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How much will it cost to construct a new facility to accommodate a business unit’s plan for growth? Does a business unit actually need more space? What kind of space will best support a new way of working? It’s by providing solid answers to hard questions — whether about a problem-plagued building system or another department’s workplace needs — that facility executives earn the respect and attention of top management.
“Senior business leaders don’t want to be put in a position of making decisions on the basis of emotions,” says Karen Pritchard, vice president, real estate services, Fidelity Real Estate Company. “It’s essential to have data to help the corporation decide how to use very expensive assets to support how it does business.”
At the University of Miami main campus, located in Coral Gables, Fla., a call about a problem with a building sets off, not alarm bells, but an orderly process of data analysis. Like other facility executives who enjoy a solid relationship with the boardroom, Victor Atherton, associate vice president of facilities administration for the university, has built his reputation on a data-driven management style.
“Data is an opportunity,” he says. “Having performance measures and benchmarks tells us how we’re doing on a daily basis in terms of our own systems. We can respond to our customers and to the administration in just about any situation because we have data for everything.”
The University of Miami is a major private research institution and a sports powerhouse. But its Coral Gables campus is also a lush 260-acre site with a tropical garden and more than 100 buildings — a physical environment that plays a significant role in attracting students.
Data about the condition of buildings is essential to top administrators of the university. But details about blisters on a roof or the ages of chillers aren’t likely to win points in the boardroom. Instead, Atherton uses a facility condition index to give top executives a snapshot of the state of physical assets on the campus.
“The board of trustees and senior administrators really would like to know the condition of a university’s facilities,” he says. “In the beginning they don’t know to ask. But, once they know, they are interested.”
The facility condition index is deceptively simple: It’s the deferred maintenance backlog divided by the replacement value of the building. The lower the number the better.
“The facility condition index is a tremendous communicator because it’s a very succinct number and it’s either getting better or worse,” Atherton says. In his annual report to the board of trustees, Atherton not only provides the current facility condition index, but also benchmarks that number against the previous year’s tally and against the national average.
“The national average is 20 percent,” Atherton says. “So if you’re below 20 percent the board thinks that’s pretty good. Well, our department likes to be below 5 percent.”
Supporting Business Needs
Quantifying a deferred maintenance backlog takes one kind of data; answering questions about the impact of new server or wireless technology requires very different information. It’s the facility executive’s job to determine what information matters most, then figure out a way to get it.
The result can be some very nontraditional facility strategies. At Fidelity Real Estate Company, an all-consuming effort to understand how the real estate staff can support business needs has produced a real estate department that doesn’t directly manage real estate and facilities. The company will hire people with no real estate background and increasingly doesn’t even have the words real estate in job titles.
“The majority of our real estate workforce is not engaged in the management and operation of our real estate on a day-to-day basis,” says Pritchard. “Instead, they are engaged in partnering with Fidelity’s businesses to understand what kind of work those businesses do and where they’re going. It’s essentially a client service management organization. They are now more geared towards understanding what the workplace needs to be and how to get it there rather than on implementation.”
With $860 billion under management, Fidelity is the largest mutual fund company in the United States; it’s also the largest provider of workplace retirement services, serving 13.9 million retirement customers. The real estate department’s job is to use the 8.5 million square feet of space that Fidelity owns or manages to help the company stay on top.
Pritchard is part of the senior management team charged with making that happen. One strategy for doing that has been to outsource most day-to-day facility management activities and real estate transactions. Only about 30 percent of Fidelity’s real estate staff has primarily operational responsibilities, Pritchard says.
As it has outsourced what it calls tactical functions, Fidelity has moved to build a strategic organization. “When I say strategic,” says Pritchard, “I’m talking about the folks who interact with our customers, the Fidelity business units, on a day-to-day basis.”
When Fidelity set out to build a strategic real estate organization, the company didn’t limit itself to people with real estate or facility management experience. “We brought in a few people who, rather than having experience in the field, had good consulting experience and specifically good communication skills,” says Pritchard. “We wanted our workforce to learn from them about relationship-building, communication skills and planning.”
The strategic model has been a big change for some employees. Fidelity’s engineering group is responsible for design and construction of data centers, super LAN rooms and other mission-critical spaces. The positions require a high degree of technical expertise. But technical expertise isn’t enough. They have to understand business issues. Which servers is the company buying? How many? Is Fidelity going wireless? When? In which business units? “If you don’t understand what’s going on in Fidelity’s technology business, you can’t possibly understand what kind of infrastructure we need to support the business,” Pritchard says.
That’s not to say that tactical issues don’t matter. “You have to be fabulous at the day-to-day stuff — transactions, facilities and construction management, tenant management, project execution,” Pritchard says. “If you don’t do that well, you have absolutely no chance of accomplishing your mission and maintaining credibility with top management.”
