Professor Michael Mainelli, Executive Chairman, The Z/Yen Group
[An edited version of this article first appeared as “Benchmarking Facilities Management”, Essential FM Report, Number 43, Tottel Publishing (January 2005) pages 6-7.]
For any business function, one key sign of having ‘arrived’ is pressure to benchmark. Entire books have been written on the subject but, in a nutshell, benchmarking is a process of comparing two or more business processes in order to understand how to improve them. Processes can be compared within an organisation (e.g. a multi-national contrasting finance processes in subsidiaries in different countries) or among different organisations (e.g. a ‘club’ of companies sharing information on their finance processes). Good benchmarking has been the starting point of many successful change programmes. Equally, poor benchmarking has scuppered change programmes or has overlooked opportunities for improvement.
Facilities management is well suited to benchmarking. However, benchmarking, in any area, is never as straightforward as it looks. Can we define facilities management in two different organisations? How do we know that we are comparing like with like – apples with apples? Can we trust the people who are providing the comparisons? Have people just given us easily available numbers or have they worked hard on them? How do we reconcile different levels of information within different organisations? How do we fairly compare organisations of different sizes? How can we ensure that the information has been validated: interviews, published accounts?
Facilities managers should welcome benchmarking as a sign that their function has become more important. We can expect significantly more benchmarking in UK facilities management soon. Most of the recently-created Special Purpose Vehicles (SPVs) set up for Private Finance Initiative/Public-Private Partnership (PFI/PPP) deals need to provide ‘market testing’ of their costs on a regular basis and, short of re-tendering, benchmarking is an efficient way of doing this.
Benchmarking is the art of knowing the possible. From benchmarking you find out where you can improve; how much volume can make a positive or negative effect on costs; and what do the ‘best of breed’ achieve so you can set your own targets. A good benchmarking process is regular. It’s part of the routine. Basically there are three types:
what does your customer think? interviews or surveys on customer perceptions of quality and operational performance;
how good are your operations? cost-per-staff, cost-per-meter, throughput per head, breakdowns of activity costs, risk incidents per hours worked, etc;
how expensive are your suppliers?
Benchmarking can be an expensive or lengthy process. The first stage, as in any major project, is a clear definition of the objectives and scope accompanied by a statement of the anticipated benefits. The process of setting objectives is often iterative: we find out what is possible, perhaps a competitor wishes to share information, and then re-examine the objectives, scope and benefits. In benchmarking programmes Z/Yen has managed, the clearer the objectives and the more the project benefits are ‘pre-sold’ to senior management, the better the end result. The objectives, scope and benefit need to gain support within the organisation before we move on to planning the project.
The next stage in benchmarking is thorough consideration of what constitutes comparable organisations. A number of questions show the flavour of this stage: are we trying to learn best practice or see how comparable organisations tackle our sort of problems? Are we going to learn more from people like us, or from people outside our sector working with different problems? Will our own people find X or Y organisation more credible? Are our people going to believe a study which does not include Z organisation? Can we get outside sponsorship? How will we encourage people to share sensitive information? What benefits will other participants get from the benchmarking?
Because benchmarking intrinsically involves third parties who provide the comparisons, this dependence needs to be addressed early on. Can we do all or most of the benchmarking from the outside or do we need direct contact with the comparative organisations? Whom do we know in these organisations? Can trade associations help us? Organisations must be approached at an early stage to assess their genuine interest and commitment. In principle, many organisations are open to benchmarking, however the timing and the effort may not coincide with their current plans. Benchmarking will need to be sold to them.
In benchmarking, as in any major project, it is easy to list a long series of ‘essential’ factors for success or hundreds of ‘crucial’ pointers. The design of a full scale project is too involved a task for a short article, but in outline one structures facilities management benchmarking around seven standard elements – inputs, processes, outputs, feed-back, feed-forward, monitoring and governance. Some ideas for comparison include:
inputs: direct expenditure, management time spent, non-FM staff time spent, related insurance expenditures, compliance time and effort, external advisors and costs;
processes: scheduling, implementing, speed of response, financing, modelling, documentation, education;
outputs: square footage managed, cleaning, security, fleet, reprographics, training days, scale of communications and any other numbers dealing with efficiency;
feed-back: looking at measures of effectiveness in measurement and reporting structures, outcome measures, risk reduction or mitigation measurements, reductions in cost, event and impact comparisons, testing wider awareness in the organisation via customer surveys;
feed-forward: setting targets, objectives, motivational structures, risk management, event horizon scanning;
monitoring: reporting structures, assessing payback, charging structures, activity-based costing, communications and briefings;
governance: strategy setting process, organisational inclusiveness in decisions, seniority of governance, independent reporting route(s) to the board, policy inhibitors, policy trends.
