KPMG puts its trust in partnering, not costs
Tim Winter, head of engineering with professional-services firm KPMG, explains how completely overhauling how assets were managed and maintained brought very positive results.
Partnership’ has been talked about a lot in this industry — in fact, it is uniformly viewed as a panacea. However, in practice, partnering is something being aspired to, but few actually achieve.
Competition is rife amongst providers, which means it is tempting, from the procurement side, to largely focus on price. With many providers struggling to differentiate their service, often with rather homogeneous capabilities, providers leave themselves open to being beaten down on price. Low profit margins leave little room, however, for suppliers to perform and certainly not to innovate. It brings about too much focus on cost control at the expense of delivering a quality service.
Norland has worked with KPMG since 2004. Liam O’Connell, the account director at Norland, shared my views about the structure of the industry and, like me, wanted to change the way we worked together. We set out to create an environment from which a true partnership could emerge and demonstrate to the industry that not only was an effective relationship possible, but that all parties could prosper from it.
Three key ingredients were required.
• A close working relationship between the client and contractor teams.
• Effective management and measurement of performance.
• Good results.
From these three ingredients would flow trust, mutual understanding, joint goals and a true partnership.
When I joined KPMG, I inherited a very traditional contract built around a fairly standard PPM (planned preventive maintenance) schedule with various operatives to carry these tasks out. The contract included some flexibility to allow for additional reactive works. The problem with this model was that it gave KPMG no visibility of the underlying financial implications and little control over how its assets were being maintained.
As part of the new ‘partnership’, we took a different approach by completely overhauling how the assets were managed and maintained. We developed a task-based model cleared through a computer-aided facilities-management system with an innovative commercial model focused on the level of service delivered.
The revised way of working has put KPMG in more control over our assets and has meant we are resourced to the level which ensures our service level agreements are met. The contract also provides incentives for better performance.
My KPMG team agrees all tasks and maintenance schedules, and the new CAFM system provides more focus as part of an intelligent approach to lifecycle management.
The intention was that the KPMG team would have full vision of Norland costs to operate the contract and that success would depend heavily on a partnership approach to solving engineering, delivery and resourcing issues.
Working with Norland, we built a risk-and-reward model into the contract. It was kept simple and set targets around how efficiently tasks were completed and the quality of service experienced. The model generated a monthly performance score. Exceptionally high levels of service could result in additional profits, with poor performance resulting in significant penalties. Low scores for three successive months give us the right to terminate the contract.
Each month, the system produces an ‘efficiency score’ based upon the following criteria.
• Completion of the PPM tasks.
• Completion of the reactive maintenance tasks.
• Completion of statutory compliance tasks.
• Cumulative overrun task hours (The accelerator).
• The scores achieved in the quarterly supplier survey.
• The results of an audit.
We also introduced iCount, which has proved very popular. It gives those working in our buildings the opportunity to give meaningful feedback. A system of green, amber and red cards rate performance. Green relates to an excellent service and results in two points being added to the monthly performance score. An amber card means standards failed to meet expectations resulting in a 2-point deduction and a red card is given for completely unsatisfactory work, resulting in a 6-point deduction. The iCount process replaced a quarterly survey and meant we could measure customer service more objectively and in a more timely manner.
KPMG routinely audited a sample of all the work being carried out by Norland. If any tasks failed the audit they affected the monthly performance score. Anything below 88% resulted in a deduction of points.
The monthly performance score was reduced by 10 points if Norland failed to deliver any critical statutory compliance tasks during the month.
To meet the needs of the new system, Norland redesigned its approach and better matched the blend of skills and competencies in its team against the types of tasks required. Norland achieved its target profit margin within the 100 days.
The Norland team went on to achieve additional performance bonuses of 20% for seven consecutive months in 2012.
In 2012, quality audits carried out by KPMG on a sample basis for both PPM and reactive tasks resulted in Norland achieving 100% performance at eight out of the 10 sites audited.
From KPMG’s perspective, the partnership with Norland is very much working as intended, with both parties benefiting significantly. We have control of our assets and visibility of all the costs. Norland is delivering a high-performing service within the parameters of the contract but with the opportunity to make better margins in line with stronger performance.
By working collaboratively and with a spirit of trust and partnership strong results have been achieved by both parties. Most importantly we have a sustainable model which incentivises good service and quality-based behaviours.