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Reading Room Articles
As this century comes to a close, and the securitization of real estate comes into full force, many firms will be attempting to maintain a competitive edge while increasing yield. Outsourcing presents an opportunity for managers in the multifamily industry to "look outside the box" and work smarter in the coming millennium. Every Decade has a Silver Lining Fallout from corporate downsizing, which occurred as a response to recession in the early 1990's continues to affect some segments of the United States economy. While this situation evokes a negative connotation for many, a positive trend has emerged from the bloated excess of the 1980's. As big business boomed and government regulations fell by the wayside during the Reagan era, prolific mergers created enormous corporations. Redundant tasks and overstaffed departments became the norm. Heavy recession in the early 1990's forced many companies to lay off significant portions of their workforce, mostly in those "redundant" departments. As these companies shrunk, they realized that they still needed to accomplish many of the tasks those departments had performed, but not often enough or on a large enough scale to justify re-establishing the departments. At the other end of the spectrum-recently laid off employees began to reengineer their talents, by consulting or performing highly specialized jobs for these companies as independent contractors. At the same time, new college graduates-dissatisfied with the lack of opportunity available in traditional employment markets-marketed themselves as "hired guns" to perform short term, technologically advanced assignments at a competitive price. These recent graduates lacked experience, but had the advantage of being the first in a generation of technology-savvy workers, unafraid of computers and willing to forgo benefits and a traditional career track for quick money and the personal freedoms that accompany freelance work. By 1993, the face of the American workforce had been altered significantly. Outsourcing reigned supreme. Outsourcing is the practice of hiring specialized firms to perform services that, traditionally, have been handled in-house. Outsourcing presents the opportunity to obtain expertise without paying high overheads, hiring and training costs. Through competitive bids based on scopes of work, these specialized firms perform assignments that would not be feasible within a company's existing structure. While outsourcing as a concept is neither unique or new (advertising agencies, payroll services and tax accountants have been around for decades), the practice has exploded in recent years. The reason is simple: A company that focuses on performing one task will likely be excellent at that task, and will be able to offer competitive pricing because they don't have large overheads supporting many other functions. One of the first companies to capitalize on the outsourcing trend was Manpower Temporary Services. By 1993 Manpower was the largest employer in the United States; bigger than General Motors-bigger than the federal government. It utilized a simple concept: recruit "temps"-homemakers who wanted a little extra cash now that their kids were in school; young people just out of college who wanted to "shop" potential employers before deciding where to seek permanent employment; retired workers who wanted extra cash as well as the freedom to pick and choose assignments-market them to large firms who needed administrative staffing but didn't want to incur the costs of recruiting, hiring and paying benefits-and take a cut of the hourly rate for their own overhead. In 1997, temp agencies are everywhere-some specialize in specified tasks like accounting or medical billing-others provide employees that can do just about anything. Manpower now has offices worldwide, and recently expanded to include a Technical Services division, dedicated to filling engineering, consulting and computer jobs in an industry where the annual growth rate exceeds 20 percent. Recent strategic alliances with firms such as Ameritech and Drake Beam Morin continue to reinforce Manpower's stronghold on the temporary employment industry, and its role as a leader in outsourcing trends. Strategically Positioning Your Company for the Future Though outsourcing began as an effort to cut costs, a main benefit of the practice is the opportunity to gain a competitive edge in industry, by hiring experts whose flexibility allows them to perform services at a fraction of the cost. By incorporating outsourcing as a strategy, according to data from the Outsourcing Institute, participating companies can expect the following benefits: • Improved company focus • Accessible world-class capabilities • Accelerated benefits of reengineering • Reduced operating costs • Resources and expertise not available internally • Internal resources freed-up for other tasks • Increased available capital funds • Shared risks and once-removed liability Outsourcing in the property management arena presents unlimited opportunities for increased profits and decreased overhead costs. Some areas multifamily firms have turned to include human resources, marketing, training services and curriculum writing, strategic planning, market research, asset management and information systems. When choosing an outsourcing vendor, several factors should be considered to ensure that the alliance you are creating will meet your company's needs. Similar Corporate Cultures. The outsourcing vendor's company culture should be, as closely as possible, aligned with that of your own. Similarities in this area will work to your advantage in the case of emergency or crisis situations, and will ensure a common focus for both of the parties involved. Shared Value Structure. Again, similarities in overall business philosophies will only increase efficiency and productivity. For instance, if your company places a high value on multi-level communication, but the outsourcing vendor believes in a strict hierarchy and chain of command, it is likely these two firms will not work well together, and will experience many problems related to misdirected communication and uninformed decisionmaking. References and Reputation. As with any potential employee, if you don't check references, you may be inheriting a problem. We like to believe the best about people, but not checking references is simply bad business. Ask for examples of past work, as well as permission to contact the vendor's previous clients. Ask previous clients about the vendor's ability to meet deadlines, its responsiveness in emergencies, and their level of satisfaction with the vendor's quality of work. If possible, contact clients whose work scope is similar to your own. Weigh the information you receive heavily in the decision to hire the vendor. Quality and Price. While cost is always important, it is necessary to remember that quality of work is one of the main reasons you are outsourcing in the first place. Take bids from prospective vendors, and require scopes of work with those bids. Compare costs based on their scope of work, as well as the information you have gathered during reference-checking. Always keep in mind that old cliché that usually rings true: "You get what you pay for." Confidentiality. Before divulging any proprietary company information to your vendor, require them to sign confidentiality agreements. Because these vendors may also provide services to your competitors, it is vital that an atmosphere of strict confidentiality is agreed upon by both parties. In some cases, it may be necessary to seek an exclusionary contract. The practice of outsourcing presents a win-win situation for everyone. Ultimately, your clients win-they have receive the best possible service from your company, because you have taken the time to hire the best available resources at a competitive price. Responsiveness is a recurring theme in the 1990's, and will likely carry through the next century. The trend toward outsourcing indicates a recognition in business and society that quality and efficiency will always triumph over staid and stagnant practices. Rapid advances in technology have created a truly "global village," allowing us to reach out and touch everyone. Including outsourcing in your firm's strategic plan opens up a wealth of available expertise for a reduced cost. Companies who take advantage of these resources will emerge as industry leaders, in our increasingly small world. 
Kathleen M. Lane To read more articles from this author please visit www.smmonline.com. The Sales & Marketing Magic Companies, shares more than 20 years of experience in multifamily housing, encompassing leasing, marketing, management, training, authoring, consulting, developing, and Brainstorming! For more information on Sales & Marketing Magic for Apartment Managers; the latest Tools & Forms Catalogue; The Annual Multifamily Housing Brainstorming Sessions™; or to receive top ideas, FREE, via e-mail, please call 727-784-9469 or visit www.SMMOnline.com. |
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