Archive for category Recession
I’ve written before about the “credit-crunch come recession” (have a read of Recession and the P-Word if you haven’t already done so). Whilst I know I’m not alone in doing so, I do sometimes wonder if I am alone in publicly acknowledging the effect that this economic downturn is having (or is likely to have) on our industry. The reason I say that as that (at least until this week) pretty much all I’ve seen in the media is a series of press releases from service providers talking up the market. Advising us that, actually, a global recession is uniquely good for the FM industry.
Strangely, this week seems to be one for telling it like it is. Firstly, i-FM reports that the cleaning sector is feeling the pinch; recent growth figures have hit 14% per annum but this is expected to slow to 2% for the current year and just 7% over the next 5 years. This tells us nothing of the effect on margin, of course, but we all know that higher turnover doesn’t necessarily mean that profits aren’t eroded.
Then there’s FM World, which also seems to be reflecting the true state of the market now. On the subject of projects and capital spend, we find that “Interior Services Group has reported that many of its corporate clients have delayed or cancelled projects due to start in quarter four of 2008 or next year.” No surprise there, and I doubt that it isn’t a picture reflected in many, if not all, of that sector’s order books. More worryingly perhaps, a report earlier in the week shed some light on what’s really happening so far as a response to the present economic climate is concerned: “Businesses across the service sector have reduced investment and spend in their buildings and predict that this will decline even further over the coming months resulting in a spate of job losses across the FM sector. That was the gloomy message from the CBI’s quarterly Service Sector Survey…”
“In the three months to November, firms reported steep falls in business volumes and profitability, as well as plans to scale back employment and investment. Firms selling services to businesses saw the volume and value of their business, profitability and numbers employed fall at record rates – the steepest declines since the survey began in 1998. Companies are also cutting investment plans sharply as worries about future demand intensified.”
Now there’s nothing wrong with being seen to adopt a positive stance in the face of adversity, but that’s not the same as making bullish noises for bullish noises’ sake. The FM sector, like all other sectors, is being hit hard and the position is unlikely to change as we head into a New Year that might well see a number of established players do well to last the course.
To my mind, I do believe that opportunity exists out there, but I would add a large dose of realism to what I’ve seen written by others. For client organisations, it’s time to go back to basics with a review of FM strategy, a reconsideration of business need both in terms of services and service levels, and – out of that – an appraisal of supply options. From my own experience, this process usually becomes part of a “contract life-cycle” but there’s no reason why special circumstances shouldn’t result in a different approach and a different timetable. For service providers, it’s absolutely imperative not only to be proactive, but also to be innovative. Doing nothing will simply result in margins being eroded or – worse still – contracts being lost as clients align themselves with those organisations demonstrating a commitment to delivering better value. That’s “better value”, not “lower cost”, and the two things are not necessarily the same (although I accept, of course, that they often go hand in hand).
One thing I don’t see for 2009, however, is a year of business as usual. Those who pretend that it will be are likely to be the first casualties of the media hype I referred to earlier.
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?
When 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?