Building Operating Management

Adding Value: Action Plan



Top management expects more than smooth-running buildings. Here’s how leading facility executives are responding to new demands. Second part of a series.


By Ed Sullivan   Facilities Management

The real job of the facility executive today isn’t just facility management. The real job is becoming a business partner who can add value to the organization. That’s the conclusion of a six-month research project conducted by Building Operating Management. Titled “Tomorrow’s Facility Executive — Today,” the research included teleconferences, roundtables and telephone interviews. All told, 77 facility executives responsible for corporate, health care and educational facilities participated in the research.

It’s no surprise that the technical knowledge upon which the profession was built is no longer sufficient to meet new expectations. Instead, facility executives require a combination of people and analytical skills to satisfy the demands of top management and business unit leaders.

Part one of this series reported on how facility executives can take the first steps in the direction of adding value by learning how to see facilities the way the CEO does, to align facility plans with organizational strategies and to identify the real value of facilities to a company. (Those reports appeared in the April issue of Building Operating Management. That issue also included a listing of facility executives who participated in the research.)

This month’s articles wrap up coverage of the research project by examining how leading facility executives are managing data, developing communication strategies and establishing links with key managers in the organization. These successful tactics offer practical lessons to other facility executives who are developing their own action plans.


Use Data to Guide And Justify Decisions

Imagine how difficult it would be for a foreign service employee who didn’t speak the language of the country where he or she was posted. That’s the predicament facility executives can find themselves in if they don’t have a good understanding of finance and can’t measure key aspects of facility performance.

The challenges facing facility executives in this regard can be roughly divided into three categories. One is mastering accounting terms and concepts. In some cases, that knowledge is the difference between sinking or swimming. At one financial services company, the entire top management team is made up of accountants. Every department has an analyst. “It would be very difficult for me to do my job without an accounting background,” said the company’s facility executive, whose career began in the accounting department. “I would be overwhelmed by questions from our accountants.”

'Even when financial knowledge isn’t so clearly a prerequisite, it’s a big asset. “Don’t overestimate the CFO’s grasp of what you do,” said one facility executive who reports to the CFO. That means facility issues have to be translated into financial terms if the CFO is to understand them.

And it’s not just the CFO. “If you start telling upper management about the UPS, they’ll think you’re talking about the guys in the brown shirts,” said one facility executive.

A facility executive in a retail organization speaks in terms of cost per person when she is talking to the human resources department. With the controller, she refers to cost per square foot. When distribution centers or stores are involved, it might be cost per DVD. “It’s a matter of speaking the financial language that your customers speak,” she said. With facility costs presented in terms that others in the organization readily understand, it’s easy to factor in real estate costs per DVD in a warehouse or per call in a call center if plans for expansion are being discussed.

Performance Metrics

That facility executive does more than speak the language. She has data that enables her to provide key metrics to top management and business unit leaders. That’s a second challenge when it comes to doing the numbers. “Collecting, tracking and reporting data are not always top priorities for the engineering folks,” said one facility executive. “It’s important to make data a priority. You can’t manage what you can’t measure.”

What kind of measurements are needed? Better ones. That’s true regardless of what the facility executive is measuring. In some organizations, simply getting a handle on basics like total square feet is a challenge. But even sophisticated organizations have room for improvement.

The facility executive at one university said he wants to be able to provide top management with three metrics: one for the quantity of space, another for the suitability of space, and the third for the quality of space. On the first count, he is able to compare program requirements against the actual amount of space provided. And the facility condition index provides a good measure of quality. But suitability remains a challenge.

As that example shows, metrics need not always be based on financial parameters. “We live, breathe and die by our customer satisfaction scores,” said one health care facility executive. “It’s one more thing you can use as a barometer to demonstrate that the physical environment has an impact on patients and staff. We need to work harder at providing measured outcomes of what the real estate is intended to deliver.”

Good metrics can translate into innovative strategies. Measuring classroom use revealed that a landlocked university has thousands of square feet of available space and led to new ways of controlling that space. One health care organization has a metrics-based standard for use of space. If an area is not scheduled for use at least 50 percent of the time, the organization will look to see whether that space can be shared with another clinic or department.

What’s more, metrics provide benchmarks that can both guide facility decisions and demonstrate facility management success. That has clearly been the case at one major university. There, a detailed facility condition index provides a benchmark used to set project priorities, inform and get input from deans, and help the board of trustees focus on asset preservation. That data has been a key part of an asset management plan that has reduced the deferred maintenance backlog by nearly $60 million since 1992 and has kept operating cost increases to less than 1 percent a year, despite the addition of new buildings and a sharp increase in the use of power-hungry technology.

