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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