Balanced scorecard to measure FM Performance

In the facilities management (FM) function, use of a balanced scorecard enables companies to evaluate the performance of their external providers against multiple criteria (Figure 1), help set alignment and focus, identify improvement opportunities, enhance performance reporting, and conduct constructive discussions with their FM providers.

In a sense, the balance scorecard process for FM service providers should be similar to the way in which individual performance is handled – expectations are set, measures to evaluate performance are established, performance is monitored and discussed throughout the year, corrective measures are implemented, and performance is formally documented.

Although there is no set format for balanced scorecards, and they vary from company to company, Figure 1 demonstrates elements many organizations include in those for their FM service providers:

• Evaluation criteria – areas measured (e.g., cost, customer satisfaction, service delivery, safety performance)
• Weight placed on each criterion (i.e., different % for each criterion, totaling 100%)
• Evaluation comments – favorable as well as areas for improvement
• Evaluation Score (e.g., 1-5 scale) for each criterion and a total weighted score.

When to use a balanced scorecard

A balanced scorecard should be prepared for each FM service provider only when it makes good business sense to do so, e.g., when the amount of FM spend is significant, services are frequently performed, or when the provider works on-site full-time. The balanced scorecard approach works extremely well for companies that operate under an integrated facilities management (IFM) – wherein some FM services are self-performed by one service provider while others are handled by firms with which it has partnered, all in an integrated manner model – because of the multiple service lines and the breadth of the provider’s responsibilities. But it is also very valuable for firms that do not operate under an IFM model.

To view year-on-year balanced scorecard trends and determine if performance is improving or not, organizations often use graphics (see Figure 2).

Evaluation criteria – the basics

The evaluation criteria on the balanced scorecard should be tailored for each category (e.g., cost, customer satisfaction, service delivery, etc.) as well each major service line (e.g., janitorial services, food services, maintenance, etc.) and the weight should vary to reflect the importance of each criterion to the organization. Firms typically establish scoring definitions and the means by which the scores will be calculated to minimize subjectivity and provide clarity on how performance will be measured.

While some organizations use highly detailed scorecards to thoroughly evaluate each criterion, the “right” level of detail for any given firm is dependent on multiple variables including that there is a credible and easy process by which to obtain the necessary information.

Specific evaluation criteria

Cost

While all firms track actual costs, they should also evaluate cost performance at a more detailed level with weights and scoring definitions assigned to each sub-category to ensure cost-effective service delivery. Many organizations find it useful to assess costs not only in aggregate, as in the above example, but also by type of expense. This enables them to zoom in on specific expenses such as maintenance or energy/utilities, and have meaningful discussions with their providers about whether their expectations are being met.

Customer satisfaction

Measuring the satisfaction level of those receiving FM services is another critical part of the process. Organizations should use a variety of methods to obtain input directly from their internal customers, including periodic email surveys (e.g., annual/semi-annual/upon completion of a service), online or paper suggestion boxes, administrative assistant feedback sessions and number of complaints received. A detailed scorecard, similar to the one in the cost category, should be established to measure customer satisfaction.

All of these are excellent ways to “hear the voice of the customer” and identify areas for improvement. Yet care should be taken to develop and administer surveys that capture relevant information without being a burden to complete, and that feedback sessions do not keep participants away from their jobs for too long.

Service delivery

Proper operational performance is ensured only when providers meet or surpass firms’ service delivery expectations. Thus, organizations should implement a detailed scorecard to assess service delivery performance for each service line.

Similar to the scorecard examples, organizations should establish detailed scorecards for their other outsourced service lines, such as janitorial services, call center and mailroom.

Environmental, health and safety (EHS) performance

Proper measurement of FM service provider performance must take into account injury to people or harm to the environment. Some firms argue that EHS performance is the service provider’s issue, and thus do not track it. But it is difficult to maintain that position when an incident occurs, especially when liabilities occur or the event becomes public, resulting in damage to their organization’s image.

Examples of evaluation criteria for this category in the balanced scorecard include:

• OSHA recordable incident rate
• OSHA lost time incident rate
• Number of incidents
• Completion of incident investigations, including root cause analysis and implementation of corrective measures
• EHS assessment/audit results
• Waste generated/recycled
• Conservation improvements (e.g., energy, water)
• CO2 footprint

Compliance

An area often overlooked when measuring FM service provider performance is compliance with laws and regulations, and with internal policies and industry standards.

Examples of evaluation criteria that should be included in the balanced scorecard for this category include, fines, violations, regulatory inspection results, assessment/audit results, compliance with internal policies and industry standards, and peer review results.

Innovation/continuous improvement

With this category, organizations send a clear message that status quo is not acceptable and that their FM service providers need to be more than “body shops”. It measures the providers’ performance in driving innovation and continuous improvement to reduce costs and improve operational efficiency.

The balanced scorecard should include evaluation criteria such as number of new ideas, leading practices and thought leadership introduced, number of initiatives in pipeline and implemented, cost savings, and process, technology and operational efficiency improvements. For all the above criteria, organization should prepare a detailed scorecard and feed the results into the overall balanced scorecard.

Conclusion

A balanced scorecard enables organizations to perform a comprehensive assessment of their FM service providers’ performance. As this article examined only several examples of evaluation criteria that should be included in, and only one type of format for, a balanced scorecard, firms should use the concepts discussed herein as a starting point but not be constrained by them.

For example, it is not essential that the balanced scorecard use weighted averages, but it is useful to assign weights when the different evaluation criteria are not of equal importance. Or, a company may want to call out the implementation of a new information system separately on the balanced scorecard but remove it once the project is completed. Similarly, if it wants to closely monitor an IFM service provider’s sourcing activities (e.g., reduce the number of vendors, leverage spend, reduce costs, improve diversity spend, etc.), it may want to have sourcing as a separate line item on the scorecard.

Firms often benefit from developing the balanced scorecard in partnership with their FM service provider, which enables incorporation of their ideas. This is especially helping in both achieving their buy-in and understanding what they believe has worked or has not worked on other accounts, such as format, content, process, etc. If done right, using a balanced scorecard can improve organizations’ ability to monitor their FM service providers’ performance and drive positive changes. Those already using a balanced scorecard will be well-served by looking for ways to improve it and its supporting processes. And those not yet using a balanced scorecard should strongly consider doing so.

Steve Silen

Director, KPMG Advisory Services