While most universities and colleges will say that their employees are most valuable resource, real estate and facilities, in fact, make up the most significant portion of institutional costs – asset wise. Thus, for the Facilities Management organization, the key challenge is to build a functional bridge between the built and human environments that allow their institutions to operate at peak efficiency, garnering the best of both worlds without compromising the ability of institution to meet stakeholder objectives. In this way, Facilities Management can contribute to a new world of competition in higher education by providing the physical infrastructure necessary that will in part win students and faculty.

The highest performing Facility Management organizations of universities today can influence and or lead institutional strategy by providing a progressive workplace and leading edge environment for students, staff and faculty by developing facilities strategies and programs that:

• Lead transformational change throughout the institution – and beyond, into the community,
• Create the optimal set of conditions for business processes change at every level of the institution, and
• Contribute to organizational transformation by adapting the environment to the institution.

Few institutions, however, seem to recognize the potential for Facilities Managers to be leaders in their own right and how they can actually help drive innovation in ways that:

• Adapt the institution to changing business needs, such as asset restructuring and essential business process re-engineering to meet changing business need,
• Provide a healthy and stable workplace for employees, student and faculty to innovate in their work,
• Assimilate the potential for new technologies into existing and new assets that allow for that innovation to occur, and
• Promote stewardship over external and internal resources leading to environmentally sustainable practices.

It can further be asserted that Facilities and Real Estate departments should be managed as part of the institutional enterprise, not in isolation to it, with an Facilities Management Executive Board member ultimately accountable for how Facilities Management contributes to the business of the institution.

This view intersects with what many corporate Facilities Management professionals would acknowledge as the primary role of Facility Management – to focus on the needs of the occupants of the workplace. There is an even higher strategic value that Facilities Management can exploit – and that is to demonstrate to stakeholders their knowledge of maintaining and improving an institution’s asset value over time.  For example, when a project is transformed from business need to physical reality, during the process of financing, design, build, and operation, unless Facilities Management is involved in the formulation of the business case for the project, it tends to be relegated to the non-core stage of “operate” – the typical domain of facility management. Any strategic impact Facilities Management can have in a project becomes limited at this point.  However, the high performing Facilities Management Leader who is adept at corporate finance shifts their domain expertise from that of tactical operator to strategic advisor and will be not only be a stakeholder, but also a leader in developing the business case for major initiatives. For the Facilities Management Leader who can lead in these ways, there is a unique opportunity to position themselves to not only penetrate the inner circle of the Institutions leadership team but also have a driving influence from within.

So the question remains why you – as an Facilities Management Leader in your own right in your organization with these skill sets – are still on the outside of the Executive Boardroom of your institution with at best, non-board director status with an occasional invitation to the Chancellor’s Office to discuss Facilities related issues. Is it because your college has already marked your department as a potential business outsourcing opportunity – simply a support service – a range of non-core activities to be managed as economically as possible?

To deliver the vision of Facilities Management as a strategic core business discipline – one that adds specific measurable value to institutional life, a profession that must be leveraged in such as way that it drives business forward, Facilities Management Leaders can no longer let their profession be seen as a support or supplementary function to core business, but a function that is mission critical to business strategy and part of the dynamic to change – essential to developing a sustainable competitive advantage in the institutional world in the future.

I firmly believe the Facilities Management profession in Higher Education in North America is beset by a number of paradoxes, among them is the aspiration to the status of a strategic discipline when most Facilities Management Leaders still function at an operational level.  It remains common in the higher education organizational hierarchy for Facilities Management to be seen as an operational subset of finance and administration whose mandate is more transactional and less strategic – and therein lies the dilemma.

I think the 5 key issues (or dilemmas) are as follows:-

• Facilities Management has too tactical a focus,
• Facilities Management, as a profession, has an identity crisis and needs to be “rebranded” to capture more of is really capable of – so the Executive “gets the message” of what Facilities really does “top to bottom” and the institution understands that Facilities Management provides for a wider and far more strategic service than just being known as “wrench turners”,
• Facilities Management, (the industry as a whole), has a credibility issue. Architects, Engineers and other Trades – having been established for hundreds of years – have the necessary Guilds and professional associations with a “history” to support them. Facilities Management has a 30-year professional standing (IFMA). APPA has not helped things by allowing the ongoing mixing of titles of Physical Plant Administrator and Facilities Director. This has led to a credibility issue at the Executive level that does not get FMs the necessary buy in at the top. Correct titling – and accreditation – breed credibility.
• Passivity in external focus: FM’ers are so focused on technical, service and operation matters that we overlook prime opportunities to influence external factors affecting the core business.  The key to elevating the Facilities Management profile is to develop and maintain business acumen that aligns with the Executive.
• Organizational paradigms: Most Facilities Management professionals have been groomed in and for an industry focusing on functional excellence – or as one post on LinkedIn recently said “highest quality service at lowest cost”. This is an organizational definitional paradigm that is destined to set FM’ers permanently in the minds of the Executive as a service delivery entity – one that is expendable and easily “outsourceable”. Once you are on this path to be seen as a “commodity” it is very difficult to recover your position and be seen as having a strategic value proposition to the Executive.

A good starting point for determining the relevance of Facilities Management to the Institution is to define your value proposition, which requires an understanding of the University’s or College’s competitive strategy (yes, your Executive does have one!) as a precursor to aligning it to the core business and external environment.  It is absolutely essential for Facilities Management to proactively articulate the value it offers to the business rather than passively accepting an ill-defined objective or deferring to other parts of the organization.  While value propositions appear simple on the surface, they require considerable thought to arrive at one or more that are effective in addressing how Facilities Management can positively influence institutional outcomes.  The key is to avoid Facilities Management vernacular in constructing the proposition.  For example, the following elements should form at least the basis of the business value proposition:

• Provide shelter (physical space or envelope)
• Optimize workplace (learning platform)
• Reward stakeholders (fiscal responsibility or financial return)

It can also be observed that Facilities Leaders are often frustrated about not receiving clear directions from the Executive, but they struggle to define their contribution in terms that are relevant to the institution.  The typical Facilities Management output measures have failed to reflect the necessary change to core institutional business, with the executive generally believing that any FM solution is considered performance in relation to measures of core business success, i.e., outcomes rather than outputs.  For example, Facilities Management should translate their measures assessing the workplace and practices for their impact on outcomes such as:

