Here today, gone tomorrow.

If in-house cleaning managers and jan/san distributors shared a common business adage, it might be this one. Their shared sense of business fatalism can be traced to a phenomenon that impacts the former directly, and the latter indirectly: outsourcing.

As companies continue to find good reasons to look outside their organizations for their non-core business needs — like housekeeping — jan/san product suppliers find themselves dealing with an entirely different breed of customer. In some cases, distribution companies find themselves inheriting contractor customers with different ways of doing business, different product needs and different attitudes regarding the ideal distributor/end-user relationship. While a number of jan/san distributors boast successful track records working with building service contractors, other distributor business models take it on the chin when organizations decide to outsource their cleaning operations.

How? The customer’s organization might hire a BSC that prefers to work — or is already working — with another distributor. Or the BSC might buy its products and equipment directly from the manufacturer. At the least, it’s likely that the account “changing hands” will mean fewer dollars for the distributor. Seventy-four percent of the nation’s facilities outsource to contract cleaners, yet the contractor market accounts for only 12 percent of total distributor sales, according to a recent Sanitary Maintenance study.

When an account outsources cleaning, it usually starts with the labor aspect, says Fritz Gast, executive vice president of P.B. Gast & Sons, Grand Rapids, Mich. “The next thing you know, the cleaning contractor says ‘I have products that work better.’ The chemical business tends to be most at risk, and the contractor picks up a little bit of margin.”

“Some BSC companies will sell their product with their service,” says Dave White, president of Leland Associates, Kingston, Ontario. “[The distributor’s] market is diminished if the business goes to a large contractor with its own distribution.”

Full-service companies such as Sodexho, Aramark, UNICCO, ServiceMaster and ABM are increasingly popular choices to fill outsourcing needs. They, like other contractors, often supply accounts with their own products. Large contractors can also leverage business volume to secure lower pricing.

The remaining in-house cleaning departments face the constant threat of being outsourced. Today, organizations relentlessly measure in-house efficiency and cost-effectiveness. Marching orders for the 21st century facilities executive are to transform internal departments into well-oiled corporate assets. “If there’s a trend at all,” says Tony Maione, president of Core Management Services, Endicott, N.Y., “it’s that the decision makers are exploring all of their options in a way they haven’t before. They’re becoming more informed before they make decisions about in-house or outsourced cleaning.”

The good news: housekeeping arguably enjoys more credibility than ever before as a critical facilities resource. The bad news: many housekeeping departments have been slow getting past the learning curve that accompanies new and greater corporate expectations regarding the appearance and environmental quality of facilities.

Here’s where distributors can ride to the rescue and pull off the proverbial win-win coup that helps in-house customers keep their jobs. It’s advice that will also ensure that long-standing customers and tried-and-proven ways of doing business don’t go the way of the dinosaur.

If a distributor can help make an in-house customer’s department more efficient or more resilient when it comes to facing new challenges, the prospects of the customer surviving corporate downsizing and the distributor retaining a valuable account improve.

The distributor needs to ask: Are cleaning products being used correctly? Does the customer need assistance in training cleaning crews? Measuring performance? Coming up with cleaning benchmarks? Can the distributor serve as a semi-consultant and help his current customer interpret exactly what facility management is shooting for in the way of building appearance and environmental quality?

Finally, can the distributor take customer service to new levels by helping in-house customers radically raise the bar currently used to measure quality and performance?

Above and Beyond
Scoles Floorshine, Farmingdale, N.J., has focused on helping make its customers’ in-house departments more effective, says Jon Scoles, the company’s managing director.

The company works closely with in-house cleaning management to address issues such as employee morale and motivation, in addition to making sure its customers are current when it comes to product and equipment innovation.

“We sell solutions and ways of doing things,” says Scoles. For instance, he recently helped a facility manager resolve a dispute between management and cleaning employees. Acting as a mediator, Scoles listened to both sides’ issues and helped them reach common ground.

Scoles also stays abreast of regulation changes and other issues and trends that might affect in-house customers. He’s especially attuned to issues that impact his customers’ risk and liability.

It’s the distributor’s job to make sure in-house departments succeed.

“We try to make their bottom line better,” he adds.

Help In-House Thrive
Strategies aimed at outsourcing issues can be proactive — safeguarding customers from the possibility of being replaced with a contractor — or geared to address a transition from in-house to contract cleaning.

