FACILITIES MANAGEMENT RESOURCES
Benchmarking Whitepapers:
BENCHMARKING
Benchmarking—Reducing Costs by Benchmarking Reducing Costs by Benchmarking
These are tough economic times and it seems that nearly everyone is under pressure to cut costs and control expenses.
One approach is to just cut costs and reduce programs, but this doesn't bring much value to the organization. Over the long term, your facilities will deteriorate and the workforce productivity will suffer. Another more effective approach is to benchmark your key operating metrics and make critical decisions that will allow your organization to reduce costs without reducing services that impact productivity.
Does benchmarking save money? For most participants, the savings are achieved when they benchmark and implement best practices. The most effective area to begin is to focus on space needs. Your results will vary, of course, but the majority of our benchmarking participants report that benchmarking saves money by showing where to make changes in their space requirements and what changes to make.
Space
One of the key indicators is space utilization. On average, our benchmarking participants reduce their space requirements by 6% the first year and continue reducing their overall space requirements by 11% by the end of the third year.
What does that mean to the bottom line? Well, if you are a typical FM BENCHMARKING organization, your average space is about 400,000 gross square feet and your average total operating and fixed costs are about $14 per square foot per year. Our average benchmarked savings is about:
- $336,000 in the first year
- $504,000 in the second year
- $616,000 in the third year
The key performance indicator you should consider is your space utilization rate per person. Many organizations have allowed departments to grow into excess space when staff has been reduced. In organizations that have gone thru a downsizing initiative, excess space is quite common.
In the chart below, we have plotted the gross square feet per occupant for a large number of buildings in the FM BENCHMARKING database:
If your space utilization is above the median for your peer group you should review the reasons and evaluate options to begin eliminating excess space.
What about the impact of less square feet on service levels and employee productivity? Well, these participants haven't impacted the service levels in their organizations in a negative way. In fact, for most organizations they have probably improved productivity by moving people together.
A financial services organization evaluated its benchmarked metrics and reduced its headquarters space requirements from 385,000 square feet to 312,000 square feet. It was in an owned facility with total operating and fixed costs of $14.80 per square foot. They were able to consolidate space and sublease the 73,000 square feet that was vacated which provided an annual savings of more than $1 million.
A utility utilized the benchmarking data to consolidate space in an operating center. It implemented standardized workstations and reduced their space requirements from 730,000 square feet to 626,000 square feet. The leased space was near the end of the term so they were able to negotiate the return of the 104,000 square feet at an annual lease rate of $17 per square resulting in a savings of $1,768,000.
Your results will vary but one of the most significant cost savings measures you can implement from benchmarking is to reduce total space requirements and eliminate the full cost of the reduced space from your operating budgets.
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