I was intrigued when I read the headline "Any Fool can Save Money" from a recent piece written by the British Institution of Facilities Management (BIFM) CEO, Linda Hausmanis in their magazine FM World. It caught my eye because of the application of this tenant and how it relates to cost savings in Workplace and Facilities Management.
The complete quote is “any fool can save money, only a wealthy person knows how to spend it” and comes from the book ‘Rich Dad, Poor Dad’ by Robert Kiyosaki. It struck me as particularly poignant from an FM perspective mainly as cost savings seems to be an incessant target for Facilities Managers and one that needs improving on every year. For many clients, this seems to be our only reason to exist.
The Value Chain model pioneered by Michael Porter in the 1980’s, promoted the idea that organisations should outsource their non-core activities to allow them to concentrate on their core business.
The strategy of outsourcing launched a new industry that we know today as Facilities Management. The supporting argument for outsourcing Facilities Management (FM) tends to run something like this:
FM supports an organisation’s core business functions. However, if FM is outsourced, then a Client’s non-core FM becomes that supplier’s core business. So, the benefits of outsourcing FM become doubly convincing. The Client is able to focus on their business priorities, and FM is delivered by the experts.
Non-core activities are nearly always perceived to be less valuable and less critical than core activities. Consequently, the leadership focus is often on the cutting the cost of the facility rather than improving its economic value.
The Executive need to understand that the greatest value of their facilities is not the entry on the balance sheet or its market value, but in how it supports the strategic objectives of the organisation and the workforce empowered to deliver them.
Sadly FM has become the target of economic-focused strategies that solely target cost-cutting and its short-term contracting consequences, without understanding the impact on the Workplace and the staff that spend a large proportion of their waking hours in it.
While no-one would advocate outsourcing their non-core activities for it to cost more, it is hard to know when ’the price is right‘. The risk of driving down the cost to the point where it starts impacting on the ability of the people to deliver core business is a genuine one. This is particularly true in second, third or even fourth-generation outsourcing situations.
The FM industry's early adoption of Porter's reductive outsourcing strategies and the recognition of this as our primary value proposition has unfortunately led to the commoditisation of asset related expenditure.
With the latest move towards FM focussing on the Workplace, we need to look at the other side of the coin.
The Workplace is similar in context to an assembly line, it is a tool in the means of production. In a previous post Workplace: Back to the Future for Facilities Management, I proposed that Workplace should be elevated to becoming core-business as opposed to non-core business. Facilities Management of the Workplace is thus an enabler of core-business.
So the Workplace (and by extension the assets that support it) is core to the organisation’s productivity and so needs to be looked at differently. FM should be considered as an investment rather than just a cost to be cut.
Workplace productivity is notoriously challenging to measure, but the nearest thing we have is the Leesman Index.
The Leesman Index does one thing in one way. Rather than focus on the seemingly intractable question of measuring productivity, Tim Oldman the CEO of Leesman has taken the view that the best way to tackle the problem is by asking the people how the Workplace supports those who use them.
The simplicity and universal application of this model means that we can use the data to compare how the Workplace supports those that work in very different settings. For instance, while you may be able to measure productivity accurately in an advertising agency, the same method or result could not be compared to that of a firm of lawyers for instance.
With the Leesman Index, we have a unifying benchmark standard that can be compared across different workplaces and different countries. Currently, the Leesman Index has been measured in over 63 countries with over half a million sets of data. The data collected presently reveals that only 53% of employees agree that “their workplace allows them to work productively”.
We need to think about that carefully; approximately one in every two employees in the world gets up every day, struggles to work, often through the hassles of public transport or traffic and arrives at work in the certain knowledge that the Workplace will hinder them in achieving what they set out to do.
Worse still; come the time of performance appraisal we negatively assess the productivity of our employees without a corresponding performance evaluation of the Workplace. Is it any wonder then, that we experience endemic levels of low productivity and inadequate employee engagement in the Workplace?
If we consider the Workplace as a means of production, then the industrial analogy with an assembly line may be unappealing, but it is illustrative. Any manufacturing process that only operated productively 53% of the time would go out of business. So why do we accept these levels of productivity in our Workplaces? I am not advocating a return to a Frederick Tayor-like industrial workhouse, but the analogy of engineering our Workplaces to allow people to be more productive is enlightening.
