Making a Case for Transition Management
50% of all outsourcing relationships fail within five years
Source: Dun & Bradstreet
In the zeal to outsource, many Corporate Real Estate (CRE) organisations can forget that the most pressing
issues in outsourcing are people-related, not money-related. Yet, the need to achieve immediate cost-savings
from outsourcing can distract! The consequence is the disregard of one of the most important phases of the
outsourcing process – the transition.
So, how important really is the issue of transition, and how frequently does the need to transition become an
issue?
Simply, the trend to outsource continues to gather pace as pressure increases on corporate real estate teams to
create value for the organisation without increasing overheads. As witness to this, a total of 93% of the CRE
respondents to a recent CBRE/Corenet survey outsourced at least some of the activities that they were
responsible for. The trend towards outsourcing looks very much set to continue, with 37% of companies seeking
to increase the amount of outsourcing and only 4% looking to decrease the amount of outsourcing (see below).
What effect has the current economic climate had on your company’s
decision to outsource its corporate real estate services?
Do Not
Outsource
4%
No Change
55%
Outsourcing
Increased
37%
Outsourcing
Decreased
4%
Source: CBRE/ CoreNet Survey 2003
What is Transition ?
In the context of CRE outsourcing, transition is defined as the time period that follows the decision to outsource
but occurs before to day-to-day service delivery begins (as below).
Engagement
RFP to Contract
Award
Transition
Needs Analysis to
Account
Stabilisation
Service Delivery
Account Mgmt
D a y -t o D a y
Operations
Transition is an explicit process, highly detailed, and requiring full implementation so that the pitfalls besetting
others who’ve outsourced can be avoided. The purpose of transition is to seamlessly integrate the resources of a
service provider alongside, and often in place of, the CRE team’s resources. The transition exists to help stabilise
the outsource and create new and improved ways of working together.
If a CRE team is considering outsourcing some or all of its functions to a third-party service provider, a number
of key questions need to be asked:
A. Before the Transition
For the CRE team, the critical questions include:
§ How much do your people understand about the drivers behind the decision to outsource?
§ Does the team clearly see a rationale behind the decision and have they had an opportunity to provide
input or feedback?
§ Does the team understand that this is a strategic initiative fully supported by senior management?
§ Will the installation of the new service provider team result in downsizing of the team?
§ Does the company intend on transferring some of its employees to the service provider?
§ Does the company intend on re-interviewing candidates for their current positions?
§ If there are to be job losses, what steps are being taken?
§ Has a schedule of regular, formal briefing meetings been established for your employees to discuss their
concerns and expectations?
§ Once the transition begins, what will the new way of working together look like and how will it differ
from the company’s current operating procedures?
If handled correctly, by the time the transition begins, an environment of collaboration will exist in the
organisation.
It is important that everyone understands that outsourcing is a team effort that requires both a positive attitude
and an open environment where communication and teamwork levels are high. This will reduce the uncertainty
and stress, which, in turn, will increase the organisation’s flexibility and acceptance to change .
B. Once the Decision to Outsource is Made
Most importantly, don’t underestimate the psychological impact of the decision. Change involves pain, yet
change is inevitable. If ever there is a time to advocate over-communicating, it is during the transition process.
Below are the key issues to address at this stage:
1. Assign a Change Leader
Immediately upon choosing a service provider, the CRE team should agree a single point of contact within the
team
with
the
accountability
and
latitude
to
make
decisions
and
set
direction.
Assigning a senior-level individual to this role ensures delivery “as promised” by setting clear expectations and
allowing open communication which creates an environment for partnership.
This change leader will work closely with the service provider’s Transaction Manager and Account Team to
develop the transition plan, validate the scope of services, negotiate the contract and communicate to the
organisation about changes along the way.
2. Continue to keep everyone involved
Involving the entire CRE team is key at every point along the way. Keeping employees engaged allows time to
establish relationships through sharing of ideas, culture, needs, goals, processes and technologies. Employees
who are not actively engaged in the process can undermine and sabotage the outsourcing. Failure to involve
employees tends to create cynicism, cause rumours and ultimately derail even the most promising outsourcing
initiative.
