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09.01.2013, 19:17

Peer pressure

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Dr. Ravi Chinta (Assistant Professor of Management) and Dr. Mohammed Ashraf Ali (Assistant Professor of Electronics Engineering) present findings from their benchmarking of American University of Sharjah (AUS) facilities.

Dr. Ravi Chinta (Assistant Professor of Management) and Dr. Mohammed Ashraf Ali (Assistant Professor of Electronics Engineering) present findings from their benchmarking of American University of Sharjah (AUS) facilities.

Achieving global best practice in facilities management is a common goal for most universities aiming to attain preeminence amongst their peer group of institutions. A well-maintained facility in an institution of higher learning can attract the best faculty as well as students.

A resource-based view of strategy (Barney, Grant: 1991) suggests that in order to remain a premier higher education institution, universities must identify and manage key performance indicators which are vital for effective facilities management. Data-driven decision making in facilities management requires measuring, evaluating and comparing performance in all areas of facilities management. This simply means good benchmarking using the right performance measures.

In developed countries such as the USA, Canada and Australia, collective benchmarked data is compiled by associations that serve as clearing houses for this data. They enable individual institutions to compare and manage their facilities effectively. At present, institutions in the Middle East can only benchmark against their counterparts in developed nations, despite the apparent differences in the sociocultural milieus between the Middle East and the West.

This is what we have done at the American University of Sharjah: to define appropriate performance measures for its facilities management function and compare those metrics with those of its counterpart peer institutions of higher learning in developed countries.

The peer group

The Association of Higher Education Facilities Officers (APPA) was founded in 1914 and is dedicated to the maintenance, protection, and promotion of quality educational facilities. APPA serves and assists facilities officers and physical plant administrators in colleges, universities and other educational institutions throughout the world.

Benchmarking involves gathering and quantifying objective data about a facility. That data is a first step toward improved staff and facility performance and has a value apart from its use in the benchmarking process. The collected data is then compared to similar information gathered from other organisations (APPA members in our case), or from an organisation’s own ‘member’ facilities or campuses at
other locations.

A major advantage of benchmarking is the element of competition spawned by a performance comparison of various buildings or campuses within an organisation. Each group seeks to outperform the others, and in this manner everyone’s level is raised. As AUS is a member of APPA, in our study AUS data was compared with APPA data.

APPA has collected data through its biennial ‘Comparative Cost and Staffing Survey’ for more than 20 years. APPA’s new and evolving‘Strategic Assessment Model’, developed in partnership with American Management Systems Inc, is designed to provide a graphic illustration of the range and depth of facilities activities, and a road map for improvement. The model is based on a core set of benchmarks and a process for adapting them to institutions of higher learning.

The benchmarked data

For effective facilities management in institutions of higher learning, five key performance indicators are most commonly utilised. These are described next. It should, however, be noted that operational data along these key performance indicators must be accumulated over time to guide the facilities management function.

The Facility Operating Current Replacement Value (CRV) Index is the ratio of Annual Facility Maintenance Operating Expenditure ($) to the Current Replacement Value ($). In the search for metrics to compare campuses for operational efficiency, physical condition and other factors of importance, financial and facility professionals have
developed ratios based on the Current Replacement Value (CRV). CRV is an essential element of the Facility Condition Index (FCI) and other measures of institutional commitment to facilities. CRV is defined as “the actual cost of replacing the facilities, and not the book value”.

This indicator represents the level of funding provided for the stewardship responsibility of an organisation’s capital assets. Annual facility maintenance operating expenditures include all expenditures to provide service and routine maintenance related to facilities and grounds. They also include expenditures for major maintenance funded by the annual facilities maintenance operating budget.

This category does not include expenditures for major maintenance and/or capital renewal funded by other accounts, nor does it include expenditures for utilities and support services such as telecommunications, mail, public safety, security, motor pool, parking, environmental health and safety and central receiving.

The Facility Operating Gross Square Foot (GSF) Index is the ratio of Annual Facility Maintenance Operating Expenditure ($) to the Gross Area (GSF).

The Facility Operating GIE Index is the ratio of Annual Facility Maintenance Operating Expenditure ($) to the Gross Institutional Expenditure (GIE). The GIE index represents the level of funding provided for the stewardship of the institution’s general and capital assets.

