The Issue of Outsourcing

A U.S. rabbi, Susan Grossman, tells the old quip, ask two Jews their thoughts on a subject, you’ll likely get three answers.*

That’s kind of how it is for managers when it comes to the question of outsourcing janitorial work. Some managers have had such bad experiences with it that it’s even written into their request for proposals (RFPs) or “tenders” that they will not work with a contractor that outsources cleaning work.

Another manager’s experience with outsourcing may be just the opposite. He found it works, it works well, and it even proved to be cost savings. And still a third, this one with multiple locations to manage, may only say, “it depends on who you hire.” In other words, she’s had some good experiences and some not so good, and that’s the way it is.

However, outsourcing is a growing field. According to The Economist, a weekly newsmagazine published in England, outsourcing, or the hiring of independent contractors, has transformed business around the globe. “Over the past few decades, companies have contracted out everything from mopping the floors to spotting the flaws in their internet security.” Further, the global outsourcing firm TPI estimates that $100 billion worth of new outsourcing contracts are signed each year.**

My goal here is not to point readers in one direction or the other. Instead, what I hope to do is give a fair view of what outsourcing is all about, how to avoid some pitfalls, and let you come to your own conclusion.

The first thing we need to do is define outsourcing. In the professional cleaning industry, outsourcing refers to the practice of one company hiring another company (or independent contractor) to handle cleaning and maintenance operations in a facility.

In some cases, it may be spread even further than just one cleaning contractor. For instance, a leading bookstore did the following when it came to the cleaning of their locations throughout the United States:

  • They gave the contract to handle the cleaning of all their stores – several hundred – to one cleaning contractor.
  • This cleaning contractor then divided the country into five sections and contracted the cleaning duties to five secondary cleaning companies.
  • These five cleaning companies then outsourced the cleaning work to about ten different cleaning companies in each area of the country. The third set of contractors.

In this case, the actual cleaning duties for this chain of stores was handled by about 50 cleaning companies around the country.

So why would this bookstore decide to have one contractor handle all their cleaning needs in several hundred different stores? Among the benefits are the following:

  • Just one invoice. Instead of 50 or more invoices, they just have one. Processing invoices quickly becomes very cumbersome and very costly.
  • Cost savings. When each store hired its own cleaning contractors, the range of charges could be staggering even for locations that were all about the same size. Outsourcing leveled the “charging field,” which typically saved money.
  • Bookstore managers can focus on books. Particularly in situations where the stores had hired in-house cleaning workers, many managers had to supervise the cleaning crew. It was a job many store managers did not like or even know how to do. Just faxing or emailing a service request to the subcontractor is far easier.

So, in general, the benefits come down to the cost savings, in many different forms, and the simplicity of turning over the entire cleaning operation – and its potential headaches – to one master contractor. We could also add that the bookstore no longer had to worry about cleaning personnel management. This included things such as hiring and firing staff as well as dealing with turnover. Employee turnover in the professional cleaning industry tends to be very high.

The Not So Good About Outsourcing

Several problems that don’t even involve the building manager can arise when outsourcing cleaning work. One example is when the Canada Revenue Agency (CRA) decides that the cleaning contractor is not hiring true subcontractors but just paying them as subcontractors to save on employment taxes. (See sidebar: How the CRA Defines an Independent Contractor)

In such cases, the government can demand back taxes of the contractor. Depending on the amounts, this can severely impact the survivability of any business. In a worst-case scenario, all of the locations cleaned and maintained by this contractor may quickly be without service, requiring managers to come up with a Plan B at that last minute.

Another concern, especially when there are several contractors in the outsourced program, is how much the cleaning people handling the actual cleaning duties are being paid. In our example above, after each division in the “outsource pyramid” at the bookstore gets their “cut,” there may not be much left to pay those doing the work.

This can result in the hiring of less-qualified and poorly trained workers; considerable employee turnover; and contractors that can’t afford to select quality cleaning tools and equipment. The result is often less than satisfactory cleaning outcomes.

Related to this, building managers want to have confidence in whoever is being hired to clean their facilities. When work is outsourced, as it was with our bookstore example, managers will not know who is coming into their stores, and background checks may not be as thorough or detailed as they should be…if they are done at all. This leaves the store and the hiring company vulnerable to theft and property damage.

The Takeaway

If I had to answer the question asked above, is outsourcing good or bad, my answer would likely be the third: it depends on who you hire. However, the more detailed the decision-making process is, the more likely things will work out well.

One of my key suggestions when working with schools, universities, and corporate campuses is for administrators to know exactly what work they want performed by the cleaning workers. The clearer the responsibilities, the better for all involved.

Then do as much homework on each contractor under consideration as possible. Once the field has been narrowed to a few, invite each contractor to give a 30-minute presentation. Ideally, have these all performed on the same day for easy comparison.

Managers can also outline what they want to be covered in the presentation, but ultimately, they are looking for a few key qualities:

  • Someone you believe you can work with
  • Someone you can trust
  • Someone who will be responsive to your facility’s needs
  • Someone who will offer suggestions to help make your facility healthier, streamline cleaning needs, and reduce costs

Keep these factors in mind as you view each presentation and you will see, over the course of the day, one contractor usually surfaces to the top.

 

Ron Segura is founder and president of Segura & Associates, an international janitorial consulting company based in the U.S. He has over 45 years of experience in all segments of the cleaning industry, with ten of those years spent overseeing the cleaning of over 4.5 million square feet for The Walt Disney Company. Ron can be contacted through his company website at https://www.seguraassociates.com.

 

 

* Two Jews, Three Opinions by Rabbi Susan Grossman, http://www.beliefnet.com/columnists/virtualtalmud/2007/05/two-jews-three-opinions.html.

 

 

** “The Trouble with Outsourcing,” The Economist, July 30, 2011, http://www.economist.com/node/21524822.