ABM Industries Nears End of Five-Year Transition

The company's "2020 Vision" plan, involving a new go-to-market strategy, new operational efficiencies, and key technology upgrades, is in the home ...
David McCannJune 4, 2019
ABM Industries Nears End of Five-Year Transition

“We’ve just got to get organized!” pleaded comedic actor Jonathan Winters in the 1966 film, “The Russians Are Coming, the Russians Are Coming.”

It’s not the official motto of ABM Industries, but maybe it should be. For four years the company has been engaged in an exhaustive, three-phase effort to, well, get organized.

Called “2020 Vision,” the initiative began shortly after Anthony Scaglione was promoted to the CFO role at the $6.5 billion facilities management company in April 2015. It has encompassed a broad assortment of strategic and operational moves.

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The third and final phase, which began this year, involves modernizing the company’s technology.

“The one thing we never invested a lot in was our IT infrastructure,” Scaglione says. “ABM has historically been a very acquisitive company, and M&A continues to play a strategic role in the company’s evolution. But we didn’t do a true IT integration of the acquired companies, so we had a lot of legacy processes that created inefficiency in our ability to scale the company going forward.”

The first order of business in this phase of 2020 Vision has involved significant upgrades to ABM’s human resources technology. The company has 140,000 employees, about 130,000 of whom are field workers — janitors, engineers, technicians, and parking attendants — who perform client services.

“At the end of the day, we’re a labor company, for the most part,” says Scaglione. “We recognized that we needed to make additional investment to drive labor efficiencies.”

Blocking Punches

The field workers are hourly employees who “punch in” at the beginning of each shift. That meant that the single highest labor management priority in the company transformation was gaining greater control over what Scaglione calls the “small punch” — when employees clock in early.

Under the Fair Labor Standards Act and the laws in most U.S. states, employers must pay hourly workers from the time they punch in, even if it’s before the scheduled start of their shift. “In our industry, if you don’t stay compliant with that, eventually you’re going to get sued,” the CFO notes.

Anthony Scaglione

With so many hourly employees, “three minutes here and four minutes there add up pretty quickly,” he adds, suggesting that the problem was costing the company multiple millions of dollars per year. The solution was a cloud-based time and attendance system that allows ABM to monitor clock-ins and adjust employees’ remaining hours in nearly real time.

Several other elements of the company’s HR system were upgraded as well. For example, job candidates had to walk into an ABM office and fill out an application on a PC at a kiosk, or else manually fill one out, “if you can imagine that,” Scaglione says. “Now it’s all digitized. Candidates can actually apply for a job via text.”

New technology also now allows new employees to be onboarded and deployed much faster. Such changes are critical for the business, given the current tight labor market together with ABM’s vast human capital needs.

Now, the company is investing in its core human capital management system with an eye to driving organizational efficiencies.

“Historically we’ve been very manual in managing our employment structure,” says Scaglione. “You need to have some level of discipline there so the organization looks like a pyramid. When you don’t have tools to manage that, over time the pyramid de-morphs into more of a rounded shape, which drives inefficiencies. Now we’re investing in tools to measure productivity at the staff and management levels.”

The next phase of the IT improvements, a consolidation of ERPs across the many businesses the company has acquired over time, is also underway and expected to wrap up in about a year.

Knowing the Business

The first phase of 2020 Vision, designed and implemented in 2015 and 2016, was about leveraging cross-selling opportunities. It involved a fundamental restructuring of ABM’s business from one organized by geographies and service lines to one organized by clients’ industries.

The company has four primary categories of services: janitorial, engineering, parking, and technical (HVAC, mechanical, and electrical) services. The services are offered through 350-plus offices in the United States plus a small handful of international locations.

Its end-market groups are “business and industry” (consisting largely of downtown commercial office buildings); aviation; technology and manufacturing (which the company characterizes as “Silicon Valley”); heath care; and education.

“When we used to go to market along service lines [and geographies], think about a client on the East Coast that had a branch or division on the West Coast,” Scaglione says. “Our business partners wouldn’t necessarily know they were servicing the same client.

“And if a client was dealing with our aviation group in the East,” he continues, “it didn’t understand why our aviation group in the West wasn’t addressing its needs in a consistent fashion. It was a very [splintered] model in terms of what clients were looking to procure from us.”

Scaglione took over the CFO role shortly after the appointment of a new CEO, Scott Salmirs. The two began a process of interviewing customers, who, they discovered, were typically “procuring one of the four main service lines and didn’t know of the full suite of services we could provide,” Scaglione says.

The transition required alignment at the executive level. Many leaders had been at the company or one of its acquired entities for a long time. “We had to cobble together our data in a way that as we approached the end markets as experts, we really understood the drivers for each market and whether we had the appropriate teams to ultimately drive what we wanted from an organizational standpoint,” says Scaglione.

There was, of course, a fair amount of disruption to the business during implementation, especially among middle managers, who also had to acquire expertise in the end markets.

“The real value is going to be driven by the branch managers and project managers who are interfacing with the clients and can broaden the portfolio of services offered,” the CFO says.

He acknowledges that ABM is “still in the early stages of leveraging what we can provide in these end markets and driving the cross-selling that was a baseline [aspect of] 2020 Vision.”

However, he adds, there’s been very little disruption from the altered go-to-market strategy at the front-line level. The field workers are still servicing the same accounts. Additionally, surveys confirm that customers appreciate workers’ better understanding of ABM’s service lines.

Oiling the Machinery

The second phase of the company’s transition, which unfolded in 2016 and 2017, was aimed at rooting out operating inefficiencies.

Phase 2 had three major elements. One involved consolidating far-flung accounting centers into a shared-services environment. Another was building a professional procurement function — “each office had the authority to procure what it needed, and as you can imagine there was a lot of inefficiency that went along with not leveraging our scale,” Scaglione notes.

The third element was investing in and designing tools enabling more strategic account management. The tools organize information on what services are being provided to each client, potential opportunities to cross-sell sell or up-sell additional services, and plans and timelines for such sales efforts.

“Operators now have a roadmap that allows them to manage accounts more strategically,” says Scaglione. It also allows senior managers and presidents of the industry groups to have a clearer view of the accounts.

Assessing the overall rollout of 2020 Vision, he says the first two phases went “pretty much in line with our expectations.”

The third phase has proven to be the most challenging because it involves change management of the front-line service workers. “Realizing those benefits was harder and took longer than we originally anticipated,” he says.

The company has achieved the profit margin expansion that it laid out back in 2015, and exceeded it in some aspects, according to Scaglione. At the same time, ABM has faced new challenges along the way; for instance, labor costs increased “significantly more” than company executives had expected.

“However, with our focus and the investments we made, we successfully navigated much of that pressure, allowing us to look forward to the next chapter of our evolution,” the CFO adds.

ABM next will be looking to improve its data analytics on and digital interaction with customers. “Are we making it as easy and practical for the customer as we can? Does the customer have visibility into how we can help them run more efficiently? What’s the technology around that, and how are we going to drive that technology platform?”

There’s always room to get more organized.