Selecting Relationship Type in Facility Services

Transcription

1 CIB W70, Hong Kong Selecting Relationship Type in Facility Services Tomi Ventovuori Tero Lehtonen Ilkka Miettinen

2 Structure of presentation Introduction Background Objectives Research method and data Theoretical background Empirical results Conclusions

3 Background Outsourcing of facility services In the Finnish property market during 1980s and 1990s At first short-term contracts and price as the most important purchasing criteria Transition in facility service purchasing Expanding of outsource contracts Outsourcing of strategically more-important services Need to understand the role of different relationship types in facility service purchasing

4 Objectives of the study to identify the factors that influence the choice of collaborative and adversarial relationships to identify the factors that differentiate collaborative relations from adversarial relations

5 Research method and data 41 interviews (9 client and 10 service provider companies) Themes: the elements of sourcing strategies and the type of relationship Theoretical background: Transaction Cost Economics (e.g. Coase 1937, Williamson 1985, Cox 1996)

6 Transaction Cost Economics (TCE) Key dimensions: Uncertainty, frequency, asset specificity High asset specificity: skills and expertise that are the core competencies of the company activities that have critical effect on the performance of the company transactions that are extensive specialized more vertical integration is needed, switching costs are high Examples A shared database between client and service provider (CAFM - computer-assisted facility management) Property management from investors perspective

7 Transaction Cost Economics (TCE) Low Asset specificity: skills and expertise that are not the core competencies of the company activities that have non-critical effect on the performance of the company transactions that are standardised types can be controlled by adversarial relationship, switching costs are low Examples Non-technical services from property owners perspective

8 Choice of relationship type Adversarial Not economically or strategically important purchase Operational and standardised service The large number of alternative service providers No need to share sensitive or strategic information Partner selection: Immediate financial benefits Collaborative Importance of purchase: Economically important Strategically important Difficulty of managing the purchasing situation: Complexity of service Lack of alternative service providers Need to share sensitive and strategic information Partner selection: Perceived potential for longterm improvement

9 Comparison of relationship types Adversarial Short-term contracts Individual focus Power explicit and visible No significant gains from development activities or opensharing approach Minimal interactions Only operational level is involved Problem-driven Collaborative Long-term commitment Mutual benefits Mutual trust Goal congruence Transparency of information Open-sharing approach Continuous development Involvement of all organisational levels Regular meetings

10 Conclusions TCE could be used to support decisions related to the selection of relationship type in facility services. The more the facility service activity may add value to the client s business, the more collaborative relationship needs to be. Adversarial and collaborative relationships should be used in different purchasing situations and need to be controlled differently.

11 Thank you! Helsinki University of Technology