Welcome to the webinar:

The Art of Telling Your Story

EMPOWERING FACILITY PROFESSIONALS WORLDWIDE

EDUCATION

Presented by:

Christopher P. Hodges, P.E., CFM, LEED-AP, IFMA Fellow, FRICS Principal of Facility Engineering Associates

Hosted by: CQI Associates and IFMA Chesapeake Chapter

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CERTIFICATION

Contact us: IFMA - Chesapeake P.O. Box 1520 Columbia, MD 21044-0520 [email protected] www.IFMACHESAPEAKE.org

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This presentation on The Art of Telling Your Story is worth CEU credit of: 1 full CFM maintenance point self report on the IFMA website under the Camp Portal www.ifma.org

EMPOWERING FACILITY PROFESSIONALS WORLDWIDE

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ENCOURAGEMENT

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Christopher P. Hodges Principal Facility Engineering Associates [email protected]

The Art of Telling Your Story Christopher P. Hodges, P.E., CFM, LEED-AP, IFMA Fellow, FRICS Principal of Facility Engineering Associates • Chris is a founding Principal of Facility Engineering Associates, with over 35 years of experience in facility management and operations. • He is a Registered Professional Engineer, Certified Facility Manager (IFMA), and LEED AP (USGBC).

• Chris is a Fellow of The Royal Institution of Chartered Surveyors and IFMA. He is co-author of Sustainable Facility Management, the Facility Manager’s Guide to Optimizing Building Performance. • Chris is an IFMA Instructor in all of IFMA’s credential and professional development programs and was the lead Subject Matter Expert in the Sustainability Facility Professional (SFP) credential program. • He teaches sustainability and facility management in Catholic University’s FM graduate program, for George Mason University in their FM certificate program, and in Rice University’s IFMA course offerings.

Agenda • Measuring what’s important

• How people think • Delivering the message • Examples in FM

The Perception: Facilities is a Cost Center

Facilities is an Investment in Organizational Success

What is Important to Your Organization?

Alignment Organization

Organizational Strategy • Produce a product or provide a service • Satisfy stakeholders • Generate revenue

Mission Vision Values Inspires

Facility Management

FM Drivers Community commitments, Sustainability initiatives, Regulatory requirements

Influences Drives

Supports

Strategic Facility Plan Operational Structure Supports , aligns with organizational strategy and FM Drivers

Operational Planning

Operations Creates

• Work Management • Measurement & Reporting

Operations Policies and Procedures • Tactical initiatives

Choosing measures that are important … Metrics vs. KPIs

A KPI is a core metric that defines top level success

Metrics

KPIs

Metrics at Organizational Levels

KPI

2

Key Performance Indicators (KPIs)

Management Management Metrics (MMs)

3

Process Process metrics

Tactical Level (Data)

Tactical

1

Strategic

Strategic Level (Reporting Value)

KPIs: the most important performance indicators without which the organization Organizational Strategy • Produce a product or would not be able to fulfill its mission. Mission These provide a service Vision • Satisfy stakeholders KPIs often tell the story of customer Values • Generate revenue satisfaction, commitment to corporate social Management FM Drivers responsibility (CSR), and how well facilities Level Community commitments, Sustainability initiatives, Regulatory requirements support business objectives.

Strategic Level (Reporting Value)

Key Performance Indicators (KPIs)

Strategic Facility Plan Operational Structure Supports , aligns with organizational strategy and FM Drivers

Operations

Management Metrics (MMs)

Operational Planning

Data

• Work Management • Measurement & Reporting

Process Metrics Operations Policies and Procedures • Tactical initiatives

• • • •

Cost Labor Needs Process Efficiency Customer Satisfaction

The Financial Story Planning Disposal

Capital Renewal

8

Design

2

7 6

Repair

1

3 5

4

Construction

Start-up/Commissioning

Operations and Maintenance

The Financial Story Money Basics •

How we budget: capital vs. operating budget

•

Know your minimum expected rate of return (capitalization rate)

•

Using the right tools

The Financial Story

Capital Budget What is included in a Capital Budget? • • • •

Future cyclical repair and replacements Measures that extend service life or retain the usable condition Major activities with a maintenance cycle in excess of one year Systems that have reached the end of their useful life

Capital Budget: Typically 2-4% Replacement Value

The Financial Story

Operating Budget What is included in an Operating Budget? • • • • • • • • •

Service and routine maintenance Utilities Custodial services and cleaning Pest control Snow removal Grounds care and landscaping Environmental operations and record keeping Waste hauling and waste diversion (recycling) Security services

