SIA licensing and regulation: the clients’ perspectives

RESPONSIBLE SECURITY COMPANIES will have addressed the issue of licensing with their individual client bases and – hopefully – agreed upon a schedule for tackling the licensing process and the inherent costs therein.

However, what’s the level of understanding among customers? Are they prepared to pay more for a (value-added) service? Will those who currently contract-out their security provision decide to go in-house and save costs?

The industry needs to know what the clients genuinely believe will be the outcome of regulation. For this reason, Wilson James – in conjunction with Security Management Today – decided to undertake an extensive research project eliciting client views on what they feel will happen to security services (and the private sector) over the next two years.

Of the 35 major clients surveyed between August and December 2004, the majority were outside of Wilson James’ own client base such that a true representation of the market was ensured. Clients questioned included companies spanning telecommunications, banking and finance, the pharmaceutical sector, IT, insurance and education, with the bespoke questionnaire used being distributed to an equal number of security and facilities managers.

The questions asked of each participant were divided into four main areas: knowledge and information, costs, the general perceived impact of regulation on the industry and individual implications per each client.

Information sources

Clients were asked to rate the provision of information on licensing provided by the SIA, the BSIA, the trade press, contractors and industry colleagues. The interviewees were asked to give a rating on a scale of 1-6, where 1 is excellent and 6 is a poor result (indicating that they’d never received any information from that source). Contractors won out, scoring an average of 2.6.

The SIA and the BSIA fared less well, with average ratings of 3.8 and 4.4 respectively. Given that the BSIA focuses its communication efforts primarily on member companies rather than end users, this result is hardly surprising. The SIA score is disappointing, with some clients indicating that they hadn’t even heard of the SIA, or didn’t know about its role. Given the sheer volume of material issued by the regulator since its official launch in April 2003, this could be construed as an indictment of the client base.

Nonetheless, some of the general comments made by interviewees appeared to uphold their views on the regulator. Several felt that end users should have been better consulted and subsequently provided with quick and accurate information by the SIA throughout the licensing process.

Louis Malin, security director at Citigroup, commented: “The SIA has not divulged information in the right way. There has been no big impact, and they have not made certain elements clear enough. What is the licensing paying for, and what’s the genuine advantage to clients?” Malin also suggested that it would be beneficial for the SIA to research the ongoing results and impact of licensing, including the movements of officers, changes in pay rates and any variances in working hours and conditions.

Do clients have any concerns or queries about licensing which they feel are not being adequately addressed by either their contractor or the industry bodies involved in implementing these changes?

When responding to this question, a third of interviewees elicited concerns including the subject of recruiting overseas workers, roll-out timings and what were generally described as ‘grey areas’. 20% of respondents indicated that, for them, they simply hadn’t received enough information on regulation from the relevant authorities, and were concerned over the lack of hard facts and projected outcomes being communicated to end users.

The head of UK security for one of the world’s largest software companies added: “The roll-out is a big concern. Next year’s cut-off date by which officers must be licensed to operate legally places a great deal of pressure on contractors to devise an interim plan since there’s no incentive for a client to pay for licensing before it becomes mandatory.”

It should be noted that these comments do not take into account some of the more recent communications issued by the SIA, many of which address the chief executives of larger corporations.

The cost of SIA licensing

Clients were then asked if they anticipated costs rising in the areas of recruitment, wages, training and administration. The responses varied enormously here. 63% suggested that recruitment would be a cost concern, while almost an equal number felt that training would be affected. Only 55% of the interviewees believed that wage costs would increase, while 47% remained concerned over administration costs.

By how much do you think these costs will increase overall (on a per head basis) during the first year of licensing, excluding the cost of the licence? Up to £100? Up to £250? Up to £500? By up to £1,000, or perhaps more? When asked to place an estimate on the cost increase for recruitment, wages, training and administration functions alone (ie excluding the cost of the licence fee itself), 30% of respondents believed that the figure could be between £500 and £1,000.

Nearly 10% felt that the cost rise could be as much as £1,000 per head once potential wage inflation and additional staff recruitment and retention programmes are taken into account.

What is of most interest, perhaps, is whether clients see those additional costs as being covered by their own budgets or their contractor(s)? Interestingly, 54% of those clients questioned felt that clients should foot the bill for the increases. Only 20% suggested their contractors should bear the total financial burden. The remainder favoured a combination.