• Speed of knowledge creation (innovation)
• Speed to market (competition)
• Impact of built environment upon employee productivity and innovation
• Impact on unwritten rules and protocols (i.e., culture) of the institution
• Customer satisfaction
• Agility in dealing with rapid and dynamic business cycles

Some Facilities Management groups have successfully aligned to the business by implementing the concept of client relationship manager (CRM) as a single point of contact with a line of business. Progressive Universities in the US and many European and Australian Institutions now employ full-time CRMs who work with faculty heads, business unit leaders and senior executives in crafting business strategy in line with asset demand and supply to ensure continuous and smooth lines of communications between facilities and the financing arms of the universities. However, Facilities Management groups with limited size staffs may view this as a luxury. Either way, some form of relationship management with each line of business is necessary to ensure adequate spatial and financial forecasting is made. This closer alignment at the business unit level allows for a closer alignment at the executive level and therefore promotes clearer definition of direction, reducing immediate risk.

Also, an important aspect of alignment is that Facilities Management must be willing to deal with strategic risks of failure as well as the customary operational risks.  Risk is often a function of uncertainty of the future; the further out the future, the more risk.  The strategic approach for Facilities Management focuses on management of this uncertainty, which requires moving closer to the core business strategy.

Enterprise alignment is most important aspect of getting from the basement to the boardroom. Enlightening the Board and the President with timely and effective information that feeds into, is predictive of and adds strategic value to Institutional goals positions the Facilities Leader beyond the position of just a tactician, whose department is next outsourcing opportunity. Facilities management is on the cusp of a new dawn where the opportunity exists to either to head to boardroom as a strategic partner with the Executive or be redefined as a commodity and become the next outsourcing opportunity.

Where will you decide to lead your organization?

(c) 2011 Tony Stack

Tony Stack is Managing Director of BeyondFM

Workplace Performance Management (WPM) was termed coined by the NSW Government in 1996 (although there are those who would have you believe that that this term was coined by the IWMS industry or their paid consultants) as part of the Total Asset Management program developed by the Department of Public Works and Services. It defines personal and corporate accountability and sets in place those improvement processes for the physical infrastructure of an organization. Simply put, WPM exists to extract maximum shareholder value from that infrastructure through a goal setting process, establishing key performance metrics that are analyzed and reported on against these objectives.

Workplace Performance Management is a subset of Business Process Management (BPM), which has embedded itself into almost every facet of organizational operations, and has within the last few years begun to infiltrate its way into the real estate and facilities domain through Six Sigma process methodology and the like. BPM links business strategy with key performance objective to define accountability and set in place improvement processes [Mintzberg- 1988]. The development of a Workplace Performance Management process is, therefore, a substantial advancement in real estate and facilities management.

A recent survey by Business Week – often quoted by IWMS vendors and consultants –  found that 60% of organizations reported a misalignment between the workplace and business operations because there was no integration with overall business strategy. As elementary as this may seem to a first year MBA student, the “intended” business strategy rarely sees the workplace (an “emergent” strategy) as a strategy to be integrated with the whole but more of an outcome. The effect of emergent strategies on the intended strategy will always create misalignment. Unrealized strategies that minimize shareholder value and can seriously hamper corporate growth and direction.

Without this alignment of strategies, business leaders miss significant opportunities to increase shareholder value across the business spectrum but especially in its physical infrastructure where up to 75% of costs can be locked up. Profitability can by maximized through increasing spatial efficiencies, cost reductions and capital minimization.

Workplace Performance Management provides the system of measurement that creates a direct linkage between business goals and objectives and stakeholder interests. WPM also provides specific insights into those actions that increase the value of the workplace and reduces the cost of business operations. Firms that implement WPM systems in concert with BPM derive significant cost reductions – often hard currency savings of between 5 and 10 percent and cost avoidances exceeding 20 percent.

Workplace Performance Management also measures other areas of the business including Financial, Operational, Portfolio and Environmental Performance and Customer Satisfaction.

These five categories form a comprehensive workplace performance balanced scorecard for management of the organization. This balanced process ensures the organization retains an integrated and focused approach to infrastructure, operation and organizational activities that contribute directly to the firm’s financial success.

I’m taking a slightly different direction away for Higher Education this month into the corporate world, although you could argue that the philosophy behind Workplace Performance Management should be equally at home in the corridors of HE facilities management departments as in the offices of corporate real estate executives.

Workplace Performance Management (WPM) was termed coined by the NSW Government in 1996 as part of the Total Asset Management program developed by the Department of Public Works and Services. It defines accountability and sets in place those improvement processes for the physical infrastructure of an organization. Simply put, WPM exists to extract maximum shareholder value from that infrastructure through a goal setting process, establishing key performance metrics that are analyzed and reported on against these objectives.

Workplace Performance Management is a subset of Business Process Management (BPM), which has embedded itself into almost every facet of organizational operations, and has within the last few years begun to infiltrate its way into the real estate and facilities domain through Six Sigma process methodology and the like. BPM links business strategy with key performance objective to define accountability and set in place improvement processes [Mintzberg- 1988]. The development of a Workplace Performance Management process is, therefore, a substantial advancement in real estate and facilities management.

A recent survey by Business Week – often quoted by IWMS vendors and consultants –  found that 60% of organizations reported a misalignment between the workplace and business operations because there was no integration with overall business strategy. As elementary as this may seem to a first year MBA student, the “intended” business strategy rarely sees the workplace (an “emergent” strategy) as a strategy to be integrated with the whole but more of an outcome. The effect of emergent strategies on the intended strategy will always create misalignment. Unrealized strategies that minimize shareholder value and can seriously hamper corporate growth and direction.

Without this alignment of strategies, business leaders miss significant opportunities to increase shareholder value across the business spectrum but especially in its physical infrastructure where up to 75% of costs can be locked up. Profitability can by maximized through increasing spatial efficiencies, cost reductions and capital minimization.

Workplace Performance Management provides the system of measurement that creates a direct linkage between business goals and objectives and stakeholder interests. WPM also provides specific insights into those actions that increase the value of the workplace and reduces the cost of business operations. Firms that implement WPM systems in concert with BPM derive significant cost reductions – often hard currency savings of between 5 and 10 percent and cost avoidances exceeding 20 percent.

