Vested Partnership – A Boon or a Bane to Facility Management?apfm.pt/wp-content/uploads/2018/10/master_thesis... · Review . Empirical Review . Review. past studies . Identify gaps

Vested Partnership – A Boon or a Bane to Facility Management?

International FM Day 2018ZHAW Wädenswil | 09 March 2018

Presentation by: Monica AnandSupervisor: Prof. Dr. Christian Coenen

IFM Day | 09 March 2018 by Monica Anand Vested Partnership – A Boon or a Bane to FM?

Agenda• Introduction• Key Question• Key Objectives• Approach to Research• Findings• Lessons Learnt• Key Message• Strategic Focus

2IFM Day | 09 March 2018 by Monica Anand Vested Partnership – A Boon or a Bane to FM?

Introduction

Source: Colourbox.de3

Introduction

4

Outsourcing in FMOutsourcing is being viewed as a strategic

intent within organisations

Outsourcing Relationships in FMRelationships between buyers and suppliers are obscure

Vested Outsourcing in FMA new partnership-based approach to outsourcing

Research background Research aim

Research problem

Research questions

Research objectives


Key Question

5

What are the key factors that might help or hinder Vested approach of outsourcing to

succeed in FM industry?


Key Objectives

1. Current status of relationships in FM

2. Understand the relationship issues

3. Concept of Vested approach to outsourcing

4. Benefits and drawbacks of Vested

5. Future outlook of outsourcing relationships

6. Apply Vested in Swiss FM context

6

What are the key factors that might help or hinder Vested approach of outsourcing to succeed in FM

industry?


Approach to Research


Approach to Research

Theoretical Review

Empirical Review

Reviewpast studies

Identify gaps

Study the state-of-the-

art


Secondary data

Design thinkingapproach

Qualitative open-endedquestions

Vested experts

Findings


Findings

75%

25%

Most Important

2nd Mostimportant

Challenges are being faced by both buyers and suppliers Trust regarded as most crucial in outsourcing relationships

40%

20%15%

25%

0%5%

10%15%20%25%30%35%40%45%

10

Figure 1: Value of relationship in outsourcing

1. Current status of relationships in FM


Figure 2: Relationship values crucial to outsourcing

Findings

Outsourcing relationships today are very prescriptive, cost-driven and lacks insight

12%

0% 0%

24%

52%

12%

0%

10%

20%

30%

40%

50%

60%

Minimal Moderate Average Quite High HiglyRelevant

Other

11

SPOC unclear goals reputationcommunication

Excess control trust cost pressure micromanagement

Aligned interests Gaps to be filled

2. Understand the relationship issues


Figure 4: Scale of agreement on partnership in organisations

Figure 3: Relationship issues in outsourcing

Findings

50%

15% 15%20%

0%

10%

20%

30%

40%

50%

60%

Long-termPartnership

Cost Savings andProductivity Gains

Improve ServiceLevels

Drive Innovation

12

Figure 6: Motivations of interview experts to go Vested



Figure 5: Motivations to pursue Vested

Vested creates a healthy and long-lasting partnership opens up channels for clearer communication

Findings

13

Figure 7: The five rules of Vested (Source: Vitasek, Ledyard & Manrodt, 2013, p.55 )

Focus on outcomes not transactions

Focus on the what, not the how

Clearly defined and

measurable desire outcomes

Pricing model with incentives to optimise costs

A formal governance structure with insight, rather than oversight

win-win business

relationship

• Develop a business model map• Develop a shared vision statement

and statement of intent

• Develop a statement of objectives together

• Develop top-level desired outcomes together and mutually agree upon

• Performance management –measure success against high level metrics tied to strategy

• Right pricing and incentive mix; incorporate incentives for both buyers and suppliers

• A sound governance structure with collaboration, insight and flexibility

• Relationship management - create joint policies that promote right behaviours

• Transformation management –leave room to incorporate changes

• Exit management • Special concerns and external

requirements

Table 1: Ten elements of a Vested agreement (Source: The Vested Outsourcing Manual, 2011)



Vested outsourcing is structured around 5 key rules can be transferred into 10 core elements in an outsourcing agreement

Findings

40%

30%

10%

20%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Solves Mistrust Creates RealPartnership

Shifting from Cost-focus to Value

Does not solve anyproblem

100%

88%

82%

84%

86%

88%

90%

92%

94%

96%

98%

100%

102%

Benefits Risks

14

4. Benefits and drawbacks of Vested


Figure 8: Response rate of benefits and risks of Vested Figure 9: Relationship issues addressed by Vested

The biggest issue addressed with Vested is TrustRisks were attributed to lack of control, cost concerns and overdependencyThe biggest challenge involved is change of mind set and letting go of control

