How managers can move their organization from reactive emergencies to planned activities
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From the C-suite, the value of FM software is not obvious. Upper management has traditionally seen the facility department as a cost center, and top managers expect the justification for facility software to be in the form of savings. In reality, however, most of the value of FM software is derived from intangible benefits to the organization rather than direct savings. This makes it challenging for facility executives to justify the investment by quantifying the benefits.
Of course, FM software does make it possible to improve processes within the facility department. As important as those gains are, however, they are not the biggest benefit of the software nor the best argument to make to justify the software. The value added by increasing the productivity of FM customers — business units or other support functions — is far greater and is the most important factor in justifying automation to upper management.
In reality, the same thing is true with any software. Most of the value is not derived from direct cost saving or from reductions in effort needed to accomplish a task, but from improved processes, better services, and better strategic and tactical decisions. But these intangible benefits are much harder than cost savings to identify, quantify and present. Justification requires knowing the value of automation as much as proving the value of an application.
There are two general types of FM software. One is software that directly supports the customer’s needs. The other is software that helps the facility staff provide services to internal customers.
Facility-related software that directly supports the FM customer is usually justified by the customer or the IT department. Examples of software in this category are room reservation systems, grant management tools, drawing viewing tools, and work or service request systems.
The challenge for facility executives is justifying software that directly supports facility management tasks while indirectly providing value to the organization. This category includes space management, strategic space planning, property and lease management, telecom infrastructure management, energy management, preventive maintenance, project management, project collaboration, document management, CAD and CAFM systems.
While the justification approach is the same for each type of software, facility executives have to expend more effort justifying the latter because the value to the organization is indirect.
Typically, facility software has been justified by the savings on investment (SOI) it can generate. Certain FM software tools (typically transaction-based tools like work order management or preventive maintenance) are relatively easy to justify with cost savings metrics like reduced staff hours, reduced downtime for production, reduced energy costs and reduced capital expenditures through planned replacement. These tools reduce expenditures and therefore permit budgets to be reduced or reallocated.
The more complex facility management software tools like CAFM or integrated workplace management systems generate value indirectly. These types of applications support many functions and provide value by making it possible to share information and processes across many functions and departments.
Both kinds of tools can be evaluated in different ways. Simple work order systems will provide SOI by reducing effort within the facility department. More importantly, they can increase organizational productivity by making it easier to request services. For FM customers, the gains come through reduced effort, process improvement, higher quality of services and new services. The key is the increased value provided to the facility department’s customers rather than the increased productivity of the facility staff or a reduction in FM expenditures.
Cost savings, increases in FM department productivity, and increased level or quality of FM service should all be included in the justification, but the emphasis should be on the increases in productivity for the organization as a whole. Organizational value will strike a more responsive chord with upper management. Moreover, the indirect organizational value will be higher than the direct value to the facility department.
Consider a facility management budget that is approximately 3 percent of the organization’s gross sales. For a $30 billion a year company, that’s about $900 million. An initiative that generates an SOI of 1 percent will save about $9 million. If the same initiative generates a 1 percent increase in productivity for the organization, the value added would be $300 million.
Selecting and justifying software is most effective when they are done together. They both should be based on the value they bring to the organization rather than direct cost savings or application features. While cost savings and application functionality are important and necessary for success, they are not sufficient. Success is determined by whether the application and its implementation provide value to the organization.
The good news is that when the selection and justification processes are integrated, the selection process is improved and the effort required to justify the new software is significantly reduced.
The overall criteria for determining the value provided is the same for the selection process and the justification process. However, the quantification may be different. For example, the selection criteria may evaluate whether the software will make it possible to provide a new service. The justification would need to translate the value of the new service into economic terms. The value may be reduced risk, increased productivity, an improved working environment or the ability to provide new products or services to the organization’s external customers. All of these increases in value can be translated into the most important unit of measure for the C-suite: the dollar.
To see how selection and justification can be integrated, consider a company evaluating a move-management application. The following example is not intended to be used for a particular project and is by no means comprehensive. The specific metrics will vary depending on the culture of the organization, the strengths and weaknesses of the organization, the organization’s objectives and the process to be automated.
For the facility department, a move-management system can increase quality of service, reduce effort and reduce the risk of failed move projects. But for the organization, the primary value is to reduce the loss of productivity that occurs during the move process. Productivity is lost because resources are taken away from the organization’s primary tasks and focused on planning the move, packing, moving, unpacking, adjusting to the new space, disrupting the rhythm of production, generating and dispelling rumors, fighting for the corner office and complaining. While reducing the effort the facility department expends on the move process is good in concept, increasing facility management effort so as to reduce the organizational disruption may have significantly more value. The answer isn’t always to reduce FM effort, but the correct answer is always to increase value.
Integrating the selection and justification processes will ensure an alignment between the problem, the solution and the value to the organization. To properly value the organizational benefits, it is crucial to measure key performance indicators or metrics.
Using performance metrics for justifying facility software has several benefits. One is that the metrics used for justification can also be used to validate the value of the software after the fact. This will build the facility executive’s credibility with upper management. Using a value-based approach rather than an SOI approach will also help to shift upper management’s view of the facility department from a cost center to a group that adds value.
The specific metrics used to select and justify software will vary based on the organization, specific project and organizational objectives, the software application, and the culture of the organization.
Collecting metrics on FM tasks to justify value is relatively easy for the facility staff because the department has control over the information and the processes and understands the principles of facility management. Defining and measuring productivity metrics for processes and tasks executed by other departments will require close collaboration with those departments. While having good performance metrics on facility performance is useful for justifying software, it is the smaller component of the value added to the organization.
Performance metrics for FM may be generated by implementing process improvement initiatives like Six Sigma or Balanced Scorecard. These same metrics can be used to help justify software, but typically after the fact. While a Six Sigma process will help identify the need for a software application, it can also prove the value after the fact. If the proof is presented back to management after the fact, there will be less resistance to future requests as the facility executive’s reputation for adding value is validated with performance.
The performance metrics of facility department customers are far more important. These should already be in place. There are also many metrics related to things like employee turnover and absenteeism that should be readily available from human resources.
There are many financial metrics that can help demonstrate increased value to the organization. It is best to spend some time with the heads of various departments to identify key metrics they use to measure success and increased value. These other departments will also convey their objectives, which are critical to aligning the objectives, the value and the justification of facility software.
To shift the organizational culture so that FM is perceived as a value center rather than a cost center, facility executives should educate the departments to which they provide service and senior managers of those departments. Educating the departments will require facility executives to speak the language of their goals, objectives and metrics. Educating senior management will require facility executives to present the value of FM in terms of achieving departmental objectives while speaking the language of the C-suite.
Chris Keller is managing director of Facilities Solutions Group, a consulting firm specializing in developing procedures and business models to enhance the operational productivity of facilities through technology. He has worked with CAD systems and has been implementing FM automation for more than 15 years.