P&G's move to a global shared services organization in 1999 had already achieved the impressive result of reaching a $500 million savings target two years ahead of schedule. Seeking to push down spending even further, the Cincinnati-based company decided to move to a new level of efficiency by turning over the management of its far-flung facilities to a professional entity offering specialized knowledge and economies of scale.

"We came to the conclusion that the only way we were going to be able to reduce cost was to figure out how to leverage scale beyond the walls of P&G," says William Reeves, P&G's director of Global Workplace Services. "That drove us to look at a commercial model, which fundamentally led us to study outsourcing."

Unlike some outsourcing initiatives, which may be prompted by financial crisis or internal disarray, P&G's undertaking occurred against a backdrop of corporate strength and stability. The mandate behind the effort was that the outcome had to be right for three prime constituencies: the business itself, employees, and shareholders.

"Our system wasn't broken," notes Reeves. "The company is strong and doing well. We didn't view outsourcing as the main way of achieving our financial objectives. But we did want to leverage scale and take advantage of the savings opportunity, thus enabling P&G to focus on its core work."

The solution was to transfer P&G's existing FM organization, which serves 40,000 people occupying 14 million sf spread among 82 sites in 60-plus countries, to Jones Lang LaSalle.

Measuring Success

One of the first challenges was to establish clear-cut and comprehensive criteria to evaluate the performance of the outside supplier.

Starting with the formula, "success is the ability to measure the effectiveness of FM services," a joint P&G-Jones Lang LaSalle team spent almost six months devising critical and key performance indicators and filling in individual elements of the equation.

The highest priority is accorded to critical performance indicators (CPIs), which fall into two categories: reliability, defined as "uninterrupted operations at key sites," and risk management, which encompasses activities in the regulatory and public arenas. The CPIs are also closely linked to budget and cost reduction incentives for Jones Lang LaSalle.

"Because so much importance was placed on these indicators," says Jones Lang LaSalle global account executive Bill Thummel, "we devoted a tremendous amount of time and painstaking effort crafting definitions for terms like uptime, downtime, failure, and maintenance window."

The secondary set of measures is a list of 10 key performance indicators (KPIs) representing the broader-than-usual scope of Jones Lang LaSalle-provided services, which include project management along with facilities management. The specific KPIs are reliability, occupancy, move process, project cost, diversity spend, energy, cleaning, convenience services, budget, and safety.

"For each one of these KPIs, we baselined against available existing data and set targets, with the intention that the measures will change over time," says Thummel. The goal of enhanced financial performance is referred to as a "glide path," denoting P&G's aim of gradual, steady budget reduction as opposed to the radical upheaval that can follow dramatic cost-cutting moves.

Partnering and Cultural Alignment

Another measurement technique similarly reflects the overall tenor of P&G's outsourcing approach with an emphasis on joint success. In addition to a variety of occupant satisfaction surveys, the two firms conduct routine assessments of their relationship—an indication that certain less tangible aspects of the initiative such as cultural alignment and a true partnering spirit are also highly valued.

The outsourcing pact specifies a two-pronged mechanism for evaluating this "soft" side of the association. In quarterly face-to-face meetings, Thummel, Reeves, and P&G's lead procurement manager discuss program status and anticipate potential issues. Then the collective leadership teams also convene once per quarter to talk about strategies and the affiliation in general.

"We spend as much time talking about the relationship as we do the performance against indicators," says Thummel. "I think that's been a big plus."

"One of the keys to being successful, beyond having a very good contract, is having good relationships," observes Reeves. "Sometimes people get so focused on the numbers that they forget this point. But if there is a good relationship between the two leads, there is probably a good relationship between the companies."

The Tool

To provide a tracking mechanism for the multiple activities covered by the agreement, Jones Lang LaSalle programmers enhanced an existing digital tool to create a seamless, global, online platform that delivers the real-time status of all metrics. The tool takes the form of a Delphi portal with basic site information, a database of contact information for all employees dedicated to the account, links to Jones Lang LaSalle organizations that have specific responsibilities for providing resources, and special sections for sensitive information that can be accessed only by senior managers. The tool also has the capability to notify senior managers immediately when critical situations arise, such as a broken pipe that could cause a plant shut-down.

Offering up-to-the minute details of every project that Jones Lang LaSalle is managing for P&G, the portal is a repository for records of all incidents and events relating to the account, from location to resolution. The tool filters these data to determine whether the resolution could become a global best practice and whether the event occurred as the result of failure to adhere to best practices or to policies and procedures.

Thummel points out that while every real estate provider and many large companies have some sort of online method for monitoring performance against metrics, those tools are generally static, and, unlike Jones Lang LaSalle's innovation, are not updated in real time.

"Clients like to know what's going on," he continues. "Our tool allows both William and myself to look at a tracking sheet every day to see what's happening in our regions. It's working very well."

Parallel Organizations

In addition to lowering costs without impacting quality, P&G expected its service provider to offer world-class capabilities with single-source accountability, an extension of the strategy already in place under the shared-services umbrella, where Reeves had single budgetary responsibility for all general offices and technical centers around the globe.

"This was a part of our culture that we wanted to maintain," Reeves says. "As we talked to other potential suppliers, we found they covered many sites, but often there were many different people who had responsibility for them, so it did not roll up to a single individual."

Jones Lang LaSalle's response was to appoint Bill Thummel as the lead account manager while revamping its team organization to correspond to P&G's structure.

"We could have divided the P&G portfolio we manage into separate profit centers that would align with our own regions, but that didn't work for P&G," comments Thummel. "Instead, we created a new structure so that the P&G account is its own profit center within our firm."

Career Opportunities via Economies of Scale

The new team configurations work to the benefit of both parties by enabling the supplier to assign personnel in the most efficient manner. For example, the agreement allows Jones Lang LaSalle to apportion part of an employee's time to another client as long as services to P&G show no signs of deteriorating. Achieving these economies of scale has made a big difference for Jones Lang LaSalle.

"Now our internal regional groups can explore new opportunities that they couldn't have before," says Thummel. "This makes it a win-win for both of us. P&G has the assurance that its account is effectively sized to deliver at the expected level, while I have a way to redeploy any excess capacity. Plus, my staff isn't too lean just to keep costs down."

That arrangement also meets an important early objective of the initiative: creating an extended career path for P&G's former facilities employees. Not only do they now have the chance to associate with like professionals, they can develop additional skill sets by dealing with other clients and advance further up the corporate ladder in a company that specializes in their core discipline.

"Procter & Gamble is a consumer goods company," explains Reeves. "We had people in facilities management who love that work and wanted to grow their career, but there was only a certain level they could reach in our environment. Moving to a facilities expert with broader accounts expands their opportunities."

Strategic Alliances are the Future

With its shared responsibilities and innovations, the outsourcing agreement appears to signal a significant shift in P&G's business structure. In fact, at the same time it forged the Jones Lang LaSalle compact, the Cincinnati company portioned off the three other areas of its original shared services organization—IT, Accounts Payables, and human resources (to HP and IBM, respectively).

These efforts also profited from economies of scale, sharing processes, terms and definitions, common legal teams, and a deal team.

"We are comfortable that we don't have to have people working for P&G to get the service levels we need," says Reeves. "We think this is the direction of the future."

by Nicole Zaro Stahl

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ISSN: 1096-4894