The end result will typically take the form of comparative tables – we don’t do this, they do; this is our % of staff cleaning complaints, this is their %; here is our M&E cost rate per £ of turnover, here is theirs. To move from a report to positive change, workshops and other mechanisms need to communicate the results and confront managers with performance assessments. Managers need to be challenged to change their behaviour in order to reach goals that benchmarking implies can be achieved. Managers need to develop theories about how to improve. In the end, analysis can always be more detailed; comparisons will always be slightly unfair; results will probably be somewhat incomplete. The benefits, however, are not always in the end result. Frequently, the very process of benchmarking prompts much needed thought on why we do things and what we expect.
Not surprisingly, competitive organisations benchmark themselves frequently. Somewhat surprisingly, competitive firms often cooperate on benchmarking against each other. Z/Yen conducts global surveys on costs among the vast majority of investment banks. Despite being intense competitors, they all share a desire to control costs and are prepared to share sensitive information in order to help themselves. When benchmarking across organisations, an independent third party often provides confidence in data gathering and comparisons as well as anonymity for sensitive data. Many trade associations, institutes, publications and consultancies provide a valuable role helping their clients to determine what to benchmark, when to benchmark, how to plan the process, how to manage the process and how to interpret results wisely and sensibly.
We always seem to come back to “you can’t manage what you don’t measure”. However, “you can’t measure what you think is impossible to find”. There are quite a few sources for further information:
regular benchmarking reports and services – Occupiers Property Databank (sister to the well-known Investment Property Databank) at www.opd.co.uk can provide data and publish the International Total Occupancy Cost Code which gives an excellent framework for structuring costs. A good UK office space cost comparator from City University and Actium Consult is at www.mwbex.com/toc_pages/toc_home.html.
facilities management suppliers – most facilities managers have some benchmarking capability. Of note is Johnson Controls’ well-established work in this field. Likewise, a number of surveying firms have contributions to make.
industry associations – a number of industry associations are possible sources of benchmarking information, as well as good environment in which to seek possible collaborators for benchmarking. Be (building environoment) at www.beonline.org is committed to collaborative working and facilities benchmarking. Of note is that the journal Building Research & Information, www.tandf.co.uk/journals/titles/09613218.asp, is a good source of information on post-occupancy reviews given its contribution to the UK government’s Department of Environment, Transport and the Regions’ Probe studies (Post-occupancy Review of Buildings and their Engineering) and several subsequent publications.
Z/Yen – provide help and assistance with benchmarking as well as a number of relevant articles here.
Organisations obtain benefits of many different sorts from benchmarking:
new levels of performance: learning about other organisations expectation levels. One organisation with which we worked set about contrasting their facilities management with human resources, sparking a healthy internal competition in efficient practice;
new targets: seeing what others expect and how they measure it. In one instance, an organisation which thought of risk management as an overhead, turned its measures into those of a profit centre;
new ways of working: learning tools and techniques from others. One organisation started using cost/benefit analysis to determine the areas of greatest potential benefit shifted management emphasis from large risky projects to more mundane operational work activities. Another started to require demanding incident reporting times;
new roles: changing some core facilities management’s objectives. Some of the new roles include managing internal risk insurance markets, genuine profit centre deductions, or ‘concierges’ at customer sites.
In summary, benchmarking is an opportunity for facilities managers to learn. Through learning we become more effective and more useful. We become particularly useful by learning what targets we can set for ourselves, our own ‘benchpressing’ programme for fitness. While we still have a long way to go developing comparable metrics, the increasing amount of benchmarking is giving us fitness guidelines - what benchpressing weight we should expect from facilities management.
Michael’s humorous risk/reward management novel, “Clean Business Cuisine: Now and Z/Yen”, written with Ian Harris, was published in 2000; it was a Sunday Times Book of the Week; Accountancy Age described it as “surprisingly funny considering it is written by a couple of accountants”.
Z/Yen Limited is a risk/reward management firm helping organisations make better choices. Z/Yen undertakes strategy, finance, systems, marketing and intelligence projects in a wide variety of fields (www.zyen.com), such as strategic planning work for outsourcers, structuring large facilities management deals, helping with PFI/PPP risk/reward evaluation or benchmarking costs across global investment banks.
Z/Yen Limited, 5-7 St Helen’s Place, London EC3A 6AU, United Kingdom; tel: +44 (0) 207-562-9562.