A sustainable pathway to inclusive stakeholder value through partnership

By Jamie Louw, Financial Director at FM Solutions

Over the past few years, there has been much debate and discourse around the topic of job creation. Against a backdrop of an unemployment rate that continues to increase year-on-year and more than 63 % of the country’s youth (ages 15-24) that are currently unemployed, it is clear that South Africa is in desperate need of a new trajectory that will curtail job losses, boost the economy and create a desperately needed environment that is geared towards growth and job-creation.

The role of organized labour in society

The International Labour Organization (ILO) is a United Nations agency whose mandate is to advance social and economic justice through setting international labour standards[i]. One of its core objectives is the achievement of decent and productive work in conditions of freedom, equity, security and human dignity[ii]. Similarly, the South African government has also pledged its commitment to the attainment of decent work and sustainable livelihoods for all workers and has undertaken to mainstream decent work imperatives into national development strategies. At the core of decent work is job security, a living wage and the right to join a trade union.

The job market in South Africa can be classified into economies: The Real Economy and the Parasite Economy. In the Real Economy, employers pay their workers a living wage. These jobs provide the income, benefits, and security necessary to participate robustly in the economy as a consumer and taxpayer. It also drives production and demand and creates tax revenues that support the Government’s developmental agenda in service to its citizens.

On the other side of the spectrum, however, lies the In the Parasite Economy where employers fail to pay their workers a living wage and where companies (both large and small) cling to a business model where they pay less than the minimum.  Non-standard hiring practices, such as casualisation and labour broking, fall under this classification and these practices are prevalent in both the private and public sectors.

Separating the wheat from the chaff: outsourcing is not labour broking

Somewhere along the way, and because of noises made largely by unions and labour interest groups, outsourcing has been lumped together with labour broking. Consequently, these two terms are today being used interchangeably.  This is an unfortunate, inaccurate and unfavourable characterization of outsourcing.  Labour broking couldn’t be any further from outsourcing.

 – Labour broking is more inclined towards temporary or casual employment arrangement and is, by its very nature, transactional. It is a means to an end and leaves no lasting benefit after such an arrangement is done.  No cognizance is given to the longevity of employment or the quality of work from an ongoing employment perspective.  As a consequence, it has in some instances been exploitative and has a checkered record in respect of its core intention, which is rooted in a “cheap” labour deployment approach.

 – Outsourcing differs dramatically from any form of labour broking in that it creates fixed-term and permanent employment. Employees are entitled to the full benefits of employment and are afforded protection under the Labour Relations Act. Outsourcing is a legal form of contracting in the public sector, and in fact, serves as an essential cog underpinning the government’s ability to render services to all stakeholders in South African society.

The benefits of outsourcing facilities management (FM) services to private industry experts

Outsourcing is not a new trend.  It emerged for the first time in the 1950s but was only truly recognized as an attractive business strategy in the 1980s thanks to the fact that it allows companies to hone in on their core competencies, while outsourcing the non-core activities which may detract or hinder organisation success.  It is important to recognize that outsourcing on its own is not a silver bullet. It requires commitment and discipline in the outsourcing process to reap the benefits, as it impacts people, processes, methods and equipment.

Outsourcing facilities management means that the maintenance of government’s buildings and assets are transferred to a third-party organisation. This has been established practice for several years and has been effectively deployed in many public sector settings. For South Africa, outsourcing this non-core function holds significant benefits for the public sector given our own unique set of socio-economic and political challenges:

– Risk Management and failure reduction through accountability systems – Through effectively managing risk, the appointed FM service provider ensures that key assets are appropriately maintained, measured and managed. This information helps government more appropriately manage its facilities, reduces the risk of failure and allows for better planning in respect of operating costs and replacement programmes. Fruitless and wasteful expenditure is reduced in the process.  Accountability systems are also created, with roles and responsibilities clearly defined.

– Value creation and compliance focused – by outsourcing maintenance services to specialists in the private sector, Government quickly gains access to competent and skilled service providers in areas where they are currently lacking expertise. Moreover, Government is ensured of compliance with laws and regulations through appropriate records and standards which are maintained.

– People and talent management, skills transfer – Through on-the-job training and training initiatives, the appointed service provider develops proper succession plans that allow for skills transfer and upward mobility of staff. For the government, dignified, meaningful and permanent work opportunities are created that reduce unemployment and increase access into the economy for citizens.

– Process integration and improved decision-making – When FM processes are integrated through outsourcing, it empowers Government to make more timely, well-attuned and appropriate decisions in respect of the portfolios and facilities it operates

– Development of sustainable, trusting relationships – As objectives are met and efficiencies improve, a more sustainable, trusting relationship is formed between the outsourced service provider and the government department. This allows for a more united approach to FM outsourcing and helps eliminate misguided perceptions.

With all the above in mind, FM outsourcing arrangements must have at its centre a mutually beneficial, reciprocal approach that ensures that the appointed company partners with the State to ensure sustainable value creation that impacts all stakeholders.

Outsourcing Services

Jamie Louw, Financial Director at FM Solutions

[i] www.ilo.org

[ii] https://www.un.org/en/development/desa/population/events/pdf/expert/7/05_ILO.pdf