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November 12, 2013 -
Today’s tip from Building Operating Management: Use hard data about benefits to justify funding for facility projects.
While showing the downside of saying “no” to requests for funding for facility projects is important, the real hay is made with hard data illustrating the benefits — financial and otherwise — to the company of saying "yes."
"Understand the benefits to the business," says Alan Whitson, president, Corporate Realty, Design & Management Institute. "Quantify those benefits, and then 'dollarize' those benefits." Whitson adds that it's critical to know and understand the financial terms, such as discount rate, cost of capital, hurdle rate, investment horizons, etc. And then know your organization's thresholds and parameters for those metrics, and which are most important. Always relate back to those metrics.
John Balzer, vice president, facility planning and development for Froedtert Hospital and Community Health, gives an example of a new work order service. The idea is to show how customer service would increase from x to y, and what the financial impact of that would be. "It's a little more challenging, but with specific measurements, which are necessary, showing a monetary return can be done."
Showing that monetary return (or hurdle rate, if your organization prefers) is often easiest with energy efficiency projects. Still, as sophisticated facility managers know, building the proposal in terms that show dollars and not kilowatt-hours is the tack to take. Know your organization's acceptable return rate, but understand that it may not always be set in stone. Finding rebates from the utility or the government to lower that ROI, is one way to make your proposal more attractive.
So is adding soft benefits to the proposal. That is a legitimate strategy, but you certainly don't want to hang your hopes on soft gains, say the experts. Jim Cooke, national facilities operations manager for Toyota Motor Sales, USA, puts it like this, in reference to a recent proposal for photovoltaic panels: "We know and you know there's social value, but we can't quantify it. It is another piece for customers to recognize that we behave responsibly in terms of sustainability."