THE NEW METRICS
by Ann Brotherton Mohr, CID

Facility managers have always had an innate sense that there is more to operating a building than can be represented in annual budget figures. But how is the importance of that conviction conveyed to upper management except as a "gut feeling" or "professional experience"? This is not exactly the type of hard data that the CFO usually relies on. Increasingly, the experienced intuition of facility managers is being utilized by corporate officers who are re-examining the role that a facility plays in their business success. After all, a company is only as good as its people and what is the point of occupying a building but to house the people who make it all happen? Since there is a direct relationship between the effectiveness of a facility in supporting its occupants and the productivity level of those occupants, doesn't the building play a key role in supporting the core business?

Traditional thinking has always evaluated a building's success by its operating cost per square foot. Given that the expenditures on real estate are second only to the cost of human resources, this provided only a very limited perception of the true value of facilities to the organization. In the recent past, when initially purchasing or leasing a facility, decision makers did not look at cost alone but also at the suitability of the building and the site for the company's operations (an evaluation, however, that had little guidance from objective standards). Yet once a long- term commitment was made, too often building performance was never re-examined or re-assessed.

The new trend is moving towards understanding the facility as a means to increase productivity and thereby profitability. But while costs per square foot are easily quantified, performance measurements can be more elusive.

How is Performance Measured? What are some of the methods that companies use for measuring building performance as it relates to their particular business operations?

As mentioned, knowing costs per square foot is a very important metric and, as far as upper management is concerned, a driving force in measuring facility performance. It relates directly to the bottom line, is easy to measure and easy to understand. However, it also can give a distorted view of the true picture - has productivity suffered from facility cutbacks? For example, one major corporation intended to realize substantial savings by cutting back the hours that the air conditioning system cooled the building. The unintended consequence of that action was that employees who would usually stay past 6:00 p.m. or come in to work on the weekends, no longer put in the extra time because it was too uncomfortable working in the office. Productivity dropped dramatically.

Another method that was first recognized in 1989 as a legitimate measurement of effectiveness is benchmarking; the comparison of practices and performance against historic levels of productivity, expenditures, work processes, etc., both internally and against outside companies, usually within the same industry. The application of benchmarking to the world of corporate real estate is found in costs per square foot for building operations, customer (employee) satisfaction with the work environment and the appropriateness of design standards in the workplace.

Benchmarking is an important measuring tool. Without an idea of how real estate measures up against the competition, it's hard to determine how effective facility expenditures may be. Also, the comparison of work processes that affect expenditures often leads to the sharing of Best Practices, which in turn can lead to more efficient facility use.

In addition to benchmarking, an analysis needs a specific measure of performance as it relates to the demands of the users. Customer Satisfaction Surveys will provide historic data within the organization but how does that compare to other businesses? How does one customer requirement rate against another? What are the customer's priorities? How much of an improvement needs to be made to increase satisfaction? Where and how will expenditures have the greatest impact? The answers to these questions provide another part of the whole picture.

Occupant density (square feet per person) is another, very general, form of measurement. However, while useful for space planning needs it tells nothing about actual costs per square foot or customer requirements. In fact, it is based on the assumption that fewer square feet per person = more "efficiency", lower costs and higher profitability. Obviously, this may very well not be true at all.

Metrics are also available to measure the performance of a building according to the functioning of its occupants. Such methods will analyze what the employees need to be able to do, see, hear, feel in order to do their jobs. Many of these programs are proprietary and have been developed by brokers, engineers and architects to assist their clients. However, one method has been developed for general use called

Serviceability Tools and Methods ®(ST&M®). Using ST&M® in conjunction with an analysis of costs per square foot will provide a complete evaluation of building performance. Then adjustments can be made according to benchmark data and improvements can be consistently measured. Serviceability Tools and Methods ®(ST&M®) is an ASTM/ANSI standard (E06.25) for rating building use to occupant requirements. It consists of 100+ "scales" which rate different levels of performance from both the supply and the demand sides. Each scale consists of several different aspects and the appropriate selections are made according to what the users need and what the facility provides.

The topics cover a wide range of issues including:

  • Sound and Visual Environment
  • Change and Churn by Occupant
  • Layout and Building Factors
  • Protection of Occupant Assets
  • Amenities to Attract and Retain Staff
  • Office Information Technology
  • Special Facilities and Technology
  • Image to Public and Occupants
  • Work Outside Normal Hours or Conditions
  • Thermal Environment and Indoor Air
  • Management of Operations and Maintenance
  • Cleanliness

It is a logical process. A user profile is developed by interviewing the people who are, or will be, occupying the space. Then a site review is conducted to determine what the building has to offer. When the results of the two studies are seen together, it becomes immediately apparent where the surpluses and deficiencies fall. The resulting report becomes the basis for evaluating current performance against past, present and future requirements.

