4 FM quick reads on Facility management
1. Use Hard Data About Benefits To Justify Funding For Facility Projects
Today's tip from Building Operating Management: Use hard data about benefits to justify funding for facility projects.
While showing the downside of saying “no” to requests for funding for facility projects is important, the real hay is made with hard data illustrating the benefits — financial and otherwise — to the company of saying "yes."
"Understand the benefits to the business," says Alan Whitson, president, Corporate Realty, Design & Management Institute. "Quantify those benefits, and then 'dollarize' those benefits." Whitson adds that it's critical to know and understand the financial terms, such as discount rate, cost of capital, hurdle rate, investment horizons, etc. And then know your organization's thresholds and parameters for those metrics, and which are most important. Always relate back to those metrics.
John Balzer, vice president, facility planning and development for Froedtert Hospital and Community Health, gives an example of a new work order service. The idea is to show how customer service would increase from x to y, and what the financial impact of that would be. "It's a little more challenging, but with specific measurements, which are necessary, showing a monetary return can be done."
Showing that monetary return (or hurdle rate, if your organization prefers) is often easiest with energy efficiency projects. Still, as sophisticated facility managers know, building the proposal in terms that show dollars and not kilowatt-hours is the tack to take. Know your organization's acceptable return rate, but understand that it may not always be set in stone. Finding rebates from the utility or the government to lower that ROI, is one way to make your proposal more attractive.
So is adding soft benefits to the proposal. That is a legitimate strategy, but you certainly don't want to hang your hopes on soft gains, say the experts. Jim Cooke, national facilities operations manager for Toyota Motor Sales, USA, puts it like this, in reference to a recent proposal for photovoltaic panels: "We know and you know there's social value, but we can't quantify it. It is another piece for customers to recognize that we behave responsibly in terms of sustainability."
Justify Funding By Showing Risks Of Delay On Facility Projects
Today's tip from Building Operating Management: Facility managers can justify funding by showing the risks of delay on facility projects.
For an out-of-budget-cycle project funding proposal, presenting a feasible risk/reward — or put another way, benefit of the project versus cost of doing nothing — is the key to success. There are as many ways to show risk/reward as there are project proposals. So facility managers, based on the relationship they've established with their executives, must determine what resonates the most. But some general rules do apply, ranging from making the case from the risks of doing nothing to the black-and-white financial figures.
For one, poor infrastructure can have a negative effect on how the public perceives an organization. Tim Pennigar, project manager, engineering and operations, Duke University Health Systems, says that because Duke University Health Systems get a lot of funding for research, a major component of his proposals is showing how catastrophic it would be to have a failure in, say, a roof over a research facility. Donors may not be so willing to contribute in the future, and Duke University Health Systems loses some of its prestige as a research institution.
"Our job is to keep buildings out of the way," says Pennigar. "If we are out there problem-solving, we're not useful. Our job needs to be problem-avoiders. It's one thing to lose a roof on a warehouse, it's another to lose one over a research facility."
Still, showing the risk to losing inventory in a warehouse is another way to calculate risk. "Point out how much the inventory in the warehouse is worth," says Alan Whitson, president, Corporate Realty, Design & Management Institute. "Then point out how much the inventory in the warehouse is worth if it gets wet." Along those lines, Bob Holesko, vice president of facilities for HEI Hotels and Resorts, says a key component of his proposals is showing that the buildings themselves are valuable assets. "We need to protect the building as an investment," he says.
Other risks of doing nothing, like increased insurance premiums — say, for not installing sprinklers, says Jim Cooke, national facilities operations manager for Toyota Motor Sales, USA — and the cost of business disruption are also a hugely important pieces of the risk calculation. "We can demonstrate the cost to the organization if we lose business," says John Balzer, vice president, facility planning and development for Froedtert Hospital and Community Health. "If we're out of service, people will seek other options and you may have lost a customer for good."
Be careful not to use the risks of doing nothing as scare tactics, say experts. It's important that these risks are rooted in reality. "You don't want to be the boy who cries wolf," says Holesko.
Three Points Can Help Facility Managers Justify Funding
Today's tip from Building Operating Management: Three points can help facility managers justify funding for facility projects.
The first point is basic: Facility managers must have confidence in their worth to the organization. "Sometimes people in facilities get too involved in the day-to-day activities to realize how critical they are to the organization," says Alan Whitson, president, Corporate Realty, Design & Management Institute. So understanding how much value facilities adds to the organization, and putting that into numbers at proposal time, is critical.
Part of knowing facilities' importance is gauging where you stand compared with other departments. When you're competing against other departments, the feeling can be at best, awkward, and at worst, contentious.
"You can feel the tension in the room when our chief engineer is pushing for money for new roofs, and another guy is asking for bell carts," says Bob Holesko, vice president of facilities for HEI Hotels and Resorts. The important thing to remember, though, is you're all on the same side, and therefore, be forceful, but not greedy. That leads to the second point: Only ask for what's reasonable. That is important for enhancing your credibility.
"If you know there's about $1 million, and you normally would get $200,000, don't go in there with $1 million in projects," says Holesko. "Have history on your side."
The third point is related to the second: In addition to having organizational history on your side, you will benefit from having personal history as a team player. "A lot of stacking the deck takes time to develop your professional reputation for being a straight shooter," says Tim Pennigar, project manager, engineering and operations, Duke University Health Systems. "You're competing with a lot of other departments for money, so if you've got a reputation for fudging the numbers to create an emergency, you're always going to get the leftovers."
Long Range Plan Helps Facility Managers Build Relationship With Finance
Today's tip from Building Operating Management: A long range plan helps facility managers build a solid relationship with the finance department, which can make it easier to justify funding for facility projects that aren't in the budget.
Money may not grow on trees, but if you successfully cultivate relationships with your organization's financial folks, the CFO's office can become just as natural a source of facility funding as the proverbial money treeg. However, it's not likely you'll go from zero to flush with cash in 30 seconds. As Jim Cooke, national facilities operations manager for Toyota Motor Sales, USA, says, "This isn't rocket science, but it sure isn't easy either."
In most cases, an out-of-cycle funding proposal assumes that money is required above and beyond what's included in the annual facility management or capital improvement budget. But facility managers need to start earning their credibility with that annual budget. At the end of the day, their track record for using budgeted money successfully is a huge factor in determining whether they might get more.
One tip in working with the financial folks on the annual budget is recognizing that the annual budget doesn't just cover one year.
"If a facility manager doesn't have a long-range plan, at least five to 10 years, then that's something they need to immediately do," says John Balzer, vice president, facility planning and development for Froedtert Hospital and Community Health. "You have lots more credibility when it looks like you've thought a proposal through rather than being reactive."
That basically means, if a building system is near failure, constantly reminding the financial folks in the budgeting process that aif projects continue to be put offs to be unfunded. [reminding them of what?] Be as detailed as possible regarding how money in the budget will be spent, and show the consequences and risks if a project is put off for another year. "The CFO has a short-term memory,"says Bob Holesko, vice president of facilities for HEI Hotels and Resorts. "It's always important to remind him or her about what you've spent to keep something in service. There's no sense spending good money on a bad system."