One of the $64,000 questions on everyone’s lips is who should pay the cost of the licence fee itself? Contractor, client or officer? In this survey, only 24% of clients believed they should pick up the tab. 55% want the officers to pay the fee. A respondent stated: “Since the licence fee is for an individual officer, it should be that officer who takes responsibility. Potentially, contractors and clients already stand to lose a lot of money through additional recruitment and retention costs, particularly if money is spent on providing the extra training for officers who then leave once they’ve qualified to hold the SIA licence.”

Importantly, the client concerned then added a footnote. “This may add to the retention and recruitment difficulties, but it is potentially a vicious cycle and has no clear solution”. One solution suggested by over 20% of respondents is that the cost of the licence fee ought to be shared in various proportions between client, contractor and the individual officer to achieve the best possible situation for everyone involved.

One wonders what the perception of regulation and licensing really is among budget holders and Board level directors of security companies? When asked about the awareness of Board level directors, an alarming 63% of those security and facilities managers questioned suggested that they didn't think their senior colleagues were particularly aware of the cost implications (or indeed any other potential impacts) of licensing.

Hopefully, those letters from the SIA to chief executives may have changed that scenario somewhat.

Impact... and implications

Clients were then asked to sum up their views on the impact of licensing on costs, work performance, value for money, staff recruitment and staff retention. On a scale of one to five (where five is the highest impact), cost scored the highest average by far (at 2.1). Staff recruitment and retention were the other areas of most concern. Those clients ‘interviewed’ felt that the areas in which licensing would have the least impact would be on work performance and value for money in terms of the service they receive from their security provider(s).

To be frank, this is a worrying trend, and may well indicate the fact that the key messages the industry is attempting to communicate to clients with regards to individual and industry improvement aren’t hitting home.

One client involved in the survey – the security manager for a major facilities management company – aired his hopes for the future. “The situation will evolve over the next ten years or so such that the industry plays host to a specialist security workforce. One that can assist the extended policing family on issues like surveillance and petty crime. Security officers may also be more receptive to a whole range of new and diverse tasks.”

Short and long term effects

Not surprisingly, perhaps, the majority of interviewees felt that increased costs would be the overwhelming short term consequence of licensing, and the most visible outcome. While it is reassuring to see that clients recognise that a long term effect of licensing would be better qualified staff, increased value of service and higher levels of officer retention, they do not seem to feel that these ‘variables’ will be particularly visible to them as end users.

Whether this is because their focus as business operators is on the obstacles rather than the positive benefits – or whether this is simply due to a lack of communication on these points – is difficult to say, but it’s an area that must be addressed. Some respondents explained that although they thought skills across the country would improve, they felt they already employed the highest calibre recruits and this is why they anticipated the difference in their own service would be little.

The consensus also seemed to be that while there might be short and longer term difficulties in recruiting new security operatives, any initial retention problems would decrease over time and translate into better overall staff retention in the long run.

Of concern was that under 20% of interviewees anticipated there being any staff retention problems. Given that 76% of client security or facilities managers felt the individual officer should shoulder some of the licence fee cost, this is a somewhat surprising result.

Passing on the cost of a licence to a given officer can potentially create huge recruitment and retention difficulties for contractors, in particular if competitors are offering to pay the cost for them and provide other benefits to aid their own recruitment and retention. Many security companies have already predicted that poaching of high calibre officers will be rife in the short term as contractors fight to bring in enough staff from an ever-decreasing labour pool.

In addition to this, some participants in the survey recognised that wage inflation would be a necessary outcome of regulation. Again, this would suggest that the full impact of potential poaching and other recruitment or retention difficulties hasn’t been effectively communicated to end users.

Will clients reassess their security provision in view of licensing? Will they consider changing anything about their security operation to offset or balance the likely effects? One third of those managers questioned said they’d reassess their security provision as a direct result of licensing, while over half are already considering making changes that will offset any increases in service costs.

Increasing the use of technology and/or changing shift patterns were but two solutions identified.

Comments made suggested that most clients would not be willing to consider any cost saving ideas which resulted in a reduced service delivery and that, while technology is indeed important, it still needs to be backed up by consistent and skilled manning to ensure a valuable overall service.