The facilities annual operating expenditures generally range between four per cent and eight per cent of gross institutional expenditures.

The Capital Renewal Index shows the relative funding effectiveness in addressing identified capital renewal and renovation/modernisation needs. The numerator of this ratio is a total of the annual capital renewal expenditure and the annual renovation/ modernisation expenditure. Annual Capital Renewal Expenditures are all expenditures over and above facility maintenance operating budget expenditures required to keep the physical plant in reliable operating condition for its present use. These expenditures are over and above normal maintenance for items with a lifecycle in excess of one year and are not normally contained in an annual facility operating budget.

This is typically represented as a total expenditure for capital renewal of an organisation’s capital assets. Plant renewal focuses on maintaining the operability, suitability, and value of capital assets. It is accomplished through the replacement and rework of those components of a building that wear out even though those components are routinely maintained. Capital or plant renewal is a time-driven process with specific useful life cycles for areas such as heating and ventilation systems. It is often provided in the form of capital funding for ‘major maintenance’ before it becomes ‘deferred’.

The Facility Condition Index (FCI) is a comparative industry indicator/benchmark used to indicate the relative physical condition of a facility, group of buildings, or entire portfolio, ‘independent’ of building type, construction type, location or cost. The FCI is expressed as a ratio of the cost of remedying existing deficiencies/requirements, and capital renewal requirements to the current replacement value. As an equation, this is: FCI=(DM+CR)/CRV.

The FCI provides a corresponding rule of thumb for the annual reinvestment rate (funding percentage) to prevent further accumulation of deferred maintenance deficiencies. The FCI value is a snapshot in time, calculated on an annual basis. Forecasted FCI values for a building in the future, for example, would include the current deferred maintenance items, plus projected values of capital renewal requirements.

The FCI is represented on a scale of 0 to 1, or 0 per cent to 100 per cent, with higher FCI values representing poorer facility condition. While property owners/managers establish independent standards, a ‘fair to good facility’ is generally expressed as having an FCI of less than 10-15 per cent.

The adjacent table presents the AUS data vis-à-vis the APPA peer group of educational institutions. Several inferences can be drawn from this benchmarking exercise. These values help us identify areas for improvements. Now, goals need to be formulated, corrective actions taken, and an ongoing program established to ensure that progress will be made and measured.

 
Benchmarked data
 
Benchmarked Indicies
American University of Sharjah (AUS)
Peer Group (APPA) Average Values
1
CRV Index
0.01
1.3-1.6
2
GSF Index
$0.44
$3.0-$4.0
3
GIE Index
0.03
3.8-9.5
4
CR Index
0.0038
1.2-1.9
5
FC Index
0.0126
0-0.5
 

GIE Index = Annual Facility Maintenance Operating Expenditure / Gross Institutional Expenditure (GIE)

 

While AUS exhibits a leadership position in all of the above benchmarked data, it must be remembered that benchmarking is an ongoing process. AUS’s leading position may be explained by the newness of its physical plant compared with its well-established counterparts in the United States. An organisation’s standards may change as staff improve both performance levels and measurement techniques. Data gathering for benchmarking studies can also uncover heretofore unexplored areas for improvement. Further, an organisation might, through strategic planning, develop new goals which require new benchmarks.

 

“Learning follows various roads. We note the start but not the end.

For time and faith must rule the course, while we see not beyond the bend.”

(Khalil Gibran)

 

Conclusion

Benchmarking is a systematic process of continuously measuring, comparing, learning and improving to develop a framework to evaluate resource management in organisations. It is used to identify best practices and key enablers for the effective transfer of best practices across independent organisations (Zairi and Whymark, 2000). Traditionally, benchmarking has been described as a practice that promotes imitation. Thus, benchmarking is the practice of being humble and truthful enough to admit that someone else is better at something, and being wise enough to match and even surpass them at it. However, the above benchmarking data reveals that it can also be an exercise to confirm an organisation’s market leadership position within certain areas that could provide sustainable competitive advantage. When an organization achieves such a leadership position, the benchmarking paradigm should shift from external referencing to selfreferencing. The latter should be driven by organisational aspirations resulting in ambitious self-improvement programs to maintain the leadership position. This benchmarking exercise has led to ambitious goal setting that has become part of the strategic intent of the American University of Sharjah to sustain its preeminence as a leading educational institution in the Middle East.

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