Recession and the P-Word

The comments on my “Welcome” post made consideration of what we now seem to be terming a recession as somewhat inevitable. One or two articles of late have addressed the question of whether or not FM is “recession-proof”, so I thought I’d offer a very summarised view of my own starting with what I see happening around me on a daily basis which – to my mind – answers the question unambiguously.

Firstly, clients tell me that they’re being asked to accept budget reductions, projects put on hold, pared-down maintenance regimes and continuous scrutinisation of headcount. When tender activity is considered, it’s more with a view to reducing expenditure than it is to aligning service delivery with business need, and this is reflected by internal targets that relate largely to savings and little to service enhancement or customer satisfaction. And the softer services – those that aren’t “critical” to the core business – are feeling the pinch most of all… never mind the effect on staff morale & retention, eh?

Secondly, suppliers tell me that they’re seeing their margins squeezed on existing business, and that client tender strategy is focussing purely on bottom line savings, regardless of service and quality issues that arise as a consequence (e-bidding/e-auctions are probably cases in point, and worthy of a post in their own right!). “Best value” at the bid stage is seemingly no more than a sound-byte as clients opt for the cheapest solution; consequently, innovation is the first casualty as the safe option is to stick with the tried and tested formula.

So… does this scenario suggest an industry that’s recession-proof?

Quoting from one of the comments I referred to earlier, how about this as a stake in the ground… “The resilience of the FM industry in times of recession is surely linked to the resilience of the clients that the FM industry serves”? That’s undoubtedly got to be relevant, but is it enough to simply acknowledge the issue without trying to be proactive and (dare I suggest) creative in overcoming it?

partnership-thumbWhen purse strings are tightened it’s all the more important for the relationship between client and supplier to work effectively; that way, collaboration follows as a matter of course and both parties start to progress towards the achievement of common goals & objectives. Sensible sharing of risk, incentivisation as well as penalisation, and openness & honestly are all part of the equation.

Hang on, though… isn’t that what partnership is about?

  1. #1 by Elliott Chase on July 21, 2008 - 3:03 pm

    This is fun – good for you, Tony, for getting it started.

    Of course no industry is truly recession-proof (except maybe economics consultancy); and I don’t suppose it really matters whether we have yet met the proper definition of recession – it’s an easy catch-all term for the time being, and makes a handy way to refer to what is called in more polite society the current ‘downturn’.

    Here is something interesting that I stumbled across the other day, with regard to your point about the industry reacting to the situation. For some in FM – no doubt hoping it is recession-proof – there are new opportunities potentially on offer. For example, MITIE has posted on its website (but not otherwise distributed so far as I am aware) a press release entitled ‘Downturns can be healthy’ []. Apart from some tortured English (eg, muddling ‘less’ with ‘fewer’ – sorry, it’s my job to spot these thing), this makes quite a reasonable argument for why outsourcing is a good thing and companies should do more of it – especially now. Of course such a thing would be good for MITIE. But if we believe in (outsourced) FM, perhaps we all have to support that argument and make it at every opportunity….but carefully, so as not to seem desperate or opportunistic.

    A bit of fun is always welcome, Elliott, and thanks for the comment.

    I entirely agree with you that outsourcing is always an option if cost is the primary driver, and I’m a passionate believer in outsourcing anyway (or, rather, “right-sourcing”); perhaps we should try to keep it solution-neutral by saying that the answer lies, potentially, in revisiting the sourcing strategy itself… supply option appraisal can have a multitude of outcomes, after all.

    Anyway, I’m glad you mentioned economics consultancy specifically. I’d hate anyone to get the wrong idea about FM consultants 🙂

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