The Myth of Performance Management June 20, 2011

Posted by Sezgin Kaya in Business Performance, FM Excellence.
Tags: Facilities Management, facilities management performance, FM KPIs
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The Myth of Reporting Facilities Performance – Horizontal-integration

 

The past 20 years have enjoyed significant research and development into the field of performance management. Kaplan and Norton’s balance scorecard, Neely and Adams’ performance prism entwined with business improvement approaches such as six sigma, lean processes, and theory of constraints drove businesses forward to popular enterprise-wide performance management implementation projects. Yet, given the advancement of such methodologies and richness of data and information to supplement those, executives are still frustrated with not getting the right FM reports they need to make decisions.

 

Given the amount of changes, log of events in economy, they typically end up with mountains of reports and bulletins weekly. Operational managers, on the other side, secure their operational data in some shadow and duplicate systems to keep track record of reliable and timely data to run the business rather than reporting on it. And service managers spend more time preparing reports than questioning the sanity and validity of it. Anything done ‘good for business’ is mired somewhere in data or process not turned into any form to relate itself to business and hence demonstrable the value of FM…

 

To the confidence of facilities industry as a whole, the overload of reporting have been causing a growing disbelief in those so called ‘performance reports’, preparation of which sucks significant amount of time and resources away from operational or administrative activities crucial for the efficiency of facilities business. Not to mention the premium of several hours of work on defining performance reports and associated algorithms, process and governance, and crucially painful links to fees and payment. Most of which, during the course of the operations, can end up with redundant processes to operate within the context of a ‘finite relationship’ between client and service providers.

 

The formality and governance of those terms has become even worse for clients, given the increasing trend of ‘skills drainage’ from client side to suppliers due to outsourcing, which left clients with complex facilities management process and systems inoperable with the remaining skills.

 

There have been, however successful attempts to align corporate objectives to operations in the past, such as use of Porter’s value chain analysis by examining the revenues, expenses, resources, and assets contained in each business process. These were valid and successful approaches to align operations to business ‘vertically’ in the organizational ladder. However, such business approaches entail recasting information from horizontal functions or systems; such as accounting, supply chain, HR, procurement, environmental management, and facilities operations to provide a business process view. This is typically a challenging task. Thanks to horizontally integrated enterprise-wide technologies, which are increasingly becoming capable of providing multi-layered information from various sources and can now turn into management reports in an instance. However, the challenge is less on technology, but more in the process. It still remains to facilities managers to identify their own reporting requirements before starting to engage with other functions for a comprehensive and horizontally integrated reporting.

 

This article outlines a simpler way of identifying facilities management reporting requirements at three levels. Each level requires determining reporting frequency, details of content and key business recipients. Once the reporting requirements for these three levels are determined, then FM can engage with other horizontal functions to align data structures for consistent enterprise-wide reporting. For example a stand-alone P&L account for a specific FM contract may not necessarily mean anything other than to its service provider’s account managers and their immediate clients, such as Head of Facilities Managers. But it becomes more relevant to the business when the same report is related to other accountancy reports from Finance to demonstrate the impact of the same P&L report on the business growth.

 

Three levels of FM reporting requirements suggested here as:

 

1) Relationship Management– This level focuses on relationships with key stakeholders. In particular, FM organizations are built upon their relations between customers (including end users and local community), service providers (supply chain), clients and business owners. This requires systematic reporting and intelligence based on account-level information contributing towards the business performance. The primary objective, at this level is to retain, improve, and expand their commercial relationship continuously, as well as contribute to its clients’ reputation and image.  Managing relations is a key success factor outside daily operations and requires balanced approach between Supplier Account Management team, In-house executives, and key business owners. More and more FM organisations now adopt ‘relationship modelling’ tools to clearly define stakeholder maps and share a quarterly communication plan with activities between their clients and the suppliers as part of the management reporting.

 

The Relationship Management reports mainly comprises of one-stop shop strategic scorecards, which include high level business alignment of balanced measures, including:

-          profit and loss accounts,

-          actual and forecast on the targets achieved,

-          strategic scorecards for specific measures such as management of finance, customers, process maturity, growth

-          impact statement on the shareholder / stakeholder value

-          stakeholder maps and communications

 

2) Operational Management- At this level, FM organisations focus on effectiveness and efficiency of maintaining a portfolio, and managing it to the agreed standards by adding value, mitigating risks, and increasing the portfolio or asset quality. The primary objective is to demonstrate tangible benefits exist in all areas of scope with increased business performance and reduced risks.

 

The Operations Analysis reports typically include results from a combination of various sources, such as:

-          risk based management – maintenance, compliance, criticality assessment, and service downtime reliability measures

-          efficiency and effectiveness by external or internal benchmarks on cost, quality, environment, space, and occupancy

-          asset and portfolio life-cycle value over the contract or asset life-span. This may also include forward maintenance registers, asset utilization figures, life expectancy, and future value of assets

Operations analysis reports require internal or external technical competency and expertise on maintenance and management of facilities, operations and assets. Information from daily service transactions are used as part of operational decision making, however not directly included as part of this level of reporting.

 

 

3) Service Management – This is the transactional level of services. The primary objective of FM Service Management is to offer quality services to provide positive customer experience in a service setting. Daily service transactions between customers and service are captured as the key sources of data to support service reports at this level. There are, however, disjointed approaches to capturing customer data. Lately, following Pine and Gilmore’s[1] book titled: “The Experience Economy”, customer experience has started to enter –and to a certain extend—replace the concept of ‘customer satisfaction’ in FM arena. This shifted the focus on collection of customer data. They suggest in the book that a positive customer experience can be achieved by creating memorable, valuable and enjoyable service settings. It is however yet unknown to most FM practitioners, how to apply this relatively new concept into their practice. Only a few innovative FM service providers in the UK have built up customer experience into their service management offering. They have done this by examining nodal points in a customer journey and enhancing those interaction points between a ‘service’ and customers. The trend with those successful attempts is now towards a holistic approach to services, and focusing on the impressions of customers in the service setting rather than nitty-gritty ‘service tasks’.

 

This comes with its own reporting requirements. For those organizations reporting on service tasks, accomplishment of each service against an agreement, such as contractual obligation, is key in their information to manage services. To that purpose, service audits are constructed – a mechanism to gather compliance of service provision to its agreed service levels. For managing service, most organizations would find service audits sufficient to operate a service contract. However, for others with holistic service approach, customer experience is the key service information, and hence they gather information that leads to ‘positive customer experience’. In either of holistic service or service task approaches, data is required from customer’s feedback on the interface with services.

 

The Service Management Reports, typically include results from a combination of various sources, such as:

-          customer feedback and experience

-          delivery compliance to contract service levels

-          financial transactions and frequent reporting on budget, actual forecast

-          daily service alerts, logs and responses

 

 

The reporting requirements and their content, as identified above are suggested here as a guide for facilities managers to engage with other business functions to implement and relate their business outputs to executive level stakeholders. The key barrier to implement horizontally-integrated reporting is mainly around culture, process, and people, as highlighted by a number of authors including Kennerly et al[2]. But a participative and consultative management style, as an earlier work[3] claimed, could handle this issue if the following qualities of the performance reporting regime set up in those organizations:

1)      improved visibility,

2)      reduced ambiguity and;

3)      improved communications

 

Despite its barriers of its implementation, a horizontally integrated reporting across different business functions requires facilities managers to clearly communicate their requirements at different management levels, and participate into initiatives with their peer colleagues in a participative and consultative manner.