By Anne Cosgrove
Published in the January/February 2015 issue
In 2006, the University of Minnesota (U of M) administration was in the midst of transitioning to a budget model that would direct the majority of revenue to its colleges and other units. Monies that were previously given to the university’s nine cost pools to deliver services would be dispersed to “business units” (e.g., colleges, departments, programs). The transaction structure became such that these business units were paying customers for services provided. The U of M Facilities Management (FM) department is one of these service providers. In addition to operations and maintenance, FM would begin receiving payment for its utilities service/delivery as well as its customer service center operations.
As the new cost structure was implemented, Michael Berthelsen, associate vice president of facilities management for the U of M Twin Cities campus, took the helm to lead FM. The new budget model presented both a challenge and an opportunity for the department.
For that accomplishment (and related improvements it has spurred for FM and the university overall), he is being recognized as the 2015 Facility Executive of the Year.
Upon beginning the transformation of facility management at U of M, the FM department was impacted by the two largest budget cuts to the university since The Great Depression. Berthelsen and his team worked together to reduce expenses $18 million between fiscal year 2009 and fiscal 2013 budgets.
Having worked at the university since 1993, Berthelsen’s background is in finance—a skill set that served him well in his current role, which he was hired for in 2006. Previously, he was the CFO for University Services and a contributor to the new budget model. “We refer to this model as responsibility centered management,” says Berthelsen. “This is a term often used in higher education. In the business world, it would be likened to a good cost allocation system.”
As he explains, primary drivers were to improve customer service, from both cost and reliability standpoints. The framework from which he created the FM department transformation centered around customer focus, cost-effectiveness, and culture of accountability. “We needed something to help drive and focus our work from a communications perspective, for both customer and employee engagement,” explains Berthelsen. “So we established ‘the 3Cs’. We then built a strategy map, borrowing from Kaplan and Norton’s Balanced Scorecard business planning, to drive the strategy and change methodology.” The three driving principles are defined as:
Customer Service. Building strong relationships with students, faculty, and staff so that FM can anticipate their needs and customize its services to meet them. Focusing on the customers represented a shift away from taking care of the university’s buildings and towards caring for the needs of the people and programs in them.
Culture of Accountability. To provide world-class service, there must be accountability at every level of the team. Each FM employee is given clear expectations and is reviewed annually. At a unit level, FM publishes a monthly scorecard tracking unit progress against performance metrics.
Cost-Effective. The goal is to provide quality service to customers at a competitive price. This entailed reviewing all aspects of the operation, from processes to parts, to increase the value FM delivers.
New Budget Model, New Staffing Approach
With the 3Cs and a new strategy map guiding the improvement process, Berthelsen identified what types of changes needed to be made to reach these goals. Staffing was an area he and his team honed in on; with more than 1,100 employees in the department, this required a close look.
“A big part of the transformation started with asking ourselves how to make the organization more customer focused,” Berthelsen explains. “And one of things we recognized was that we were very siloed by unit of service. There was a great deal of specialization, with many small shops across campus, targeted on their own area. This often made it difficult for facility users to get service, or they received varied levels of service, depending on who they called.”
In examining ways to structure the department, Berthelsen and his team looked at methods used by private sector and property management companies. “We found these types of entities focus their structures with a single point of contact,” says Berthelsen. “That person may not provide all services, but they are the point of contact for a customer. They have line of sight for the entire building.”
The U of M has five campuses throughout Minnesota, with its Twin Cities (Minneapolis-St. Paul) campus being the oldest (established in 1851) and the largest. With 23 million square feet of space, this campus is the hub of Minnesota’s research university. More than 30,000 students attend programs on the Twin Cities campus.
The Twin Cities campus comprises nearly 1,000 acres in Minneapolis and adjacent St. Paul. To serve these geographies, the FM department operated with service districts. Each district had a team responsible for that area. This structure is still in place today, but significant aspects were changed.
“We created a whole new structure built around the property service model,” explains Berthelsen. “Each district had a director and several managers. We still have directors, but we established team managers within each district. Each team manager is responsible for a little over one million square feet of space. This includes custodial services, maintenance, and customer service. They are also the resource for needs beyond FM, such as environmental health or security; they will bring in the right resource to assist the customer.”
Assigning specific spaces to designated team managers increased accountability, while also providing the opportunity for FM to establish new relationships with facility users. This is because once team managers have determined who their lead contact from each college or department is, they are expected to communicate with that contact on a regular basis. There are also monthly meetings between FM and the customer group (district) advisory committees.
With this came a reorganization of staffing and service areas to maximize efficiencies. With more than 1,100 employees (which includes union workers), the transition took several months to implement. To align with the new FM services model, new job descriptions were created, and a team approach was introduced in several ways.
In regard to service technicians, for instances, these employees were responding to calls from all around the Twin Cities campus. Today, there are teams of technicians assigned to specific facilities/areas. In addition to improving communication and response time, it has advanced technicians’ familiarity with the buildings.
In 2010, the team approach was implemented anew for the custodial program; instead of one or two people cleaning an entire space, there are teams of four to five people, where each person is responsible for specific tasks.
This change, also spurred by significant budget cuts in 2009, resulted in faster service and improved quality. Berthelsen reports the department saved more than $6 million from fiscal year 2010 to fiscal year 2012 as a result.
Service Delivery: Who, What, Where?
Another cornerstone of the FM department transformation was the creation of annual service level agreements (SLAs) with customer units. Since customers were now paying for services (rather than passively receiving them from FM), SLAs specify what services will be provided, and related details. The FM department tracks and bills customer units for the agreed upon, and any additional, services provided.