Benchmarks can be based on internal data — past years’ electricity costs or employee density measures, for example — or on peer group norms drawn from outside sources. Although many industry benchmarks are developed by consulting groups and are available only to clients that share data, some benchmarks are publicly available. The Energy Star Buildings program, for example, provides free energy performance benchmarking nationally. Local sources may also be available. One facility executive at a school district uses his state’s free energy consulting service to compile energy data for all his facilities and compare it against similarly sized school districts. The service even suggests ways the district can become more energy efficient and offers advice on how it can achieve certifications.

Regardless of the source, benchmarks can help facility executives build credibility. As one facility executive said, “If you can show that you’re doing good things with the money they’re giving you, benchmarks can help you to win funding.”

The Bottom Line

Although facility performance numbers — whether based on dollars or not — can help secure money for projects, management will be taking a hard look at the financial implications of any facility decision. Doing the same thing is a third challenge for facility executives.

That doesn’t mean facility executives need to be CPAs; the accounting department is a resource that the facility executive can use to crunch the numbers. But the facility executive should be savvy about numbers. For example, even though cost control is an important way that facilities can add value, the benefit of cost reduction requires just as much analysis as investments. A misunderstanding about facility costs can lead corporations to fall prey to false economies. A lower rental rate that requires a longer lease term may eventually cost more if the company vacates the space well before the end of the lease. And consolidating call centers may have a much smaller impact on real estate expenses than anticipated if management doesn’t understand that the facility accounts for only 6 or 7 percent of overall call center costs.

Facility executives should also bear costs in mind when evaluating whether a given facility strategy will add value. For example, companies too focused on maintaining flexibility for growth can get burned at the bottom line by taking on too much space. Similarly, a business unit seeking to reduce the risk of a disaster halting its operations may lobby for a more expensive infrastructure than the business case warrants.

To balance costs and investment, facility executives should be their own toughest critics. As one said, “I put myself in the president’s chair and make decisions as he would.”

Doing that requires facility executives to sharpen their pencils before requesting money for any project. “Management knows that, when we come forward with ideas, we have minimized our operating costs,” said one facility executive. That attitude should permeate the entire facility department. “My folks should do with me what I do with the CFO,” said another facility executive. “They need to be rigorous in their analysis.”


Use Communications To Set the Agenda

There’s a paradox at the heart of any attempt to get the most value out of physical assets: The place to start isn’t the buildings themselves. Of course, the physical assets themselves matter tremendously; so do bricks-and-mortar issues like codes, comfort, energy and safety. But that’s generally not where the greatest challenges for facility executives lie.

In many cases, the three most important tasks are communication, communication, communication. Other skills are important, of course: financial savvy, solid decision-making abilities, the right degree of technical expertise, knowledge of the business. But just as location is a central consideration in any building decision — from leasing space to constructing a new high school — so communication comes into play in any effort to boost the value of facilities to a corporation or university.

“It used to be a good day as long as no one complained,” said one facility executive. “Now you have to get out there and tell people what you’re doing. ‘Look at what I kept running. Look at who I made happy.’ ”

On a college campus, deans need to know the condition of their facilities. Business unit leaders in a financial services firm need solid information about the rate of churn, plus the cost of moves, raised floors and demountable walls, so that they can determine whether they’ll be in a location long enough to make investments in flexibility pay off. The hospital COO needs to keep abreast of the status of construction projects.

It’s also important to get the word out across the organization about facility matters. Some facility executives feed information to corporate communication departments for newsletters or press releases. Others publish their own newsletters. One facility executive with hundreds of employees in nearly two dozen states hired a communications manager to keep information flowing. Another broke an old taboo and let everyone know when indoor air quality tests were being conducted.

Communication is essential in part because facilities are often taken for granted until there’s a problem. That makes it easy for top executives to make short-sighted decisions about physical assets. A lack of communication also opens the door to productivity-sapping grumbles about a remodeling project that seems to be taking forever, though in fact it’s ahead of schedule.

Teacher’s role

Facility executives should see themselves as educators. If a department complains that its carpet looks shabby, the employees need to understand why new carpet isn’t in the budget — perhaps because facility funds are earmarked to support key company initiatives like ensuring business continuity or supporting growth. “A lot of that is just talking to your customer,” said one facility executive.

Salesmanship is another aspect of communication. The first day in any new space, employees have to cope with change as well as inevitable disarray. The result can be nitpicking and fingerpointing.

“If we’ve done a big restack, we have people on the floor the first day with khaki pants and white shirts that say ‘Event Staff’ so employees know who they can go to,” said one facility executive. “We have an IT person and a couple of mechanics there to help. We give them coffee and donuts. It really sells the new space.”

