Service is key to margin of success

(23/07/2001)

FOR YEARS THE MANNED guarding industry has talked of the need to raise profit margins, yet despite all the talk, margins in the industry remain notoriously low.

BSIA chairman David Cowden, who will become executive chairman of the association when current chief executive David Fletcher retires next April, reckons that manned security companies need to change the way they pursue contracts if they are to raise quality of service, and with it profit margins.

Cowden says: "The industry has got to stop being busy fools, and stop chasing volume at any price."

All too often, clients insist on paying a low price for guarding services, forcing guarding companies to cut costs. "They're forced to keep on looking at prices; they go to guards' wages, then the level of supervision and management," says Cowden.

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"Unless that churn rate goes down, we can't make progress in service quality." - David Cowden, BSIA chairman

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Instead of cutting costs, improving quality of service is the key to raising margins in the manned guarding industry, says Cowden. "We must concentrate on getting quality of service sorted out," he urges. "Regulation won't by itself raise the quality within manned guarding."

Cowden believes that before quality of service can be markedly improved, turnover of security officers must be reduced. He cites a BSIA survey from 1997 which found that the turnover of staff in the manned guarding sector was more than 75% per year, with the better guarding companies still experiencing turnover of more than 35%.

He says: "Unless that churn rate goes down, we can't make progress in service quality…Once you've actually done that, the companies will begin to charge more."

Industry acknowledgement

Cowden says that a number of the UK guarding companies he speaks to regularly acknowledge the need to reduce turnover. At the ASIS European Conference in London in May, Thomas Berglund, CEO of Securitas, called for UK guarding companies to pay their officers more and train them properly to encourage them to stay in the manned security industry.

Cowden agrees with Berglund: "We need to make a career in guarding much more appealing," he says. The BSIA chairman is to visit Sweden and Denmark next month (August 2001) to assess the training models for security officers in those countries and find out what the UK can learn from them.

The manned security industry must raise its game if it is to compete successfully for labour with other industries, emphasises Cowden: "There are an awful lot of service sectors, and everybody is trying to dip into the same pool of labour," he says.

Chicken and egg

Investment in technology to complement security manpower can also improve the quality of service provided by guarding companies, says Cowden, but he points out that there is a 'chicken and egg' situation here - with margins currently being so low, it is hard for manned security companies to invest in the research needed to integrate technology and manpower.

"There is a balance between technology and manpower, but it takes money on part of the supplier in developing the systems," says Cowden. "That's where margin comes in. The manned guarding industry is not in a position to invest in that research at the moment - it simply hasn't got the money."

Cowden hopes to lead efforts to improve quality of service within the manned guarding industry via the BSIA's Manned Security Section. He says: "Given that the top end of the market - and I don't have any connotations on size [of company] here - are members of the BSIA we can do it through a members' forum.

"That's where there's a role for the BSIA to play in bringing companies together to try and establish a new set of standards covering these issues. No-one can do it in isolation, there has to be a general consensus," says Cowden.

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"The justification for higher margins becomes tougher as the traditional manned guarding company digs its heals in." - Keith Francis, Vision Security Group

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Cowden's is optimistic that the major players in the manned security sector are committed to raising quality and moving away from the 'lowest price wins' culture, but Keith Francis, sales and marketing director for Vision Security Group (VSG), has his doubts.

The Northampton-based guarding company, formed by senior managers who previously worked for Firm Security Group prior to its acquisition by Williams PLC, has enjoyed rapid growth in the space of twelve months and now employs around 300 staff. VSG turned over £6.5 million in its first year and boasts a growing portfolio of blue-chip clients, including Nestlé and Fortnum and Mason.

In bidding for contracts, though, VSG keeps coming up against major manned guarding companies who are bidding for contracts primarily on price, rather than quality.

Francis says: "In the last six months it has been surprising just how aggressive they've been in keeping their business. The justification for higher margins becomes tougher as the traditional manned guarding company digs its heals in." Unless you're prepared to cut costs or margins, as a guarding provider you have to walk away from many deals with major end-users, he says.

Menu pricing

Francis believes that both manned guarding providers and their customers would benefit from what he calls 'menu pricing'.

He explains: "What we tend to get now is that somebody will get a price for providing security and we [the manned security provider] would list added value. In the past the industry has failed to deliver that because the client hasn't purchased key elements of added value.

Keith Francis, VSG: wants menu pricing

"If we had a menu price (listing a specific price for extra training and services], you get a licence for buying, say, the cost of training, and we would then deliver. We remove the grey area of added value, and that would help margins," says Francis.

Earlier this year, David Dickinson, director and general manager of Group 4 Immigration Services and former sales and marketing director for Group 4, told SecurityPark that replacing tendering with best value would help margins in the manned security sector. He said: "Now there is a minimum wage, how are you going to get your price down? You do so through best value. You agree their costs, and you save yourself the trouble of constantly re-tendering."

But VSG's Francis says longer term deals don't necessarily help margins. "The end-user doesn't necessarily spend more," he says. "There is no benefit for the supplier other than stability."

Impact of regulation

Group 4 Falck hopes that regulation, and licensing of contract security staff, will lead to lower turnover improved quality of service and better margins in the manned security industry.

A spokesman for Group 4 told SecurityPark: "Once the Act and regulation of the industry takes effect, standards of service to the customer will improve, and it will make the security industry a better employer of its people. As a consequence of the industry being a better employer and giving better performance to clients, margins are bound to improve."

"Once the customers see the benefits of proper training, proper equipment and alike, they will be happy to pay the price," the spokesman added."

VSG's Francis, though, thinks regulation will have a neutral effect. "Clients will welcome regulation, and the costs will be passe

Related topics:  Manned Security and Security Guard 

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