Value goes beyond mere cost reduction. While cost reduction can be a part of value creation, it is not the sole determinant. Ultimately, a comprehensive understanding of value considers both price and quality.
When benchmarking facility costs (NEN-EN 15221 Facility Management), lower costs are often assessed as positive in advance.
However, facility costs are proportional to the other expenses and represent ‘only’ a relatively limited part (8-12%) of the total costs. When one invests (too much) in saving on facility costs without also looking at the benefits side, this can lead to penny-wise pound-foolish activities.
Suppose that the facility costs per m2 at organisation A are 20% higher than at organisation B. It may seem that A performs worse than B. But when A scores 5% higher than B on the number of graduates or profit margin and employee satisfaction, then organisation A will on balance perform better than B.
We therefore not only look at cost optimisation but also especially at the contribution to the benefits, ambitions and objectives of the organisation, ‘Fit for purpose’. Strategic management of the learn/work environment is more than just steering on effectiveness and efficiency It is also about manageability & being in control and engagement of the occupants in the learn/work environment.
Which organisational goals are pursued and how does Real Estate/Facility Management/Information Technology contribute to them? Linking and alignment of learn/work environment objectives with organisational strategy can easily be mapped out using the Strategic Alignment Matrix. and the Real Estate Six-pack method.
The price of a product or service can be misleading without considering its corresponding measure of quality. Price alone does not provide a comprehensive understanding of the value or worthiness of a particular item. Quality refers to the characteristics, features, and performance of a product or service that determine its superiority or excellence.
“A price is meaningless without an adequate measure of quality.”
(Edwards Deming – PDCA cycle)
The benefits are not only incidental revenue of selling real estate or regular rental income but mainly the indirect effects of Facility Management (FM) on the costs and benefits of the other items in the annual financial report. How can FM facilitate the desired performance and added value (even) better? How can it contribute to integral management?
Insight into your own facility costs compared to similar organisations helps as a reference to compare yourself to the average in the market. It answers the question: do we do things efficiently and in the right (financial) way. A further investigation can be made by also looking at the contribution to the own organisational goals and the benefits. Are we not only doing things in the right way (efficiency) but are we also doing the right things (effectiveness)?