Facilities decision makers handle a dynamic set of responsibilities.
Buildings and their needs are constantly changing, not only from the natural consequence of wear and tear, but also from customer traffic, equipment use, and even from environmental factors like plant growth and weather patterns.
Experience and expertise demonstrate that crafting a facilities budget doesn’t tend to be a straightforward task. Every portfolio has its own unique set of benefits, goals, and risks.
And selling a complex facilities budget to the C-suite can be a daunting proposition.
Every company officer is bound to have a slightly different top-of-mind focus that guides their approach. The way your head of operations thinks about budgets will naturally be different than the outlook of your head of strategy.
Let this article be a reference point. As you guide budgetary conversations with leadership at your organization, you’ll have a strong basis upon which to make your case as your specific needs for 2021 draw nearer.
Labor rates only tell part of the story
To many business leaders, the promise of a lower labor rate is itself a promise of lower overall spending. Lower prices appear to translate to a company budget that’s freed up to focus on other company-wide initiatives.
But though it can be tempting to favor the lowest labor rate, the promise of the least expensive invoice does not always align with the broader goals of your business. Quality and long-term costs should also be seriously considered.
Labor rates naturally increase with skill level. In almost every case, a more experienced maintenance technician is going to charge a higher hourly rate than a less experienced one. A budget mindset that’s focused on the lowest rate alone misses the benefits of higher-quality work. And those benefits can be easily discovered on a balance sheet.
First-time fixes also increase with skill level. A more skilled technician hired to repair your HVAC unit is more likely to fix the issue on his or her first trip. And so while highly-skilled labor may cost more by the hour, you can expect fewer total hours to be billed. In the long run, a more novice technician may end up costing more thanks to a greater number of total hours billed and a greater frequency of return trips.
Remember the total cost of ownership approach. Maintenance is bigger than labor costs alone. Building a facilities budget is really about understanding the broader context of your business. Energy use, technology licenses, administrative functions, and capital projects should also enter the picture. But skimping on labor quality will hurt these other functions in the long term.
Read more about the importance of the total cost of ownership approach for building a facilities maintenance program.
Providing a holistic view of the meaning of labor rates will help your organization’s leaders better understand how facilities management has an influence on brand quality, long-term savings, and higher-level strategy and values.
Year over year comparisons are limiting
Your facilities portfolio is dynamic. It’s constantly changing as new business priorities are introduced, but also as your customer base subtly changes, as you grow or right-size your workforce, and as locations and hardware assets change with age and use.
So given this constant degree of change, it’s a mistake to create a budget according to something as simple as a year-over-year comparison.
Last year’s budget is based on last year’s goals, expectations, special initiatives, and often unavoidable financial consequences due to natural disasters, market events, and even accidents.
A large-dollar investment like a facilities budget is too important to be left to the results of a mere average, or an expected gradual budget shift. After all, what’s being averaged may no longer be in play.
For your corporate officers, the perspective gained from context and expertise is essential. You can make this viewpoint even more meaningful with the value-added benefits of data gathered on your portfolio’s changes from year to year.
Facilities budgets are both art and science
Just picture the different business locations in your portfolio. Even if they’re located across the street from each other, no two locations are really alike. Building quirks, environmental factors, customer traffic, and countless other variables make each of your locations totally unique.
And though no two locations are really the same, ordinary budgets tend to assume that they are. But there’s much more to creating a location budget than multiplying an average across various maintenance categories.
This is a nuanced picture of facilities budgeting. But you can help your organization’s leaders best use this information by delivering a message that starts from the ground up:
Geography: An understanding of the ways in which your portfolio is uniquely impacted by its geography will play a role in the way you plan budgets and services throughout the life of your lease. Along with the ground on which it stands, any given location is constantly changing according to environmental factors. Beyond structural concerns related to the relationships of building materials and the earth below, even the trees around a building and the orientation of your building along the path of the sun can have significant long-term effects on indoor temperature, humidity, sun exposure, and so on.
Customer traffic: Especially at your more popular customer destinations, the impact of customer foot traffic on a maintenance budget cannot be ignored. Customer interactions place strain on the cleanliness and integrity of floors, restroom facilities, point of sale units, coolers and refrigerators, rack displays, and anything else that regularly comes into direct contact with customers. A store in the middle of Times Square should therefore have a quite different maintenance budget set apart for customer traffic impact than a store of a similar size and product offering in a less active area.
Asset conditions: Just as no two locations can be expected to be under exactly the same environmental conditions even if they’re relatively nearby, no two locations will have exactly the same asset and equipment conditions. It’s often time consuming and complex to gather equipment data for all locations within a region, but doing so will help you predict and plan for future maintenance needs. Preventative maintenance scheduling, the likelihood of imminent reactive repairs, and decisions about repairing or replacing an asset can only be made once this data has been gathered.
Weather: The influence of weather patterns on facilities maintenance is considerable. Intense wind exposure gradually wears away at sealants around windows and entryways—and over time, air leakage will put additional strain on HVAC systems, causing both energy use rates and reactive maintenance costs to increase. Near the oceans, salt water vapor gradually corrodes even the inner surfaces of outdoor equipment like HVAC units, door and window hardware, and even sidewalks and structural walls. And in snowy regions, floor care service frequency will be increased as customers and associates track moisture in the form of snow, along with sidewalk salt and other chemicals generally harmful to most surfaces.
From the perspective of the facilities decision maker, creating a budget is both art and science. Facilities portfolios are constantly changing, and there’s a host of environmental factors to keep in mind. And selling a nuanced budget to your organization’s C-suite isn’t always easy. From the viewpoint of pure dollars and cents, aiming for the lowest facilities ticket cost looks like a clear win. But beyond the price advertised on a sample invoice, there’s a more engaging story about skill sets, priorities, building materials, local conditions, and asset data. An interdisciplinary, data-driven approach to facilities budgeting will help your organization make more strategic decisions in this rapidly changing industry.