Contractors can use benchmarking and benefit from benchmarking in a number of ways. Here are the most frequent reasons cited:
- Contractors need good competitive data in the bidding process to obtain new or additional work. Benchmarking information can be a key element of this process.
- Owners are under continuing cost pressure and are looking to their contractors for cost concessions. Benchmarking data can support your cost position. If you are already in the best-performing 1st quartile and providing good quality services you can explain this to the owner and mitigate some of the pressure to reduce costs. If your costs are high then you should begin thinking of ways to reduce them and still maintain profitability.
- Many contractors benchmark their costs from client-to-client and building-to-building to understand the performance of their various contracts.
- Every contract has an end but the end can often “be extended.” Procurement groups are often required by company policy or auditors to re-bid work at regular intervals. But benchmarking data has often been used to show the procurement group that the costs are competitive. It is generally not in the client’s best interest to rebid work just to keep the contract competitive.
Contractors have the same issues getting started with benchmarking as CREs and FMs and other contractors. Everyone is busy, sometimes doing more than one job and the press of daily issues and problems often keep the benchmarking initiative from beginning. Without good benchmarking comparisons, contractors may not realize their cost profile is high or low, and they may lose work before understanding their cost position.
Another issue is the complexity of benchmarking. It seems that regardless of what benchmarking program or tool you use, the task often looks formidable. Data may be held by different organizations and, when working for a client, some information regarding space or headcounts may not be readily available. Finally, many benchmarking forms are not user friendly so no one usually volunteers to “benchmark” unless they can see the benefits.
All of these issues can be easily overcome and the benefits to benchmarking certainly outweigh the negatives. Here is a suggested approach to help you to get started. We have used examples from FM BENCHMARKING to illustrate how easy the process should be. This approach will allow you obtain the key output reports in the minimum amount of time.
First, focus on what is important! For contractors, what is important are the services included in your scope of work. Energy management, maintenance and janitorial services are often provided by contractors operating under service contracts so the KPIs (Key Performance Indicators) for those services need to be benchmarked. In this article we will discuss the KPIs for janitorial services. Subsequent articles will cover maintenance and security services.
Janitorial services are compared on a cost per cleanable area basis. Since, for most janitorial contacts, the labor utilization is a major component, usually more than 80 percent, we look at labor utilization.
Comparing your cost per cleanable area may give you the wrong perspective on your performance unless the comparisons are made with a relevant peer group. For a quick analysis we can utilize FM BENCHMARKING LITE to create a chart showing the cost per cleanable area of a good peer group (with the LITE product, one doesn’t need to input any data), namely other office facilities. Thus, for example, we see in Figure 1 a chart showing the cleanable cost per area cleaned for office facilities.
This allows you to see at a glance how your facilities compare with other office buildings. There are 360 buildings in this peer group with a median cost per area cleaned of $1.26 per cleanable SF and a first quartile performance of $1.12 per cleanable SF. By looking at and comparing similar types of facilities, you will be able to make intelligent “data driven” decisions. The contractor for this example has totaled his annual cleaning costs and divided by the cleanable area to determine the annual cost of $1.14, which is in the second (blue) quartile. This is an opportunity for the contractor to propose some changes in the service levels or frequencies to the owner that would improve the cost performance and possibly improve the profitability for the contractor—a win-win for both.
Using FM BENCHMARKING LITE gives the contractor an idea of the performance of a good peer group but it doesn’t directly show the building on the report or provide a table of the implemented best practices by quartile for that peer group. If the contractor wants that information, the full version of FM BENCHMARKING will be needed.
The full version of FM BENCHMARKING shows at a glance how your facility compares with your peer group for janitorial costs (see Figure 2). There are 361 buildings in this peer group with the same distribution as in Figure 1 (the same 360 as in Figure 1 plus your own building). But now, we can readily see our building’s performance—it is the one in yellow, just at the beginning of the second quartile.
To reach first quartile you could start by reducing your janitorial staff, encouraging the remainder to work faster without reducing the overall quality. However, this usually isn’t too effective. Usually the quality of the services will decline and you will start receiving more complaints.
A much better approach would be to evaluate what best practices other organizations in this peer group have implemented to reach the 1st Quartile performance level. Figure 3 shows some of the best practices you have implemented in our sample building (the third from the last column), what has been implemented by the peer group in your quartile (next-to-last column) and the next better (first) quartile (right-most column). This is only a partial list of the best practices from this report to illustrate how this can work—in reality, there are about 30 best practices overall.
Using the results from this table, the service provider can make proven recommendations for janitorial services that would help achieve first quartile performance. Again, this is win-win for both the contractor and the owner. The owner will achieve cost savings from the janitorial improvements and improved levels of service; the contractor will improve their profitability by more effectively utilizing their workforce, and there will be improved occupant satisfaction, which benefits everyone.