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Building Operating Management

Good Financial Sense





By Ed Sullivan   Facilities Management

 

Which is safer: stocks, bonds or an FDIC-insured savings account? The obvious answer is the savings account. The principal is guaranteed by the U.S. government. But that guarantee conceals a significant long-term risk — the danger that inflation will eat away at the value of the account. Stocks, the riskiest choice in the short term, have been the safest bet for preserving long-term value.

Now consider a choice between more and less efficient chillers. The former will cost more and save more. What justifies the added cost is the long-term return. But keeping a long-term view isn’t easy.

Imagine a facility executive who justifies a very efficient chiller. The next summer is the hottest on record, and it follows a summer that was unusually cool. As a result, the electric bill rises. That short-term performance raises doubts about the investment in the mind of a skeptical CFO, who doesn’t want to hear that electric costs would have risen more with a lower efficiency unit.

But that’s the message the facility executive has to deliver — in the language of the CFO. It’s the facility executive’s job to be the voice of fiscal reason — to be a financial advisor to the CFO.

To succeed, the facility executive needs a solid grasp of both technology and business plans. One requirement is to know the right time frame to analyze an investment. Another is to balance the risk of buying into emerging technology too soon against the risk of losing years of benefits from a newer system.

Think of Wall Street: Some stocks are duds, even in the long run, and even the best stocks can be poor short-term investments. But long term the stock market is the place to be.


posted on 4/1/2004

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