International FM strategies – hot right now

The relatively immature Nordic FM market is in an exciting developmental phase right now, with more widespread testing of regional, national or international FM strategies. Global corporations based in the US and UK, where the FM market is most mature, have been using international FM strategies for a few years now. But this greater interest extended to larger operations in the Nordic region in 2009, mainly in the private sector, but also multinational organisations like defence companies and aid organisations.

Progress of the FM sector in the Nordic region

Basically all players – private or public sector – have either taken or passed the first step on the maturity ladder, where they outsource one or or a few single services to one or more external service providers. The first services to be outsourced as single services are cleaning, waste management, security services, property services and staff restaurants.*

The developmental second step is to coordinate several FM services required at or around a site, and managing them as an integrated whole. The underlying driver is the realisation of the substantial locals synergies of an FM operation. If you choose to collaborate with an external specialist, often, the choice is between service providers that specialise in managing integrated complete solutions – IFM providers.

IFM solutions are currently most common in the private sector, but also occur in the public sector. For about a year now, an increasing number of players have also reached the third step on the maturity ladder, meaning them choosing standard FM/IFM solutions for not only one site but several – regionally, nationally or internationally. We call this multi-site FM/IFM.

The development driver towards multi-site FM/IFM strategies is the wish to exploit synergies and economies of scale through standardisation and high volumes. And the interest in this type of solution is growing. In 2009, we observed a trend-break among large companies right across the Nordic region, who are now increasingly demanding international FM/IFM solutions.

Choosing your FM strategy

To select an FM strategy, clients need to make a few in-principle decisions. One of the most important is the degree of centralisation – will the FM strategy apply locally, nationally or internationally? One of the big benefits international FM strategies offer is more standardisation of production, working methods, site structures and/or levels of service at different plants or offices. This improves the prospects to control, monitor and compare FM operations centrally in large and geographically diverse groups. It also means that in time, administration reduces.

The decision to manage and develop FM services in-house or in partnership with a specialist FM provider is another critical factor, and here there is a clear trend towards more outsourcing to external providers – in the private and public sector. In Coor’s market research in 2009*, over 50% of all respondents in Sweden, Finland and Denmark stated that the share of outsourced FM functions would probably increase in five years’ time. The share of respondents expecting an increase was highest in the public sector. This research also shows that in all countries, respondents generally take a positive view of outsourcing. On a five-point scale, all averages were around 3.59-3.77.

The third question a client must take a view on is to organise and manage FM operations by services/services segment or by local sites/offices. The core issue is how much of a gain is expected from volume-driven economies of scale compared to local synergies, and this question is especially important for clients considering multi-site FM/IFM solutions.

Significant local synergies in FM operations

The logic behind running FM operations differs greatly from that of purchasing input goods and standardised materials. The difference lies in the great prospects for local synergies offered by FM operations. Local synergy gains arise through the same person delivering several services in the same place. For example, a receptionist at an office could also take care of other services, like managing mail or coffee. But local synergies often differ between offices or sites. The conditions and different duties for a receptionist vary from site to site.

The significant local synergies offered by all FM operations explain why IFM solutions are becoming more common throughout the West. And the larger and more complex the site, the greater the opportunities for local synergies. The big disadvantage with organising and managing an FM operation by single services/service segments is that it eats away at economies of scale by reducing the scope to exploit local synergies.

For example, if we consider a purchaser that chooses to purchase reception services globally – the same service to be delivered at offices in Stockholm, New York, Sao Paulo and Beijing. But will any of these receptions become cheaper to run? It is likely that the client already has the lowest possible reception staffing. So global purchasing resulting in any fewer staff is far from certain. If anything, there is a risk of more staffing, making the operation more costly.

In upcoming issues of Nova: rolling out an international FM strategy

Considering national legislation and practice, not least in the labour law segment, as well as cultural differences, are crucial to FM services. They have major implications when rolling out an international FM strategy. What are the implementation choices – what do you need to bear in mind? These are the questions many large companies right across the Nordic region are dealing with right now, and we’ll go further into the subject in upcoming issues of Nova.

But if you want to discuss these matters with someone at Coor now?

Please contact Jens Ebbe Rasmussen.

* Information from market research conducted by Demoskop/Coor in September 2009.