Workplace Performance Management also measures other areas of the business including Financial, Operational, Portfolio and Environmental Performance and Customer Satisfaction.

These five categories form a comprehensive workplace performance balanced scorecard for management of the organization. This balanced process ensures the organization retains an integrated and focused approach to infrastructure, operation and organizational activities that contribute directly to the firm’s financial success.

Although most news reports emphasized that the stimulus was working, my reaction was more  of a, “Wow, that is simply NOT sustainable!”

The sudden nature, size, depth, and length of the recession of the past two years has hit the nation in such a way that virtually all of us have been profoundly affected. That is certainly true of higher education. Wage freezes and cuts, furloughs, buyouts, layoffs, reductions in retirement matching, curtailment of course offerings, and caps on student enrollment have become part of the higher education landscape.

US higher education is looking at one of the toughest periods in its history. There are challenges on every front. Public institutions are facing significant cuts in state support. The National Council of State Legislatures reported recently that 44 states expect a total shortfall of $120 billion in FY2010. And it was going to be higher in 2011. Private institutions have been ravaged by sharp and steep endowment losses. Community colleges are unable to enroll the increased demand of would-be students. For-profit institutions are multiplying and growing. Just look at University of Phoenix’s staggering record enrollment numbers that have surpassed 450,000.

This June (2010), the U.S. Department of Education (DOE) reported that 114 non-profit degree-granting institutions had failed the department’s financial responsibility test. Half of the institutions on the list now must post letters of credit to protect federal grant and loan funds. Failing the DOE test is a reasonable indicator of survival risk, and some sources place the endangered species list at perhaps 250 and growing. Another risk indicator is Moody’s estimate that colleges and universities lost $120 billion in endowment value between July 2008 and April 2009. Several bond-rating downgrades have been announced, and more are on the way.

Significant tuition increases at private institutions do not appear to be an option. In the past 25 years, tuition and fees have gone up 240 percent—about four times the rate of inflation. Over the past decade, the increase was 72 percent for public institutions and 98 percent for private institutions. The number of high school graduates will decline over the next decade. The practice of discounting also seems to be nearing its limits, with the national undergraduate average at 35 percent. Most believe discounting beyond one-third of your tuition income to be a serious financial mistake.

Warren Buffett once remarked, “When the tide goes out, you can see who has been swimming naked.” Well the tide IS out! And a sizable number of higher education institutions will need to invest in new swimsuits.

Did you get caught without your swimmers on?

Things began to change in 1994, when John Elkington coined the term the “Triple Bottom Line,” which expanded the traditional reporting framework to take into account ecological and social performance in addition to financial performance. The corporate world quickly saw that the value of reporting and adopting green performance led to establishing a competitive edge in the market place. Again, Higher Education was slow to adopt this metric as the need for competitive leverage was measured in other areas such as academics, college athletics programs and endowment funds.

The inability to quickly identify the triple bottom line as a viable tool for competition in Higher Education as quickly as new emerging technologies have been identified and funded, has led to a laissez faire attitude in regard to sustainability programs that has not only been detrimental to campus operations (in terms of short term costs) but also to campus infrastructure (in terms of long term reliability and maintainability, and capital renewal expense). The delay in adopting a triple bottom line approach to business operations early on severely limited the ability to maintain campus infrastructure at peak design performance, resulting in the continued institutionalization of poor business practices that have become accepted as normal business process. This “normalcy” is the legacy we risk passing to the next generation, and where a majority of us find ourselves today.

Issues and Context

So now many institutions find themselves in catch-up mode. Playing catch-up is never fun – and it always has a price to play. The last forty years of blissful ignorance created many problems and many issues for institutions. One only needs to read the daily papers and journals to see the impact that multi-year decreases in State and Federal funding are having on education at all levels. Combined with the double-edge sword of the economic crises in the 80’s, 90, and 00’s, and declining revenues and funding because of competition from on-line institutions or cheaper community colleges and alternate education sources, most Universities and Colleges are finding themselves in the category “asset poor and/ or broke,” meaning there is no cash flow to support and maintain infrastructure, let alone a sustainability program. So it is within this context that we must look to what the next ten years holds for us and how we will address the six specific areas that will define the next decade in terms of sustainability:

1. Increasing student enrollments – 20 to 30 percent
2. Conscious decision making about college selection based on sustainability awareness and viability
3. More open competition among universities for students and research dollars
4. Long term trend in declining public support with education becoming viewed as more of a private benefit despite Obama’s push to increase funding for Pell grants.
5. Increasing energy costs (using traditional sources)
6. Three way pressure on use of resources (economic, society and ecological)

Each of the above issues is a challenge in and of itself, yet when faced with the triple challenge of meeting the three goals of quality, capacity and affordability, and doing in such a way that we minimize our impact on the environment, they seem insurmountable. Yet, this is the challenge for our generation – and the way we handle it will be the legacy by which future generations will judge us.

Challenges

These challenges are no doubt a daunting task. Tackling each as isolated projects and expecting any real success is just taking a blinkered approach and hoping for the best. Increasingly, institutions are taking a holistic approach to sustainability strategy in an effort to gain some synergy and overcome these odds.  A survey conducted by Planon, Inc during one of their recent educational webinars ,“Optimizing Campus Facilities and Real Estate for the Future,” identified that more than 65 percent of Higher Education respondents had instituted an Office of Sustainability or a centralized program management office to manage the diverse number of sustainability programs on Campus. This is reflective of the afforementioned synergistic drive. The unstated mission of these Offices is to deliver today’s needs without compromising the abilities of future generations to meet their own needs, given the limitations of today’s finite resources and limited budgets – a big task, but doable. Within that context, this Office has to partner with other inter- and intra- Campus Offices and subject matter experts who have access to knowledge of how these resources are utilized to execute strategies that are both realistic and realizable.

