With summer right around the corner, retailers are ramping up to refresh or remodel many of their stores, keeping their service providers the busiest they’ve been in the last few years.
With summer right around the corner, retailers are ramping up to refresh or remodel many of their stores, keeping their service providers the busiest they’ve been in the last few years. Retailers have an increased number of open positions to fill in both facilities and construction, and service providers are gearing up to fill business development and project management roles — all good signs for our industry.
Recently in discussion with a veteran retail colleague, we chatted about the outsourced model that some retailers have adopted in the last few years when the industry was not doing well, and companies scrambled to extremes to reduce spending.
For those of you not familiar — basically, the outsourced model is when all facilities and maintenance services are awarded to a select few service providers; this is also referred to as a “fixed fee model” or a “buy the budget model.” Ideally, these models gain the economy of scale for all service calls and eventually eliminate or downsize headcount in the facilities department, all of which reduce cost. I’ve seen this model attempted in construction as well.
Now, the outsourced model is not an evil thing — it’s simply misunderstood or misrepresented. It can and has worked with some retailers, but only if it is architected by knowledgeable industry professionals. Knowledgeable industry professionals are generally not outside consultants who solely have procurement experience in buying pencils and copy paper or a finance background. Knowledgeable industry professionals are seasoned folks that have run facilities departments for national or regional multi-unit chains. They are deeply involved and understand the intricacies of not only the facilities needs of the chain, but equally as important, the culture of the company. If you woke up a seasoned facility professional from a dead 3:00 a.m. sleep and asked him/her about the current issues at their New York City downtown flagship location, they would ramble off in certainty all the current open repairs and capital projects slated for that location, as well as review the scope of work and qualify those incoming proposals sitting on their desk — down to all related costs and timeline of projected completion date based on the lead time expectancy of the necessary equipment and material. It’s in their blood; that’s what they do.
Also, common sense must come into play with developing such a business model. Building a model broken out by trade is a savvy approach, understanding and playing to the innate strengths of the contracted service providers. It’s not impossible, but it’s rare to have one service provider who can offer excellent services across the board for every single trade. Take me, for example: I have over 25 years in the retail industry — of which 75% of my time and experience is in design, construction and facilities. Hypothetically, if one day I wanted to hang a sign outside my office to offer additional services for merchandising, I guess I could do that — but really, how effective would I be?
And by the way, I’ve heard of retail chains that have had outside consultants with limited or no facilities knowledge attempt to develop a sustainable outsourced business model — only to have the retail operational folks, the customers and ultimately the brand pay the price for the misdiagnosed needs of the facilities. (And this was after they had laid off the department team members with the expertise.) By the time this model cycles through, generally in 18 months to 2 years, the damage has already been done — literally — to the equipment and facilities, leaving these leaders to wonder why their capital costs sky rocketed. It’s not the consultants’ fault or even these service providers that offer the outsourced model; it’s these “leaders” that attempt to implement a business model of which they know nothing about — without the proper in-house expertise. I know, I know what you’re thinking: involving their in-house experts may raise red flags in foreseeing a possible elimination of their job roles. Well, give them that common courtesy to work this model out. I’ve heard of success stories where the facilities folks have built hybrid models and have achieved both cost savings and continued excellence in service. Doing it behind their backs is poor leadership practice and ultimately has its own costs.
There are two schools of thought on how these types of outsourced models are implemented. It’s been discussed if the operational folks ran the chain, generally they prefer to have facilities in-house because they are fully aware of the white glove service provided and appreciate the intimate familiarity in-house facilities partners have with the store environment and company culture. On the other hand, it’s speculated when a chain is run by finance folks, there appears to be the constant argument and focus to just reduce cost and therefore they are the ones most likely to support implementing an outsourced program. So, the million-dollar question is….who’s running your chain? And the answer is: partner up with operations and educate your finance folks. Take your own leadership stance in voicing and ensuring the right facilities model is operating for your business.
— Grace Daly is an industry leader in retail design, construction and facilities, as well as an avid career coach. She is currently the Executive Director of Construction & Facility Conferences for InterFace Conference Group.