Change Management

Many opportunities to increase the value of facilities hinge on significant changes in the way physical assets are used — changes that may engender a good deal of resistance if employees don’t understand the rationale for the change. Effective communication can help sell the change.

One example is the adoption of virtual office strategies. “It’s really difficult to tell someone that they will have to go online to reserve space and that they can’t have family pictures in their cubicle,” said a facility executive in the midst of a hotelling initiative.

In cases like those, it’s up to the facility executive to make clear the bottom-line reason for change. “We treated employees like the smart business people they are,” said the facility executive responsible for the hotelling project, who used metrics like cost per seat to make the case for change. “We communicated until we were blue in the face.”

It’s important to be sensitive to personnel issues and look for ways to make changes more palatable. By moving into cubicles themselves, facility executives can gain credibility when they say that an open-plan setting can improve communication. Letting employees have a voice in the design of workstations can help sell the change. So can improvements like adding amenities, providing natural light or simply using more vibrant colors.

To sell major changes, a facility executive must develop a keen eye for what’s important to the internal customer. In one fast-growing firm, speed was a key goal for new construction. One way to do that was by using standards. “We’ve talked about standards forever in facility management,” said the facility executive. “And we’ve had a lot of pushback. But people are more open to it if it will do two things: reduce costs and get them into space quicker.” There’s a snowball effect: Once a facility executive has developed a track record using standards to cut costs and construction time, it’s easier to sell the idea the next time.

How Can I Help You?

Good communication is also essential to effective customer service, an increasingly important concern for facility executives. Whether it’s providing scripts for maintenance staff who will work in patient rooms or designating a customer service representative as a point of contact for a business unit, the goal is to make sure the lines of communication remain open.

“Any support services department is really a customer services department,” said one facility executive. “Customer satisfaction has to be our No. 1 goal.”

That philosophy increasingly shapes facility management jobs. At one university, facility managers are expected to spend 80 percent of their time in the field, working closely with customers and front-line facility staff. In a medical center, facility employees look for burned out fluorescent tubes and stained ceiling tiles before customers complain. One corporate real estate department physically locates staff members within business units.

Style with Substance

Providing good customer service is one way to adhere to a fundamental precept of good communication: Actions speak louder than words. Although it’s not enough to focus on the basics of facility management — comfort, safety, operating costs and the like — it’s essential to get them right. “You better be doing those things well,” said one facility executive. “You’ll get killed if you don’t.”

It isn’t enough to talk a good game. Management in one health care organization automatically approves energy projects with paybacks of three years or less. “But there’s a caveat,” says the facility executive. “If the project doesn’t work, my budget gets slammed. Management treats us as business people, which is how you want to be treated.”

It’s both salesmanship and substance. One facility executive dedicates an experienced staff member to the executive suite to make sure everything is in good shape. “Our strategy for managing the relationship with top executives is to show them that we’re stellar,” he said. “Is it a beauty-is-skin-deep thing? No. Usually, the facilities department is noticed only when things aren’t going well. We want capitalize on the opportunity to show them how good we are. Doing that builds credibility that allows you to develop a relationship.”

Three traits mark leaders in a changing profession

Any transformation — whether of a career, a company or a profession — starts with personal change, a new set of guiding principles. More than skills or experience, these ideas are what count. In conversations with scores of leading facility executives, a handful of principles stand out.

One is a focus on the needs of the business. That requires an understanding of the functions within the organization, whether it’s underwriting, radiology or eighth-grade science. “Facility managers have to be more well-rounded business people than the managers they support,” said one facility executive. “A cashiering manager doesn’t need to know facility management, but I need to understand that area.”

Facility executives who don’t have a good grasp of the unique value that the organization brings to its customers — factors that distinguish it from its competition — will have a hard time identifying ways facilities can add value. Top executives weigh choices based on whether they increase shareholder value; that’s a test facility executives can apply too.

Candor is another trait of successful facility executives. Part of it is not exaggerating facility needs. “My role is always to seek resources,” said one facility executive. “But I have to be very above board with the CFO.”

Likewise, it’s a mistake to promise something that can’t be delivered. “If you know it’s going to take 12 weeks to get a project done and you tell people you can get it done in six, you’ve ruined your credibility,” said one facility executive.

Honesty also demands that facility executives fess up to what they don’t know. At a hospital that uses a national benchmarking service, management receives quarterly reports about a wide range of areas, including facilities. The report triggers a lot of questions, and the facility executive doesn’t try to bluff. “Sometimes I have answers and sometimes I don’t,” he said.

