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CHICAGO, IL

Vested: Jones Lang LaSalle, Procter & Gamble Illustrate Five Rules of Transformative Outsourcing

Real estate outsourcing movement featured in new book showcases best practices for successful corporate real estate relationships 


CHICAGO, Dec. 6, 2012 – Many companies have outsourced non-core operations, but few have managed the real estate outsourced relationship as effectively—and unconventionally—as Procter & Gamble (NYSE:PG), according to author, and innovator of the Vested® business model, Kate Vitasek. In her new book, Vested: How P&G, McDonald’s and Microsoft are Redefining Winning in Business Relationships, Vitasek tells the story of how the consumer product manufacturer’s relationship with Jones Lang LaSalle (NYSE:JLL) transformed the contracting approach to corporate real estate in what was the largest facilities outsourcing deal in history.

In P&G and JLL’s agreement, both companies shared in the risk and the reward of the business with a Vested “What’s in it or We” approach and focus on mutual success. Their contract covered 40 separate areas of shared responsibility including facility management, project management and strategic occupancy services in 60 countries, an uncharted scope that neither company had achieved prior.

 

Through transformative contract parameters originally established in 2003, Jones Lang LaSalle was empowered to deliver on P&G’s goals of achieving cost efficiency while exceeding customer satisfaction targets for six consecutive years. During that time, P&G’s Global Business Services (GBS) division reduced cost as a percentage of sales by 33 percent for its outsourced operations including the work with Jones Lang LaSalle, says P&G in Vested.

Unlike a traditional outsourced or business relationship, in which the real estate services provider focuses on daily service and the client corporation focuses on strategy, P&G and JLL are equally “Vested” in driving cost savings while maintaining guaranteed service levels, said Global Chief Operating Officer of Jones Lang LaSalle’s Corporate Solutions business Bill Thummel. ”We recognized very early on that we could positively impact P&G’s productivity, if together, we could shift the economics of outsourcing to an outcome-based approach focused on results, not individual tasks,” said Thummel.

Five Rules of Successful Vested Relationships
Vested illustrates, through the P&G and JLL story, five rules of successful Vested - relationships:

  • Rule 1: Focus on outcomes, not transactions. Jones Lang LaSalle’s compensation was linked to its success in achieving specific outcomes established in collaboration with P&G – not on property commissions. Charged with bringing new ideas to the work and determining best methods, this structure ensures that both parties share a vested interest in driving transformation.
  • Rule 2: Focus on the what, not the how. Rather than defining service minutia in the contract, P&G delegated these details to JLL. At the outset, approximately 550 P&G employees were transferred to JLL. Most had never worked for a real estate services provider or even any company other than P&G, but P&G trusted JLL to effect the change in mindset and motivate the new employees to drive innovation for their former employer.
  • Rule 3: Establish clear and measurable desired outcomes. JLL worked with P&G to define big picture results rather than measuring the program against task performance. Each year the two companies jointly review the defined measures to determine the extent to which the desired outcomes were achieved. For example in 2005, the companies focused on the successful integration of P&G’s Gillette and Wella acquisitions. 
  • Rule 4: Create a pricing model with incentives. Four key components define the incentivization model in the JLL – P&G contract. The cost pass-through arrangement is structured so JLL manages the budget and costs, but P&G retains responsibility for the bills, while the management fee at risk structure creates increased accountability for results with P&G withholding a portion of the JLL management fee until results are achieved. The model also includes a structured approach to compensation for above-base scope projects; and lastly, JLL receives shared savings incentives when it helps P&G reduce costs.
  • Rule 5: Insight versus oversight. P&G and JLL incorporated a proactive governance structure into their contract to ensure an ongoing “win-win” relationship, establishing both companies as co-owners of the corporate real estate function, with shared goals and communication processes aligned with both organizations.

Results Behind the Rules
During the companies’ first five years under contract, Jones Lang LaSalle evolved from being the newest of P&G’s 80,000 vendors to being “Supplier of the Year” for two years in a row and winning the P&G GBS Excellence Award for three years in a row. In May 2012, the two companies announced a five-year renewal of their agreement.

Vested: How P&G, McDonald’s and Microsoft are Redefining Winning in Business Relationships is available on Amazon. For a new case study summarizing the P&G and JLL relationship, visit the Vested website library at http://www.vestedway.com/vested-library/

A leader in the real estate outsourcing field, Jones Lang LaSalle’s Corporate Solutions business helps corporations improve productivity in the cost, efficiency and performance of their national, regional or global real estate portfolios by creating outsourcing partnerships to manage and execute a range of corporate real estate services. This service delivery capability helps  corporations improve business performance, particularly as companies turn to the outsourcing of their real estate activity as a way to manage expenses and enhance profitability.

For more news, videos and research resources on Jones Lang LaSalle, please visit our U.S. media center Web page. Bookmark it here: http://www.us.am.joneslanglasalle.com/UnitedStates/EN-US/Pages/News.aspx

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47 billion of assets under management. For further information, please visit www.joneslanglasalle.com.