For far too long, security companies and their customers have enabled each other in a race to the bottom of the price spectrum. Cost has become not only the dominant criterion for bid evaluation, but in far too many cases the only criterion. But while short-term savings are of course possible, in the long term there are no winners in this marathon of cost cutting.
The commoditization of security services is shrinking the pool of qualified labor in what is already a tight job market. It threatens the livelihoods of millions and general confidence in what we do. But most alarmingly, it undermines the very purpose of our services: the protection of our customers’ people, assets and reputations.
In this blog, Rebekah Wells takes a hard look at the causes of the never-ending downward price spiral and why security providers and users should re-think wages and benefits to reverse this debilitating trend.
The security industry is pricing itself out of relevance. Not because our prices are too high, but because they are too low. In many markets, a full-time security officer doesn’t even come close to making a living wage and must work a second or even third job to make ends meet. Given the purpose of our work, protecting people and assets, and the millions of livelihoods involved, this is not a sustainable situation. The time has come to face its consequences on both sides of the negotiating table.
I know, I know: everyone wants to get paid more. And yes, like any other business, the security industry is highly competitive, and it is the responsibility of corporate and government procurement professionals to source the lowest price and best value possible. I’ve been in this industry for a long time now, and I’m not here to complain about competition or price pressure – these are facts of doing business
The commoditization of the security industry
What I would like to point out with this blog is that the value side of the price-value equation has eroded to a disturbing degree. The near-exclusive focus on price leaves little interest or bandwidth for qualitative factors upon which sustainable program success depend. In short, we are witnessing the commoditization of the security industry.
When economists talk about commoditization, they describe a process in which goods and services that provide value – and are differentiated from each other due to functional, operational, qualitative or other attributes – become indistinguishable from each other. When goods and services are exactly similar then buyers quite naturally go for the cheapest option. Think crude oil futures, not your corner gas station. Think oats for sale by the ton on the Chicago Mercantile Exchange, not your favorite oatmeal brand.
For better or for worse, security officer services are increasingly viewed as a commodity. In a business that is directly dependent on the quality of its people and processes, price is becoming the only factor that distinguishes between competing providers. Bidding processes shun critical but admittedly complex and time-consuming comparisons of “value”, and instead skew invariably towards cost.
But is it true that the services of different security providers are identical and undifferentiated? As someone who has worked in a variety of companies and capacities in the industry, I can confidently answer: No, of course not. Security companies do have different approaches, quality does vary, and some companies do get more things right than others.
LPTA works best when there is no performance risk. So why are we using it to evaluate security service proposals designed to mitigate risk?
RFP responses used to be evaluated according to “best value” or lowest “responsive” (conforms to bid specs and legal requirements) and “responsible” (presumed probability of living up to financial, quality, performance and timing requirements) bids. Now, they now routinely refer to “lowest price, technically acceptable” bids, or LPTAs.
The LPTA process favors the lowest price as long as other proposal criteria are scored “acceptable” rather than “unacceptable”, a pass-fail evaluation typically based on quantitative rather than qualitative criteria.
And LPTAs certainly have their place, especially in bidding processes where deliveries are simple rather than complex and performance risk is either minimal or irrelevant. As we know, this is not the case for security contracts. While we won’t quibble on the complexity of what we do relative to other services, the performance risk of security service providers most certainly does matter when it comes to mitigating risks to people and assets, not to mention duty of care and liability issues.
The problem with using LPTA for security officer procurement is that it can be difficult for RFP authors and evaluators to understand and define the requirements that underpin sustainable risk mitigation. While quantitative factors such as headcount, uniforms and shift coverage are easy to specify, for example, qualitative factors specific to the security industry, such as the importance of skilled management and the SOPs to mitigate risk through managed labor, are not.
Security is a people business, and commoditization is making it harder to hire the right people
So why does any of this matter, really? Because until someone figures out either how to eliminate all threats or to harness robots and artificial intelligence to provide security, ours is a business that depends on people.
Let’s use the HR department’s mission – hiring, developing and retaining talent – to better understand how commoditization is impacting us and our customers.
Even with acceptable benefits, without a decent starting wage hiring great people is a challenge no matter what industry you’re in. In the security industry, where entry-level officers earn close to the minimum wage, the challenge is even greater.
