Have we taken outsourcing too far?

Kostas Koultzis
A decade ago, if you owned or leased a large chunk of corporate real estate you had a large internal property team. Property and programme managers, alongside designers, managed the entire estate – from strategy to build and maintenance – for large banks and other retailers. Yes, some larger companies did employ consultants to do things like cost management, but on the whole, most of the estate management was done in-house.

Fast forward to now, and most companies have reduced their internal property team and outsourced most everything from Transactions, Operations (FM) and Capital Delivery. In-house corporate real estate teams have shrunk in some cases from hundreds of people to just a handful.

This move towards total outsourcing begs the question – are we giving away too much? What should be retained in-house? And when do the risks of outsourcing start to outweigh the benefits?  

To outsource or outtask?

First, to clarify what I mean by outtask. Outtasking is where you pay specialists to do certain elements of property management for you. This could be anything from preparing your capital plan, to scheduling estate works or the actual physical delivery by contractors. How much or little you outtask depends on the size of your internal team. In an outtask model, internal teams typically retain governance and control and set the overall direction for the estate. Importantly, the internal team retains the data and control over where the money is spent – they drive performance and control risk.

This is in direct opposition to the outsource model where the internal property team is cut to a bare minimum and most, if not all, tasks are undertaken by consultants and contractors and large elements of spend and risk are in the control of the outsource partner.  

On the whole most clients I speak to have found outtasking successful but outsourcing less so. There are several reasons for this: contractual arrangements and having the right performance metrics; commercial pressures with suppliers; loss of internal knowledge; ability to drive the outsource partner’s continuous improvement; and data and insight sitting with the outsource partner which limits the ability to identify risk.

Some companies have implemented a successful outtask model, only to move too quickly, or too far, to outsourcing and found themselves with an estate out of their control – a warning to us all of the dangers of taking outsourcing too far. The companies who have found the most success have retained the core estate management elements (planning, programme governance and risk) whilst outsourcing tactical delivery to consultants.

So, what is the tipping point?

As with many strategic decisions, there is a sliding scale of benefit and risk for outsourcing vs outtasking. If you move too far along the scale towards total outsourcing, you will encounter increased risk and internal customer dissatisfaction and you will almost inevitably see a dip in your estate’s performance. Likewise, if you move too far towards doing everything in house, you can also see the same but for differing reasons: you lose the benefit of market knowledge and expertise, of specialist input and commercial edge.

So where is the optimum balance? I believe it sits firmly between the two, with a lean internal team that retains control of the strategy and planning and manages the consultants who make the delivery on the ground happen. The internal team can drive real value through strong, aligned KPIs and collaborative working with the suppliers whilst still being involved in the decisions and strategy. The key is to keep a close eye on estate performance, ensuring the balance always tips towards real benefit and high performance, and never towards high risk and low performance.

With uncertainty in the market, there is a lower risk appetite in most organisations and an increased focus on controlling property. This means increased pressure on getting the outsourced vs outtask model right, and ensuring companies retain control and direction whilst utilising the best expertise in the market to deliver.  

This article was first published in Building magazine.

Originally authored by Kevin Chrisp.

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