Applications of Serviceability. As a facilities tool, ST&M® can be used throughout the occupancy/ownership of a building. Serviceability standards can be used to:

1. Provide Strategic Advantages in Real Estate Negotiations: If a relocation is planned, developing and applying a specific User Profile to prospective sites before entering into lease negotiations provides a strong, strategic advantage.

Armed with a clear, concise Serviceability Analysis, objectively outlining deficiencies and surpluses, the strengths and concerns of each location are available for comparison. Now more of the costs associated with paying for any necessary upgrades or overpaying for needless amenities can be borne by the landlord. It also becomes much easier to rate the ability of the facilities to be operated and maintained economically.

Later, when it comes time to exercise any lease options or renewals, an updated Analysis can be applied illustrating deficiencies that will support the need for additional tenant improvement dollars.

2. Evaluate Existing Sites/Real Estate Portfolios. As department needs change, divisions grow, new groups are added and real estate portfolios fluctuate, businesses with multiple facilities find they must have the ability to shuffle groups around to accommodate operations and/or make effective determinations on the disposition of property. But which locations will really be the best at supporting the needs of the occupants and the organization?

By developing a Site Profile database, the User Profile(s) can be applied to determine the capability of each building within a portfolio to support the organization's core business. Similarly, new and updated User Profiles can be applied to those buildings with space available and the subsequent report will immediately determine the optimum location for each group. This can eliminate unnecessary upgrade expenses, reduce political issues, improve employee morale and insure the best value from real estate investments.

3. Standardize Architectural Programming and Evaluate Plans. For many large organizations, a new architectural program is developed for every single project when in reality, more times than not, there are many basic similarities that are requirements of the core business itself with each group having just a few specialized needs. By using an ST&M® User Profile, the basic employee requirements are established in a concise form for reference by the architect/interior design firm. This reduces up-front fees and helps to avoid the wish list mentality leading to over-design and inflated construction budgets.

Similarly, by applying the User Profile to the architectural plans prior to the development of construction documents, any deficiencies and surpluses can be adjusted prior to build-out. This can lead to huge cost savings by reducing change orders during construction and eliminating retrofits after occupancy.

4. Make Budgeting Decisions with More Knowledge. The dollars are never available to take care of all of the work that should be done as condition assessments are developed and maintenance needs outlined. It is always necessary for someone to determine how the funds that are available will be spent.

A Serviceability Analysis becomes an essential tool for making objective budget decisions. Through the application of a User Profile(s) to a particular facility, performance deficiencies can be easily identified and the money spent where it will have the most significant impact.

For companies with multiple facilities, each building's individual capability can be rated according to user requirements to determine which best meet the needs of the occupants. Then deficiencies can be compared to make educated determinations on where budget allotments will allow for the greatest improvement in building performance.

5. Assign Real Dollar Value to Chargebacks. Serviceability can help normalize and adjust chargeback dollars based on how well the physical space is accommodating the users' needs. When space usage changes, the chargeback changes. By differentiating chargebacks through Serviceability Analyses, appropriate costs are allocated with reference to how well each building's capabilities meet each occupant's requirements. Overall satisfaction with facilities and services increases and the volume of complaints is reduced.

6. Establish Service Level Setpoints. Service levels are usually pretty vague and measurements can range from a scale of one to ten (1 to 10) to performance frequencies and repair response times. But how can you insure consistency over time so that you can make valid comparisons?

Serviceability is the only performance standard available that can establish service level setpoints that, because they are an ASTM standard, will not change over time. By providing a numerical value based on the clients' needs and the buildings' capabilities, specific service levels can be set which can then be tied to budgets and gap analyses and identify specific actions that are needed to fulfill a company's vision or mission statement.

Performance guidelines need a reference point - something against which they can be set and Serviceability provides just such a measurement.

The Whole Picture. In today's tight employment market, it is more important than ever to attract and retain qualified personnel. Providing suitable work space will not only help ensure the type of high-performance staff every business wants and needs but increase productivity of those people to maximize both human resource and facility dollars.

The effective measurement of facility performance relies on more than just one metric. We will always need to know the operating costs per square foot in order to stay competitive but these costs do not represent the whole picture. If optimal use of a facility is to be achieved, then there must be an understanding of how well the building supports its customers. Without the application of different metrics, chances are any facility will fall short of meeting its customers' requirements and significantly reduce profitability potential.


Reading Room
The New Metrics

Copyright © 2002 FMtools, All Rights Reserved. Terms of Service - Privacy Policy