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 companys 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 whove 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 teams 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 companys 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 organisations flexibility and acceptance to change .

B. Once the Decision to Outsource is Made

Most importantly, dont 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 providers 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 companys 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: The Service Agreement Resource Plan Communication Protocol Reporting Requirements Project Planning Corporate Governance Tools Strategic Plans, Business Case Templates etc Technology CRE Teams 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 corporates 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 weve 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, youll 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, its better now than later. For more information, please contact: Vik Bangia Managing Director Global Corporate Services T: + 1 213 613 3459 Vik.bangia@cbre.com David Forbes Senior Director Global Corporate Services T: + 44 207 182 2173 david.j.forbes@cbre.com

About CB Richard Ellis

Headquartered in Los Angeles, CB Richard Ellis is the worlds 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 companys 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 companys website at www.cbre.com