Since approximately 80 percent of universities emissions are the result of physical plant activities, it follows that the Office of Facilities Management has a crucial role as a resource and the subject matter expert on campus utilities, planning and project management. It further follows that Facilities Management most likely has what the Office of Sustainability really needs – a highly organized list of campus projects with cost estimates organized into various sustainability buckets. Invariably these buckets fall into the following categories depending on the size and geographic location of a campus:

1. Energy efficiency and GHG reduction strategies
2. Renewable and clean energy production/ purchase agreements
3. Recycling strategies
4. Water conversation
5. Green buildings
6. Custodial Services
7. Green Landscaping practices
8. Transportation strategies and practices
9. Environmentally friendly preferred purchasing policies

Not only does Facilities Management have the list of what sustainable projects are necessary, they also have the innate campus knowledge and experience with project sequencing that others on campus do not. Gathering information for sustainability projects that will impact campus wide infrastructure is more art than science and has a wider range of socio-economic variables than traditional projects. A greater analysis shows that there is an impact on more than just physical space and infrastructure; and it will take the combined resources of facilities management, administration, faculty, students and maybe even the wider community to gather the information necessary for that analysis.

To be an effective tool for capital allocation, a strategic plan must be designed that incorporates an analysis of this information and it must be used to build a coalition and consensus at three levels within the Campus– Facilities, Finance and the Board Room. Without consensus and buy-in, the strategy, and any sustainability program, is doomed to failure. The strategy has to:

1. Anticipate the upkeep of core systems (maintenance prevents massive capital renewal costs).
2. Drive strategic capital investments (sustainable projects that are a long-term investment proposition for the campus and the community versus short term fixes).
3. Persuade the Board by under-scoring the long-term impacts/ benefits on finances, revenues, OSHA compliance, maintenance and sustainability (of adopting a sustainability position in the first place).

Unfortunately, in today’s economic climate, Finance (i.e. budget) is becoming more difficult to manage as competition for scarce campus dollars intensifies. With capital and operating budgets under scrutiny, fewer projects are getting financed and only those with exception ROIs (should this be exceptional ROIs or is this a finance term?) are being considered, which is the reason why Higher Education is now taking more interest in the financial model behind the Triple Bottom Line. Without informed discussions, core sustainability projects are bound to be deferred and opportunities to reduce emissions may be lost. But if projects are explained persuasively, decision makers can gain a broader strategic view of the campus and its needs, and projects can be pitched in light of how they position the University from a competitive point of view. The key is to think of your project list not as a “to do list” but as an opportunity for sustainability committees to become more informed, gain more knowledge and benchmark processes that set in place successful climate-action plans.

Opportunities

So what’s the next step? First, get organized. Review your project lists and categorize each project list according to their impact on sustainability in terms of your campus, your local environment and your global setting – in that order. If there is one take away for this article, remember this maxim —  think big, start small. Understand that by implementing a solution to maintain core infrastructure to last a long time is in itself a sustainable step – its impacts are local and its implementation costs are high – whereas the implementation of concentrated cleaning products are low cost, yet the domino impact on the environment is high as manufacturing, packaging, shipping and storage infrastructure and production is minimized. Other examples could include:

• installing software that integrates with your space management, energy management and room scheduling software to monitor classroom downtime to shutdown heating and cooling and turn off lights and HVAC. This can reduce carbon emissions by up to 15 -20 percent and save energy costs.  It can also help Facilities Management proactively schedule maintenance in classrooms and lab space, reducing O&M costs,
• talking to your architectural and energy consultants about Section 179D of the IRS Tax Code and see how they can partner with you to help you make energy efficient improvements to your buildings. Yes, working in partnership with your consultants you can get the benefit of this deduction. These savings could significantly offset energy costs and the efficiencies gained by building improvements will significantly reduce carbon emissions – a double win.

Summary

Adopting a centralized sustainability program office has the potential to deliver millions of dollars per year in savings and generate tens of thousands of metric tonnes in GHG savings . The ROI is significant and will outweigh many of the pet programs submitted to the Board that have previously won out.

Finally, get the members of your sustainability committee to join you in making the case for campus stewardship and investment in campus infrastructure. Projects that save energy and preserve building envelopes are the same projects that reduce carbon emissions. Sustainability, by definition, is preservation; and preserving campus infrastructure and facilities while meeting our current needs without compromising the abilities of future generations to meet their own needs is not a bad thing.

I figure we have until 2020 to adopt the right sustainability strategies. If we miss the boat, we will be leaving a legacy to the next generation that they may not be able to fix.

(c) Tony Stack BeyondFM 2010

Tony Stack is the Managing Director of BeyondFM

As the blogger said “ having seen capital sources enter this arena without the understanding of the business and its customers,” he is not optimistic about the future of the company. Further evidence in recent weeks has demonstrated that this once strong and viable IWMS player is now a shadow of it former self with many former staff (personally known to the author) retrenched or left of their own accord due to the frustrations of not knowing what was happening within the company. And with many talented people in product development, product management and R&D no longer there to “steer the ship”, what does this say for the future and viability of the product line?

As this blogger said “clients are being asked to sign long term maintenance support/ U&E agreements”. If I was a customer of Accruent or FAMIS and asked to sign one of these agreements, I would be looking long and hard at the company’s long term viability and its commitment to me.

If those things didn’t add up, I’d be looking elsewhere for a more secure option.

Perhaps IWMSNews asked the right question “Has the endgame in the IWMS industry started?

Opinions are those of the author only

(c) 2010 Tony Stack Beyond FM

A classic example of this is the software required to plan, maintain and operate campus infrastructure (commonly called Integrated Workplace Management Software, or IWMS). Although this software is resident within the Facilities Department and is used mainly by those employees, the campus wide benefits derived from implementation far outweigh the benefits that accrue directly to the facilities group.

Attempting to develop a defensible ROI based on cost as percentage of the facilities budget will always result in a multi-year payback. The natural response to this is that Finance will find other programs and initiatives that achieve a quicker payback at a higher ROI that are “core” to the University’s business. Failing to implement an IWMS solution because of this ROI method will result in significant infrastructure costs in future years which will have to be funded by reducing or eliminating the “quick payback” core programs and ultimately impacting the institutions long term viability and competitive edge.

Facilities Leaders need to change the decision making paradigm used by Finance by demonstrating the campus wide financial benefits of an IWMS solution. This requires understanding what your true total costs of operations are and what the true benefits are. This requires the development of a Total Cost of Ownership (TCO) model.

