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How BP and JLL Are Reinventing the Strategic Outsourcing of Real Estate
In 2020, international energy company BP (formerly British Petroleum) set out to reorganize and redefine itself as an integrated energy concern, with a new mix of product sources to reflect the world’s transition to a lower-carbon future.
The effort encompassed how BP works with strategic suppliers such as real estate services company Jones Lang Lasalle (JLL) for its global workplaces, including real estate and facilities management, and small workplace and capital projects.
Wendy Cuthbert, BP’s global head of workplace solutions, encouraged the company’s workplace leaders to explore the University of Tennessee’s (UT) “vested” methodology, which aims to create highly collaborative business relationships, in which the parties are mutually committed to each other’s success.
In the spring of 2020, BP selected JLL to help it shift from four primary suppliers of real estate management to one global provider. A joint BP-JLL deal architect team (DAT) set out to reduce costs, increase service levels and achieve workplace sustainability goals, while simultaneously ensuring that JLL would benefit from incentives for increasing BP’s profits.
At the outset, the parties sought to move from a transactional business model (i.e., paying per transaction) to one that was “outcome-based.” A key step toward that effort was to define a shared vision, built on six mutually desired results.
Next, the parties set out to rethink how they would approach the scope of work. At BP, it’s vast, spanning 92 sites in 32 countries around the world. Facility types range from BP’s expansive corporate campuses and sprawling R&D facilities in Pangbourne, U.K., to strategic data centers and even a one-story childcare facility.
The conventional approach to such an initiative is for the buyer to create a detailed statement of work (SOW) by which it defines its requirements. The vested methodology flipped this on its head, challenging BP to acknowledge JLL as the true expert in the services it would provide. Together, they formed a taxonomy — an inventory of the work needed to achieve the shared vision and desired outcomes. At the same time, a defined workload allocation outlined not only JLL’s responsibilities, but also BP’s commitment to supporting the partnership. As the parties rethought how workplace services could be delivered, they created a list of “ponies” — transformation initiatives crafted to support continuous improvement or larger-scale innovations.
Next, the DAT set out to rethink how BP measured success in its vendor relationships. The usual method is for a buyer to use service-level agreements (SLAs) to measure how well the supplier meets a specific requirement. Instead, the parties defined success not according to discrete tasks, but against the mutually defined desired outcomes, linked to 11 strategic metrics.
Under the innovative pricing model, the more successfully the parties deliver on BP’s transformation goals, the more JLL benefits from earned incentives. Key features of the model included the creation of full transparency, so that the parties could identify the true cost drivers for both organizations, and reward JLL for achieving non-cost-related outcomes, such as helping BP meet its workplace zero-emissions goals. A “safety lock” meant that JLL must achieve a certain safety threshold to gain additional rewards.
Lastly, a governance framework was put into place that involved BP and JLL team members working closely together to create comprehensive processes for managing the relationship, transformation initiatives, and compliance and regulatory needs.
As a result of implementing the program of change, BP and JLL say they developed a “what’s-in-it-for-we” mindset, rather than the traditional buyer-supplier approach. This shift has produced real benefits, they say, empowering team members to challenge the status quo and continue to find ponies that create value for both parties. Team members use a mobile app and supporting portal to submit, keep track of and celebrate ponies, ranging from process efficiency to system and technology improvements, and reduction of the workplace carbon footprint.
The results underscore what team members call the” power of and,” leading to lower costs for BP’s procurement organization, record operational results for its workplace groups, and higher profits for JLL.
In the first year of the initiative alone, the companies delivered more than 100 transformation initiatives designed to create value against the desired outcomes. Yet despite these concrete results, the partners insist that the most satisfying outcome for all team members was the cultural shift that arose from the vested model.
For BP and JLL, team members are adamant that the real innovation isn’t the hundreds of fresh ideas that were implemented under the initiative. Rather, it lies in the way they deployed the vested “win-win” business model to drive innovation in everything the companies do, delivering value that transcends any one outcome.
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