that means for the big and small service providers?
There is more expectation from boards to understand what’s being spent during a recession and the impact of that spend. That call for transparency is driving the value prerogative. More transparency can only be a good thing.
What can small FM firms offer that big FM firms can’t? And vice versa?
The bigger firms no doubt have bigger budgets to invest in impressive marketing documents and programmes, but specialist people are few and far between. I’d say the smaller firms have the monopoly with expertise, but only because they have to offer that level of service if they’re to compete in what’s a competitive market. SMEs are often seen as the eyes and ears for their customers; there’s more hunger to demonstrate value at every stage of a contract because there’s more at stake.
Bigger organisations have bigger overheads and so obviously have to take on more or nurture current customers to grow and remain profitable. That means teams have to be spread a lot thinner. And there’s only so much expertise within the market. However, larger firms can be seen as less of a risk in times of recession, as there is an assumption there’s more financial robustness and security.
The Living Wage has increased. Even the firms that commit to RLW are concerned about whether increasing it is financially sustainable. In recession, do you think it’s likely the end user will push social value over cutting costs?
There are enough vacancies out there to pay a decent and fair wage and to deliver a good service all while remaining financially sound. But it’s about understanding where and how labour is required. If you think about these multi-let buildings, with 30 or 40 floors, and ten different service providers delivering something slightly different for each of those floors, then that not only has a net zero implication but a labour and cost implication too. Let’s think about the bigger picture and find a way to work smarter – particularly when it comes to allocating resource.
If, for example, there’s a way to re-apportion labour in one of the big, multi-let buildings, that have multiple suppliers – without jeopardising the service by moving to a more marketplace model – that means that wages can go up in a way that’s not only sustainable but will attract and retain the ‘best in class’. Given the current labour shortage, this approach makes even more sense. Labour may be in the wrong places right now. We should always pay people a fair wage but to make that financially viable each year the Living Wage goes up, propose ways to reshuffle that labour so ultimate value can be derived.
It’s a candidates’ market. The war for talent has never been fiercer. Recessions usually see a spike in unemployment. Do you think that will happen this time?
No. We have to look after those talented individuals in our sector to make sure that as we get through this recession those individuals are still around at the end of it. I think FM will flourish but only if it puts people front and centre. To get through any crisis, we have to think differently, reimagine, change and evolve. The FM firms that place value, innovation, and people above all else will come out of this stronger.
Want to hear from other business leaders?
Click here to read Rachel Basha-Franklin’s interview.
Click here to read Mark Tyson’s interview.