Reducing Costs by Benchmarking

Many FMs participate in benchmarking programs to see where they stand and help set performance targets or goals. But benchmarking shows more than where you stand—it also can identify which best practices others have implemented to achieve performance improvements. By knowing what others have done, and implementing those best practices, you will be able to achieve costs savings as well.

A case study

Figure 1. Incremental and cumulative savings from 238 office buildings during their first five years of benchmarking. All numbers reported are medians. Notice that the additional savings achieved from each subsequent year is somewhat less than from the previous year (see the first column), savings continue to increase, so that during the fifth year, the median company achieved savings of $0.62 per gross square foot.

A group of 58 companies from one industry has benchmarked continuously since 1993. The benchmarking sample size includes 238 office buildings. Figure 1 shows how much savings they have achieved in each year of benchmarking. As with all benchmarking reports, we prefer to use medians rather than means (averages), because medians eliminate any potential effects of any anomalies in the database.

As a group, the median portfolio size is 468,000 square feet, so over a five year period the group has saved, based on the median savings, nearly $1 million per participating member. ($2.04 X 468,000 SF = $954,720). These are real, experienced savings—not projections!

How were these savings achieved? The group compared their benchmarking performance and looked carefully at the best practices being done by those outperforming them (achieving lower costs). One item that stood out was the extent of the PM (preventive maintenance) program of the lower-cost companies. Companies that were able to achieve a preventive maintenance percentage of over 65% of their total maintenance had a significantly lower overall maintenance cost.

Figure 2 shows that there is actually a range of PM percentages that keep maintenance costs as low as possible—between 65% and 85%. After 85%, the costs start to climb slightly again, as there can be too much maintenance.

Figure 2. Total maintenance costs drop significantly as percentage of preventive maintenance to total maintenance climbs to 65%. It then stays level until 85%, when it starts to rise again. Most companies who don’t benchmark find it more difficult to achieve a 65% PM percentage.

What does the PM percentage have to do with benchmarking? A lot, as these very same companies were able to increase their PM percentage during each year of benchmarking (see Figure 3).

Figure 3. This shows how the PM percentage increased each year over a five year period, as the companies also were reducing costs.

Like many organizations, the participants were not able to increase their overall preventive maintenance activities to the desired level in one year. To achieve optimum maintenance performance they needed to develop and implement various PM programs over the years.

It is this type of analysis and implementation of best practices that allow organizations to benchmark their way to reduced costs while maintaining or even improving the quality of their services.

After reviewing this information you should:

  1. Review your building’s PM performance.
  2. Compare your maintenance strategies to others in your peer group.
  3. Develop a strategy to increase your PM activities to the optimum levels that would allow you to achieve lowest overall maintenance costs.

A good benchmarking system will enable you to track your PM percentage, calculating it automatically, and even filter by it, so that you can generate reports based on who has a high-versus-low PM percentage.

Articles are based on data from FM BENCHMARKING, which until the pandemic had been the online benchmarking tool for facility managers and CREs. Data tracked by FM BENCHMARKING includes cost and labor data as well as best practices for more than 95% of typical facility costs. For questions about benchmarking, please contact Peter Kimmel on LinkedIn. Peter was one of the principals of FM BENCHMARKING and now is consulting in the industry.