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By Tim Springer and Steve Lockwood
Published in the August 2002 issue of Today’s Facility Manager
• In March of this year, the Bush Administration declared the U.S. would impose 30% tariffs on imported steel. The increase will take effect over the next three years.
• This year (through June), forest fires have consumed almost two million acres of timber—more than twice the average—just at the start of the fire season.
• Speaking before a Congressional Committee, Federal Reserve Chairman Alan Greenspan predicted a mild economic recovery with interest rates continuing at 30 year lows at least into third quarter of 2002.
For many people, these are unrelated facts and events. For facilities professionals, these and many other seemingly discrete events take on new importance when considered in terms of their impact on their facilities.
Are they related? Consider this: the increase in imported steel prices will most probably affect the cost of many products, including construction materials, contract furniture, and vehicles. The destruction of timberlands will also result in increased prices for lumber related goods such as paper products, contract furniture, and construction. Low interest rates affect availability of capital. Consequently, large capital expenditures, such as new buildings and major renovations, are more attractive to developers and real estate investors.
How can facilities professionals address the impact of these and other events and conditions on the day-to-day operation of facilities? How can organizations understand the impact of such events on facilities and the resulting impact on costs, organizational effectiveness, and profits? This is the first of a series of three articles that will demonstrate how a strategic approach to facility planning can provide facilities professionals with the tools required to respond to these questions.
Now more than ever, business leaders are being held accountable to–and responsible for–increasing shareholder value. Business executives must create value by introducing and supporting innovation in products, processes, and business models. They must also lead their workforce, stimulate change, and promote innovation and improved performance. Finally, they must deliver value by capturing and increasing profits on all the business growth strategies they pursue (Paul Branstad and Chuck Lucier, “Zealots Rising: The Case For Practical Visionaries,” Strategy+Business, First Quarter 2001, pp. 42-53).
To accomplish these goals, executives are pursuing a number of business growth strategies, each of which has facilities implications. These strategies generally fall into one of the following six categories:
- Cost cutting, cost avoidance, cost control;
- Restructuring and reorganization;
- Merger and acquisition;
- Recruit and retain the best and brightest;
- Reduce cycle time; and?
- Improve performance and productivity.
Each of these strategies has an impact on all parts of the organization, including the facilities. For example, facilities issues that accompany merger and acquisition include questions such as:
- What are the right locations?
- Which buildings should be kept and which disposed?
- What are the timelines for facility decisions?
- Does the right capacity mix exist for the new, merged organization?
- Which facility management practices will best serve the new organization?
- How can the clash of cultures be minimized?
- How can facilities project the appropriate image of the new organization?
A similar list of issues and questions can be developed for each of the growth strategies. The point is, facilities are critical to the success of the organization in reaching its goals and objectives. But it is up to facility professionals to learn how to articulate the importance of facilities to the organization.
Current Circumstances In Facility Management
Business today is focused on what’s new, fast, flexible, changing, independent of time and place, and able to do more with less. This is juxtaposed to the characteristics of traditional facilities–very long life cycles, aging inventory, difficult to change, place dependent, and costly.
Obviously, this can’t continue. To achieve fundamental change, one has to change the fundamentals. To develop facilities that are highly responsive to change (flexible, adaptive responsive, supportive), represent high value, and provide a high ROI, facilities professionals must change how they think, plan, and deliver, and then measure what they do and its impact on the organization.
A traditional facility project follows the time honored path of defining the project, securing the budget, hiring a designer or architect, programming, planning, designing, building, occupying, maintaining, and finally renovating.
When information about the intended occupying business units is collected, it is a “snapshot,” captured at a particular point in time and used to determine how best to fit a certain number people into the least amount of space. This is a “bet the farm” type of process where the entire solution is built–some 12 to 18 months after the data have been gathered–with the hope that it will work, but almost always ends with negative results. In response, organizations often adopt a “one size fits all” standard intended to minimize the cost of change, rather than meet the performance requirements.
To accomplish the goals of providing responsive, high value, high ROI workplaces, professionals in the field must develop a strategic approach to facilities. Strategic facility thinking moves beyond a project based view to a holistic approach that aligns with–and responds to–the organization’s objectives.
A strategic approach considers the full range of organizational activities from culture to technology and from human resources to financial considerations. The best way to begin is by asking a different set of questions, such as:
- How are work processes changing?
- How are work behaviors (what people do at work) changing?
- Are the skill sets required to perform the work changing?
- Is the organizational culture shifting? If so, how?
- How are the tools and technologies changing?
- How are stakeholders, customers, and the client base changing?
- What are the workplace implications of each of these changes?
- What measures link to business performance?
Answering these questions allows development of a strategy before the start of a project. It drives the project and assures alignment of the solution with the organization’s business strategy. It also yields a shortened development cycle and greater efficiency and effectiveness of the resulting solution.
Linking Facilities Strategy To Business Issues
Each of the six previously mentioned business growth strategies has ramifications and impact on facilities–and vice versa. The challenge for facility managers is to articulate this relationship in terms that apply to their company.
The discussion thus far would be meaningless were it not for the dollars at stake and the potential for facilities professionals to demonstrate how they can affect profits and the organizational bottom line. Yet, most organizations today still treat facilities and workplaces as costs–not assets or investments.
Few elements of an organization have as great an impact on worker performance as do workplaces and facilities. In fact, dollars spent on human resources are, on average, 13 times greater than dollars spent on facilities. Thus, spending money wisely on facilities allows leverage of those expenditures through their impact on workers’ performance.
Facilities are often the second largest line item behind personnel, but many executives don’t fully understand or appreciate what facilities involve or include. So it is not surprising that more than ever, facility professionals are being challenged not only to reduce costs, but to slash them dramatically and drastically from the facilities line item.
Focusing only on the immediate goal of cutting costs ignores several other areas of impact and potential benefit. Yet, a purely cost based view of facilities and the pursuant strategy of wholesale cost cutting can actually have a detrimental impact on organizational effectiveness and profits. For example the cost associated with real estate reduction is often more than half the projected “benefit.” Whereas, the ROI of workplace changes aimed at improving performance can yield benefits of almost for times the cost.
The bottom line is this: without a holistic view and a strategic approach to planning and managing facilities, industry professionals are left chasing costs and missing bottom line benefits.
As former principal/partner of Foresight Assocates, Springer ispresident and founder of Geneva, IL-based HERO, inc. andfrequently writes and speaks on a wide variety of issues affectingorganizations, work, and workplaces. For other columns from Springer, go to From Where I Sit and for future musings from Springer, visit his Web site.