July 2019 — Organizations with multiple facilities can use benchmarking to their benefit in several ways. An organization with a portfolio of facilities will usually have similar types that easily can be benchmarked. Some examples would be:
- Retail branch banks
- Corporate HQ
- Data Centers
- Call Centers
- Healthcare: hospitals, physician’s offices, etc.
- Back office facilities
- Headquarters or Class A office space
- Shopping malls
- Retail: grocery, pharmacy, big box, etc.
Most medium-to-large companies have facility portfolios containing multiple similar facilities that could be benchmarked so their performance can be compared. This is a good way to start benchmarking since there is no concern about data confidentiality (because the buildings are all inside your company) and financial systems should be similar or the same (for the same reason).
If you need more info to get started, here are some of the reasons to benchmark the portfolio:
- Good data are needed to show which facilities are operating efficiently. Facility costs are the second largest component of production costs, after labor. This information was recently used by a large corporation to add production capacity in the lower operating cost facility. Benchmarking information is a key element of this process.
- Facilities with low-cost operating profiles can share their best practices across the organization so the entire organization will benefit. The information can be freely shared without any concerns about the data and/or “lessons learned” falling into competitive firms. This is also an effective way to break down barriers to communication across the organization and improve teamwork.
- FMs of individual properties or groups of properties in the portfolio are under cost pressure and always are asked to reduce operating expenses. Benchmarking data can support their cost position. For example, if you are already in the low 1st quartile cost profile, and are providing good quality services, you can explain this to the management team and mitigate some of the pressure to reduce costs. If your costs are high, then you should begin thinking of ways your peers have used to reduce them.
- Many organizations benchmark their costs across the portfolio and run comparisons on similar types of facilities. For most organizations it is common to benchmark:
- Administrative facilities
- Production facilities
- Data centers
- Call centers
- Distribution centers
- Other common types of facilities
All medium-to-large organizations have more than one of these types of facilities so benchmarking comparisons between these facilities are meaningful.
Here is a suggested approach to help you get started. We have used examples from FM BENCHMARKING to illustrate how easy the process should be, and this approach will allow you obtain the key output reports in the minimum amount of time. Benchmarking can be an intensive effort so focus on the major cost components. A quick review of your budget will show that the following represent the largest share of your operating expenses:
- Energy and utilities
- Janitorial services
These four components typically represent more than 90 percent of your controllable operating expenses. The largest expense, of these four, is almost always the energy and utilities budget or the maintenance budget. If either hasn’t been carefully benchmarked in the past year or so it is also one with the highest potential for savings. We will examine the first one (energy and utilities) in more depth in this article.
Utilities can be benchmarked on a cost basis: Utilities cost/Area or on the basis of energy intensity: either the KWH/Area or BTU/Area. In this example we will compare a large manufacturing organization on its cost performance. However, comparing utility costs may give you the wrong perspective on your performance, unless the comparisons are made with a relevant peer group. In this example we will use:
- Manufacturing facilities
- Large facilities greater than 600,000 SF
- Continuously operating facilities (24 hours X 7 days per week)
Figure 1 is a chart showing the energy costs using the above criteria.
This allows you to see at a glance how your facilities (shown in yellow) compare with other manufacturing buildings. There are 315 buildings in this peer group with a median utility cost per square foot of $2.76 and a first quartile performance of $1.88 per square foot.
Note that most of your facilities are in the first three quartiles, and there is only one facility in the fourth quartile. By looking at and comparing similar types of facilities, you will be able to make intelligent “data driven” decisions that can improve the performance for all the benchmarked facilities.
To reach first quartile, or move the high-cost facilities into the second quartile you could begin looking at the best practices that the 1st quartile group has implemented and hold focus meetings about which best practices have the highest return. Figure 2 shows some the best practices that have been implemented by the first quartile group. This is only a partial list from FM BENCHMARKING (there are about 30 best practices overall for utilities that have been shown to have a major impact on utilities).
Using the results from this table, the facilities group can make proven recommendations for utilities services that would help achieve first quartile performance or move toward first quartile performance. Again, this is win-win for both the entire organization and the occupants.
- The company will achieve cost savings from the utilities improvements and improved levels of service
- The FMs will improve their performance by more effectively utilizing their workforce
- There will be improved occupant satisfaction which benefits everyone.