This model will build a defensible argument for implementing an IWMS system and will also demonstrate the risk cost of not pursuing.

Total Cost of Operations

What makes up the total cost of operations? Certainly not what is contained within the facilities budget. This is just a fraction of the costs spend each year to keep the doors open.

The total cost of operations should take into account all organizational, operational and infrastructure data. Since sustainability is becoming business as usual, the total cost of operations should also include the carbon impact of operations. This also includes the carbon impact of students and staff traveling to and from campus. In determining the total cost of operations, analysts need to consider the following information at a minimum.

• Size of the campuses portfolio
• Acreage of grounds
• Number of Students
• Number of Staff and Faculty
• Number of Facilities Personnel broken down by position/ trade
• Number of Facilities Management
• Number of owned vs lease facilities
• Financial Data
  • Actual, imputed/ implied rent
  • Facilities Staffing costs
  • M&O budgets

This information above can be obtained from internal records. Base rent is defined as actual rent paid plus the implied or imputed rent cost of owned facilities. You may need the services of a professional appraiser if you do not already have this information. Note that the total occupancy cost per square foot is considerably higher than the base rent per square foot. This cost is increase dramatically in areas of higher property costs (e.g. NYC, etc).

The total cost of operations also includes the actual facilities budget including real and implied rent and cost of fixed assets as shown below. The facilities budget typically is broken up as follows:

• Maintenance                   8%
• Janitorial                        3%
• Utilities                           9%
• Environmental                 1%
• Life Safety                      4%
• Projects (non capital)       3%
• Space planning               5%
• Employee Amenities        2%
• Rent and Escalations       36%
• Cost of Fixed Assets        26%

Fixed Asset information is generally obtainable from your General Ledger. These costs are ones directly attributable to staff and faculty (as classified under a CIP code). Student asset costs are not covered as Facilities has no impact on them. F&A will generally monitor such assets separately.

If an accurate Space/ Asset survey is conducted each year, you will find there are a percentage of assets that do not get used year to year. Industry standards indicate that this is around 6% per year. Additionally, an accurate annual survey will determine your asset loss (theft, accidental loss, misplacement etc). Industry standards indicate that this is around 2% per year.

The final set of inputs is probably the easiest set of information to obtain. These directly relate to the Facilities Department and include all of their internal costs and data and include such items as:

• Total number of work orders performed per year
• Operational time per work order
• Work order management costs (overhead)
• Reporting time and cost.

Work Order management costs are those that are incurred in opening and closing a work order. This a non material, labor costs only. These work orders also include the service requests that originate with non-facilities personnel. A cost of doing business is the amount of time you and your staff spend running reports for field use or management. Past analysis of higher education facilities departments show that about 75% of facilities personal are involved in producing some form of reporting each month and that these reports account for around 2 hours per week of time –even with CMMS systems in place. This is due to the fact that most reports need to get data from a variety of sources and unless the CMMS system contains this information – generally spatial, financial and sometimes human resources, them obtaining that information and integrating it into reports can double this time.

You also need to enter the sunk costs of your current system into the model. This may or may not be required depending on your Finance group, but since it was used in maintaining facilities to date, it is a part of operational costs and should be included. These sunk costs include the initial license fee and any software purchase to support it since, the implementation costs, cost of training and annual maintenance and any consulting fees associated with the software package. If you purchased hardware to support your current solution and will not be using it going forward, you need to include this cost as well.

This is the basic amount of information required to determine the actual operational costs for your university. Once established, you can begin to determine the costs of a new IWMS system and the financial benefits it delivers

Cost Savings/ Avoidance

Facilities can contribute to cost savings in greater ways that just by trimming its budget. Real estate and facilities costs are generally only second to HR costs, so it stands to reason that Facilities Operations has a lot of potential for cost savings. To be able to save money means understanding what you are spending money on. This presupposes the need for information and the ability to manipulate it. Since a university is full of disparate information databases, it is obvious that a solution must be found that allows users to view all of this information quickly and determine actions based upon it. This is the premise of an IWMS system. It is integrated within itself and to other systems. It tracks and manages information pertaining to the workplace (real estate, assets, facilities, etc) and it is a management information system which allows user to manipulate data, generate reports and develop strategies. IWMS systems  can give Facilities Leaders an edge by forecasting need, highlighting areas of opportunity and managing costs.

The four major areas of cost savings within Higher Education are:

1)     space utilization savings

1. reduction in vacancy
2. space optimization
3. relocation and construction costs

2)     maintenance and operations savings

1. reduction in word order processing costs
2. reduction in maintenance costs

3)     real estate and asset savings

1. reduction in lease costs
2. reduction in asset costs

4)     environmental savings

1. reduction in carbon emissions
2. reduction in carbon trading costs

CMMS systems cannot deliver this scale of savings as they only account for the “care and feeding” side of operations and were never designed as a strategic management tool. Some CMMS systems have develop bolt on, pseudo CAFM technology which provides a limited degree of space optimization capability. CMMS systems by themselves will deliver about 30-40% of the savings about the same cost as an IWMS system. This means that the purchase of an IMWS system will deliver greater savings for a far greater ROI and much faster payback.

Space Utilization Savings

Universities, by their nature, have a lot of space. It is not unusually for a 10,000 student campus to have over 4 million square of space and several hundred acres of grounds. Physical facilities, like personnel and financial assets, are resources to be planned, managed and maintained in line with the universities strategic objectives. The goal of space planning, management and allocation is to make the best possible use of these assets and to plan for future needs. In order to assess whether space is being used effectively, space standards are generally used to determine true need against actually provision. When this equation is out of kilter, the university has a space under-utilization problem and this can account for a significant sum of money in terms of actual expense and lost opportunity.

Additional savings can be made from embracing alternate workplace practices and flexible work policies among staff and faculty and via multi use accommodation strategies for student (classroom) environments which increase space utilization and reduce occupancy cost

Using the above example of a 10,000 student campus and assuming a very modest improvement in space efficiency of 1% per year, it is possible to achieve savings over around $3.0 million over 5 years. When combined with other savings (relocation, construction, etc), we can start to achieve savings of around $4.5 million over the same time frame – or about 6% of the total cost of operations.

Maintenance and Operations Savings

Maintenance and operational expenditure comprises a number of areas.