The Financial Story

Capitalization Rate

Or: What you can (otherwise) do with $1

The Financial Story Making money work for your company $1.33 = $1.46 $1.21 = $1.33 $1.10 = $1.21

$1.00 = $1.10

The Financial Story

Financial Tools •

Payback Period

•

Return on Investment

•

Net Present Value

•

Internal Rate of Return

The Financial Story Simple Payback Period (SPP)h

Return on Investment (ROI)

Net Present Value (NPV)

Internal Rate of Return (IRR)

Initial cost of a project

Amount of return

The discount rate for an investment that yields a NPV of zero

Annual expected savings

Amount of investment

Process of adding all of the cash inputs and outflows over the life of an asset and bringing all of those amounts back to the value of today’s dollar Uses discount rate to convert future outlays to the value of today’s dollar

In other words, the discount rate at which an investment pays for itself

The Financial Story NPV = - Initial Cost (I) - PV(M) + PV(E) + PV(S) Today’s $ Energy Savings (E) Year

0

Capitalization Rate

(E)

1

(E) 2

(E) 3

Salvage Value (S)

(E) 4

NPV

5

Capitalization Rate Maintenance (M) Initial Cost

(M)

(M)

(M)

(M)

NPV calculations consider all cash inflows and outflows over the life of an investment and convert them all to the value of today’s dollar.

Agenda • Measuring what’s important

• How people think • Delivering the message • Examples in FM

Thinking Fast and Slow System 1

System 2

• Automatic • Instinctive • Emotional

• Slow • Logical • Deliberate

Understand How People Think

Motivation

Cognitive Biases

Cognitive Biases that Effect Business Decisions

• Framing effects • Anchoring

• Loss Aversion • Excessive Optimism

• Status Quo

Framing Effects How different ways of presenting the same information can evoke different emotions, decisions, and outcomes

Framing Effects

Treatment Option A: 10% Mortality

Treatment Option B: 90% Survival

Framing and Facility Management Conveying information in a way that the recipient can most easily connect and relate to their own personal experience

Anchoring The cognitive bias we have that makes us rely too heavily on the first piece of information we receive. Anchor “Would you be willing to pay…”

Average Donation

Recommend $5

$20

Recommend $400

$143

No Recommendation

$64

Anchoring Can also be our tendency to rely on our mental estimate of what a number should be based on our past experience

…not necessarily based on current information or current facts.

Simple Payback = 4 years

Loss Aversion (Losses loom larger than gains) You get one flip of a coin… If the coin shows tails, you lose $100.

If the coin shows heads, you win $150. Would you accept the bet?

•

Loss aversion is the cognitive bias that leads us to making decisions that favor the avoidance of a loss rather than the greater prospect of a gain

If we do not repair the roof…. this could happen.

Agenda • Measuring what’s important

• How people think • Delivering the message • Examples in FM

Making the Business Case 1. Know the outcome, the decision you want 2. Perform the financial analysis 3. Convey the financial and non-financial benefits 4. Convey the risk of not taking action 5. Ask for what you want

Agenda • Measuring what’s important

• How people think • Delivering the message • Examples in FM

Case Study: Facility Maintenance Program • Multi-year plan for correction of existing deficiencies • Identify capital projects and deficiencies • Prioritize projects • CMMS uploadable data Bottom line: How much money is needed to maintain facilities?

Understanding Mission Criticality & Capital Needs

Invest $24M

2008

2013

How should funding be directed?

Annual Funding Needs

FCI

Site 1

$9.0M

0.14

Site 2

$2.3M

0.42

Site 3

$0.3M

0.45

Site 4

$0.9M

0.27

How should funding be directed?

Mission: To serve the United States of America in a national role by preserving, collecting, exhibiting, and fostering the understanding of works of art at the highest possible museum and scholarly standards.

Agenda • Measuring what’s important

• How people think • Delivering the message • Examples in FM

The Art of Telling Your Story •

Know how your organization views facilities

•

•

Know how your organization makes financial decisions

Understand how people think

Questions? Chris Hodges [email protected]

Thanks to the Chesapeake Chapter of IFMA!

Thank you to Chris Hodges for sharing his expertise! Thank you to all of our Chapter sponsors for their support!

For additional information about the Chesapeake Chapter please visit www.ifmachesapeake.org Join us in: May at T. Rowe Price June for the Annual Meeting at Eagles Nest October for IFMA Chesapeake Golf Outing at Waverly Woods

Thank you for attending!

EMPOWERING FACILITY PROFESSIONALS WORLDWIDE

EDUCATION

ENCOURAGEMENT

CERTIFICATION