Outsourcing Support Services

Don’t act to privatize without a cohesive board that’s ready to weather a culture change by JAMES A. McCLURE

In the squeeze to meet spiraling educational needs with shrinking resources, a growing number of school districts are turning to outside contractors for support services. It is an opportunity to save money and free educators to educate. But there’s a catch: Making outsourcing a success is a learning process that demands careful planning, commitment and lots of communication.

"Converting to an outside contractor requires strong leadership and a cohesive school board," said James A. Williams, former superintendent in Dayton, Ohio. "You need to define the objectives and process and be open and honest with everyone. It may take several years to see results, but the right outsourcing arrangement ultimately will benefit pupils, teachers and employees."

Contracting out work operations has been a standard operating procedure in the private sector for many years. Today’s corporations apply make-versus-buy scrutiny to nearly every facet of their operations. Companies rely on complex networks of contractors to meet just-in-time delivery schedules. Some even contract out their basic manufacturing in order to concentrate on marketing and product development. The resulting efficiencies help companies compete in the marketplace and on Wall Street.

School districts can reap the same benefits by using outside contractors for support functions, such as custodial and maintenance services, food service and transportation, to free administrators to focus on education. The difference is that a school board’s decision to privatize is a public debate that usually is controversial.

The concept--whether called outsourcing, in-sourcing or privatization--generally sparks opposition from employees and their unions. Some administrators are reluctant to relinquish control. Board members may be subject to political pressure, especially when a locally owned company bids against national firms for the school district’s business.

"This is a culture change," said Williams, now deputy superintendent for organizational development in Montgomery County, Md. "Board members and administrators need to think differently, and employees and union leaders need to be involved in the decision-making process. If you make the right decision and work through all the issues that come up, the results are very positive."

Outsourcing Options
It’s possible to outsource any function outside an organization’s core activity. School systems are using contract services that include custodial care, facility maintenance, energy management, grounds keeping, food service, security, transportation, technology, computers and networks, laundry and linen, supply and equipment purchasing and accounting and billing.

Sometimes outsourcing offers a clear solution to an overwhelming problem. An unprecedented desegregation court order in Kansas City, Mo., several years ago required a massive upgrade of school facilities. "There was no way we could hire the specialized talent and purchase the equipment needed to maintain our upgraded buildings," said Bill Threatt, former associate superintendent for facilities in the district.

A facilities management contract enabled the financially strapped school district to improve custodial service and building maintenance while minimizing expenses.

Not every support service is a candidate for privatization. In both Kansas City and Dayton, outside contractors could not provide a more efficient or higher-quality cafeteria service than the school districts already had.

The school system’s technology requirements, however, made a compelling case for outsourcing in Dayton. "We knew our outdated mainframe computer was not equipped to take us into the 21st century," said Williams, who was Dayton’s superintendent from 1991 to 1999. "It was evident that we did not have the resources or expertise needed to implement a new computer system and train people to operate it."

The Dayton school district, with 27,580 students, retained its in-house food service operation and now uses a contractor for computer and technology services.

Although cost issues often trigger a move to outsource support services, successful contract arrangements often improve service quality as well as overall efficiency. Successful custodial services get high marks from teachers and staff, and some food service suppliers have succeeded in wooing more students to school cafeterias.

Employee Issues
The most controversial issue school districts generally encounter is the impact of outsourcing on employees. Employees and their unions frequently fight outsourcing proposals and may spark community opposition.

"Custodians came to school board meetings when we expanded outsourcing of custodial services," said Judson C. Crane, purchasing manager of the 18,420-student Santa Rosa County schools in Milton, Fla.

The fate of existing employees has been a sore issue in some outsourcing contracts. Some contractors prefer to transfer school district support employees to the contract firm’s payroll under a variety of arrangements. In some cases, employees are placed on the contractor’s payroll immediately. In others, employees continue to be employed by the district but are replaced with contract workers when they retire or leave. Some contractors will offer to interview existing employees but will not guarantee they will be hired.

"This was a big issue for our custodians," Crane said. "We made sure that nobody lost their job and gave people the option to stay on the school district’s payroll. There was a lot of skepticism initially and some attrition in the first few months. At this point, several years later, most custodians are satisfied with how things are going and we’re hearing few complaints."

A more popular approach is to retain existing support employees on the school district’s payroll but place them under the supervision of the service firm’s on-site managers. The result is a work force that is expertly managed, better trained and often more satisfied.

In Kansas City, the management contract for custodial services includes a full-time trainer. "No school district can afford to keep up with the complexities of new environmental and safety requirements," Threatt said. "For example, new regulations now prohibit us from using familiar household cleaners such as ammonia. Also, equipment in our new buildings requires much more skill to operate and maintain than was needed 20 years ago."

