For facility executives, the bottom line can't be measured only in dollars and cents

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For Facility Executives, The Bottom Line Can't Be Measured Only In Dollars And Cents
In most organizations, the tension between cost control and quality of the workplace is exacerbated by the growing need to manage the real estate portfolio to yield income - usually through chargebacks - and to not just treat it as a cost center. This provides for a realistic way to include real estate costs into the costs of each core business.
When it comes to the bottom line, there are two ways that organizations can look at the facilities they occupy. The traditional approach is to see facilities as a cost. This focus on the inputs to a business process leads naturally to cost control and expense cuts as organizations strive to reduce expenditures, cut staff, economize and minimize. Many real estate and facility executives report that their organizational culture and priorities drive them to this exclusive focus on cost containment.
But there is another way of looking at facilities, and it gets back to the reason organizations have buildings in the first place: to get work done as efficiently and effectively as possible. Seen from this perspective, the facility can have a positive bottom-line impact by helping improve employee productivity.
We might call the older approach an input-oriented perspective: Corporate real estate and facility executives are simply suppliers of workplaces, providing complex products – buildings, furnishings, technology – and services. These executives have little direct concern about the ultimate impact of their products and services on the organization as a whole.
Contrast that worldview with a newer outlook – output-oriented, if you will. These facilities organizations focus on helping the core business to be more effective and competitive by helping employees to be more productive. To them, the buildings, with their furnishings and support services, are means, not ends. Economy, efficiency and skillful management of physical assets are still necessary, but will no longer suffice. These workplace service providers are committed to outcomes such as improved productivity, rather than inputs such as desks and chairs. Top priority goes to meeting the needs of the occupants, by adding value to core business processes, and responding to changes in the core business workforce, all to best contribute to organizational success.
Top facility executives have only recently started to think about how to increase the added value to the primary process, or core business, of their organization. These executives realize that they must not only address the issues of cost control and income, but also must develop and implement a strategy to support the core business.
What kinds of facility and real estate departments seem to be focusing most on productivity? Interestingly, the move toward productivity generally began in centralized facilities and real estate departments, not departments that are part of individual business units. That’s the opposite of what one would have expected: Decentralized departments should, in theory, be closer to their customers and have a better sense of the real needs of the organization. But, in reality, these executives typically focused on cutting costs or on increasing the value of the real estate portfolio.
By contrast, adding value to the core business, or optimizing the core business, became a top priority for a surprising number of centralized facility and real estate departments. This was true even though, in traditional corporate organizations, the central units are the least integrated with specific processes of the business units.
Why did this role reversal happen? Perhaps because the centralized departments saw that their internal customers – the core business units – might decide at some point to buy workplace services and support direct from the marketplace, i.e. not from or through an in-house facilities department. That meant the facilities department had to see itself as

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For facility executives, the bottom line can't be measured only in dollars and cents