Does anyone think that wages that don’t even cover the cost of living are attractive to the most talented job seekers? The territory I’m currently responsible for includes the West Coast and Nevada. We hire for places like San Francisco and Silicon Valley, some of the highest-cost communities in the country, and we’re competing for talent on a very uneven playing field.
But the same situation applies in many other markets, especially but not only those located in urban centers. The sad truth is that in many places security officer wages are not even close to what economists define as “living wages”: a salary high enough to cover the expenses of living locally. This means either that a security officer will face an extremely long commute to earn a low wage or will have to work an extra job to get by. Add a dependent child or two, and the math gets even worse. See, for example, MIT’s Living Wage Calculator if you’re interested in comparing security officer wages to wage estimates for your own community.
In addition, not only are wages often too low to meet financial responsibilities, but applicants are required to have clean criminal records, pass drug tests and be willing to work evenings, overnights and weekends and have minimal benefits. In fact, most PTO benefits in our industry are minimal at best, which results in an erosion of family/work balance.
Developing talent: Security officers often need to learn a wide variety of skills (operational, technical, medical, etc.) in order to perform optimally in their jobs. Importantly, some critical skills, such as first aid, are also perishable and need to be freshened up on a regular basis.
Of course, the company hiring the officers also has an interest in ongoing staff training so that they can develop and thrive, right? In theory, yes. In practice, not always.
RFP’s rarely contain any training requirements, and there is almost never any budget for it. Even though everyone can understand the need for staff development, the message to security companies is typically “you do it on your dime, not ours.” Some companies require personnel to complete training on their own time and they weave clever language in their policies in an attempt to get around the legal requirement to pay people. This sentiment is echoed by low-paid staff: You want me to invest time completing courses on your online learning portal? When, before or after I work my other eight-hour shift today?
When the client company perceives no benefit in paying for ongoing training, when job engagement and morale are not high enough to motivate staff to learn and grow on their own, and when margins are too thin to enable service providers to pay for it, staff development doesn’t happen. Which leads us to the security industry’s next challenge.
Retaining talent: For all of the reasons indicated above – and a few more we’ll get to below – it can be extremely difficult to retain the most talented security officers.
A wage differential of just ten to twenty-five cents an hour is enough to make many people leave one low-paid job for another. Ditto for marginally better benefits or slightly better working hours. Loyalty to a low-wage job is simply not great enough to justify earning anything less. And if you’re not learning and growing, just what could motivate you to stay on?
Career planning would help. Wage increases over time would, too. But while we can and do try to build such incentives into many programs, the economic realities often make them too little or too late to make much of a difference.
So how can security providers and customers dig ourselves out of the commoditization hole we have dug together?
If you’ve read this far you might think I’m ready to jump ship, too. Believe it or not, I’m an optimist.
The commoditization of security officer services is not an inevitable fact. While the phenomenon is widespread and probably here to stay in some market segments, it is not universal. Many clients do understand the value of security in a more nuanced and strategic way, and many security providers do differentiate their services in significant ways.
One effective way to start the process is to have companies compete not simply on overall bill rates, but on mark-up and its components. Either specify wages or ask for recommendations for the appropriate market wages based on the skill sets and expectations you set for security personnel and the turnover levels you deem acceptable for your facility.
I think the solution to our industry-wide problem will be found in the C-suite. When top managers gain insight into the why of security – mitigating risks that derive from well-understood threats and vulnerabilities – and develop more robust and comprehensive corporate risk management strategies, then different kinds of discussions ensue.
Of course, Chief Procurement Officers still drive hard bargains. That’s right and fair. But many Chief Supply Chain, Marketing and Finance Officers also have an increasingly strategic understanding of security for their own reasons.
Security officers play a key role in protecting the corporation’s strategic interests. If a business-critical data center can be brought down by a USB drive, then the marginal costs of specific training to intercept such items might be a good investment. If security officers are the first and last people visitors meet, then their role as a brand touchpoint might make a difference to the company’s reputation.
When security providers are good at articulating the value of security, client C-suites will understand the role that well-trained and highly motivated security officers play in strategic enterprise risk management. We need to get better at this for the sake of all stakeholders – our employees as well as our customers – and for the future of our industry.