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THE BALANCED SCORECARD IN FACILITIES MANAGEMENTfor internal management and external benchmarking

Paul Coronel and Anne EvansDirectors, Benchmarking PLUSMelbourneAugust 1999

ACKNOWLEDGEMENT

This paper is the result of collaborative work between a number of people and the supportof the AAPPA Board. In particular we wish to acknowledge the input of time andintellectual capital from the following heads of facilities management organisations,convened by Brian Fenn who was the catalyst for the whole exercise. They played a teamleader role in particular aspects of development:

Brian Fenn Queensland University of Technology;Sam Ragusa Griffith University;Andrew Frowd University of Wollongong;Neville Thiele University of South Australia;David Spedding Deakin University;Kelvin Crump Facilities Management Services, TAFE, Queensland;

Also the input of a number of other facilities managers who participated in a workshop toassist in identifying relevant performance measures for facilities management within aBalanced Scorecard framework.

CONTENTS

IntroductionSome characteristics of top performing organisations

How the balanced scorecard fits inThe essential characteristics of the Balanced Scorecard approach

How it can apply to FM in a tertiary education context(for both internal management and benchmarking purposes)Linkages between organisational levels and functionsEstablishing appropriate objectives for FM in the Balanced Scorecard contextBroad structure of a Balanced Scorecard

A sample of the KPIs in a Balanced Scorecard for facilities managementLinkages between KPIs at different levelsCharacteristics of KPIs in a balanced Scorecard - internal versus benchmarking versions

Conclusion

APPENDIX: Detailed format of Balanced Scorecards for facilities management

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INTRODUCTION

Some characteristics of top performing organisations

It is clear from personal experience and consensus among observers of exceptionalorganisations, that top performing organisations have a number of aspects in commonincluding the following:

Customer Focus: a clear understanding of their customers identity and their keyneeds, and an effective means of response at both the strategic and the operational level;

Leadership: particularly in the sense of defining what things the organisation must getright and to communicate this clearly throughout the organisation;

Use of information to manage: a coherent performance reporting structure that helpsintegrate the actions of managers at different levels in pursuit of their key objectives;

A restless quest for improvement: they will do what is necessary to ensure theyidentify what is best practice and adapt it to fit their own organisation as soon aspossible.

HOW THE BALANCED SCORECARD FITS IN

The Balanced Scorecard is an approach to setting up performance measurement structuresthat help an organisation with some of the characteristics mentioned above. It was firstfeatured in the Harvard Business Review early in 1992*. (Ref to K&N article)

Since then it has been used in many countries and industries as the basis of a top-downreporting structure which knits together the desired strategic perspective of an organisationwith its management actions at various levels.

A smaller number of organisations have also used it as a framework for performancecomparisons (performance benchmarking) with other organisations. It clearly makessense to use similar measures for external comparisons to those that one uses to manageinside the organisation.

The essential characteristics of the Balanced Scorecard approach are as follows:

performance measurement from four perspectives ensures the focus is not merely onshort term cost / financial performance (See slide 2: the question posed in each of thefour perspectives help give the essence of what is being measured.);

a review of the key objectives of the organisation. Existing objectives may need to berestated or modified to gain the desired clarity and balance between the four

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perspectives of the Balanced Scorecard approach. (Our experience has shown that thisis necessary more often than not, both from clarity and balance viewpoints.);

linking each of these objectives to between one and three key performance measureswhich together are used as the scorecard at the top of the organisation (See slide 3: atypical scorecard has between 12 and 24 key performance measures in all; having fewermeans the risk of too narrow an outlook while risking more confusion and lack offocus.);

cascading; that is connecting the key performance measures at the top level withsimilar measures at other levels in the organisation. These should be of direct relevanceto managers in the various jobs at these other levels. Thus cascading supports thecommunication which goes with delegation and accountability.

In this way the perspective and consequently the actions of managers in different parts ofthe organisation are more co-ordinated and focussed on achievement in accord with abalanced set of key objectives.

HOW IT CAN APPLY TO FACILITIES MANAGEMENT IN A TERTIARYEDUCATION CONTEXT (for both internal management and benchmarkingpurposes)

Linkages between organisational levels and functions

In my job I see a very wide variety of industry sectors and organisations. Two of the mostcomplex, in terms of services delivered to the end user or customer are public hospitalsand local government organisations. Facilities management organisations in the tertiaryeducation sector rank up there in my view.

For this reason we propose a structure we have used elsewhere; a Top Level BalancedScorecard with supporting Balanced Scorecards for major functions within facilitiesmanagement. (This is illustrated in slide 4).

The four supporting scorecards shown are indicative; the precise number and focus of thesupporting scorecards in any single facilities management organisation will depend on therange and magnitude of functions that are under the FM Managers jurisdiction. Also to adegree on the way in which that person has divided the accountability for the variousfunctions between managers reporting to him/her.

Establishing appropriate objectives for FM in the Balanced Scorecard context

It goes without saying that facilities management supports the fundamental activities of theUniversity. The objectives for FM should therefore be compatible with those of theparent organisation.

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Balanced Scorecard for Internal purposes( for use by individual FM Managers to help run their own organisations)

In this case the facilities management objectives as a total set will be unique and specific tothe circumstances of the particular FM organisation and its parent body. Individualobjectives may be the same or similar to other FM organisations but it is highly unlikelythat this will be true of the whole set.

Balanced Scorecard for External purposes(for use by a number of FM Managers to benchmark quantitative performance measuresand qualitative measures / practices between their organisations)

In this case the facilities management objectives must be generic to be able to serve all theparticipating organisations and have a degree of relevance to each of them. The objectivesprovide a stimulus for choosing a balanced set of key performance indicators but their roleneed go little further.

Broad structure of a Balanced Scorecard

The implications are shown in slides 5 and 6.

Balanced Scorecard for External purposes

For benchmarking purposes the Balanced Scorecard has a set of generic objectives and keyperformance measures (KPIs).

Balanced Scorecard for Internal purposes

For internal purposes the Balanced Scorecard has a set of objectives specific to theindividual FM organisation, and the KPIs are used to measure the level of achievementagainst those objectives.

In addition the Facilities Manager will probably wish to:

define targets for the managers responsible for each KPI;

document strategies and tasks by which the objectives will be achieved;

fix accountabilities among his/her people for each strategy and /or task.

These additional features MAY - but do not have to - be included on the scorecardstructure. It is up to the individual manager. (Two of the leading people in our workingparty, Sam Ragusa and Andrew Frowd, have included some or all of these elements inscorecards for their own organisations. Both approaches differ somewhat from each other,as is to be expected).

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A SAMPLE OF THE KEY PERFORMANCE INDICATORS IN A BALANCEDSCORECARD FOR FACILITIES MANAGEMENT

These are set out on the next two pages. Note that it is a sample only and that the fullversion is attached at the end of this paper. It is in much greater detail, and includes theTop Level scorecard and the four supporting scorecards relating to Maintenance, CapitalWorks, Cleaning and Security.

Note in the sample that there is a mix of quantitative and qualitative measures.

Note also that each of the quantitative measures is stated in specific terms. This iscritically important when benchmarking, but also for internal purposes. To highlight whatI mean, consider the contrast between a KPI stated as satisfied customers, we willsatisfy our customers, or something similar, and the KPI as stated in the sample belowscore on customer satisfaction survey. The former is more difficult to report oninternally and impossible to use for benchmarking. Unfortunately I have seen manyinstances of the former in my work over recent years.

In addition in the full version the qualitative measures are derived from a series of questionswith multiple choice answers. Each