Path to the Boardroom
One reason the day-to-day real estate and facility matters are so important is the amount of money involved. For facility executives who want to make a name for themselves in the boardroom, being on budget is essential. That’s certainly the case for Thomas Gensemer, associate vice president, facilities administration, for Geisinger Health System. To deliver services to patients across 38 counties in northeastern and central Pennsylvania, Geisinger owns or leases 3.2 million square feet of space in more than 160 buildings. It’s Gensemer’s job to deliver the space the system needs, whether that means acquiring a building, leasing space, renovating an existing facility or undertaking new construction.
That’s an especially crucial job in an organization like Geisinger. “In health care, growth often means new or renovated space,” Gensemer says. Requests for new space come from the vice president responsible for a service line — cardiology, for example — and must be approved by top management. But the path to the boardroom often begins with a phone call or e-mail message to Gensemer.
And that’s the way top management wants it. “The service lines can’t go into executive management with a business plan that includes facilities changes without consulting with our department,” Gensemer says. “If they haven’t, executive management won’t even consider the request.”
The first order of business is to determine whether a project can be housed in renovated space or new construction will be needed. Some of Geisinger’s buildings date back to 1917, when the health system was founded, Gensemer says. “You can’t do certain things in those buildings without a huge expense. Knowing our facilities inside and out, knowing what we can do where, is extremely important.”
Working with the vice president of the service line, Gensemer formulates a budget for the project. “That budget is our bible,” he says. To put together the estimates that he will have to live with, Gensemer relies heavily on an extensive database of past project costs. Once a project has been completed, mechanical, plumbing, electrical and other costs are loaded into an Excel spreadsheet. Data on historical costs gives Gensemer a solid basis for estimating future projects. “That database is very important to us in terms of our day-to-day operation.”
Building the Base
Data is crucial to Fidelity’s real estate strategy as well. It has an integrated software environment that uses a single database and integrates CAD, lease administration, moves, adds and changes, and historical data from the building automation system. “You can’t move a person, you can’t order anything, you can’t make any change in our portfolio, big or small, without doing it in our system,” Pritchard says. “As a result, we have a wonderfully rich database that’s key to helping us optimize the use of our real estate portfolio. We know exactly what our assets are, where the vacancies are and how space is being utilized.”
Five of the 140 employees in Fidelity’s in-house real estate workforce are dedicated strictly to information management. Part of their job is to keep an eye on new software. “We go for best-in-class commercial software in each application and then we integrate them,” says Pritchard.
Modern building systems can easily drown facility executives in data. That’s why it’s crucial for facility executives to translate data into the language of top executives. At the University of Miami, Atherton issues a report to top management on key performance indicators like utility consumption, overtime and sick time, and customer satisfaction. Those metrics are benchmarked against the previous year’s performance. “Senior administration can see how we’re doing at a glance,” Atherton says.
Data is more than fodder for reports. It is at the heart of a facility asset management plan that both sets his department’s priorities and anchors his credibility in the boardroom.
The plan is based on a thorough and ongoing assessment of campus buildings. Facility staff climbs onto roofs, scrutinizes the seals on windows and runs diagnostics on chillers to determine what shape each building is in — and what’s likely to go wrong in the next year and a half.
Atherton doesn’t stop at 18 months. Data from the condition assessments is the foundation for a rolling five-year plan that addresses facilities renewal and deferred maintenance. Funds for those improvements don’t come from the university. Rather, Atherton gets to keep any money he can save by making facility operations more efficient — money that gets plowed back into facility improvements.
The third part of the asset management strategy is a customized preventive maintenance program. “A lot of preventive maintenance programs are very general,” Atherton says. “But if you’ve got a direct expansion system in one building and a chilled water system in another, the maintenance requirements are very different.” The university has developed specific preventive maintenance procedures for every component of every building.
Measure of Success
Given the importance of data in building and maintaining connections with the boardroom, it’s no surprise that successful real estate and facility executives go to great lengths to make sure they’re working with current information. Fidelity uses the title client service managers for the real estate staff in direct contact with the business units. Many of those managers are seated, not alongside the members of the real estate department, but within the business units. “We want the businesses to view our staff as part of their organization,” Pritchard says. “It’s all about how you engage with them on an ongoing basis so that they’re always part of what you’re doing. You spend a lot of time with them.”
By that measure, Gensemer is certainly a success. He recalls a conversation with an executive at an organization Geisinger partners with. “I don’t know how you survive,” she told him. “Every meeting that I’ve been to in the last three weeks, your name has been brought up.”
“I haven’t had much time for golf,” Gensemer says. But he isn’t complaining. That’s because the amount of time a facility executive spends with top executives and the leaders of business units may be the best measure of success today.