  1. 1. For Facility Executives, The Bottom LineCant Be Measured Only In Dollars AndCentsIn most organizations, the tension between cost control and quality of the workplace is exacerbated bythe growing need to manage the real estate portfolio to yield income - usually through chargebacks -and to not just treat it as a cost center. This provides for a realistic way to include real estate costs intothe costs of each core business.When it comes to the bottom line, there are two ways that organizations can look at the facilitiesthey occupy. The traditional approach is to see facilities as a cost. This focus on the inputs to abusiness process leads naturally to cost control and expense cuts as organizations strive to reduceexpenditures, cut staff, economize and minimize. Many real estate and facility executives reportthat their organizational culture and priorities drive them to this exclusive focus on costcontainment.But there is another way of looking at facilities, and it gets back to the reason organizations havebuildings in the first place: to get work done as efficiently and effectively as possible. Seen fromthis perspective, the facility can have a positive bottom-line impact by helping improveemployee productivity.We might call the older approach an input-oriented perspective: Corporate real estate and facilityexecutives are simply suppliers of workplaces, providing complex products – buildings,furnishings, technology – and services. These executives have little direct concern about theultimate impact of their products and services on the organization as a whole.Contrast that worldview with a newer outlook – output-oriented, if you will. These facilitiesorganizations focus on helping the core business to be more effective and competitive by helpingemployees to be more productive. To them, the buildings, with their furnishings and supportservices, are means, not ends. Economy, efficiency and skillful management of physical assetsare still necessary, but will no longer suffice. These workplace service providers are committedto outcomes such as improved productivity, rather than inputs such as desks and chairs. Top
  2. 2. priority goes to meeting the needs of the occupants, by adding value to core business processes,and responding to changes in the core business workforce, all to best contribute to organizationalsuccess.Top facility executives have only recently started to think about how to increase the added valueto the primary process, or core business, of their organization. These executives realize that theymust not only address the issues of cost control and income, but also must develop andimplement a strategy to support the core business.What kinds of facility and real estate departments seem to be focusing most on productivity?Interestingly, the move toward productivity generally began in centralized facilities and realestate departments, not departments that are part of individual business units. That’s the oppositeof what one would have expected: Decentralized departments should, in theory, be closer to theircustomers and have a better sense of the real needs of the organization. But, in reality, theseexecutives typically focused on cutting costs or on increasing the value of the real estateportfolio.By contrast, adding value to the core business, or optimizing the core business, became a toppriority for a surprising number of centralized facility and real estate departments. This was trueeven though, in traditional corporate organizations, the central units are the least integrated withspecific processes of the business units.Why did this role reversal happen? Perhaps because the centralized departments saw that theirinternal customers – the core business units – might decide at some point to buy workplaceservices and support direct from the marketplace, i.e. not from or through an in-house facilitiesdepartment. That meant the facilities department had to see itself as competing with firmsalready in the marketplace – powerful discipline to focus on the customer.In any case, over the last few years, there have been signs that the decentralized departmentshave also begun to focus on productivity. To the extent that this trend continues, decentralizeddepartments should be well-positioned to add significant value to their organizations.Of course, not all organizations – centralized or decentralized – walk the talk when it comes tomanagement priorities. Some do indeed give first priority to serving occupants; for years theirmanagement has been building this perspective into their group culture. For the rest, the focus onthe customer is the destination, but not yet the achievement, at the hands-on staff levels.Satisfaction Plus DelightAdding value to the core business includes meeting the needs of work processes as well as ofpeople; it also includes going beyond what is recognized as necessary and is explicitly asked for.Economy and efficiency are of course necessary but not sufficient. This is periodically confirmedby an ongoing survey of true facility end-users: hundreds of thousands of occupants of facilitiesprovided by the U.S. General Services Administration’s Public Buildings Service. The surveyhas found that good service and good technical performance are expected, even taken forgranted. They only become an issue for occupants if significant deficiencies exist.
  3. 3. PBS established a goal of increasing customer satisfaction to a specified level. It found from thesurvey that a huge increase in effort to upgrade basic technical performance, such as HVAC orcleaning, in thousands of smaller buildings would not bring occupant satisfaction up to target.Nationally, the top driver of overall satisfaction was “responsiveness with regard to proceduresfor obtaining services” and that was more of an issue in large buildings than small.The added value, expressed as delight, comes when workplace innovations make it easier forpeople to do the new necessary tasks that are being invented at the same time. Workplacechanges must keep pace with changes in work processes and people while respecting theworkers’ priorities for quality of life.Integrating FacilitiesTo be fully effective, workplace improvements need to be integrated with appropriate technologyand work processes. As time goes on, the management of workplaces will be integrated into themanagement of business processes. Consider the history of corporate management informationsystems (MIS) over the last two decades. MIS was once a stand-alone department. CEOs reliedon their MIS managers to oversee the corporate computerized business systems and themainframe hardware on which they ran. Business units and headquarters each identifiedinformation technology (IT) requirements and relied on the MIS department to developapplication programs and deliver information. CEOs and line managers delegated to the MISpeople the role of identifying needed IT investments and of recommending priorities in MISsupport for the business.That is no longer good enough for companies that use IT to gain strategic advantage. IT hasbecome a core element of their business plans. It can make viable a widespread empowerment ofmanagers and staff by giving them access to the information they need for decision-making. Itcan be the core of new products and services. IT is integrated into almost every work process ofretailers and petroleum, pharmaceutical, airline and trucking companies.CEOs are recognizing that strategic management of IT is at the heart of companies’ businessprocesses. These processes, such as the order fulfillment cycle or the product delivery process,bridge divisions or departments of the organization. Today, some CEOs are former seniorexecutives of MIS, and many have sufficient expertise to manage IT as an integral part of theirrole. Further, they are distributing IT expertise and leadership in support of business processesinstead of delegating IT responsibilities to a central, separate support group.As IT becomes pervasive, it enables a transformation of the workplace. Much work that a decadeago could only be done on corporate or government premises has become location-independent.New processes made practicable by IT happen in places chosen for convenience of the buyer, notthe seller. For instance, making a bank deposit or transfer was once done by going to a branchbank or mailing paper to the bank; now it is done by the customer, whether at an ATM in ashopping mall or on the street, over the telephone, or from a desktop computer in the customer’soffice or a notebook computer anywhere.
  4. 4. As with IT a decade ago, workplaces are starting to become an identified component of businesscompetitiveness. They are becoming key to emerging business processes. To some companies,the automobile has already graduated from a transportation vehicle to a primary workplace. Afield engineer who has the tools to operate anywhere, anytime, may need an office desk, not aprivate, permanent office. Indeed, small cubicles in an open-plan office might be shared amongseveral engineers on a part time, as-needed basis.The corporate paradigm is shifting from command-and-control hierarchies to teams that driveprocesses. Expertise in providing and supporting workplace facilities and services will be anecessary and accepted component of those teams, as today’s CEOs recognize the corporateadvantage in their interconnected information processes.Julian Arhire is a Manager with DtiCorp.com – DtiCorp.com carries more than 35,000HVAC products, including industrial, commercial and residential parts and equipmentfrom Honeywell, Johnson Contols, Robertshaw, Jandy, Grundfos, Armstrong and more.

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