The universal availability of cost data for our facilities allows us to shine a light into the darkest corners to identify and extract the last drop of expenditure in our facilities. It is this pre-occupation that underpins the never-ending spree of benchmarking the cost of our workplaces.
The truth is, that measuring the cost of the workplace is simple but therein lies the problem; it is always easier to measure where the light on the subject at its brightest and then think that just because we can see it ....it matters more than that which is not so obvious.
Conversely measuring, how productive the Workplace is, its value or its contribution to organisational performance is what really counts, but this is complex, ambiguous and hard to obtain. This leads to it being considered inferior to hard factual cost data that can be contained and proved in a spreadsheet.
I am reminded of what my Accountant friends tell me “Accountants know the cost of everything but the value of nothing!” But the cost v value argument is a genuine one. We need to understand and treat both sides of the equation with equal importance irrespective of the ease of calculation.
If we continue only to measure costs, then costs are all that will be managed. Moreover, this is what has led to the confusion between space efficiency and space productivity. Many space utilisation projects focus on strategies to increase occupancy density to levels where this becomes a false economy. These actions are then justified by the saving in headline real estate costs without result understanding the effects on productivity of the people that use the space.
In my career, I have seen cost and space optimisation projects being hijacked by the space efficiency and cost police. This has resulted in staff who are supposedly espoused as the companies most valuable asset, being treated like the stock on a Walmart shelf and subject to a strategy of Pack’em, Stack’em and Rack’em.
In this environment is it any wonder that in the 2017 Gallup State of the Global Workplace survey, Productivity levels are recorded as "dismal and unchanged". The study goes on to record that actively disengaged employees outnumber engaged employees 2:1 globally.
Unfortunately, disengagement levels in South Africa are closer to 5:1. Translate this and it means that for every employee that is working hard and delivering on your customer promise, you have five employees that may as well be working for your competition.
If you break down the typical life-cycle costs of the building over 30 years, the construction of the facility represents only 2% of the total cost. 6 % represents the cost of maintenance and operations and 92 % of the cost is staff related.
With this in mind, it follows that focussing on Workplace productivity and employee engagement could be 15 times more effective than focusing on cutting maintenance and operating costs. So, the productivity of staff, or anything that impacts their ability to be productive, should be a significant concern for any organisation.
We are in the midst of a productivity crisis worldwide. The UK has seen only a 2% rise in productivity in the last ten years despite all of the advances in technology and the ubiquitous access to information. AMSI and Associates are reporting that productivity is at an all-time low in South Africa.
If a business’s biggest asset is its people then what can we do to ensure they can do their best work? The Workplace is where the staff and property assets come together, so Workplace is a critical facilitator or inhibitor.
The Stoddard Review published in late 2016 sponsored by the BIFM in the UK, Calculated that improving the Workplace alone could add 3.5% to the UK GDP amounting to £70 billion. In their report, AMSI and Associates suggest that a 1% increase in productivity produces more than 10 times the impact of a 1% decrease in costs.
So focussing on cutting property costs without understanding how the Workplace supports the productivity of employees seems to be insane.
With the seeming rush by all in the FM space to adopt new technologies to measure to an even greater depth of operational detail I ask myself 'How much tech is enough tech'? and is the technology that we are deploying measuring the right things?
This brings me to one of my favourite quotes;
‘You've got to start with the Customer experience and work back toward the technology – not the other way around.’ – Steve Jobs
So what are we trying to achieve with all of this automated measuring apart from producing more data than we can process? I would advocate that we re-evaluate what are we are trying to achieve.
With 90% of the life cycle costs of a building cost being people related we would do well to focus on the people in the box NOT the box itself. If you have subscribed to my blog you will have received a free report that details the 10 Workplace Questions All CEO’s Should Have on Their Board Agenda in this report I highlight that we need;
This Week's Question: What is the essential technology do you rely on to do your job as an FM? please engage and leave your comments below, I promise I will respond to all comments left on the site.