• Maintenance
• Custodial
• Utilities
• Environmental
• Life Safety
• Security
• Projects
• Planning
• Rent and Escalations
• Salaries and Benefits

Assuming a total cost of operations of $70 million per year (very average), a modest 3% improvement across the board would generate savings in excess of $5 million to $10 million over 5 years – more than enough to cover some universities’ budget short falls

A three percent reduction is not hard to achieve. Adding IWMS technology to your campus has been demonstrated to deliver improvements of up to 10% to 15% in some areas of operation adding significantly to your savings.

An IWMS solution can be used to automate many of your workflows and process, stripping time and costs. Examples include automated work order creation, assigning, tracking and closing based on your operating parameters; reduction in labor costs due to automated meter reading; reduction in utility costs due to alignment of utility usage to need, and so on.

Real Estate and Asset Savings

As universities grow, their demand for space increases. Most times, this additional demand can be met through new capital projects on campus or repurposing of existing facilities. However, more and more universities are finding that space demand is exceeding current and projected on-campus supply. This necessitates purchasing or leasing off-campus property. With the acceleration of distance learning, remote campuses are becoming more important. This type of campus is suited to leasing which allows for universities the flexibility to quickly adjust to change and maximize service delivery without the long term holding costs of ownership.

Facilities Leaders are now required to have property management skills which includes leasing. As profession property management firms know, one of the most costly areas of leasing is forgetting to act on lease renewal dates. The monthly holdover charges can exceed 200% of base rent plus penalties. Missing critical dates for renewing, taking up or divesting space based on poor planning accounts for a significant sum of money. It is not uncommon to see missed renewals of up to 5% of the portfolio.

By using and incorporating an IWMS system into your operations, you can accurately track lease information and make informed decisions based on supply/ demand planning linked to HR, Space and Financial databases.

Using our previous 10,000 student campus example, an assuming an 81% owned/ lease ratio (see IFMA’s Benchmarking report #30), we end up with about 680,000 sf of leased space. Assuming just a 1% improvement per year this delivers savings of around $640K over 5 years. One percent is just being smarter about the way you do things now. An IWMS system can start delivering improvements of more than 5% per year meaning savings have grown to more than $670K per year!

In large organizations, all assets suffer from inactivity and also from shrinkage (loss). Accurately tracking usage and ownership of assets increased accountability and greatly reduces inactivity (people need to justify their use of the asset) and shrinkage (when a person or department knows it is responsible for an asset it is less likely to go missing). In our example a 1% reduction in inactivity and a 10% reduction in asset loss per year results in savings or more than $130,000 per year.

Environmental Savings

Sustainability is now recognized as a standard business practice – business as usual. Universities are being rated by their leadership in this area and Campus Leadership are looking to Facilities Management to develop programs that deliver and/ or enhance “green economics” and can measure their performance and modify their behaviors.

Transportation (to and from site) is perhaps the easiest way to reduce carbon emissions, generate carbon trade cost savings and help a university not only meet environmental targets but also show commitment to an increasing important area.

In our example of a 10,000 student campus there would be about 1350 staff and faculty of which the greater majority would use public transport (about 80%). Assuming some industry and EPA averages, about 600 tons of CO2 are expelled each per month. By implementing flexible workplace practices which reduce the number of days travelled by 10% (a moderate amount), it is possible to save over 700 tons of CO2 per year (or about $22,000 in Carbon Cost).

Savings in emissions can be exponentially increased by changing behaviors and implementing sustainable business practices such as:-

• Improving energy efficiencies through smarter technologies.
• Adopting a clean and renewable energy policy
• Establishing a recycling policy
• Implementing water conservation procedures
• Ensuring all new construction adheres to LEED principles
• Have Custodial Services implement a “Green Seal” purchasing strategy
• Practice green landscaping techniques
• Adopt non fossil fuel powered transport for campus services
• Establish an Environmental Preferred Purchasing program.

There are many ways that carbon emissions can be reduced via simple techniques as above. However, Executive Leadership needs to know how the University is tracking in relation to its objectives. IWMS systems that track and manage these environmental strategies and account for carbon savings are an important tool in delivering these results.

Summary

The TCO model incorporates all the costs of operations, and all the financial and societal benefits of implementing an IWMS system. Facilities Maintenance and Operations savings alone contribute over 60% of hard dollar savings.

In our 10,000 student campus example we have used, the cumulative process savings from implementing an IWMS system equate to almost $18 million over 5years. While this may seem a staggering number for a 10,000 student university, it should be remembered that Finance has typically only be exposed to the potential savings from a facilities budget. The costs that the facilities group is responsible for in the total M&O budget is often less than 30% of the true total operating costs. As a result, the savings are limited.

The final proof for Finance is the Return on Investment. In our example, the ROI is 5.3 months. Even allowing for a much higher WACC, the ROI is still under 9 months. This virtually eliminates the argument that the University has more cost effective programs that deliver a better ROI and builds a defensible case for increased facilities funding.

What other low cost investment could save a university $18 million and pay for itself in less than 6 months?

For a additional information, please contact the author at arstack@beyond-fm.com

(c) 2010 Tony Stack BeyondFM

Percentage improvement in communication after purchase of FM Technology

(n=1050)

(c) BeyondFM

Did you know that

• There IS a statistical correlation between Carnegie classifcation, student population and the type of system purchased that can be quantified;
• Baccalaureate and Associates institutions will typically purchase Point Solutions (55%) and higher end institutions buy Integrated solutions or build their own (or a combination of the both);
• Higher end institutions buy over 77% of IWMS solutions and related technology yet represent only 50% of the market;
• Masters, Doctoral and Research universities typical purchase more of the strategic tool sets than the operation tool sets;
• Despite claims to the contrary, most institutions do not perform a pre and post ROI analysis to determine the effectiveness of their purchase.
• FM technology generally over-delivers on expectations in the areas of Maintenance and Operations, Business Process Improvement and Project Management and under-delivers in areas on expectation in the areas of energy and sustainability.
• The majority of institutions purchased Enterprise licences as opposed to User Licences.
• Institutions who purchased some sort of FM technology saw some immediate improvement in internal, external and  cross campus communications which saved them identifiable costs. Less than 10% of respondents did not see an improvement in communications.