3. Communicate, communicate communicate!
The change leader and the staff must be open and up front with the service provider on the company’s strengths,
weaknesses, and needs. It allows the service provider to configure an appropriate service delivery platform that
both parties fully understand and buy into.
4. Have a transition plan
A typical transition plan would include the following:
Ø
Ø
Ø
Ø
Ø
Ø
Ø
Ø
Ø
Ø
Ø
Ø
Ø
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The Service Agreement
Resource Plan
Communication Protocol
Reporting Requirements
Project Planning
Corporate Governance
Tools – Strategic Plans, Business Case Templates etc
Technology
CRE Team’s Objectives
Training
Quality Assurance
Strategic Planning
Process Improvement
Performance Measurement
5. Follow the transition plan
How often do service providers and clients work together to create a detailed transition plan only to leave it on
the shelf once the transition begins? A transition plan is a living document that gets everyone focused on the
goal, committed to the time deadline and in agreement to the process.
6. Build the relationship
Outsourcing CRE is not like typical vendor outsourcing. Taking time to get to know the service provider team is
vitally important. Similar to the CRE team, the service provider needs the same feeling of empowerment,
belonging and purpose. As the relationship grows, there is a point beyond which the level of responsiveness and
commitment from the provider to the corporate’s goals will be indistinguishable. Successful partners have found
and maintained a relationship around this point.
7. Support Due Diligence Activities
The most successful transitions are those where the service provider has been given ample opportunity to fully
examine the corporate facilities portfolio, analyse all processes in place, staffing levels, 3rd party contracts etc. in
detail.
This is a critical step in accurately defining service scope, resources required, and establishing achievable
budget/ cost save targets. Planning and executing a transition from the RFP documentation alone can set the
stage for costly surprises and disappointments that could have been avoided with a more rigorous due diligence
effort up front.
8. Establish an objective basis for Performance Measurement
Because real estate is a personal business, it is tempting to gauge performance on whether or not you like the
team, feel they did an adequate job and want to continue to work with them. Unfortunately, these characteristics
are difficult to track objectively and many a service provider has been surprised at year-end by a harshly critical
review. In setting the standards for performance management early, both parties have a list of objective goals
on which to base their measure of performance.
9. Invest for the Future
A thorough transition can usually take place anywhere from 30-120 days depending on the scope of service.
Whatever the magnitude and timescales involved, be sure to bu dget appropriately for costs associated with
transitions that can include staff salaries, employee retention, training, HR start up costs, computer equipment,
software, general operating costs and travel related expenses. A successful transition establishes the critical
foundation of people and processes that need to be in place to succeed in achieving the outsource objectives.
Thousands saved during transitions can result in millions lost not too far down the road.
Summary
By embracing the transition phase of outsourcing, the CRE team will increase the chance for success and
demonstrate their commitment to the quality and effectiveness of service delivery. The important thing to
remember is that transition is an ongoing process. The “official” transition period we’ve discussed may indeed
have an end date, but transition continues long after the work is migrated to the Service Provider. As the two
cultures begin to merge together, new process changes continue to be made and implemented, all of which will
add up to a successful transition.
The old adage, pay now or pay later applies to outsourcing. You are likely to see financial improvement from
outsourcing no matter how good or bad the provider. However, if you understand and apply the elements of
account transition and can formalise, finance and follow through on a transition plan, you’ll never have to look
back at outsourcing with regret.
As a suggestion, next time you consider outsourcing, make sure to ask the various service provider
candidates about their philosophy, methodology and history with the transition process. If it leads to a
surprise, it’s better now than later.
For more information, please contact:
Vik Bangia
Managing Director
Global Corporate Services
David Forbes
Senior Director
Global Corporate Services
T: + 1 213 613 3459
[email protected]
T: + 44 207 182 2173
[email protected]
About CB Richard Ellis
Headquartered in Los Angeles, CB Richard Ellis is the world’s leading commercial real estate services firm. With
approximately 14,000 employees, the company serves real estate owners, investors, and occupiers through more
than 250 offices worldwide. The company’s core services include property sales, leasing and management;
corporate services; facilities and project management; mortgage banking; investment management; capital
markets; appraisal and valuation; research; and consulting.
For more information, visit the company’s website at www.cbre.com