“One of the things I do is talk to the owners and say, ‘It’s OK to outsource the labor, but not the materials,’” says David Donnelly, sanitary supply division manager for Perkins Paper, Taunton, Mass. “Don’t let the contractor dictate what you’re going to pay for materials.”

While the facility manager might relinquish some control over the employees and the labor, Donnelly advises them to keep the supply-buying function in-house, and instruct the contractor to bill for straight labor. Donnelly suggests counseling the facility manager about the importance of quality products, and explaining that if the two functions are separate, the manager can more easily account for and manage the labor costs.

Donnelly also explains to customers that BSCs sometimes mark up prices when they supply their own cleaning products.

Regardless of the strength of its product-and-service offering, Donnelly says his company retains business with newly outsourced customers only half the time. For other distributors, that percentage is even less. But while outsourcing means the end for some relationships, it can, at times, present opportunities, says Donnelly.

For example, one of Donnelly’s accounts grew when it went from in-house to a contract cleaner. “Now, not only do I sell that building, but all the other buildings the contractor deals with. So I picked up that business,” he says.

“You have to align yourself with some good contractors, and keep your ear to the ground,” says Donnelly. Find out who’s going to outsource, he suggests, and either approach management about ways to keep the product business, or track down a qualified contractor and partner with them to win that business.

Step Up To The Plate
Keeping in step with the changes inherent in any account that goes from in-house to outsourced often helps distributor come out on the winning side.

“What you’ve got here between the distributor and the in-house, and the distributor and the small contractor is a kind of dance,” says Vince Elliott, president of Elliott Affiliates, Hunt Valley, Md. “Each party’s got to follow the right steps. One can make the other look bad, so they need synchronization so they’re each doing the right job to make themselves look good.”

And there’s ample evidence that distributors who are quick on their feet benefit.

“The distributors have become better trained at many of the value-adding processes, such as training people on appropriate staff levels,” says Maione. “To stay competitive they need to be focused on those additional activities.” And according to Maione, distributors are fine-tuning their product and service offering.

“Distributors are raising the bar as far as providing more value-added services,” he says.

Outsourcing’s Causes: Financial Pressure, Poor Management

According to a 2001 Operations and Benchmarks survey by the International Facility Management Association (IFMA), 74 percent of respondents said they outsource housekeeping, 15 percent said they had an in-house department and 11 percent used an in-house/BSC combination. Outsourcing is a popular method for dealing with facility-related tasks for various reasons. The top three general reasons for outsourcing, according to another IFMA survey are: because special skills are required (as might be the case for window cleaning or landscape maintenance); to reduce or control costs; and to focus on core competencies.

Cost is always top-of-mind with facility managers, especially during times of economic hardship when every dollar counts. Thus, it’s no wonder that contracted janitorial services are so widespread. Per square foot, in-house cleaning costs $1.60 and outsourced costs $1.22, according to a 2001 IFMA report.

“The No. 1 reason people outsource is because of financial pressures,” says Maione. “Closely related to that would be a lack of internal resources.”

Indeed, managerial mismanagement is a common reason facility managers outsource cleaning. Many custodial departments have been whittled away to where there aren’t the needed managers to effectively run large, in-house operations. Without adequate resources — managerial and monetary — to operate the cleaning department, performance suffers. And when the tasks aren’t accomplished satisfactorily, facility managers begin to explore other alternatives.

Market Considerations

Cost notwithstanding, there are several reasons organizations look to BSCs to provide cleaning. Dissatisfaction with the quality of in-house, union-based labor is one of them, says John Walker, owner of ManageMen consulting service in Salt Lake City. Discipline problems also plague in-house departments more often than BSCs, who have fewer hurdles in replacing ineffective employees.

Also, organizations are more likely to outsource building space they don’t own. For instance, a hospital might have 95 percent of its cleaning staff in-house, but outsource cleaning needed for additional leased office space. (Similarly, many organizations use contract cleaning on an interim basis, for example, as space needs increase over a given period of time.)

The cleaning needs of facility management and leasing firms are most often met through contract services. In the case of the real estate leasing organization, the primary mission is leasing tenant space. Therefore, these organizations outsource the bulk of their facility management operational needs.

Most of the recent movement from in-house to contract cleaning has affected the so-called “owner-occupied” facilities: hospitals, schools, government buildings and corporations, among others.