The above information is offered as is, and is based on actual data collected from over 1,000 respondents. No opinion has been offered and none will be offered in the blog pertaining to product, module, company, service or solution. This data is copyrighted. Please contact me for permission to reuse .Thanks……….

The reality is that each building you add on campus – no matter how energy efficient – adds to your carbon footprint, unless it is a zero-energy (ZE) building or it replaces a building that used more energy. While ZE buildings may one day become the norm, we are not there yet. New campus buildings, even LEED certified or better, are energy hogs and are responsible for significantly increasing the size of campus carbon footprints. No amount of energy monitoring or fancy software is going to help you reduce that figure while you continue to build new buildings.

Institutions that are committed to reducing their carbon footprint need to look at new construction in a new light. For example, the way an institution uses its space is as critical an aspect of sustainability practice as LEED certification of new buildings, energy-efficient heating and cooling systems, co-generation, or alternate energy systems are. An institution that uses its space as well as possible is one that does not build new buildings, however green they may be, unless its mission and programs absolutley need them. Colleges and Universities can save energy dollars and reduce carbon emissions by maximizing the utilization of existing space and avoiding new construction. While it may be difficult to imagine a president of a college or university knocking back new construction (since new buildings are often viewed as legacy accomplishments), that’s what is needed.

On many, if not most campuses, inefficient space utilization is the norm. The most desirable spaces may be intensively utilized and fought over while less desirable spaces are cast off and sparsely occupied. Over time, as new buildings are constructed and departments and offices move into those richly furnished, high prestige spaces, the areas they leave behind are taken over by existing personnel and offices. Over time everyone spreads out resulting in lower space density /poor space utilization. Ever greater areas are “used” while activity and output stays roughly the same. The campus “appears” to be fully maxed out and without effective space tracking and auditing technology, requests for new buildings often results.

Colleges and Universities tend to suffer from structural space inefficiencies was well. Consider the academic year. For most schools it is common place to see entire campuses empty of students, faculty and programming for the entire summer – 3 months. Meanwhile, staff and departmental offices are still open for business and buildings are still considered occupied for maintenance and operational puposes. Costs are still being incurred and energy is still being expended on a daily basis. This is not the way to do business – and from a sustainability perspective, we cast ourselves as being very, very poor stewards over our environment.

The inefficiency of faculty offices deserves special mentions – the very professors who espouse the sustainability cause. Faculty members generally have their own offices, but these may only be utilized a few hours per week during the 15-17 week spring and fall semesters and completely unoccupied otherwise – all the the rest of 12 months being heated and cooled as a consequence so the buildings HVAC system design. That is 33% efficiency rating or lower. Again, that is no way to do business is you are in the business of reducing you carbon footprint.

Strategies for addressing poor space utilization

Each problem presents an opportunity, and as such there are many ways to take advantage of these opportuities. Of course none will be easy, but all are possible. It all depends on where you see the low hanging fruit:

1. When a new building is first proposed, first determine whether there is a way to meet the program needs for the building by reconfiguring and better utilizing existing space. If your institution does not have a Space Management and Forecasting solution, now is the time to seriously consider investing in one.

• This will give you a base line from which to determine whether current space can be better utilized and if so how much space and energy costs can be saved.
• If space is truly maxed out, you will have a base line from which to forecast future program need to determine future building requirements
• The Space Management Solution will then allow you to track and monitor future space utilitization and report back to F&A on grant utilization by PI, etc.

2. During break periods, especially intersession or the December holiday break, encourage or require everyone to take vacation time and put the campus in a shutdown mode as much as possible.

• By utlitizing the Space Management and Planing Solution you can tie into your CMMS solution so that preventive maintenance work orders can be automatically generated for equipment and spaces in areas shut down.

3. HVAC modifications can be implemented for faculty offices so these spaces stop being heated, cooled, or ventilated when unoccupied (which is most of the time).

4. If your school is committed to an enrollment growth scenario, it might be possible to accommodate many more students without new construction if you operate academic programs at full tilt year round and thus make better use of existing buildings over the summer.

• Again, using a Space Management solution in tandem with a Room Scheduling solution will allow you proactively plan and manage this

5. More aggressive scheduling including starting classes earlier or even on Friday afternoons can defer the need for a new building.

We can build all the LEED-certified, carbon-neutral buildings we want, but that’s just a drop in the bucket if we don’t do something to increase the efficiency of the billions of existing buildings in exisitence today and our edifice complex to keep building more – in fact, we may be doing more harm than good. A building that uses energy very efficiently but is half empty most of the time is a problem as well.

Next time a President or Administrator says, “we need a new building”, I hope you’ll stop and ask yourself ,

a)      are we really sure we need a new building? Let’s look at our space utilitization.

b)      If we make changes to our buildings, can we make as enegy efficient as possible?

Hey, its not as glamorous as planning that next new LEED building with Frank Gehry, but it a whole lot greener!

(C) 2010 Tony Stack BeyondFM

1. Improving accountability;
2. Planning for workforce change;
3. Integrating sustainability into total operations;
4. Implementing total cost of ownership practices;
5. Making facilities a strategic partner with leadership; and
6. Leading change.

Traditionally, facilities departments have had to rely on a complex array of home grown tools which don’t (or can’t) integrate with other campus systems. A number of institutions develop their own systems, which (unfortunately) break down over time due to complex integration issues, lack of a dedicated staff, budget cuts, and loss of expertise (through natural attrition). Worse off are the universities which have spent hundreds of thousands (or even millions of dollars) on integrated workplace management systems (IWMS), computerized maintenance management systems (CMMS), or computer aided facility management solutions (CAFM) only to find that in order to provide meaningful results, they have had to incur additional resource costs to make the integration viable.

Facilities departments must respond to increased demands for accountability with information that demonstrates how well they are managing institutional resources. The growing demand for increased accountability has affected facilities departments as much as, if not more than, other operating areas.

Facilities represent a significant portion of every budget. Access to pertinent, real time information by decision makers and leaders is an essential premise to accountability. So when assessing the level and status of accountability measures, facility professionals should consider the following:

• Is it possible to demonstrate the performance of the campus portfolio?
• Is it possible to determine the value of facilities and determine total costs of ownership (TCO), functional (and actual) life cycles, and the department’s contribution to reducing the costs of the former and increasing the value of the latter?
• Can facilities clearly articulate the department’s successes in deploying accountability measures?

