4 FM quick reads on budgets
1. Budget Success Means Changing Past Practices
History does not offer many useful lessons. A typical budget process goes like this:
- Get a copy of last year's budget.
- Review it and make adjustments as required.
- Submit it for approval.
- Top management returns and questions the budget, requesting a 15 percent reduction.
- Review, reduce, and resubmit the budget.
- Top management approves the budget — for 22 percent less than originally requested.
Instead of this worn-out approach, propose a multidisciplinary approach: zero-based budgeting using an equipment maintenance plan (EMP) and historical spending.
Zero-based budgeting does not reference or review previous expenditures. Instead, it requires that managers thoroughly re-evaluate all expenses requested, starting from zero. The benefits of using this approach are that it uncovers wasted or poorly used resources, identifies areas for improvement or potential reduction, and allocates time, resources, and staffing more efficiently and effectively.
Zero-based budgeting is action-based. This means managers must justify all department activities, including those related to human resources. Using this approach does take more time, as you can imagine. That is why I suggest using it in conjunction with the other two approaches in order to obtain the maximum benefits from the effort.
2. Facility Cost Cutting: Three Tips for Success
Today's tip from Building Operating Management: When facility managers have to cut costs, these three tips can help prevent problems.
1. Do thoughtful research before committing money to a project. "We are much more careful about the way we evaluate growth projects and spending in general," says Julie O'Loughlin, senior director of operations and facilities, Fenwick & West. The firm is just now beginning a $6 million expansion of a conference center, a project that was actually approved a year ago, because the firm took more time doing its homework. "We are pushing the limits in sustainability, quality and aesthetics," she says. When putting more time in on the front end, facility managers should aim for "multiple wins" and look beyond the fulfillment of immediate goals.
2. Try to maintain the same level of service. When it comes to cutting costs, potential savings should be carefully targeted. “It's important to maintain the same level of service and maintenance without spending the same money, and we have been successful at that," says O'Loughlin. For example, an expensive summer picnic was replaced with monthly events that highlight diversity — such as Martin Luther King Jr. Day or Cinco de Mayo.
3. Don't make cuts that will increase long term costs. SAP cut facility costs during the recession. For example, less time and effort was spent on replacing chairs, tables and carpet. "We are repurposing and extending the life of fixtures and finishes — carpet, wallpaper, light fixtures," says Larry Morgan, head of operations for SAP in Palo Alto and Vancouver. But the budget cuts did not sacrifice energy efficiency as a way of reducing first costs. When equipment must be purchased, efficiency is a priority. "A seven-year return on investment is the break point," says Morgan. "Sustainability and energy efficiency are two of our sacred cows."
This has been a Building Operating Management Tip of the Day. Thanks for listening.
3. Facility Managers Should Seek Allies in Other Departments
Today's topic is the value of having allies in other departments.
To win support from other departments, facility managers may have to go out of their way to learn how they can help those departments. Asking for more work may seem like the last thing a resource-strapped facility organization needs. But in the long run, the more that the facility department is seen as a resource, the more facility managers will build clout and the easier life gets to be.
Once other departments see the value of the facility department, you will have more people on your side in a staff meeting when you need to contest a budget cut or justify an investment. In the best case, the other departments will see your requests as ways to help them, not as ways to advance a narrow facility management agenda.
Being on good terms with other department heads can also reduce one of facility management's biggest headaches: being the last to know about changes that will affect the facility, like a departmental reorganization or plans for servers that will require additional cooling. What's more, facility managers who take care of other departments can call in favors when the time comes.