Stuart Lodge – Pricing and Standards in Security: is it a Downward Spiral?

 
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Monday, 5 December 2016

Stuart Lodge – Pricing and Standards in Security: is it a Downward Spiral?

Stuart Lodge, CEO of Lodge Service

Stuart Lodge, CEO of Lodge Service

In his latest blog for Infologue.com, Stuart Lodge, Chief Executive of Lodge Service, discusses standards and pricing. Stuart writes: “You get what you pay for – it is a truism that the suppliers and users in the security industry cannot get away from however much they try.

“For as long as ‘price’ is regarded as the prime, or even the only criterion for assessing competing security service providers, overall standards will continue to flat line, certainly in the absence of any legislation or mandatory standards by the SIA. This seems as far away as ever.

“Obsessive price-fixation ignores other important strategic issues such the ROI (Return on Investment) of security – the mitigation of risk, the cost savings and the increase in revenue for a user that can be achieved from a properly specified and managed programme.

“What is damaging the industry today is that there are a number of security companies who are quite prepared to take business for a charge rate for guarding services which is below what can be considered commercially or operationally feasible. They are paying their staff at very low pay rates: at a level that is lower than can support a sustainable level of competence or reliability of service.

“If the service level is that low, then why should a user invest in security protection at all? It creates a false sense of security that exposes the organisation to a range of risks – arguably even more risks than if no guard was present.

“The pressure on pricing is just as great for larger security companies as the smaller ones. Suppliers are judged on price by many customers most of the time. The companies that win the contract are those that want the business at any cost – an unscrupulous company or a company that is desperate to grow.

“Sometimes it is because the supplier needs the volume turnover as the board is under intense pressure from shareholders for growth.

“At the other end of the scale there are smaller companies who are trying to make their way who will pay minimum wage to get into contracts that are very heavily weighted on price. In one case the invitation to tender quite openly included advice in the published document that the weighting would be 65 per cent based on price.

“What is driving prices down is that procurement departments have become ever more heavily involved in selection of security suppliers over the last ten years, Sometimes their decision goes directly against security managers’ recommendations.

“As one senior manager in procurement said: “ it is very simple, there are only three things you have to remember: price, price and price again”. This tendency is not unique to the security sector. The role of the procurement manager in practice is to drive down pricing, quite ruthlessly

“The attitude is that if a potential supplier does not accept this ethos, they will always find a company that will. But the effect is to drive some companies to employ staff on the minimum wage or even less. It results in poor standards of performance in guarding and high staff turnover: if another job offer comes along at an extra 20p an hour the staff will move to it.

“Lower prices means lower standards in guarding, and probably no proper training or other investment in personnel: no development of skills.

“Counter to this is the growing demand by security users for added value through exemplary customer service. The guard is an ambassador for the organisation, a visible presence on the premises that will either support or detract from the brand.

“Some sectors are less price sensitive than others. The corporate office market has tended to offer better pay rates, to attract higher quality guarding – certainly in the case of the major financial institutions in the City of London, where ‘front of house’ service is valued.

“But overall margins for guarding are being driven down inexorably even in city centres. Where five years ago there were net margins of 6-10 per cent, they have fallen to just 3-4 per cent.

“The quality of the officers has not been directly affected in terms of their pay rates – not yet.

“So the quality of service delivery on site will get worse over a period of time. The incumbent supplier will continue to lose the contract as the customer sees service levels decline. And so the downward spiral goes on.

Solutions

“As an industry we have to stand firm and practice what we preach: that quality service has to be paid for. In the main this is not happening.

“In any security guarding company the managing director and board will all nod their heads and agree that they don’t operate at the lower end of the market; they want to invest in training their staff and supporting standards.

“But as an industry we need to have the guts to do it, to deliver.

“A key player of course is the SIA, and its role in helping to raise and sustain standards through legislative proposals. However, the SIA says it is unable to act on this, in an election year, on specific recommendations for licensing.

“The whole industry, including the NSI are left wondering what is going to happen and when. No dramatic change in standards or accreditation will come about for about 18 months at the very earliest because of the election it seems.

“As an industry, what we can do – all we can do – is stand firm and maintain sensible pricing at a sustainable level so the sector is able to employ and invest in officers for the immediate and longer term benefit of customers and of the industry.”

Lodge Service Website

Opinions expressed by contributors and commentators do not necessarily reflect the views of Infologue.com or Interconnective Limited.


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