Why poor contract transition management is not an option
RODNEY TIMM of Property Beyond explains why poor transition management is not an option and provides advice on ensuring successful contract transition.
There appears to be significant inertia in the property services outsourcing industry, with incumbents regularly being awarded contract extensions for a variety of reasons, even in situations where service standards are not being met. But at some stage change will likely happen. And after the long arduous process of ‘testing the market’ and the awarding of a contract more aligned to operating needs, the daunting task of transitioning looms.
With the new property service delivery model and underlying contracts designed to offer enhanced service performance standards, the expectations of all stakeholders will be elevated. But experience has shown that the transitioning process can have an enormous impact on the actual service delivery and performance outcome for the duration of the contract. This transition may be from internal teams to external service providers, between service providers or even insourcing from a prior external contract. In all case poor transition management is not an option.
Whenever there is a change in the service delivery model, there are effectively three transition management processes required. First, there is a need to transition out the existing service delivery team – whether the service was being provided previously by internal or outsourced team members. Second, there is the need to transition in the new contractor or service delivery team members. And, finally, the management team that has the overall responsibility for the service delivery needs to go through a transition process to understand the key elements of the new service delivery model to ensure performance standards and expectations are achieved.
Too often these three separate processes meld into one and key elements resulting from divergent objectives in these streams are neglected. The disappointment of the outgoing service team requires different management controls and drivers in the transition out process compared to the enthusiastic optimism of the incoming service team undertaking the transition in process. Similarly the management team needs to understand the changes that have been incorporated into the new model and not continue their management oversight based on prior arrangements.
Even if the incumbent service provider is successful in securing the next iteration of the service contract, portfolios will likely be adjusted, service specifications changed, governance frameworks evolved, fee structures revised and performance management more focused on outcomes. The renewed service provider needs to understand that the future will be different.
Transition planning is complex with a range of work streams that all have to be managed simultaneously and reviewed continually to arrive at the ‘go-live’ date with responsibilities and accountabilities successfully transferred.
Careful and detailed program management for the three transition groupings is the foundation for the underlying work streams and being fully prepared for the critical ‘go-live’ date. Transition periods can vary from six weeks to three months and longer, dependent on the complexities of the portfolio and the service functions being transitioned. The plan should include regular formal and informal meetings between the various interest groups, so that transition issues are identified early and remedied quickly. There is no second prize – the success of the transition will impact the performance standards of the ensuing contract for it full duration.
The communication plan is another key element in changing the service delivery model. Stakeholders are many and varied. The timing and format of the communication needs to be appropriately customised for each of the stakeholder groups. Informing the incumbent contractor that their bid for renewal has not been successful will likely bring out negative reactions and a sudden drop in existing performance standards. The transition-out plan should be structured to incentivise ongoing performance and cooperation. The impacts on the internal property service management team will result from the changes to the service delivery model requiring changes in team structures, roles and responsibilities. All aspects that need carefully considered communications.
The other internal stakeholders of the organisation, as recipients of the property services via the new arrangements, will require communications to provide the necessary detail of contact points, service request arrangements and changes to the scope of services. External subcontractors, including cleaners, tradesmen and maintenance teams, need to be informed of the changes to the service model and management structure. These changes may also include the novation of contracts and communications need to provide the assurance that all outstanding accounts will continue to be paid.
The aspect of transition that tends to be the most complex is the successful implementation of the management information systems (MISs) that will be used in the service delivery and will contain all relevant critical data and information.
Property services systems are all different; the quality of data varies significantly and uploading the data is not for the feint-hearted. Data will need to be sourced from the former service provider systems, internal data systems or source documentation such as lease agreements. Transferring data files in the required formats is a specialist function of technology and data experts – make sure they are a key part of the transition team.
The ability for the month-end finance data, including both accounts payable and receivable, to be reconciled between the old and new systems is usually a benchmark of success. The process usually requires ‘dummy runs’ to give all parties concerned the comfort that rent will be paid without lease defaults resulting, subcontractors will continue to provide their services and receivable payments will be deposited into the right accounts.
PROCESSES AND PROCEDURES
In addition to the finance processes, during the transition-in period, there are many other processes that need to be mapped and implemented to support the service requirements. These processes will, for example, likely include customer requests and help desk, contractor checks and site inductions, essential service and compliance testing, access and security requirements, capital works approvals and procurements.
Although some of these processes may exist and may be able to be adapted, many will need to be developed, documented and implemented with agreement between the parties in the contract. During the transition-in period, adequate time and resourcing are required to review and approve these processes, which if not done at this stage of the contract, tend to be forgotten and are often never formalised.
PEOPLE AND TRAINING
The new team members – both internal team members with responsibilities of managing the new service delivery arrangements and those members of the new outsource delivery team – need to be identified or engaged and trained in the relevant MIS, processes and procedures during the transition-in period. Numerous site inductions are likely to be required. At this early stage, the team culture of the new working arrangement will start to emerge and needs to be directed to provide the right outcome.
The transitioning of the internal property services management team should be focused on the contract governance and performance arrangements. This will include understanding the services specification and contract terms, mapping out approval processes, implementation of the reporting requirements and understanding the contract performance management framework. In many contracts, these aspects are neglected and ‘bad habits’, both by internal management and the contractor, result in service standards not meeting expectations. These habits are difficult to change once they become part of the contract culture and will likely continue for the duration of the contract.
The complexities and challenges of transitioning property service delivery and contract arrangements should not be underestimated. Ensure that there are detailed transition-in and -out obligations linked to appropriate remedies for non-performance in all contracts. Provide an adequate budget to enable the transition managers – both internal and as part of the contractors team – to deliver the right outcome as the foundation for excellence in service delivery for the contract duration. There is no second prize.
Rodney Timm is the director of Property Beyond.