The major issue with this challenge is that facilities departments need to work closely with other administrative functions to understand the very real demographic changes they face. In this context, facility managers (fms)—although not demographers by trade—must understand how shifts within their cities, states, and regions can impact the need for educational services. By understanding these trends, fms can generate more realistic capital plans and maintenance strategies based upon what they have and what they will need.

As they plan for workforce change, fms should ask the following questions:

1. What demographic changes are expected in your city, state, and region?
2. What are the demographics of your current workforce?
3. What are your future service requirements and core functions?
4. What are the gaps between what you have and what you will need?
5. Do you have the right mix of resources in terms of personnel and technology?
6. What strategic options are/are not available to you?

Access to a fully integrated information source is critical to defining a facilities management solution. Technology that integrates with GIS/market mapping software, financial, and human resource databases will allow fms to develop multiple, time based scenarios from which costs and risks can be assessed. This will also allow departments to enact long-term strategic plans, thus minimizing loss of capital and other resources due to knee jerk reactions to demographic shifts. Those managers who are early adopters of this technology can be agents of change within the larger community.

Like it or not, the sustainability movement is here to stay. Even students and parents, who traditionally chose universities based on programs, cost, and prestige factors are now looking at how universities are addressing sustainability—from green purchasing to eco-friendly dorms and classrooms.

Consequently, fms must make sustainability central to all decisions; otherwise, their stewardship over facility infrastructure will come into question. Harder to do is to set goals and time frames so stakeholders will know when (and how) the department has succeeded. Finally, fms need to determine the players and their level of involvement.

Sustainability is an accountability issue. Fms must take on leadership roles and be taken seriously in that position. Strategies that can be enacted include:

• Custodial services. Are green products being used?
• Waste management. Can recycling programs be extended and expanded? Are there innovative ways to recycle materials into new construction?
• Purchasing policies. Do recycled or recyclable materials have preference in the inventory system? Can the system even track green purchasing?
• Construction. How committed to LEED is the facilities department? Is it possible to demonstrate how the department is using green technology and green construction methodologies?

Along with accountability, TCO and sustainability go hand in hand. Stakeholders need to know fms are making the best decisions in light of all available information and that those decisions have the required return on investment (ROI).

In the higher education arena, this goes even further. The TCO must be able to demonstrate that fms have made the right decision from financial and stakeholder perspectives. This means fms are now being tasked with assigning costs to non-traditional TCO components such as image, usage, etc.

While traditional TCO models can cope with the numbers, fms need tools that allow them to quantify these components in order to make the right decisions. One method of quantifying subjective costs is to rank and weigh the importance of the nontraditional items based on user perception. This requires upfront discussion and agreement as to what is perceived as a real value add and what is seen as a wish. To determine this, fms should ask the following questions:

• How does the department define TCO? Is there consensus of all staff members? Is that consensus carried through in policies and procedures?
• How can fms achieve institutional alignment on the need for TCO?
• Do internal customers understand the concept and the need for TCO? How can they be educated, if necessary?
• Are facilities design standards based on TCO? A TCO philosophy is essential in the planning phase.
• How are intangibles measured in the TCO equation?
• How are TCO and sustainability being related?

Fms need to demonstrate their value and the value of facilities to get a seat at the highest tables of decision making within their institutions. Fms must elevate themselves from the basement to the boardroom.

FM departments can contribute valuable information to discussions of campus planning, facilities usage, sustainability, and operations. However, despite professional achievements in recent years, many fms are still not able to leverage their knowledge at boardroom levels.

Getting an invitation to the dance is a long-term process and will take some years for fms to achieve. Given that facilities operations are generally second only to HR and can have one of the largest impacts on both budgets and cost savings, managers need to strive harder for this level of engagement and recognition by top executives.

One of the best ways to raise the profile of FM and increase its value to the organization as a whole is to demonstrate tangible results that support the mission, vision, and strategy of the institution. This makes it essential for the facilities department’s strategic vision and plan to align with the institutional strategic plan.

Unfortunately, many strategic plans are created in isolation from other facts and rely on long held assumptions about how facilities have always operated. This attitude toward strategic planning puts facilities at odds with institutional leadership, which is why fms often don’t get a seat at the table.

Being able to demonstrate value relies heavily on the ability to craft and implement a defensible strategy based on real time data and realistic scenario models. A well maintained and supported IWMS program offers fms the ability to derive any number of metrics from the available data, benchmark these metrics to industry averages and desired future states, and craft strategies which close gaps. While access to (and use of) this information is vital, the final analysis about what path to pursue rests with the fm.

Campus leadership will judge the strategic value of fms by their ability to enact a strategy that aligns with institutional goals and objectives. The closer these two align, the quicker fms will get invited to join the higher level discussions.

The ultimate reason for demonstrating a high level of value and acceptance within the institution is so that fms will be recognized as leaders of change.

Change is inevitable. Shifting demographics mean that expectations change, economics change, and knowledge changes. Facility leaders need to determine whether they are going to manage change or lead it. Having the right tools is only part of the solution.

Leaders must have the wisdom to act purposefully on the knowledge that grows out of information and data. Managers who consistently demonstrate this characteristic will be sought after as leaders of change.
Fms who wonder if they make the grade in terms of leadership should ask themselves the following questions:

• Do I understand the fundamental difference between management and leadership in regard to change?
• Do I have managers or leaders working for me? Can a manager become a leader?
• What have I done to understand how people are going to respond to change? Will I manage their expectations? Or will you lead them through change?
• How well do I understand the drivers of change in my institution?
• How will I assess and measure change outcomes and successes?
• Do I know what the unintended consequences of change could be? Can I develop alternate strategies and contingency plans?

While it is impossible to predict the future with certainty, it is certain that the demographics of the professional world will change and that accountability for reaction to that change will increase. With the right tools, information and data, and wisdom, today’s fms can begin to explore the implication of these trends and start to prepare their institutions for what will come. Institutions that adopt change as a mantra and quickly adapt to it will become the institutions that survive the future.

(c) 2010 Tony Stack , Beyond FM.

Tony Stack is Managing Director of BeyonfFM