Outsourcing of property development

Outsourcing of property development

The management team of a retail property development company

Assignment

The management team of a retail property development company, part of an international retail conglomerate, was asked by the executive board to find ways to improve the effectiveness and efficiency of the business unit and to reduce administrative costs. Three options were identified: the creation of a separate company, selling the business unit, or outsourcing certain areas of the unit’s operations.

Approach

Each of these three options was evaluated on it’s merits. The advantages, disadvantages, risks, business models, and organisational and management forms were systematically reviewed. Personal ambitions were also addressed: at the end of the day, the formation of an independent company would ultimately involve (personal) entrepreneurship.
Because of apparent need not to outsource the core business activities, and so as not to disturb the closely aligned relationship between the retail chain and the retail property development unit, the options of spin-off and sell-off were eliminated. In addition, the organisational and management model for the outsourcing option provided an opportunity for a genuine improvement in efficiency and effectiveness.
‘Outsourceable’ activities and the formulation of the outsourcing relationships were identified, and this helped to create transparency and confidence in the feasibility of the outsourcing concept.
The management team played a central role in this process: it mapped out the route to be taken, and defined the preconditions and parameters for the process. The employees participated in the development of possible organisational and management structures. Alignment sessions with the executive board helped to eliminate any misunderstandings and facilitated the forming of a consensus. Potential outsourcing partners were invited at an early stage to make proposals about the possible outsourcing arrangement. This helped to enrich the outsourcing concept as a whole.
A detailed implementation plan allocated the tasks between the management team members and the employees, which established a sense of certainty and stability.
The implementation of this plan is already underway, and a shortlist of outsourcing partners has been drawn up, while at the same time the operational processes, including the coordination and information channels, are being refined, aligned, and implemented.

Results

The results are:
•   a clearly defined vision for the future from the management team;
•    a detailed and shared vision about the core competencies of the organisation itself and the new organisational and management structures (outsourcing with control over the end result based on the cost-plus principle);
•    a reduction in the size of the workforce by 25%;
•    a reduction in the need for support services (administration, HRM, facility services).

Expected future results are: lower administration costs, higher degree of organisational flexibility (capacity), and interaction between the retail property development unit and the outsourcing partners aimed at joint innovation and reduction of costs.

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