Finding the Right Fit
For some organizations the decision is a matter of dollars and cents whatever saves money is the route they choose. For others, the reason to outsource focuses on core competencies or reducing liabilities.
Then, there are executives who believe maintaining a consistent corporate culture or a specific level of quality requires in-house staff to handle certain support services. Such facility managers may say contract employees dont take as much ownership of the facilities they clean or that they just arent part of the family.
Certain markets, especially commercial offices, have a strong tendency to outsource all cleaning functions either as a stand-alone contract or combined with other facility services. The trend toward contract cleaning coincides with many facility executives resolve to concentrate on core business to reduce investments and increase profits.
About 90 percent of facility managers who are members of the International Facility Management Association (IFMA), say they are responsible for housekeeping services, but only about one in five perform those functions with in-house staff. Housekeeping also is the most outsourced facility-related service in most commercial organizations, which comprise the majority of IFMA members, the association reports.
But even in some markets where housekeeping traditionally is done in-house, there are some specialized cleaning tasks requiring an outside expert to get the job done. And, since every business school, clinic or storefront must at least break even to survive, discussions regarding outsourcing a non-core function such as cleaning are inevitable. The difference is whether it involves a few tasks a year or the entire department. Facility managers and their housekeeping directors need to be prepared for both types of conversations to make the most beneficial decision for their buildings.
The most common scenario
Many housekeeping departments may balk at the discussion of outsourcing, because of a perceived concern that staff could lose jobs to contract service providers. But outsourcing doesnt necessarily mean replacing whole departments.
The term out-tasking is used to describe a more likely scenario, where a specially trained contractor does project work, such as window washing, hard floor care or waste removal and everything else is done in-house.
Splitting up responsibilities among in-house and outsourced staff in this way, facility managers get rid of some major operations headaches while keeping control of areas that require special attention. Things a manager avoids by out-tasking specialized work include: the need to train people regarding highly-specialized cleaning techniques; purchasing specialized equipment; complying with government regulations regarding certain tasks; or recruiting and retaining staff for technical jobs.
For example, washing windows at ground level generally requires purchasing a few tools and basic chemicals. Also necessary is some basic training in how to apply the chemicals and use a squeegee, the most common tool.
But consider windows that are a few stories off the ground. A housekeeping department must invest in lifts, scaffolding and other costly equipment that carry a higher risk of injury. That can mean a need for increased insurance to cover employees who are at risk to fall from high levels and added training to comply with workplace regulations governing activity on makeshift surfaces. Thats why most organizations will contract out such work.
In the case of an organization that contracts through a central purchasing department, there may be preferred vendors who will give a discount for one-time or quarterly services due to the high volume of combined contracts across multiple facilities. If a facility manager or housekeeping director must work with purchasing personnel to contract such services, it is important to ensure the contract administrators have proper task specifications with which to base their negotiations for a specific site.
Sometimes, it makes sense to contract out cleaning in some buildings and not others within an organization.
Larry Armstrong, director of general services for Carnegie Museums of Pittsburgh, Pa., chose to contract out cleaning at the organizations Andy Warhol Museum when it first opened a few years ago, while maintaining in-house crews in the rest of the facilities he manages.
Its hard to monitor an off-site building on a day-to-day basis, he says. By contracting it out, I just have one person to contact with issues, rather than tracking down a whole crew.
While the management of his contract cleaning staff at the remote location has changed over time, the staff has remained the same and so has their quality level, so Armstrong says he has been happy with the decision. He does require the management to notify him of new hires. Armstrong says he wants to make sure he trusts the people he lets into the museum where there is expensive, one-of-a-kind artwork, especially since he isnt there very often to observe them.
Many colleges and universities split cleaning among different facilities within the same organization. Some may have affiliated hospitals or clinics with in-house staff, while contractors clean classrooms and offices. Often, management chooses to keep health care facilities in-house in these situations to more closely monitor compliance with stringent Joint Commission on Accreditation of Healthcare Organizations requirements. Another common option is to contract out most cleaning, but leave highly sensitive research areas done in-house or by actual members of the research staffs.
Another outsourcing option is to contract management positions while keeping staff in-house. This is a common practice in union environments where the staff is grandfathered into a facility under a union contract, but executives want to institute a new focus for the cleaning department. They then bring in different managers to institute the change. This is an equally viable option for non-union environments where the housekeeping department requires the same shift to improve or update services, but where management chooses to keep existing staff.
Good Samaritan Hospital in Downers Grove, Ill. chose to outsource cleaning management this past January, after a steady decline in service quality. The source of the problem was a supervisory staff that had risen through the ranks from entry-level positions, says Mark Charles, director of support services for the hospital. In this case, the people in management positions didnt have much experience supervising staff and tracking processes. Managers also didnt have a strong training program in place to further develop themselves or workers. Progress was stymied and service levels began to suffer.
"While financial savings was a minor concern, we were more interested in our outsourcing companys ability to provide quality staff training and development programs, as well as a comprehensive scheduling and tracking computer system," says Charles.
The ability to get things up to speed very quickly once the new managers took over was another concern Charles had, but he says the transition went very smoothly and the outsource staff quickly meshed with hospital personnel.
Charles is quick to point out that lower quality within an in-house operation isnt always the workers fault, as many executives often think. He felt his cleaning staff was working hard and trying to do a good job, but didnt have the right direction to do so. Since the administrators felt a loyalty to the workers who had been with the organization for some time, administrators chose to leave most in place, giving them a chance to improve under new management. So far, the gamble has paid off the staff increased quality levels almost immediately and workers have taken to the new programs available through the outsource management company.
