Outsourcing and Privatization – It all depends on your view.

There is good news and bad news when it comes to the subject of outsourcing and it all depends on your perspective. If you are a contractor or building owner, outsourcing is good news, business prospects are looking up and opportunities for profit and cost reduction are on the horizon. If you are an in house manager, supervisor or cleaner, you probably see outsourcing as a threat to your livelihood and something you’d just as soon not think about, let alone experience. Same view, just a different perspective.


Why Business’s Outsource

There are many reasons why companies, organizations and the government outsource cleaning services and the reasons may vary slightly with each situation, but here are some of the common “why’s I hear:

1. Cost savings: normally a 30% to 40% reduction in labor costs is what is sold and often realized.

2. Technical expertise: let the experts do what they do best, so in house staff can focus on the core business.

3. Liability: shift the responsibility for such things as lawsuits, claims and complaints to the contractor.

4. Responsibility: shift the responsibility for hiring, firing, managing, and union issues to the contractor.

5. Cost control: paying a set amount each month allows for better budget control and projection, and depending on the agreement, in some cases if the contractor goes over budget, our costs remain the same.

6. Financial Management: we use the contactors money for labor, equipment and supplies for 40 to 60 day, interest free.

7. Equipment financing: the contractor owns, maintains and pays for the equipment.

8. Education: the contractor knows the industry and is required to train and certify their staff and company.

9. Less management time: we have one contact person to deal with and get one invoice each month.

Why keep cleaning in-house.

1. Don’t want to lose control over internal operations

2. Don’t want outsiders in the facility.

3. We know our needs better than anyone else

4. We can do it as good or better than anyone else

5. Union objections and Internal politics

6. We use the custodial department as an entry level job and promote from there

7. We’ve always done it this way and our people have been with us for many years

8. We could end up with no staff, no management and no equipment or cleaning program and going back in house would be very difficult and costly.

Reality

It’s a mixed bag and every situation is different. There is no reason an in-house operation can’t be as competitive as an independent contractor. There are no secrets today, the same equipment, chemicals, training and expertise is available to everyone. Often the problem is a failure on upper management’s part to understand the true value of the cleaning and maintenance functions in their organization.  The next problem is hiring a qualified management team that is capable of putting a professional cleaning program in place and running it in an organized manner. Hard choices are often required and some companies and individuals just aren’t comfortable making those choices.

A Trend toward Outsourcing

There is no questions that over the last two or three years there has been an increase in the number of organization outsourcing for services. When the economy tightens, outsourcing is a common way to cut costs and this trend will continue to grow in the future.

Some industries tend to utilize contractors more than others, right now we are seeing more contracting in health care, education and government markets.

If I had to guess, here’s where I put contractor penetration in the following commercial segments.

Hospitality 10%, Education 15%, Health Care 20%, Government 40%, Office Buildings 90%, Industrial 40%

The ongoing challenge is determining which approach is the best for your organization and not getting stuck in any one approach when the world around you is changing.

Next Generation Of Contractors Emerging

Over the last year or so I have noticed what I am referring to as the next generation of contractors and business owners. I’m wondering how these new comers entering the market place will impact existing businesses. It appears to me that these new  guys will catch the old guys off guard. Here’s some characteristics that I’ve notice with these new guys:

– Under thirty years of age

– Technologically suave

– No fear of failure or the unknown

– No limits and no borders

Have you seen these guys in your neighborhood yet, something tell me you will and when do, they will have already eaten your lunch.

Bailouts Won’t Solve Financial Crisis

It’s my opinion that the governments current approach to buying and bailing the country out of the financial crisis is doomed to failure. In order to solve the financial crisis we (individuals and businesses) need to do things that will cut costs and generate a profit. Mailing people and businesses checks doesn’t do that, certainly not when you give it to large corporations. In fact I think it does the opposite. It’s like welfare, social security and unemployment, the concept sound good on the surface, but in reality these programs take away incentives and encourage people and businesses to become dependent on the government rather than themselves.

In the past there have natural ups and downs or cycles in business. When one business failed, another came in behind those that failed, saw opportunity, picked up the pieces, did things differently, invested some time and money and turned things around. Unfortunetly, when the government started getting involved, it disrupted the natural and needed cycle of success and failure. It messed up the entire system and now we are all paying the price, or I guess I should say we and our grandchildrens, grandchildren will be paying the price.

For us to get out of this mess, govenment needs to get out of the way of small business owners and let those that screw up, fail, so others can find a way to turn a failure into an opportunity that generates a profit. Until this happens, sending out checks will only make the problem worse and the debt larger.  That’s the way I see it. What do you think?