Perhaps the hardest things to be up front about are problems. A natural tendency is to say nothing and hope that the problem can be fixed or that no one will notice. That’s the wrong approach. As one facility executive put it, “When there’s bad news, that comes fast.”

A third important principle assumes different forms. Sometimes it looks like patience, sometimes like optimism, sometimes like stubbornness. But it boils down to the same thing: persistence. It’s the quality that leads a facility executive to offer comments on a business plan, whether they’re requested or not, or to spend years educating management about the value of investing more in facilities.

Persistence is an important trait for any facility executive. After all, even facility executives who have the best relations with top management have frustrations. Even the most successful facility executives don’t succeed every time. For facility executives still struggling to break through to top management, it’s important to keep success stories in perspective.

One hospital facility executive spends an hour a week with the CEO and the COO walking the facilities from top to bottom. When new projects are proposed, he’s brought into planning discussions as soon as the idea is on the table. But when it comes to allocating funds, he’s still often on the inside looking out. With a fixed pot of money for the project, the first priority is getting the high-tech medical equipment, not paying for the HVAC system.

“Before I’m in the room, the money has been divided,” he said. “Then they ask us to work with those numbers.”

Hard to take? Certainly. But not a reason to become discouraged. Even as one facility executive struggles to get management to unlock the potential value of physical assets, he remains enthusiastic. He takes obstacles as challenges, looks past delays to ultimate results and savors successes. Behind his persistence, he said, is one simple factor: “I have a passion for what we do.”


Get Plugged into Information Networks

The good news for the facility executive at a growing financial institution was that he had made progress getting access to business plans. The bad news? “When they hold planning meetings, I’m not invited.” The result is that he doesn’t see critical details from the company’s operating plan until the 11th hour.

That’s what happened when the facility executive learned that plans called for 20 percent growth last year. What he didn’t know was that all those new people were coming in the first quarter. “I aged 10 years and bought more stock in Jack Daniels,” said the facility executive.

Effective communication is a two-way street. In the ideal situation, the facility executive gets direct or nearly direct information about plans that will affect facilities. “Right after a planning meeting, he tells me what’s coming up,” says one facility executive who reports to the senior vice president for strategic planning. “I’ve got my ducks in a row even before that thing hits the capital budget.”

Reacting to problems

But top executives often don’t involve the facility executive early in the planning process. In cases like that, it’s generally up to the facility executive to make everything work — regardless of the impact on the facility budget. It’s a case of ignorance being bliss, especially when facility costs aren’t allocated back to business unit budgets. “When we’re the last to find out, everyone else is happy because it doesn’t affect their budgets,” said one facility executive. “But my costs skyrocket. In the long run it winds up costing everyone more.”

Putting out fires is all too often a way of life for facility executives. It becomes a self-perpetuating cycle. The facility staff is so busy responding to emergencies and sudden demands that it has no time to be proactive. Equipment is delivered, but there aren’t enough outlets or the right kind of power, or the equipment won’t fit in the door. A special project requires a company to bring in temporary workers but no one thinks about where they’re going to sit. An order is placed for a $6 million piece of high-tech hardware but no one budgets for installation — $1 million worth of egg on everyone’s faces.

The only way to avoid situations like those is to get good information. A facility executive doesn’t have to depend on a formal reporting relationship to stay in the loop. A department head can be a pipeline. “Over the years, I’ve become more successful in forging those relationships,” said a hospital facility executive. “The head of surgery, who has a considerable amount of clout, won’t make a move to upgrade anything without speaking to us.”

The hardest part of getting information may be establishing an initial connection. A good way to do that is to demonstrate that the facility executive can reduce costs that land in a business unit’s budget. “That’s your ticket to the dance,” said one facility executive.

One success often leads to others. Facility executives who gain access to timely information have more chances to add value. Capitalizing on those opportunities makes it easier to get in on the informal channels of communication that are so important in large organizations.

In some cases, facility executives have more than a network. They have a champion. “Our management and board see the value of our facilities,” says a facility executive from a major university. The facility operating budget receives an increase to reflect new construction. What’s more, although the university doesn’t fully fund renewal and replacement costs, the institution has created a fund to address those expenses and has agreed to increase the amount that goes into the budget by $2 million each year until the annual investment reaches a reasonably adequate level.

Would facilities get the financial support it does without a champion? “No way,” said the facility executive.

Job description for a Champion

The champion’s job is simple: to make the case, at the highest level of the organization, for facilities. A facilities champion may support investments in facilities, back a move into workstations, or argue for a proposal to create a central facility or real estate management department.

