In this interview for our Good Business campaign I spoke with Terry Mills, COO at Cloudfm. We focused on procurement, including the fact that Cloudfm doesn’t do tenders and his thoughts on vested and collaborative contracts.
Walk us through your background.
I started life as a professional marine engineer and then moved into the building services industry as a chartered engineer. My career took a turn to facilities management in the early 90s, where I ended up going to the Nordics, working for Johnson Controls, which is now part of CBRE, building a facility management business. I jumped ship from there and joined Nordia Bank, where I outsourced and sourced a couple of exciting projects, one being facilities management. Then I found my way to ISS Group, where I spent a significant amount of time, before moving into consultancy, only to be lured in by the amazing minds at Cloudfm in 2021, initially as technical services director and now as COO.
What are your key priorities as COO?
My role is broad but in a nutshell I’m responsible for business development and commercial operations, part of which involves ensuring quality and client success across operations and the supply chain. I’m also here to lead the transition to technology and data-led total asset care, leveraging our two technology platforms Freedom and Mindsett-PRISM, because our strategy is to grow the business globally, and we can only do that by embracing tech and innovation. The global solution is clearly technology driven and we’ll be working in collaboration with some large channel and direct customers to deliver outstanding results in the space of energy and asset management, particularly with Mindsett-PRISM. What excites me the most about my role is that I love finding solutions and then putting them into action and watching them come to life.
Before joining Cloudfm, you published a white paper called Outsourcing to Right-sourcing of (Facilities) Services and Management – tell us more?
After twenty-seven years of experience within facilities and services management, I have seen procurement of services and services management generally undertaken either via sourcing or outsourcing. The paper focuses on the latter, where I candidly describe my observations on practices and behaviours that, in my opinion, should be improved for the benefit of all within the industry.
Can you share some of those observations?
What I saw in the early days was very much based on an open dialogue and transparency between outsourcers and potential clients. More time and effort were spent understanding the challenges and there was a two-way approach to finding the best solution. Both parties of which were united in their mission to deliver the best possible service for the long-haul, not just a given contract term.
As the market observed the benefits of outsourcing, procurement evolved trying to productise the approach. From then on, I observed more aggressive approaches to the market and a shift to one-sided power-based contracts. And unfortunately, those sitting either side of the fence responded to those requests, despite the fact the only way to make money from those contracts was to walk away or deliver poor service. If you signed up, you knew you were also signing up to other problems down the line. No such thing as win-win.
That bothered me. So, I decided to write about it to share my views and to promote the methodology behind vested and collaborative contracts. That’s the approach where you’re setting up a marriage that’s going to last but protecting each other by writing a prenup to start with. Leave the negotiation table feeling good, rather than breaking into a sweat. That’s the approach that’s going to deliver the most value and fix the problems associated with the ‘carrot and stick’ model that, let’s face it, isn’t getting us anywhere.
It’s arguably easier to speak candidly when you’re not part of a big organisation that demands consideration of stakeholders and their related interests. Does joining Cloudfm limit the potential of your call for change?
Not at all. I joined Cloudfm because of what the business is doing in this space. It’s truly inspiring, as is CEO Jeff Dewing who believes this change is needed and is actively driving that change forward.
How?
Allow me to give you some context. When the company was first set up, Cloudfm focused on a very niche market in the UK – distributed small buildings, such as restaurant chains and depots, where there’s no place for site-dedicated technical support. The FM and building managers at these organisations relied on mobile men and women in vans, all with a wide range of expertise and skill sets, that could check and fix things as and when needed.
Forgive the sweeping generalisation but these customers tend to have a poor control of their spend, because each site manager will engage a local supplier as and when things go wrong. Centralising the budget would involve a bit of guess work in terms of the volumes and qualitative elements of what they’re procuring. Plus, there weren’t the systems to support the nature of the work which is dynamic and reactive.It’s very hard to procure the traditional way with these challenges and what tends to happen is procurement goes out and pushes down hourly ratesand – surprise, surprise! – what they end up finding is the cheapest hourly rate, but the engineers take twice as long to do the work or botch it. So they end up spending the same, or more, and lose time in a repeated tendering process.
Then there’s often a rigid SLA penalty clause based on unrealistic expectations which do not reflect real market dynamics which negatively impacts both sides by not providing an outcome that’s useful. It’s about finding the right solutions, being realistic, and not spending all your effort measuring yourself to death, meaning there’s no time or freedom to focus on getting the results you want.
For our maintenance services management, Cloudfm came up with the idea of average job value, or representative rates, that is based on the quality of the outcome – the idea being that the customer understands that money needs to be made when an ‘on-site-on-time-on-budget and compliant’ solution is in play, and appreciates that due to a mutually beneficial set up, the supplier will deliver whatever needs to be delivered, and deliver it well. We have ranges of volumes that we know are realistic. We bundle that together to an average job value for the customer, and we share that data with them. Then we use our systems to deliver our promises.
Every discipline in our system has a tier one, tier two, tier three supplier that gets work in that particular postcode area, and when that particular skill is required. And they get paid to perform, so they perform well. With this new approach, we tend to spend about six to nine months with our customers baselining the volumes, the rates, and so forth, before we enter transformation mode to deliver even more value. Clients get transparency, they get control, they get results.
How does that work with tenders?
We don’t do tenders.
You don’t get your work through tenders?
[laughing] Yes, it’s a challenge. It limits our growth rate. But in most cases the system is broken, and we don’t see the value in being squeezed to the point where it limits our potential. We know there is a place for tenders, and we have started to look at how we could approach it in a different way. But we don’t want to agree unit rates. We are allergic to them.
Going back to vested, and the hold-up regarding industry wide adoption of these collaborative approaches, why do you think that’s the case?
Trust. Or a lack of. You must trust your partner. You need to be open and transparent. And you need to have the right attitude when going into a negotiation. The good news is there is much more readiness to be responsible. Plus, in the context of skills shortages, there seems to be more appreciation that both sides must strive to understand how value is measured. It’s partly common sense – we know what value we’re seeking, but we don’t yet know how to measure it – but common sense can be scarce in procurement practices, where the focus is on cost and measurements that don’t necessarily link to value. If you’re too focused on measuring the wrong things, you’ll miss out on the value that sits on the periphery of what you even thought possible.
Follow our Good Business campaign
More information the Good Business campaign is available on our website.
The previous eight interviews in the series are available to read on our website:
- Amy Brogan Q&A
- Simon Joe Portal Q&A
- James Banks Q&A
- John Hamilton Q&A
- Sally Leigh Q&A
- Alistair Blackmore Q&A
- Adam Jones Q&A
- Lizzie Neave and Mel Taylor Q&A
If you’d like to find out more or talk about how you and your business can get involved, email me on jo@magentaassociates.co.
