I’ve been doing quite a bit of work recently on benchmarking and operational reviews for Facility Management departments and whenever I start to dig deep into the information to do the analysis, I realize how easy it is to be fooled by the big picture.
My best example of being fooled by the big picture was with a past job. I started the new job just one month after the fiscal year and had a multimillion dollar profit & loss budget to manage along with a service team as a supplier to the Facility industry – my first time on the other side.
Then, a months after I joined, I started to see the trend with the numbers – and it didn’t look good. At first, my CFO told me it wasn’t a problem – they decided that it was an allocation problem with our labour overhead between corporate accounts and my region’s budget and it wouldn’t grow.
Their explanation sounded logical and they had convinced themselves because they were looking at my budget numbers and it seemed to fit with their numbers. But I wanted to know for sure and to understand it, since I was new to the company. So, I started breaking my multimillion dollar budget apart and reporting it based on different segments. The capability was there, but our accounting folks as well as my predecessor and my new operations staff didn’t see the need to separate it by Area Manager and between ongoing contracts and what we called ‘extras’ generated from the ongoing contracts. I had them create new budget reports. One for each of my Area Managers and one for the extras.
What I found stunned me. Our margins were ok, but when I looked at the budget for the extras, it showed a 100% margin on a $750,000 revenue projection. It seems that the revenues were budgeted, but the expenses were forgotten. In the overall budget, this huge quarter million dollar mistake was hidden until a couple of months went by and as expenses that weren’t budgeted started to accumulate.
Needless to say, this mistake made what looked like a good year when the budgets were set (before I arrived on the job) into something completely different, since the gap simply continued to widen.
I’ve always wanted more details and to drive accountability to those who earn revenues or expend costs in a way that’s meaningful and allows analysis and action. This was the best example of how important that is. When your CFO, their accounting staff and experienced operations staff miss something like this, you know there’s a flaw in the process.
And that flaw is two things. First, not just looking at the big picture to make decisions. After all, good results in one area can mask bad results in another area and if you don’t see it, you can’t fix it. Second, without detailed visibility into your operations, you won’t understand where the issues are and how to deal with them.
And how does this example from a service business relate to Facility Management? Well, you do have an expense budget and while you may not have offsetting revenues, you still need to understand your expenses and where you’re wasting money. Just because you meet your budget yearly doesn’t mean there isn’t some area that could cost less. And, you can extend this to your operational information like CAFM and CMMS information. If you don’t track and understand your space use, you may not be using it very effectively and are costing your organization money. Without a CMMS system, you can’t track and assess your repair and occupant calls to see trends and make changes that will improve results and save money.
So, make sure you have the ability to easily see the details in addition to the big picture and you’ll be better off.
