David Dickinson – Static in more ways than one!

There has been much comment of late about margin erosion, competitive bidding practices and similar topics, but one point that I have not seen covered in any depth is the size of the licensed services sector.  Infologue’s annual industry (and therefore market-size) makes interesting, if dismal reading.  Since 2010 (and probably before that) the turnover for the licensed services sector has remained at best static and more likely reduced by a small amount.

In short, this is a mature market, and is now exhibiting the classic signs of lowered prices, intense (not to say occasionally vicious) pricing and mergers, acquisitions and business failures.  These circumstances make change inevitable – but what sort of change?  If I might be forgiven for going back to the hopeful mantra which accompanied the implementation of the Private Security Industry Act, “a profession not an industry, a career, not a job and value, not price”-  aspirational for sure, but, in the event, doomed as the same old ways continued or even worsened.  It’s easy to blame external forces for much of what has happened and is still happening.  But what, within our own reach can be done?  The control of costs is the biggest single contributor to profit and I do not mean control of wages!!  May I suggest that one very-much-overlooked area is the sheer cost of labour turnover.

In the late eighties, the Group 4 guarding companies embraced the concept of total quality management, as much to change some of the culture of the company, as to identify areas of improved service and profitability.  Those readers familiar with the TQM approach will recognise the phrase “the price of non-conformance”, commonly referred to as ‘the Ponc’.  This proved to be the best of all the concepts for achieving our goals and those goals were achieved handsomely over a number of years.  One of the biggest Ponc’s turned out to be labour turnover.  This was highlighted by a regional operations director at a management conference.  He told the audience, proudly, that his HR function has recruited ‘two hundred and fifty new security officers in the first quarter’ at an average cost of £1000 per head’.  He paused, looked around and said ‘sadly, we lost 249 officers in the same period, so that net gain of one person cost, effectively £250,000!’ His region’s labour turnover at the time was around 30%.  It was better than some and certainly below the industry average, but the costs were enormous.

It is clear that, across the regulated services sector as a whole, things are certainly no better if not worse, and the recruitment costs are likely to be much higher per head – but it doesn’t have to be like that!  The causes of labour turnover are well known with pay being the highest cause of dissatisfaction, but other factors come close – lack of opportunities is in second place and lack of appreciation a close third.  These factors were present, in a slightly different order, as long ago as 1990, the difference being that lack of appreciation was very much number one.  Whilst pay may take a while longer to address, the other issues (and there will be more or different ones in each company) can be addressed to changes in management style and priorities.  With licensing costs included, the cost per new recruit, taking in advertising, interviewing, vetting, uniform and training must surely be nearer £1500 today. With the job market opportunities increasing almost daily, keeping people becomes an even greater priority!

Maybe the mantra mentioned earlier is not out of date, after all!!