Contractors that specialize in custodial work, food service and other support functions often can motivate employees more effectively than a school district can. Williams noted that support employees are under-recognized in many school districts because educators’ primary focus is on teachers and students. In Dayton, the contractor sponsors an awards banquet for custodial employees.

Contractors’ Expertise
The greatest benefit of outsourcing is the efficiency and quality that result from expert management.

Effective work force scheduling, for example, can save labor costs without reducing employee wages and benefits. One school, for example, traditionally paid custodians overtime to clean up after basketball games. When the school district outsourced its custodial management, the service firm developed a flexible work schedule with a later shift on game nights to eliminate the need for overtime.

In another case, contract managers re-deployed employees to form a traveling outdoor crew that freed building custodians to concentrate on interior maintenance.

Professional management, coupled with new technology, can yield big savings in unexpected areas. "I never thought about how much we spent on water," Williams said. In the Dayton schools, urinals in the boys’ washrooms ran water continuously. A $45 sensor now shuts the water off when each washroom is not in use. The result: The district’s annual water bill is nearly $160,000 lower.

Dayton’s contractor also upgraded the schools’ lighting with a new system that saves more than $350,000 a year in energy costs and won a commendation from the U.S. Environmental Protection Agency. Even bigger savings may be possible in the future. Deregulation of energy utilities will give facility management contractors an opportunity to negotiate favorable electricity rates for school districts.

There’s also a payoff in improved quality when professional managers take over a school’s support services. Ralph Seeley, assistant superintendent for business in the 7,740-student Coppell, Texas, school system, said his district’s teachers and staff give the outside custodial service favorable ratings of more than 90 percent in periodic surveys.

"Our contractor surveys around 40 teachers per month on different campuses to gauge the quality of custodial service," Seeley said, adding that the contractor’s manager conducts a random building inspection weekly with the building principal.

A Culture Change
Outsourcing a support function represents a major change in a school district’s organizational culture. Administrators, in particular, face a new way of working with support services and an unaccustomed partnership with the contractor.

In Santa Rosa, the custodial service management contract replaced site-based management. "In some schools, custodians did strictly custodial work," said Crane, the purchasing manager in Santa Rosa County, Fla. "In others, they handled additional duties such as picking up supplies, working in the ticket booth and helping out in the cafeteria. We were overstaffed in some areas and understaffed in others."

In Dayton, outsourcing meant that principals had to relinquish some of their control over custodial services, such as the authority to authorize overtime. In return, however, the management contract freed principals from day-to-day administration of support services.

"Initially there’s a tendency to blame every glitch on the contractor," Williams said. "Once principals got accustomed to the new arrangement we began getting positive comments. Now principals report that they have more time to concentrate on teaching and learning instead of support services troubleshooting."

A management contract gives a school district a partner that can offer fresh thinking and new solutions. "Facility managers in many school districts are former principals or administrators," Williams said. Dayton’s contractor, he adds, brought in engineers and MBAs.

Forging Partnerships
In some cases an outside contractor actually shares financial risks with the school district. "We have a true public-private partnership," Threatt said. "When we started, the Kansas City schools needed more than a million dollars worth of equipment and supplies and the school district was broke." The district’s performance contract makes the contractor responsible for repairing and replacing equipment.

The need for close working relations and opportunities for partnership make a school district’s choice of an outsourcing supplier a critical decision.

"Schools need to consider the expertise of the company, its experience in working with school districts and the quality of the people they bring in as managers," Seeley said. "We’ve been fortunate in having the same manager in place for years. Without a good manager on-site, all the expertise at the company’s home office doesn’t mean a thing."

It’s also essential to enlist school district team members in selecting a contractor. In Santa Rosa, four bids for custodial service were reviewed by a 12-person committee that included administrators, board members, principals and the union president. "We didn’t just look at price," Crane said. "We studied the company’s history, visited sites, checked references and looked at other services each company offered."

The controversy that often surrounds an outsourcing decision does not end when the contract is signed. "There are always naysayers who do not want outsourcing to be successful," Williams said. "That’s why it’s important for the superintendent to lead the effort to make the partnership work and not delegate that responsibility."

The adjustment to an outsourcing partnership is a time-consuming process that may take several years of hard work and open communications among school administrators and contractors. The results are worth the effort, according to those who have been successful.

"It’s one of the best things we’ve accomplished," Williams said. "The support and expertise of our outsourcing partners allow us to focus on our No. 1 job: educating young people."

James McClure is a Chicago-based free-lance writer and consultant on labor issues. E-mail: jamcclure@mail.com. His clients include The ServiceMaster Co.