“The agreements state what the customer pays annually, and it outlines what they receive in exchange,” Berthelsen explains. “In the previous model, they weren’t directly paying for anything, and level of service was not always clear. This clarifies how often services (such as cleaning) are performed, to what level of quality, and what is FM’s responsibility versus customer responsibility? We are still glad to, and hope to, provide services above and beyond the SLA, but this clarifies things.”
He adds, “This approach has not only provided more transparency for FM to know where its services are being rendered and at what cost. This also enables university administrators to identify where monies are going within each department.”
Knowledge Of Facilities And Customer Increased
As might be expected, many employees working in the FM department were hesitant about the changes being enacted. Says Berthelsen, “We redid every job description, which meant everyone had to reapply for their jobs. So that was difficult.”
Also, employees were used to working alongside only those doing the same type of work (e.g., plumber, mechanic), and the team structure assigned to specific areas of the campus meant they were now working with different types of workers.
“With the front line staff, it used to be that we had larger crews by specialty. So there was an electrical crew, pipefitter crew, plumbers, mechanics, for example,” Berthelsen explains. “And they took direction largely from their general foreman. We broke them down into smaller groups based on their geography. We wanted a small core of staff (custodians, mechanics, trades) to be very close to their buildings, minimize their travel time, and maximize familiarity with the facilities. Currently, we have 15 teams, each with team manager. Each has its own maintenance crew and custodial crew.”
In 2007, when the changes were put into practice, Berthelsen introduced his “Mike’s Memo,” an e-mail newsletter sent to his staff several times each month to communicate current issues affecting the way FM operates.
“To move to the team structure was a challenge,” says Berthelsen, “but it has settled in now. Several years ago, there was an instance that demonstrated to me the approach was working. A pipe had broken in one of the buildings housing several health clinics, and it created a flood. We were meeting with senior academic leaders from the program to determine which clinics needed to be open and where we would move them. The academic leaders didn’t know all the hours of operation, but our team leader for the program spoke up and knew this information for each clinic.”
Meanwhile, in conjunction with the new service delivery model (and the wake of 2009 budget reductions), the preventive maintenance (PM) program at the Twin Cities campus was overhauled to reduce costs and improve customer service. The following opportunities were pursued: reduce PM frequency; focus discretionary repairs (prioritize mission critical equipment); and manage overtime by having FM staff evaluate the urgency of a service call.
In order to create a more comprehensive vision to maximize performance and life cycle, FM combined data from its computerized maintenance management system and financial systems. This enabled the department to understand its total costs of operation, improve equipment life cycle costs, and create a more focused maintenance program. A second phase addressed staffing levels to improve alignment with a revised service delivery model and maintenance program requirements.
The streamlining of the PM program resulted in a $5.2 million annual savings for first year, with comparable annual savings thereafter.
Green FM Part Of University-Wide Movement
In 2011, the U of M’s Twin Cities Sustainability Committee developed a climate action plan (CAP) after the institution signed onto the American College and University Presidents’ Climate Commitment (ACUPCC). The CAP focuses on implementation of the university’s sustainability goals, identifying strategies for reducing greenhouse gas emissions and moving the campus on the path to climate neutrality by 2050. Berthelsen co-chairs the committee with the head of the horticultural sciences department.
FM’s involvement in sustainable initiatives began in 2009, when it launched the Twin Cities campus “It All Adds Up” energy conservation program—and set a 5% energy reduction goal for fiscal year 2010. This translated to a savings of more than $2 million annually. The goal was reached at the end of March 2010. In spring of 2010 the university was one of seven Minnesota organizations recognized by Xcel Energy; recognized for the Largest Electric Savings by a Commercial Customer.
Accomplishments Noted, Improvements Ongoing
Funding from the state of Minnesota decreased significantly in 2008, but the FM department was impacted. Funding decreases recurred through 2013, and FM was able to maintain and improve services due to many of the structures put in place in the department transformation.
For instance, FM responded to fiscal year 2010 budget reductions by implementing efficiency and cost savings projects in the areas of custodial, maintenance, energy conservation and inventory management. These projects were put into practice over a 12 month period and resulted in a recurring annual savings of $10 million. The projects were geared to minimize impact on customer service and employees as much as possible. For example, a $3.2 million reduction in custodial services resulted in a 1% drop in customer satisfaction while no employees were involuntarily laid off. This was accomplished through the use of federal stimulus funds and managing attrition over an 18 month period.
With the current FM structure in place since 2007, Berthelsen can reflect on how the changes have improved not only the department but also the quality of customer service. “From the customer side, there is much more clarity about who to call for a service. Because of the service level agreements and the training we’ve done with our staff, there is also consistency of delivery. We want everyone to receive the same level of service. We welcome the opportunity to provide specific services as needed, of course,” he says.
And referring back to the familiarity the staff members in FM have gained with the buildings, programs, and people they serve, Berthelsen notes that this connection has increased allegiance and accountability. “Indirectly, that connection has also driven us to manage our costs better,” he says. “From an outcome perspective, we have good stats to show that we have managed our costs per square foot very well. It is difficult to say that is because of the service model, but it has helped us identify priorities. But the structure was not created primarily to lower costs; it was about customer service.”
This article was based on the project literature, and an interview with Berthelsen. The nominations are open for next year’s Facility Executive of the Year Award. For more details and to view the nomination form, visit www.FacilityExecutive.com/FEY2016, or e-mail the editor at [email protected].
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