To focus more on the return of accommodation, it should be clear what exactly this return is. Returns are often (only) linked to the revenues from shared use (by third parties).
At the same time, there is a realization that the accommodation should in the first place support the primary process.
Efficiency is the ratio between output and input. Accommodation performance for an organisation is the output. The input is the cost of the accommodation. The performance of the accommodation is made transparent on the basis of the added value of accommodation and associated goals or standards. The rate at which the goal is achieved constitutes performance.
In other words, to be able to say something about the return/added value or performance of the accommodation, the intended purpose must be clear. Which user’s organisational goals need the accommodation to contribute to? What is the desired added value of the accommodation for the organisational objectives? And what is the actual performance of the accommodation? The comparison of the desired and the present performance gives a performance analysis with which the yield (in the broadest sense of the word) can be determined.
Benefits are defined as the difference between value and price on the demand side. Profit is defined as the difference between price and cost on the provider side. Price is the matching mechanism between supply and demand.
It is about the ‘fit for purpose’ and this differs per building function and user. What for one user is fit for (his) purpose, is not necessarily a fit for purpose for another user in the same building.
Value engineering is about the relationship between intrinsic use value (for an organisation and its employees), the total cost of ownership and the market price. Managing the ecosystem of bricks, bytes and behaviour to create lasting value.
A new level of integrated understanding is emerging. Accommodation is more than just a necessity, it adds also value (an increase in benefits and reduction of costs). All interrelated variables should be made explicit and measurable. Taking them into account earlier will save money in operation later.
At first sight, buildings may look the same. They can even have the same price. Yet, there are differences that make one building less efficient and more costly to refurbish for the intended work processes than the other. The purchase price is the same, but the value for the user differs.
Value creation with the learn/work environment must be balanced with the costs, risks and time involved in initiating, implementing and operating accommodation. Value creation is doing the right things (effectiveness) in the right way (efficiency). Be aware that emotion steers behaviour. Engagement aspects should therefore be taken into the equation.
The first level of value creation often used is less space with better quality and better management. The next level is creating a hybrid place and space, making the home and public third places between home and work a structural part of the accommodation portfolio. This offers the potential for change and possible innovation breakthroughs in the absence of the main social learn/work environment that avoids or sometimes even inhibit change.
“Value creation by means of the learn/work environment arises from the mix of characteristics (performance) that are relevant to the primary process and the stakeholders.” (René Stevens)
Focus on people and their Behaviour instead of mainly on processes, procedures and structures of the organisation, the Bricks & Bytes. Only when employees share the dream of the organisation does synergy arise and they become intrinsically motivated to increase productivity and add (more) value. Cultures are shaped by their environments.
Smart Management is when the focus of a learn/work environment is on increasing the effectiveness and benefits of the activities in that environment and less on cost reduction of the accommodation.
“Value engineering is about the needs and requirements of an organisation as a whole and the individual user requirements of the employees/students in particular.”
The main focus on cutting costs means most of the time that corners are cut and quality goes down, along with customer satisfaction and brand loyalty.
Distinction between price and worth
Does the price of real estate equal the subjective worth attributed to it, or is the worth of the object the same as the (market) value? In ordinary language: is the worth of real estate similar to whatever you can get for it?
- Valuating – Process of determining the market price.
- Market price (value) – An estimate of the price the property can fetch on the market at this point in time.
- Price – Actual trade price in the market.
- Valuation -The ‘best estimate of the actual market price by an expert.
- Appraisal – Process of estimating the intrinsic value for an individual or a group of individuals.
- Intrinsic value (worth) – Personal (subjective) estimate of the intrinsic value by the party/parties concerned.
- Added value (value for money) – The independent simulation of the weighing process of the real estate players in determining their intrinsic value in a given context.
The price is the only thing that really exists, for it is the amount mentioned in the tender brochure or in the lease or sale contract. The (objective) value of real estate does not exist, for it is an individual and therefore subjective estimate in a given context.
If the organisational goals are defined objectively and measurably and translated into the required learn/work environment performance, this limits risks and increases opportunities.
The learn/work environment is a catalyst for people’s performance and therefore has a strategic impact and drive revenues.
Most of the constraints on performance are in business’s processes, not the people. It’s unfair to hold any individual person accountable for a performance result that is constrained by the business system and/or the learn/work environment.
