The document discusses how facility management (FM) can shift from a cost center to a value center by integrating with workplace productivity and talent management. It argues FM risks falling back into a reactive, cost-focused role without this shift. To make the shift, FM departments must quantify how their activities impact core business functions like marketing, human resources, and risk management. This helps demonstrate FM's alignment with key performance drivers like skilled staff and technology. Integrating FM with information technology and human resources can further increase workplace productivity and enterprise value.

1. 32
ACILITIES
From Cost
To Profit
http://www.rfpmagazine.com/
In the current, credit squeezed world of corporate real
estate, facility management (FM) risks falling back into
its historic, cost constrained role of reactive repairs and
maintenance and endless lobbying for a fair share of the
corporate budget.
Over the past thirty years facility managers became
increasingly influential through applying the techniques of
life-cycle costing; highlighting that a property’s operational
cost over its lifetime could easily exceed its capital cost.
This life-cycle approach had particular appeal in the
sophisticated world of property trusts and public-private
infrastructure, where institutional investors demanded
clear alignment and transparency between the risks and
rewards of long term ownership.
This influence has not extended to the same degree in
corporate real estate, where building occupancy costs
are relatively small compared to the traditional, “big
three costs” of staff, purchasing and rent. The public
sector likewise, despite frequently leading the way in
the techniques of total asset management, often finds it
difficult to maintain the funding commitment to match its
long term asset liability forecasts.
But it needn’t be so. In corporate real estate, maintaining
a quality building environment should be viewed as an
investment in workplace productivity.
In the quest for efficiency and effectiveness, top
performing corporations are beginning to view costs such
as IT and building occupancy as investments in workplace
productivity, rather than costs which were traditionally
resented and cut to a minimum. Governments too, mindful
of their electoral communities, are keen to demonstrate
the overall value of their services by ensuring that costs
and tax burdens are balanced by quality outputs.
This emphasis on investment is having the greatest impact
in the HR and IT departments, where the pressure of the
“talent crunch” has been escalating in line with highly
mobile workforces and the use of enterprise-wide systems
to automate and control an increasing range of business
processes. FM is an increasingly important factor in the
war for talent.
For example in the higher education sector, demand for
researchers is soaring as more and more countries seek
to develop their educational skills base and strengthen
their economic competitive advantage. Ensuring a well
supported, high quality research environment via a pro-
active FM program can make a powerful contribution to
a global recruitment campaign. Similarly in the business
services sector, seeking efficiencies from outsourcing and
shared service consolidation has magnified the need for
highly skilled, techno-literate staff to operate the ERP
platforms on which much of the efficiencies depend.
In corporate
real estate,
maintaining
a quality
building
environment
should be
viewed as an
investment
in workplace
productivity
Moving FM from a cost centre to a
value centre involves integrating facility
management with workplace productivity
and talent management, argues Alan Masterton.

2. 33http://www.rfpmagazine.com/
At the University of Sydney, we too seek to balance the
competing factors of cost efficiency and service quality.
To assist with the budget allocation process for our
service divisions, we apply a matrix of high performance
drivers, benchmarked against world class standards. This
ensures that the desired outputs of service satisfaction,
productivity and efficiency are supported by the necessary
inputs of technology, process and capabilities.
So how can facility managers in corporate real estate
apply these value-focused trends? Increasing the
relevance and authority of the FM department requires
providing the corporate decision makers with greater
clarity and understanding on the links between FM and
the corporation’s core activities.
In the same way that life-cycle costing rose to prominence
in sectors whose core activity was the long term
ownership of assets, corporate FM departments must
likewise attempt quantify the risks, benefits and leverage
of their activities on the core business.
Most corporations in the developed economies operate
in skill intensive and technology intensive environments,
where staff are increasingly aware of their scarcity
and value. The challenge of employee recruitment and
retention is one of the key activities of the modern HR
department, with benchmarks indicating that world class
corporations suffer only half the attrition rates of their
peer groups.
For investment analysts and risk managers, employee
attrition rates indicate the rate at which money is
literally walking out of the corporate door. The impact on
shareholder value is clear and quantifiable: the cost of a
new recruitment program, the lost productivity until the
new recruit is inducted and moves up the learning curve
of the role.
FM, whilst often not the primary cause of voluntary
termination, frequently can be a contributing factor. The
attraction of an accessible, modern and employee-friendly
workplace can prove the final incentive to quit the current
employment. Facility managers are well advised to seek
guidance from their HR colleagues on the key messages
from the employee exit interviews and the cost burden
that can be traced to a low quality environment.
An even greater impact on shareholder value is workplace
productivity and the rate of change that now occurs
within corporations. For example, a typical billion
dollar corporation can expect to undertake 25 process
improvement projects each year and on average will be
involved in a major acquisition or divestment around once
every seven years.
This degree of change requires large efforts by HR and
IT in terms of forming and reforming corporate business
units and processes in line with such improvements and
acquisition / divestment activity. FM can a play key role
in workplace productivity through the adoption of building
designs that can be more easily re-configured to suit
changing business circumstances
A recent survey on corporate real estate practices by
DEGW for CoreNet Global indicates that organisations
will be more likely to pay a premium of over five percent
for flexible workplace design and contract terms . More
High Performance
Driver
Current Performance World Class Target Forecast Performance
Required Investment
Service Satisfaction /
Effectiveness
Service Efficiency /
Productivity
$$$$$
Technology Enablement Time
Process Management Resources
Workforce Engagement
/ Capability
ROI
Table 1: University of Sydney: Matrix of High Performance Drivers
Benchmarks
indicate
that world
class
corporations
suffer only
half the
attrition rates
of their peer
groups

3. 34 http://www.rfpmagazine.com/
FM
departments
must quantify
the risks,
benefits and
leverage of
their activities
on the core
business
importantly, two thirds of the respondents believed that
the integration of the corporate real estate function with
IT and HR will be accepted as industry best practice in the
future.
Closer co-operation or integration of these three
departments will have a significant impact on the way
in which their services are planned and delivered and
will facilitate the relentless drive for efficiencies and
effectiveness. In most cases, service integration will
require each discipline to broaden their training in order
to increase appreciation of how the others perform their
services and evaluate how the collective service can
improve workplace productivity.
For the corporate “customers”, integration of FM, HR and
IT should improve service levels through the provision of a
more pro-active and coordinated approach. The integration
of FM, HR and IT will have a significant impact on the
way in which their services are planned and delivered. For
corporations, integration should increase enterprise value
by ensuring more productive and flexible workplaces.
For FM, demonstrating a clear alignment to the high
performance drivers of skilled staff and technology should
enable corporate FM departments to shift their focus
solely from cost efficiency to a broader, enterprise-value
base of cost efficiency, workplace productivity and talent
management- finally shifting FM from a cost centre to
value centre. RFP
Core Business Function Performance Measure Related FM measures (sample)
Marketing • Customer satisfaction scores
• Repeat business rates
• Rates of referrals
• FM satisfaction index
• Facility condition index
• Capital renewal expenditure
Human Resources • Voluntary redundancy rates
• Staff satisfaction scores
• Total recruitment costs
• Employee satisfaction index
• Gross sq m per employee
• FM staff skills index
Risk Management • Enterprise value
• Business continuity readiness
• Enterprise risk profile
• Age of mission critical buildings
• Emergency planning coverage
• Work order backlog
Table 2: Relating FM to Core Performance Measures
Alan Masterton is Director of Operations Performance at the University of Sydney.
Employee attrition rates indicate
the rate at which money is literally
walking out of the corporate door.