Findings

13%

37%

50%

Transactional Contracts

Vested Contracts

Partnership-basedRelational Contracts

12%

24%

52%

12%0%

0%

10%

20%

30%

40%

50%

60%

Agree Strongly Agree Neutral Disagree Strongly DisagreeLevel of Agreement on Outsourcing Transformation

Future outsourcing contracts will be partnership-based Vested is not a silver bullet to fix every relationship loophole but will be more sought after in performance-based and outcome-based contracts where value is desiredThe biggest need is the partnership

15

Figure 10: Outsourcing contract preferences in FM

5. Future outlook of outsourcing relationships


Figure 11: Level of agreement on outsourcing transformation

Findings

More than 50 % of the survey participants regard modern approaches such as Vested to be accepted in Switzerland, but would take at least 5 years

12%

24%

52%

12%

0%

10%

20%

30%

40%

50%

60%

2 Years 2-5 Years 5 years More than 5 years

2 Years 2-5 Years 5 years More than 5 years

16

Figure 12: Outsourcing contract preferences in FM

6. Apply Vested in Swiss FM context


Answer to KeyQuestion

17

What are the key factors that might help or hinder Vested approach of

outsourcing to succeed in FM industry?

1. Preparation

•Determine FM outsourcing strategy•Transactional, performance or outcome-based•Ensure it aligns to the corporate startegy•Use of Value bridge exercise

2. Choice of the Outsourcing Strategy

•Use of Sourcing Model Matrix•Determine the right economic and relationship model

3. Build the Vested Relationship

•Build trust as a foundation to the relationship •Co-creating a shared vision, strategic objectives•Set the guiding principles•Include the relational tenets into the outsourcing contract

4. Sound Governance Structure

•Jointly agree on the best governance structure•To ensure the interests of both parties are aligned•Focused on a joined vision and strategic objectives•Set mutually agreed performance measurement mechanisms

5. Change Management •Invest into change management to help unlearn•Ensure all the stakeholders are bought into Vested mindset


Lessons Learnt


Lessons Learnt

Outsourcing Focus in FM

• Outsourcing landscape for FM is changing

• Value is desired above cost • Outsourcing is shifting focus on

bringing strategic value to business

• In the future, more partnership-based agreements will be needed requiring close collaboration

• In Switzerland, modern outsourcing approaches will take time to be applied

Outsourcing Relationships in FM

• Value of relationship in outsourcing varies depending on contracts; services and sectors

• Outsourcing contracts and relationships are strongly connected

• Trust-worthy relationship is very important in FM

• Vested partnership approach enables trust and results in strategic value

Applying Vested Partnership in FM

• Vested addresses current relationship issues

• Increases trust and collaboration enabling long-term partnership

• Vested is different as it is based on relational contracts and not transactions

• Vested creates mutual value for both

• Outcomes are transformative


20

Key Message

Take Home Message

Facility Management Outsourcing Model

Relational(Future Outsourcing Contracts)

Preferred provider Performance -based model Vested business model

Transactional (Current outsourcing contracts)

Basic provider and approved provider

model

Providing services at competitive cost transformation or innovation standardised services

FM Outsourcing Spectrum

21

Figure 13: Sourcing spectrum of FM (based on Vitasek et. al. 2015, p. 22)


Viewing FM outsourcing as a continuum – choosing the appropriate strategy to enable the right relationship

Make Buy

1

Strategic Focus

Strategic Focus


Engagement and Stakeholder buy-in

Vested is about the right mindset

Finding the right fit –corporate compatibility

Change management

24

Monica Anand Masters in Facility Management

[email protected]+41 77 520 97 39


mailto:[email protected]