It’s important to identify the right person to champion facility causes. “The way for me to communicate ideas effectively is not to go bang on the door of the CEO,” said one facility executive. Rather, he relies on the person to whom he reports, the senior vice president of operations, to become the champion.

A health care facility executive said he doesn’t try to approach upper management with facility issues. “To them, facilities is small potatoes. If you can keep the nurses happy, they’ll be your voice with upper management.”

At the university that sets aside funds for operating costs, renewal and replacement, the facility executive needed a couple of years to educate his future champion about the need to invest in the physical plant. The breakthrough, said the facility executive, came when he led the president to a run-down building and warned him that the entire campus could wind up in that sorry state. “That made an impression.”

Facility executives who don’t get a hearing in the boardroom often find covert ways to get the resources they need. At one hospital, the CEO wants a hotel-like appearance, yet pushes the facility executive to make ancient air handlers last a little longer. The facility executive doesn’t argue, but he has his own agenda. His plan is to sneak in infrastructure improvements. “I smile and talk about the hotel look,” he says, “but the whole time I’m thinking about air handlers.”


Jump on Opportunities

It isn’t often that a facility executive has big news for the CEO. But this was big, and only the facility executive knew it was happening.

Like many of its competitors, the facility executive’s company was having a banner year, and business unit heads were optimistic as they entered the budget cycle. One by one, their plans for new space were forwarded to the facility executive, who had to analyze them and report back solid cost information they could work into their budgets. It was a demanding, time-consuming effort. The real estate department had to immerse itself in lease terms and infrastructure requirements. Getting those details right, city by city, build out by build out, had earned the team a central role in the budget process.

That year, it wasn’t enough.

As the facility executive stepped back from the individual reports, he realized that microscopic analysis didn’t tell the whole story. Business unit after business unit was projecting strong growth, and planning to take space to accommodate it. Taken together, the facility executive could see, it represented an enormous amount of space. But it wasn’t until he added up all the requests that he saw the scope of the financial impact: $1 billion added to the capital plan. And no one else knew — at least at that point. The facility executive went to the CFO and let the numbers speak for themselves. Three weeks later the facility executive found himself at the table with the CEO, the COO, the CAO and the heads of the business units.

“That was a potential disaster,” said the facility executive. “No company in the world can sustain that kind of growth. We would have been eating space for years.” Management hit the brakes: No new space or build outs without approval from the top. Once the dust had settled, a new review process was developed that gave the facility executive one more thing to do: Add up all the numbers.

Not many facility executives find themselves in a story with a billion-dollar punch line. But the lesson applies to many situations: When an opportunity appears, seize it.

Plans for growth are one example. A building program presents a chance to get the organization to think in a new way about facilities. Conversely, an acquired company’s real estate can be an opportunity to cut real estate costs.

Little things count. One facility department is rated on a 1 to 5 scale by business units. Among factors ranked are recurring service problems. For the facility executive, a low score on that measure is a kind of good news: “We jump on that,” he says. “It gives us the opportunity to work directly with the individual to put in a corrective action plan.” That mindset applies in all sorts of cases. A health care organization is building four clinics; the facility executive has determined his department can handle the new space with no extra staff. “Upper management noticed that,” he said.

It’s rare that a facility executive can have a substantial impact in a few weeks. More often, it’s a matter of years. A facility condition assessment can be used to win top management’s confidence, but putting it together is a lengthy process and using it to get funds takes even longer. As months and years go by, it’s easy to get discouraged, lose sight of the goal or simply get so swamped with day-to-day problems that the opportunity falls through the cracks. That’s why it’s important to have a long-term focus on opportunities.

One facility executive spent more than a decade trying to convince upper management that it was worth adopting universal workstation standards to reduce churn costs. What took so long? Entrenched corporate culture was one thing. At the start of the process, the company had just moved into a new headquarters and managers had given up enclosed offices for cubicles — a tough battle itself.

There was also an element of denial. “I’d show them the churn numbers and they’d tell me we weren’t going to churn that much next year,” said the facility executive.

The CFO position was another obstacle. Typically, the CFO wanted to see quick results, and reducing churn costs took time and investment. Then, after the facility executive had finally started winning over the CFO, that person would leave and the facility executive had to start over.

Today, the company is closing in on the goal of universal standards that will make it possible to move 300 people over a weekend — a major opportunity to increase speed and reduce costs. “Size of office is stature,” the facility executive acknowledged. “For some people, giving that up is hard to stomach. But when the top line isn’t moving and management wants to move the bottom line, all the little things they wouldn’t do before suddenly make sense.”




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  posted on 5/1/2005   Article Use Policy

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