At the heart of value creation is the exploration of the learn/work environment as an interconnected and interdependent eco-system of Bricks, Bytes & Behaviour. Optimizing the feedback/feedforward loops between the inseparable “silos” of Real Estate (RE), Facility Management (FM), Information Technology (IT) and Human Resources (HR).
The model of three domains, Physical, Digital and Social, helps to have the right discussions about how to facilitate an integrated learn/work environment. The domains are partly different and partly they come together and overlap. Sometimes they create synergy but quite often there are also tensions. A good learn/work environment needs to take care of what it does in these three domains. Focus on the balance between the physical, the digital and the social environment.
This model helps to show problems in an unbalanced learn/work environment that narrows its focus on only one or two domains instead of on all three. Measuring the added value of the learn/work environment should address all three domains in an interrelated way.
Addressing the larger framework in which the “silos” exist and interact with each other and the entirety of the whole, re-establish integrated wholeness. This may feel complex at first, but hold in mind that the whole is more than the sum of its “relatively independent” parts. It is in the total eco-system approach, where the real added value is created.
A holistic vision is important here, in which a conductor ensures that the various parts of the learn/work environment (RE, FM, IT, HR) are coordinated in such a way that they optimally facilitate the most important capital of an organisation, the employees. To this end, the conductor coordinates the periodic measurement and analysis of the performance of the learn/work environment. Keep in mind that what is important to measure is not necessarily easy to measure.
Decisions about the learn/work environment have a great financial impact – because they impact not just occupancy costs, but the viability of the whole organisation.
Sustainability is an important theme in value engineering and requires an integrated and holistic approach. A sustainable learn/work environment has a connection between people, profit and planet aspects. Usually one builds on costs rather than on value.
“Don’t think of costs, think of value. You don’t need permission to add value.” (René Stevens)
Value creation with the learn/work environment consists of:
- Direct income, through sales (positive difference between book value and sales price) and through rental income (shared use and/or rental to third parties).
- Direct cost reduction, by reducing the number of square meters of floor space and/or reducing occupancy costs per square meter of floor space.
- Indirect benefits, because the learn/work environment positively influences the return from the primary process. Plus contributes to achieving the sustainability objectives as part of the social return.
- Indirect reduction in total operating costs (excluding occupancy costs) through a more efficient and effective learn/work environment for the education and research process.
All aspects come together in a business value case calculation (evidence-based investment roadmap) in which the benefits and cost are made explicit to see if the benefits justify the costs.
The impact of welness
Healthy features are good for people and therefore for the organisation. Health and well-being metrics of the learn/work environment have a huge impact on the largest costs, namely personnel, and should therefore be an integral part of any value engineering or optimizing of operational expenditure in general.
The financial effects of chronic illness resulting from learn/work environment-related stress can be divided into direct costs (insurance/medical, absenteeism, compensation, presenteeism) and indirect costs (engagement/morale, overtime costs, overstaffing due to low productivity, customer delays, accidents).
Before we can change the learn/work environment for the better, we must first change ourselves: to become aware, take responsibility and take action!
A learn/work environment is more than a collection of ‘workplaces’. It is all about ‘places that work’ for you the user; inspiring environments that generate energy, where people meet, collaborate and exchange knowledge and information. A place where they experience a sense of belonging. In short: Places that Matter. Success does however not only depend on a smart design but also on the proper use of the environment, the right attitude and the behaviour and culture of the employees and the management style of the employer.
The learn/work environment is one of the critical secondary business processes. It requires integration and coherence with other business processes such as Human Resources, Finance, Sales & Marketing and the associated systems, so that in addition to support for the primary process, the internal information provision and external accountability are in order.
Just as an annual formation and financial budget is made to be in control and to be able to steer, an accommodation budget can also be drawn up. The accommodation budget consists of the elements of the Six Pack monitoring system, it is a total cost of ownership approach.
By definition and measurement agreements, the sub-budgets of departments and business units can be “added up” to form a consolidated accommodation section in the annual report.
There is always pressure on the available financial budget for which evidence-based value engineering will support the decision-making about budget allocation between education, research and the learn/work environment in which it all takes place.
As an organisation, dare to think big, but start small and expand incrementally. Without experimentation, innovation is impossible. Experiment and gradually find out which form and speed of implementation suit the organisation best. Have faith in the process. Like anything new, it takes a bit of trial and error before you get it right, but the payoff is worth it.
ATELIER V supports in the preparation of Scenario analysis, Integrated business and Value cases. More information or an informal conversation? Contact us by Email, we are happy to serve you.