Kurdia, M. K., Abdul-Tharim, A. H., Jaffar, N., Azli, M. S., Shuib, M. N., & Ab-Wahid, A. M. (2011). Outsourcing in Facilities Management- A Literature Review. Procedia Engineering, 20, 445–457. https://doi.org/10.1016/j.proeng.2011.11.187Kakabadse, A., & Kakabadse, N. (2005). Outsourcing: Current and Future Trends. Thunderbird International Business Review, 47(2), 183–204. https://doi.org/10.1002/tie.20048Lehtonen, T. (2006). Collaborative relationships in facility services. Leadership & Organization Development Journal, 27(6), 449–464. https://doi.org/10.1108/01437730610687746Linder, J. C. (2004). Outsourcing as a Strategy for Driving Transformation. Strategy & Leadership, 32(6), 26–31. https://doi.org/10.1108/10878570410568884Lok, K. L., & Baldry, D. (2016). Demand and supply of FM outsourcing services. Journal of Facilities Management, 14(3), 221–248. https://doi.org/10.1108/JFM-07-2015-0024RICS. (2012). Raising the Bar: Enhancing the Strategic Role of Facilities Management. Retrieved from http://www.rics.org/ch/knowledge/research/research-reports/raising-the-bar-enhancing-the-strategic-role-of-facilities-management/KPMG. (2017). The REFM outsourcing landscape : Insight from the front lines. Retrieved from http://www.kpmg-institutes.com/institutes/shared-services-outsourcing-institute/articles/2017/05/refm-2017-pulse-report.htmlEY. (2013). Outsourcing in Europe - An in-depth review of drivers, risks and trends in the European outsourcing market. Retrieved from http://www.ey.com/Publication/vwLUAssets/Outsourcing_in_Europe_2013/$FILE/EY-outsourcing-survey.pdfEY. (2016). Does your workplace outsourcing create value beyond savings ? Retrieved from http://www.ey.com/Publication/vwLUAssets/EY_-_A_point_of_view_on_the_future_of_real_estate_and_facilities_management/$FILE/EY-workplace-outsourcing-value-beyond-savings-report-2016.pdfFrydlinger, D., Cummins, T., Vitasek, K., & Bergman, J. (n.d.). Unpacking Relational Contracts- The Practioner’s Go-To Guide for Understanding Relational Contracts. Knoxville.Frydlinger, D., Nyden, J., & Vitasek, K. (2005). Unpacking Collaboration Theory. LINDHAL. Thalsam College of Business, The University of Tennessee, Knoxville.Vitasek, K., & Fenn, I. (2017). Vested outsourcing in corporate real estate and facilities management. Corporate Real Estate Journal, 6(4), 323–335.Vitasek, K., & Keith, B. (2010). VESTED For Success Case Study - Novartis and JLL: From Performance-based to a Vested Agreement. Knoxville.Vitasek, K., Keith, B., Manrodt, K., & Kling, J. (2015). Unpacking Sourcing Business Models. Thalsam College of Business, The University of Tennessee, Knoxville. Retrieved from http://www.vestedway.com/Unpacking_Sourcing_Business_Models_2015.pdfGroot, R. de. (2017). Intel-DHL EMEA Case Study. Thalsam College of Business, The University of Tennessee, Knoxville.Vitasek, K., Ledyard, M., & Cummins, T. (2010). A Better Way to Structure Outsourcing Contracts.Vitasek, K., Ledyard, M., & Manrodt, K. (2013). Five Rules That Will Transform Outsourcing (Second). New York: Palgrave Macmillan.Vitasek, K., & Manrodt, K. (2012). Vested outsourcing: a flexible framework for collaborative outsourcing. Strategic Outsourcing: An International Journal (Vol. 5). https://doi.org/10.1108/17538291211221924Vitasek, K., & Manrodt, K. (2014). The Vested Way. http://www.vestedway.com/books/

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Bibliography


https://doi.org/10.1016/j.proeng.2011.11.187

https://doi.org/10.1002/tie.20048

https://doi.org/10.1108/01437730610687746

https://doi.org/10.1108/JFM-07-2015-0024

http://www.kpmg-institutes.com/institutes/shared-services-outsourcing-institute/articles/2017/05/refm-2017-pulse-report.html

http://www.ey.com/Publication/vwLUAssets/EY_-_A_point_of_view_on_the_future_of_real_estate_and_facilities_management/$FILE/EY-workplace-outsourcing-value-beyond-savings-report-2016.pdf

Image Sourceshttps://www.colourbox.com/image/winner-s-circle-race-car-posed-at-the-checkered-finish-line-image-18894365https://www.colourbox.com/image/bookshelf-image-13820123https://www.colourbox.com/image/jigsaw-image-18376102https://www.colourbox.com/image/typing-on-keyboard-laptop-at-work-table-image-24298024https://www.colourbox.com/image/data-image-25943882https://www.colourbox.com/image/the-audience-watching-the-concert-on-stage-image-30328043https://www.colourbox.com/image/pen-and-glasses-on-books-image-14768011https://thenounproject.com/https://www.colourbox.com/image/closeup-of-business-office-life-work-is-a-recommendation-concept-with-vintage-tone-and-soft-focus-image-23835422


Appendix I

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Vested Five Principles and Ten Contractual Elements (Vitasek et. al. 2010) IFM Day | 09 March 2018 by Monica Anand Vested Partnership – A Boon or a Bane to FM?

Appendix II

28

Traditional and Relational Contracts (Frydlinger et al. n.d, p. 5)


Appendix III

29

Nine Relational Tenets in relational contracting process(Frydlinger et al. n.d, p. 21)Guiding Principles in Relational Contract (Frydlinger et al. n.d, p. 27)


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Vested Partnership – A Boon or a Bane to Facility Management?apfm.pt/wp-content/uploads/2018/10/master_thesis... · Review . Empirical Review . Review. past studies . Identify gaps