As organizations face ongoing financial pressures, most are exercising every available option to increase revenue and/or reduce operating costs. But, are all options really on the table?
Many leaders are struggling to gain board support for facility-related investments. This is primarily due to wait-and-see hold patterns. For those who have exhausted their quick-fix options, they should seriously consider the benefits associated with facility replacements or improvements.
Nothing today should be considered off limits when it comes to improving company performance. Leading organizations know they cannot reach peak performance without the right facility. Today, it’s not so much about facility expansion as facility optimization.
Construction efficiency improves
Even though construction is arguably the world’s most inefficient industry, it has been immune to reform by being classified as acceptably inefficient. That is, until now. The economy and other global pressures have exposed the construction industry’s inefficiencies, excessive waste and inability to maximize facility owner’s return on investment. Business owners can now benefit from a heightened awareness that facilities have untapped value, when it comes to improving a company’s performance.
There’s a real motivation to better deal with facility development issues, for both new and existing facilities. A school, hospital, manufacturer or museum cannot be competitive without the best facility to support their ongoing needs. Planners, designers and builders are increasingly focused on how to optimize a facility’s functionality, aesthetics, flexibility and development costs. With facility costs typically only 5 to 7 percent of operating costs, there is an opportunity for exponential returns.
ROI varies
A business owner’s return on investment with facilities can vary dramatically. This stems from the fact that every development has a new group of people, working on a unique design, that are all supposed to carry out the vision of the owner – for the lowest possible cost. A CEO’s set of requirements, given to five separate teams, would likely lead to five different results. And the overall impact to the organization – good or bad – would be directly related to how things were approached during design and construction.
The right approach
First, it should be understood that facilities have a significant impact on an organization’s profitability, growth, image, employee retention and future market adaptability. The overall affect to an organization is often underestimated. A facility can pay itself off, or financially drain an organization, depending on how the planning, design and construction are approached.
Leadership
To develop at an optimum facility, leadership is key. There are many developers, architects and construction organizations, with a wide range of approaches and expertise. Therefore, the right leader needs to be put in place. This needs to be someone who can assemble the best team and lead to the best result. Leader selection should be done cautiously. A focused and holistic approach is important to make sure all of the key objectives are met.
Approach
There are many ways to approach facility developments or improvements, with each producing a different result. A $10 million investment can give you a $15 million or an $8 million return, based on how things are approached. Two key issues related to the approach are:
- The human element – A facility development is made or broken, based on the team and how well it functions. A talented team, with good communication systems, is necessary to make sure that an owner’s requirements are well understood and executed. Design and construction professionals admit that the human element is the underlying cause of most problems and project shortfalls. With the hundreds of decisions and challenges to be faced, the team dynamics need to be carefully understood and monitored.
- High-quality decisions – Real value killers are unsubstantiated decisions. Recommendations from designers and builders need to be geared toward each unique project. For key decisions, the impact on cost, efficiency and future market value needs to be understood. Evidence-based systems (EBS) should be put in place that require the architect, engineer and builder to validate their recommendations and show how they apply to the project. Unsubstantiated decisions often lead to unnecessary and/or excessive costs.
Designer’s role in maximizing value
Facility owners need their architects and engineers to take a value optimization approach to design. Today people have quick access to information and want to be more involved in planning and design, every step of the way. Business owners need to make sure they get what is right for them, according to their definition of value. Thanks to the media, people are less trusting and more suspicious. They don’t know what to believe, so they need validation that their investment is being optimized.
Evidence-based design
An evidence-based approach to design should be taken, showing the impact on cost, efficiency, employee environments, and marketability. With this, the design can be preserved and less subject to unraveling later, due to first-cost tunnel vision. With a business approach to design, facility owners can best ensure the maximum return on their investment.
Building information modeling (BIM)
BIM is not just the new generation of design, but an information platform to benefit everyone. BIM is to the AEC industry as Windows is to the PC world. Key benefits to facility owners are alternative design scenarios, building cost models, operational efficiency studies, energy modeling, and space optimization. Facility owners can require the use of BIM, to the extent it will enable them arrive at the best facility solution.
Green design
Every facility owner can benefit from green design. Exhaustive efforts can LEED to some good benefits, but every facility owner can incorporate a basic level of green elements with no initial premium and/or quick payback. Far too often, it’s all or none. Because everyone has now jumped onto the green wagon, the real innovation is the ability to incorporate green design into any project in a practical and affordable way. This is an important part of the value optimization equation that will allow owners to optimize their investment.
Builder requirements for facility optimization
Construction companies should be driven by their client’s need to get a better return for their investment. There are many companies that can build a quality building. Getting the right facility though, for the best cost, is where the challenge lies. A value optimization based strategy is key to differentiation and breaking away the pack, as efforts continue toward the commoditization of construction.
Accountability
Businesses are under more pressure than ever to optimize their facilities. Therefore, more than ever, they need a builder that demonstrates accountability and supports a good return-on-investment. When investing millions in their facility, they need to know others are treating their money and values like their own. When they sense otherwise, trust is immediately lost. They are reliant on their builder to embrace their vision and requirements, and then inject them into the entire construction team.
Simplicity
Today people are thirsting for simplicity. The best projects incorporate a user-friendly approach, designed to benefit the owner, designer, and subcontractors. Timely, reliable, practically formatted information supports the best decisions. Today, construction leaders should prove that simplicity is the ultimate form of innovation.
Respect for design
A builder’s support for the owner’s vision and design is essential. Each customer’s unique requirements and expectations need to be well understood. Otherwise, they cannot arrive at the ideal balance between aesthetics, functionality, and cost. It’s all about respect. Then, as with the traditional master builder, the design intent needs to be embraced and constructed through a collaborative effort with the architect and subcontractors.
Specialty contractor expertise
The construction industry is becoming more reliant on the expertise of specialty contractors. With increased challenges and complexities, the best use of industry talent is necessary to arrive at the best construction solution.
- Partnerships – Things are continuing to shift toward a partnership approach to projects. This is driven primarily by pressures to optimize facilities, through a collaborative effort. Expertise is key here, at every level and every building component. Specialty contractors need to recognize who their supporters are. These being the organizations that value their service and expertise. Then, they should focus heavily on their supporters and avoid the commoditizers.
- BIM – Building Information Modeling (BIM) is not a trend. It is in the early stages of revolutionizing the AEC industry. BIM allows specialty contractors to eliminate waste and integrate their expertise with owners, designers and builders. By helping them be more cost effective, this can now allow them to naturally be an extension of their customers and lead to quality repeat work. This applies to excavating, masonry, steel, painting, roofing, HVAC, plumbing, electrical, etc. contractors.
The new normal
It has been three years since the stock market crash of 2008. Things have changed. Although facility developments are limited right now, this will increase as business owners strive to adapt to the new market place. For many, this will require the rebuilding or reconfiguration of facilities to increase efficiency or marketability.
For example, health care and senior living organizations cannot increase occupancy levels without responding to the increased preference for non-institutional environments. Colleges are finding they need to respond to the new community design concepts in student housing. Successful retailers need to quickly respond to their window of growth opportunity. Manufacturers have extreme pressures to increase production, upgrade technology and reduce operating costs.
Many businesses can no longer afford to not make improvements to their facilities. For some, it will be a matter of survival.
