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Analyse and Learn

15 March 2007

Benchmarking is much maligned and misunderstood. Is it a journey of discovery or an example of ‘lies and damn statistics’? This depends on what you are aiming to achieve and how you go about the process, as Paul Carder and Ian Jeffries explain

WHEN DELIVERED WITH INDEPENDENCE OF MIND, and with the right aims, benchmarking can inform managers about any areas of strategy and operations. One cannot possibly learn as much by remaining in ‘isolation’ as one can by sharing experiences with managers in different companies. Every company and every manager is different, and some will be ahead in one area, and behind in another. Leave egos at the door, and you cannot fail to learn from others.

The FM industry is still comparatively young and continuously developing new solutions. There are few ‘industry standard’ solutions and processes, so there are more opportunities to improve FM services. The expansion of FM itself, into wider areas of ‘business infrastructure support’ has been partly led by benchmarking. It is driven by managers asking “how do they deliver XYZ, and with whom?” and taking this learning into their own organizations.

Some of the other advantages that stem from the benchmarking process include:
● Standardization of data collected in various FM systems, between buildings and between companies;
● For FM companies, the ability to provide a common structure for measurement and monitoring across client accounts;
● Closer working with finance and other property functions to create a common standard for accounting systems, shared by all functions.

FM companies have been generally slow to pick up the baton and run with client-led benchmarking assignments. Many clients have now insisted in FM contracts that they receive regular benchmarking reports from their FM providers. This need not be a burden, at least for standard cost and space use analysis.The ITOCC standard has been developed to assist the whole industry, not just client occupiers.

It is possible to successfully benchmark almost anything. As an example, the IPD Occupiers FM Benchmarking Group has looked at many of the following questions:
● How are FM departments structured?
● What has been kept in-house, and why?
● What does the FM supply chain look like and does it deliver?
● How does FM deal with customer relationship management?
● Approaches to corporate social responsibility and environmental management interlinked to FM
● Managing space use and support functions
● How do companies measure and manage FM performance?
● Costs for total FM, and for specific service lines, and how companies manage and reduce these costs over time?
● Approaches to investment, and longer-term life-cycle issues.

Note that cost benchmarking has been placed near the foot of the above list. To many people in the FM industry, ‘benchmarking’ means metrics such as ‘£ per sq m. floor area’ or ‘£ per occupant’. This is clearly important, but is only one subset of what is possible.

Even in apparently homogenous global companies, policies and practices often differ between countries. FM may be centralised, structured and take full advantage of the supply market in one country. In another it may be disparate, managed by various administrative departments, and use a mixture of directly employed and local contractors. Social and business cultural aspects also clearly differ between countries and can affect both the design of buildings and the way that they are managed.

It is possible to benchmark FM internationally, but it is not straightforward. A simple approach is to focus initially on country-by-country analysis. Once you have some ‘in-country’ datasets, it may be possible to take a ‘matrixapproach’ and look at cross-border issues.

Occupancy costs can be difficult to compare like-with-like. Property tenure (rents, rates/taxes, and service charges in particular) is affected by local property practices. However, IPD Occupiers has worked with advisors and professional bodies to develop an International Total Occupancy Cost Code.

Development of ITOCC
In 1999, OPD (now IPD Occupiers) launched the Total Occupancy Cost Code (TOCC). This provided a comprehensively defined metric for capturing all occupancy costs, and came to be used increasingly in the UK as an industry standard for measuring costs.

In response to feedback from global organisations, the International Total Occupancy Cost Code (ITOCC) was launched in 2001, reflecting the experience of users of the original Code, and extending its scope internationally. The third edition of the Code was issued in 2004, having been updated, and to include a major new section on space. The latest (4th) edition was published in December 2006.

Standard ITOCC terminology is essential to an improved understanding of occupancy and, consequently, to the quality of its management. Standardization of definitions allows real estate/facilities experts to ‘talk the same language’, and promotes effective communication with business executives and Board members.

Some of the specific objectives of ITOCC are to:
● Set out an accepted global set of occupancy definitions
● Provide the data framework for occupancy cost accounting, performance measurement, space and cost comparison/benchmarking
● Make total occupancy costs (including previously hidden costs) transparent
● Improve performance monitoring of real estate and facilities management
● Support communication of effectiveness and value added to the rest of the organization
● Support a common standard for occupancy management information systems (IPD is also working with PISCES/OSCRE to adopt the ITOCC as a global standard for computer data transfer).

IPD analysed cost categorisations in Europe and the US and mapped ITOCC against these. None of these codes, to our knowledge, has found widespread acceptance amongst occupiers across national borders.

IPD also found that none of the comparative codes have the structure or depth of definition required to provide an effective data platform for the measurement of total occupancy costs.

The codes examined to date include:
1. France: Observatoire des coûts d’exploitation des bureaux, Apogee, Institut Français du Management Immobilier
2. UK: Building Maintenance Information, Occupancy Cost Analysis, RICS
3. Australia: Property Council of Australia, Asset Performance Scorecard
4. Netherlands: Jellema (theoretical); Quickscan: DTZ Zadelhoff, Moret Ernst & Young Bouw en Onroerend Goed; NEN: Nederlandse E…. Norm 2748 from the NNI (Nederlands Normalisatie Instituut)
5. USA: Building Owners and Managers Association (BOMA) Chart of Accounts; WorkPoint Accounting, Institute of Management Accounting (IMA); IFMA/Global FM Global Benchmarks Survey, IFMA

The ITOCC is being continually improved to suit the needs of users globally. IPD would be pleased to receive comments on the definitions contained in the document and on local country variations, suggestions of future priorities for data standards and practical ideas for improving the rate of acceptance of definitions amongst occupiers and the FM industry.

It is always best to start with some desktop research and if you are looking at cost and space data, the ITOCC is a useful place to start. There are also a few questions to ask yourself before you start exchanging data:
1. Do you understand your own data? Before engaging with external groups, it is vital to get your own data structured and consolidated
2. What are your objectives? You may need to identify what you need to be good at, and focus on this. Alternatively, focus on what you are not good at to find ways to improve.
3. Which network will best fit your needs? Look around the market at different sources of benchmarking, and assess how each may fit your requirements.

● Paul Carder is director, Global Business Development, and Ian Jeffries is manager Knowedge Transfer, at IPD Occupiers

[Panel] Benchmarking aims to analyse information against comparable sets of information, in order to learn and improve:
● Analyse: to understand what you are looking at, what else it might be affected by, and how it may be affected. You need to avoid too many simplifications, which lead to inaccurate analysis.
● Comparable: to use a well-worn expression – “lets ensure that we compare apples with apples”. Of course, business processes and services are more complex. So you ultimately compare similar types of fruit, or perhaps similar eating experiences!
● Learn: there must be learning after analysis, or no value is added. This may be learning that total FM operating costs for a specific industry sector lie in a specific range. Or, it may extend to factors that effect these costs, such as management structures, supply chain, and other issues.
● Improve: unquestionably the most difficult element, but needs to follow on from benchmarking, or there will be no perceived benefit. If these elements are covered, then all involved will have a useful journey. If you analyse comparable sets of information, and learn enough, it should be possible to make improvements in your business operations.

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