ISS: Acting Local, Going Global – Jakob Stausholm
The facilities management industry has expanded greatly over the past two decades to include a broader level of service with an even greater global reach. Jakob Stausholm, group CFO of ISS, tells Steve Dunkerley about how integration and globalisation are driving value creation in 2010.
In the spring edition of FDE Jeff Gravenhorst, group CEO of ISS, provided insight into the changing nature of the facilities management (FM) industry over the past 20 years. During the 1990s, FM firms might have won an office cleaning contract at a single location. Modern contracts, however, bundle facility management, cleaning, security, catering, property and support services in a package that covers a number of buildings in several locations around the world. This growth is set to continue; according to analyst Frost and Sullivan, the European integrated FM market will be worth €17bn by 2015.
When Jakob Stausholm joined ISS as Gravenhorst's successor as CFO, he spent an extensive first year visiting the company's client sites. For Stausholm, this global induction provided a valuable global overview of the organisation, its clients and the outsourcing business in general.
Steve Dunkerley: What are the cultural challenges of working for a global company?
Jakob Stausholm: I have lived in a number of different places in Europe, Latin America and the Far East. If you look at ISS, we have more than half a million employees, of which only a hundred are based in our headquarters in Copenhagen.
In my first year with the company I visited more than 30 countries and returned to some several times. I travelled a lot to learn, meet our staff and customers, and to really get a feel for the industry. Our sector is distinct in many ways, but mainly because of our workforce. The things we do are not in our offices or plants but at our customers' sites. We work at many locations. And we are not a company with a lot of Danish expatriates: we have a local presence and almost always use a local country manager.
SD: Is being a global company with a local presence popular with clients?
JS: I think that all companies are asking how they can organise themselves in the most efficient way and it's clear that engaging with a global partner such as ISS can make savings in terms of outsourcing. You need less supervision and fewer activities. Also, our customers have more leverage in their procurement process, which forces us to be more efficient because there are a number of synergies that can be explored with a bigger contract. We believe in integrating services onsite, partly because our business-specific solutions explore synergies by integrating service lines, and partly because of efficiency in supervision and administration.
SD: Multinationals are often concerned that, when outsourcing, their service provider sub-contracts to another company. But ISS owns a lot of these companies. What benefit does that offer?
JS: We believe that our key differentiator is that we have a high percentage of self delivery, because only when you self deliver can you actively control the service. As a service provider, if you sub-contract, you take a risk, especially when you hire a new sub-contractor in the hope they will be better than the last one. We work closely with our customers and staff to determine the right service levels and to improve the quality of delivery.
SD: ISS grew through aggressive M&A, making 67 acquisitions in 2007 and 104 in 2008. Is the company still pursuing this strategy?
JS: Much less so. We emerged from the 1990s as the world's largest cleaning company. We changed our strategy when we realised we could offer something better in terms of integrated facility services. This required us to develop a number of competencies. Some would take too long to develop and that is where the acquisitions helped. We have built platforms in our key countries that enable us to deliver the bulk of the services we want to deliver.
I am not saying that we are there yet, but we have a presence in our key markets, which is why we are not so acquisitive anymore. What we have said is that, for the moment, we are only selectively acquiring companies in the emerging markets. In general, what we are focused on is growing the business organically. We don't need to buy the contracts through acquisition; we prefer to win them in the market.
SD: You are fairly new to ISS, having joined in 2008. How have you settled in and what activities are consuming most of your time?
JS: Prior to ISS, I worked at Shell for 19 years where I was lucky to be inside an inspired learning environment with many capable people. However, the difference between the oil and gas industry and the service industry couldn't be greater. Shell is capital intensive and you have to think carefully about investment decisions.
By contrast, ISS is asset-light but manpower-intensive, so management and supervision of staff is critical. We're also exposed to commercial issues all the time. I have had four CFO jobs and I was chief internal auditor for Shell. The real challenge for me was to come to ISS and learn the world of services. Having Jeff Gravenhorst as a CEO, who had previously been CFO, assisted that transition.
The bread and butter for ISS is winning, delivering and retaining service contracts. For me, it has been an interesting move to step into a very commercial world and learn something different. That said, I learnt the core disciplines of finance in jobs at Shell.
SD: How is the finance function structured at ISS?
JS: We have thousands of staff, although at head office there are only a hundred people. In terms of people reporting directly to me, that is a relatively small number. I have regional CFOs reporting to regional CEOs and country CFOs reporting to country CEOs.
The way I work that is that every month I have my finance board. I meet with my functional leaders as well as my regional CFOs so that they have a strong functional agenda and see strong functional leadership.
But I want my finance staff to be an integrated part of the business, not a function sitting on the sidelines with me saying, 'you cannot do this', 'this was good' and 'this was bad'. I want them to be team players fighting and working for the company. By bringing that finance expertise to the heart of decision making, I think we're adding most value.
SD: Where do you see growth in terms of value?
JS: We have high-profile public and private customers. We're not working at a small level where it would be a different type of competition we're up against. One of the core strengths is the way we do business; our blue-chip characteristics, health, safety and environmental concerns are appreciated by the companies that are after bigger contracts. We have a large business with quite a variety of customers. Recent deals include a global contract with Sony Ericsson earlier this year across multiple locations and facilities, and, most recently, we were chosen as the preferred bidder for Citibank across EMEA.
SD: What is your message to fellow CFOs?
JS: The world is not getting easier and the markets are getting less predictable, so you need to be versatile. It's not just a matter of cost cutting; you have to seek out value. We certainly had a tough time in 2009 but we shouldn't stop trying to be more efficient. We shouldn't forget that we are in a period of growth and we want to be out there in the marketplace.
A good CFO should be able to steer a company towards growth while at the same time ensuring that the organisation is cost efficient and well controlled.