The Leader - November/December 2008 - (Page 30)

A T O O L FO R G R O W TH : F ACILIT IES MAN A GEMEN T The evolution in facility management strategy and practice reflects the need to align corporate business objectives with corporate real estate management. operational requirements for the facility. Finance systems, scheduling and legacy database tools further support implementation efforts. And, ﬁnally, capital planning tools support long-term strategic planning associated with the facilities. Given the comprehensive visibility that these systems provide, many organizations are realizing their value in gaining insight into and optimizing the total cost of ownership. Strategic Asset Management in Practice So how do corporations – particularly those with multiple business lines and geographies – implement efﬁcient processes and technologies to effectively plan for their long-term investments in facilities, and ensure those investments are aligned with business goals? Here is the story of how one multinational corporation has approached this challenge. With more than 2,000 facilities around the world, the organization has a central CRE group which is divided into ﬁve global regions. Each region faced many similar challenges. Decisions about real estate investments were generally tactical, since there were few mechanisms in place to align those investments with long-term business strategy. The corporate real estate group tried to be responsive to business unit demands, which, in the absence of an overall strategic framework, translated into a reactive rather than proactive asset management approach. The regions were continually pressured to reduce “discretionary” expenditures, and spent much of their efforts managing costs, rather than focusing on how to most effectively support growth. Historically, the company’s capital planning horizon was 12 to 18 months, typical of many corporations where shareholder pressure for short-term returns, continually changing market conditions and evolving technologies make long-term planning a challenge. However, the organization wanted to better understand both the longterm liability inherent in its facility portfolio and how well the existing portfolio supported longer-term business plans. One of the ﬁrst steps in the company’s effort to extend its capital planning horizon to three to ﬁve years was to assess the most important subset of its facilities worldwide. The assessment evaluated the current condition of facilities, the backlog of deferred maintenance, and upcoming maintenance and renewal requirements. Seventy-ﬁve facilities were chosen representing three building classes. With a building list established, assessment teams consisting of an architect, electrical engineer and mechanical engineer evaluated each identiﬁed facility and its major building systems. The organization uses VFA.facility software as both a database for information about its facility assets and a tool for planning its capital investments. Assessment results documented in the software included recommended maintenance and repairs, as well as renewals for major building systems such as heating, air conditioning, and power. Along with each requirement, the associated cost and urgency was also documented. The regional corporate real estate teams then reviewed the data for the facilities in their region for accuracy. In addition to categorizing facility requirements according to common groups such as building system, functionality and code compliance, the organization also classiﬁed requirements based on leasehold obligations, strategic priorities and an asset’s potential for generating revenue. In categorizing leasehold obligations, for example, the organization considered facility wear and tear and depreciation costs for every asset, as well as tracking lease disposals and terminations. A pre-deﬁned target Facility Condition Index (FCI) was established for each facility, based on its region and the class of the building. For example, a primary data center, a Class I facility, would have a target FCI of less than 2 percent, meaning the cost of all building requirements – from repairs to system renewals – should not exceed 2 percent of its replacement value. However, in a back ofﬁce operation, a Class III facility, an FCI of up to 15 percent was acceptable. The FCI metric, calculated automatically with the software, gave the corporate real estate team the ability to compare and benchmark similar buildings to each other across regions, and more readily identify buildings that were in the greatest need of updates. Each region can now independently deﬁne the target FCI for each of its assets based on the asset type for that particular region. Using the capital planning software, individual regions can also create “what-if” scenarios to determine the impact of different capital investment decisions today on both long-term spending requirements and the FCI of regional facilities. Such scenario planning tools are also useful in making decisions regarding the renewal of leases, and when to lease vs. buy a speciﬁc facility. The assessments included identiﬁcation of requirements related to system redundancy based on the criticality of a building to the organization’s operations. Systems with a high level of business criticality require the highest level of redundancy. A critical facility such as a primary data center, for example, would be expected to have full redundancy for all major building systems. With detailed data about its facility assets and their current requirements in place, including redundancy requirements, the organization could readily 2 0 0 8 TH E LE ADE R 30 NOVEMBER / DECEMBER

Table of Contents Feed for the Digital Edition of The Leader - November/December 2008

The Leader - November/December 2008 Leadership Contents Message from the CEO Real Estate in the News Leveraging Business Geography My Work @ Bank of America Blending the Old with the New A Tool for Growth Creating Real Estate Value Nokia-Siemens Networks’ Peter Doran DTZ’s James Maddock Annual Economic Development Directory The Georgia Report Location Profile: Magdeburg, Germany Linking Corporate Real Estate to the Enterprise 3rd Quarter 2008 Adding Value in Challenging Times Australia and New York Shell’s Paul Huston Economic Development in the News A Look Ahead In our Next Issue Calendar of Seminars Index of Advertisers Chapter Learning: The Global Perspective

The Leader - November/December 2008

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