Measuring FM Performance

15 August 2006

Counting costs rather than measuring performance and demonstrating value to business is one of the reasons why FM has failed to achieve a strategic role in many organisations. Margaret Nelson explains results of recent academic studies on performance measurement in FM

PERFORMANCE MEASUREMENT has become very important in facilities management as a result of the growth in outsourcing and the increasing need to demonstrate added value to the organisation. Although several tools exist in the marketplace for measuring performance, FM has struggled with finding the right tools arguably because of the very nature of the profession.

We need to measure both tangibles and intangibles to demonstrate added value to core business activities. However what is required and what is actually measured are two different things. This problem is not just limited to facilities management, but has been identified in general management as well. Goran Roos stated that 'too often measurement systems are driven by what is available rather than what is needed' (KPMG LLP, 2001).

This article is based on the results of research undertaken at the University of Salford and presented at the Euro FM 2005 conference in Frankfurt, and subsequent discussions after the conference presentation with a number of practising FM professionals. (The full paper is available in the conference proceedings of EFMC 2005 www.eurofm.org) It has been generated out of the key issues relating to measuring FM performance.

Keeping score?
Is performance measurement only about keeping scores, and why do we need to keep scores? It could be argued (Varcoe, 1996) that we need to measure to ensure that things are done. In addition, however, it should also be used to 'effect positive change in organisational culture, systems and processes' (Procurement Executives' Association, 1999), and should enhance decision making and accountability. There was general agreement with this, however it was admitted that at this stage in facilities management, performance measurement is more about getting things done, rather than effecting positive change.

Intangibles make facilities management different from other management disciplines and contribute to the added value from FM, but they are difficult to measure. There has also been identified 'an unrealistic expectation' from performance measurement in facilities management 'about the opportunity to blend a mix of improvements and benefits that clearly can be difficult to achieve'(Pratt, 2004). The main challenge facing facilities managers was seen as that of trying to quantify service activities that do not normally have a numeric outcome (Pratt, 2004). Hence measures tend to lean towards the administrative and other easily
quantifiable activities.

Although performance measurement is not only about keeping scores, for various reasons it has been difficult for facilities management to overcome this stage and move on to the value adding stage of effecting positive change. The remaining key issues all surround the use of performance indicators that were found to be the most commonly used in facilities management performance measurement.

The first of these was subjectivity versus objectivity. Some literature (BIFM, 2004) would seem to suggest that Key Performance Indicators (KPIs) are still mainly subjective, and query what level of objectivity can be achieved. This is one of the main weaknesses of using KPIs which has led to a number of problems (Berry et al, 1995). Others (Kincaid, 1994) would suggest methodologies using both objective and subjective data sets to overcome this issue.

There was also identified the need to distinguish between KPIs and operational indicators. The former are critical success measures which help an organisation define and measure its progress toward set organisational goals. The latter are measures related to the day to day operational facilities management activities. Our research identified that that there was some confusion in some organisations about KPIs and operational indicators (which usually took the form of Service Level Agreements [SLAs]). This led to problems including frustration at the system, high levels of administrative effort required to manage the performance measurement process, very little added value, and the use of a mostly penal system.

It was proposed that facilities management KPIs should be derived from the organisation's business strategies. This would directly link the measurement system with what needs to be achieved to add value to the organisation's business objectives. KPIs should also include both leading indicators (these tell us how an organisation is currently performing and predicts the likely financial performance) and lagging indicators (these tell us how an organisation has performed in the past ).

Both our research and subsequent discussions with conference participants revealed a lack of leading indicators in use in facilities management. This emphasises facilities management's position as a reactive profession, and needs to be addressed in order for facilities managers to truly become pro-active.

There was also identified the need to include incentives in addition to penalties in facilities management performance measurement systems. A performance measurement system based on the application of penalties for underachievement or failure only was found to be de-motivating. Incentives were found to be motivating and were said to encourage innovation and continuous improvement.

So are we really measuring facilities management performance? As an industry we are still counting costs rather than measuring performance and demonstrating value to business. This perhaps may be one of the reasons why facilities management has failed to achieve a strategic role in many organisations. The current use of lagging indicators collected using post-hoc financial reporting systems, makes it easy to lose the dynamics of service contracts and hence hinder continuous improvement and create an inherent weakness in KPI-based FM performance measurement systems.

Although we found that there was a need for FM to move towards the adoption of leading indicators, there was no evidence of the existence of any leading indicators in use in the market. We need to move towards measuring service outcomes rather than service outputs (or inputs for that matter) in order to demonstrate the currently mythical added value to business objectives.

œ Dr Margaret-Mary Nelson, Reader in the Built Environment Department of the Built Environment, University of Bolton, BL3 5AB, M.Nelson@bolton.ac.uk. This project also involved Qi Zhou Moss and Prof. Keith Alexander at the Centre for Facilities Management at the University of Salford

References
Berry, A.J., Broadbent, J. and Otley, D., (Eds.), (1995), Management Control - Theories, Issues and Practices, UK: Macmillan.

BIFM, (2004), Introducing the new BIFM/ARK KPI Register, Available on the World Wide Web URL http://www.bifm.org.uk/index.mhtml?get=kp i/kpiinfo.html

Kincaid, D.G., (1994), Measuring performance in facility management, Facilities, Vol. 12(6), Pp. 17-20.

KPMG LLP, (2001), Achieving Measurable Performance Improvement in a Changing World, Available on the World Wide Web URL http://www.kpmg.com/Rut2000_prod/Docu ments/9/Performance%20Management%20Assurance%20White%20Paper%20External.pdf

Pratt, K., (2004), Performance Measurement, Available on the World Wide Web URL http://fm04.atalink.co.uk/articles/consultanc y-and-recruitment/060.html

Procurement Executives Association, (1999), Guide to a Balanced Scorecard Performance Management Methodology, Procurement Executives Association. SoSKPIs Ltd (2000), Customer Satisfaction of Service Key Performance Indicators, Available on the World Wide Web URL http://www.soskpis.com/

Varcoe, B., (1996), Facilities Performance Measurement, Facilities, Vol. 14(10/11), Pp 46-51.