Sunday, August 28, 2011

Choosing the Right Service Model

Selecting the right service model for your CRE and FM organization is a fundamental determinant of your ability to succeed.  Executing the plan well is important of course, but does little good if you have selected the wrong plan.   Corporate structure, size, sophistication and culture will all influence your choice of service model, which must be well aligned to optimize potential.

This makes understanding your organization well in these multiple dimensions a high priority as you engage on a service model review process.  This understanding will be the keyhole to insights into opportunities and risks with the various service models, as they relate to your particular situation. 

While there are a multitude of service model options, there are three general classifications into which they tend to fall.  Understanding the characteristics of each will help you understand their alignment with your organization, resources and skill sets required to manage, and their respective advantages and disadvantages.

Best of Breed Services Approach
This service model places the CRE / FM organization in direct control of a number of specialized service providers.  These may range from real estate transaction management, design and construction management, all the way to operational functions such as maintenance and general services.  This model allows you to select the best possible provider for each function, effectively putting CRE / FM in a General Manager’s role.  If your organization is global then you have the freedom to select the best providers in individual markets.

By selecting the best service providers for each function and region you enable service excellence.   In addition, corporate CRE / FM groups retain appropriate control of tactical execution while avoiding the risk of single point dependency. 

However, it is not risk free or without burden.  Taking this approach will require attention to governance processes and consistency.  The CRE / FM staff must assure that uniform standards are in place and met by all providers, that accountability systems are in place and equitably exercised, and that sufficient resources are in place to manage a large number of contracts and relationships.

Not to be undervalued, it is critically important in this model that disparate entities be harmonized as much as possible.  This means special attention to KPI’s, technology, contract synchronization, quality of resources, and solving the technology puzzle in a manner that allows CRE / FM to receive and communicate a rationalized perspective of operations with high confidence. 

Bundled Services Approach
The bundled service model describes a one to one relationship between the CRE / FM client and a service entity that directly provides all services.  It provides a consistent approach to all services and strong cross-functional coordination since all have the same reporting and reward mechanisms.  Additionally, it provides a single point of contact for the CRE / FM group, thus lowering the internal management resource requirements. 

The advantages to this model are consistency, economies of scale, and transparency.  It is incumbent on the CRE / FM client to establish a contractual and relationship framework that maximizes these benefits while allowing flexibility to continually press the “art of the doable” upon the provider.

Primary risks in this model are the single point of failure nature of a one to one relationship, and potential uneven service performance across the entire portfolio.  The latter increases in leverage the more dispersed your portfolio is.  An additional risk is that the line between client and provider can become blurred, even internally.  In worst case scenarios this can make the CRE / FM group seem irrelevant or without influence.  For this reason alone CRE / FM groups that adopt this model must have strong internal executive leadership.  Selecting a single provider may indeed be the right choice, but it is always important that both parties clearly understand who is serving whom.

Integrated Services Approach
Similar to the bundled services approach, the integrated services approach provides a strategic alliance between client and one contractual partner.  Unlike the bundled approach, the Integrator is able to source individual functional services from the best providers available in a given market. 

The integrated services approach is in many ways a combination of the first two models with most of the benefits of the best in breed approach.  Additionally, it transfers the responsibility for management and coordination of multiple service provider contracts to the integrator, thus allowing for a smaller internal CRE / FM function.  While there is still the dependency risk of the one to one relationship model it is diminished by the integrator’s ability to individually source functional service providers.

This model also has the advantage of placing technology in the integrator’s sphere of responsibility.  They then must assure that a wide array of service providers deliver information via the same or compatible technology applications so that data management, analysis and reporting are consistent and transparent across functions.

Risks inherent in the integrated services model include the integrator’s ability to manage a number of service providers in an integrated and transparent manner, and a poorly constructed governance system that allows individual players too much autonomy.  Care should also be given during the development phase to assure that the total management structure and cost across the service spectrum is optimized.  CRE / FM groups should insist that they be given full visibility into the contractual and management framework between the integrator and its multiple service providers, to assure that an unhealthy and costly management bureaucracy is not being implemented.  You must provide and fund appropriate management but should avoid redundancy where not needed.

One final note here applies regardless of your service model choice:  The coin of the realm is data.  Accurate and timely data about all facets of your operation is the only way you will know when things are working and what’s wrong when they aren’t.  Developing your own data capabilities (acquisition, analysis, and articulation) is a critical first step.  From that position of knowledge and confidence you will be able to demand strong data discipline from your service partners.  Without it you will be hostage to the unknown and unproven.

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