While contracting out management helped Good Samaritan get its housekeeping back on track, it may not work for everyone. If an organization has had a few management companies come in to improve their housekeeping department and the same problems exist, there likely are other issues that need to be addressed. Outsourcing the whole department may be an answer, or the problem could exist beyond a single department.
Sometimes the changes management hopes to achieve in the housekeeping department cant happen with partial outsourcing. And there are certain advantages that contractors have over in-house departments that are hard to ignore if money is the main factor, says Vince Elliott, an industry consultant with Elliott Affiliates, Baltimore.
When it comes to straight cost to clean a building, outsourcing wins hands down, he says. Its cheaper to contract out the work because you can be very specific about what you will and will not pay for. Whether youll get a high level of quality with that savings is another story.
Contract cleaners, on average, are cheaper than in-house operations on a per-square-foot basis, with in-house costing $1.60 and outsource costing $1.22, according to a 2001 IFMA report. However, the report draws a correlation between the increased frequencies often expected of an in-house housekeeping department and its increased cost. Contractors, on the other hand, stick to the frequencies in their contract and if facility managers or owners feel that isnt enough to create a level of cleanliness they require, they have to pay more to get it.
Because of this known savings of contract cleaning, if an organization is strapped for cash and looking for places to cut cost, housekeeping is an easy target, according to Howard Lackow, senior vice president and director of outsourcing services at the Outsourcing Institute based in Jericho, N.Y.
In this economy, everyone is taking a look at the way to provide more cost-effective services to their clients and outsourcing simply is becoming an accepted way to do this in support service areas, says Lackow.
But that doesnt mean every in-house operation is destined for outsourcing. Most often, departments that have been mismanaged for some time, or that have not documented their productivity and return on investments are on a road toward complete contract services.
For other departments that have been tracking their progress and are working to find alternative solutions to their labor or quality concerns, it is less likely they will receive a pink slip anytime soon. Most likely they will need to consider the many other partial outsourcing scenarios to clear up trouble spots.
Making the final decision
Before deciding to outsource a service such as cleaning, Lackow suggests conducting a boundary assessment to determine what makes the most sense for that specific situation.
Managers need to look at all of the components involved in providing that particular service and evaluate based on many criteria whether it is a candidate for outsourcing, he says.
Included in such an analysis should be questions of how necessary it is to the companys core functionality, what type of expertise is necessary, what type of technology is necessary and the cost of providing the function.
When it comes to cost, Lackow warns managers to look at both direct and indirect costs before making a decision. The cost of cleaning a building might be $1.60 a square foot, but that could include payroll taxes, the cost of benefits, and hiring and training.
Each facility will have a different breakdown of needs and costs that can sway an outsourcing decision. That is why no one can say outsourcing is the best option every time. For instance, contract cleaning companies often have an advantage in their larger purchasing power, receiving discounts individual organizations may not, but if a school or hospital is part of a larger buying group of its own, that may cancel out purchasing benefits of outsourcing.
If the number of cleaning staff is negligible compared to the many others that a given human resources department must cover, removing cleaners from payroll may not cause as much of an indirect benefit as originally anticipated. On the other hand, if a company isnt able to invest in the training required to provide quality services, a contractor may present larger resources.
Finding the right contractor with similar values, management structure or culture also can make or break an outsourcing decision, says Carnegies Armstrong.
If they dont understand the administrative demands and customer expectations Im facing then how can I trust them to do a good job? he asks. Thats why Armstrong always looks for someone with a proven museum track record.
Lackow also advises managers that once they make the decision to outsource and they find a the right contracting partner, they must remember that circumstances can shift during a given contract, requiring changed frequencies, adjusted prices and other moves that can affect their original cost-benefit.
Many people think they are buying something in a one-time purchase and theyll buy cleaning services again when the contract is up, forgetting about it until then, he says. But long-term contracts require different costs and service levels built into a timetable over the years, and the customer has to be prepared for those changes.
| When facilities pull cleaning in-house
In recent years, it has been more likely that an organization making a large shift in housekeeping responsibilities would outsource all cleaning tasks. If a facility manager has problems with one contract service provider, the tendency is to put out a bid request to other contractors who might offer better services. While that still is the case in many organizations, recently others have pulled everything back in-house to improve cleaning operations.
Often, this occurs when outsourcing costs have increased over time to a level that is close to what in-house managers would have to pay to handle the operations themselves.
In the case of St. Louis University, the school was struggling with turnover rates of 20 percent or higher in its contract cleaning staff. In addition, the contractor was in a deadlock with local union negotiations and the school was facing a crippling work stoppage if wages and benefits werent settled. Considering these problems, Charles Smith, associate vice president of facility services looked into the details of his contract operations to find a better solution. What he found was that the school was paying a hefty management fee to get rid of human resource-related headaches involved in hiring contract workers. But if Smith brought the cleaners in-house, he could pay each person higher wages and offer a better benefits package with the same budget. He also could negotiate the increase with the union himself, avoiding the contractors existing labor troubles.
"If you would have asked me two to three years ago if I would ever bring a contract situation in-house Id have said no way, but times changed, problems occurred and the money had reached a critical point that we couldnt ignore," he says. "It just became a no-brainer once you looked at the numbers."
In Smiths case, he already had supervisors working with the contract workers; he provided the equipment and he was able to justify the increased human-resources load, which, after three months, has been very insignificant compared to original estimates.
When it came to staffing, the university was able to hire on only the workers Smith felt would continue to produce high quality. He also predicts that some workers who might only have been working at the university with a temporary situation in mind, will be more likely to stay longer because of the increased benefits he now can offer, including access to other non-cleaning jobs through the university system.
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