Master Thesis Facility Management Business Essay

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Atkin and Brooks (2009) states that the most important function of Facility Management is to provide, operate, maintain and improve supporting services in order to create an environment that supports the primary processes or -objectives of a concerning organizations. They also say that in practice, facilities management can cover a wide range of supporting services and products.

According to Cotts et al (2009) the most recent definition of facility management is: “a profession that encompasses multiple disciplines to ensure functionality of the build environment by integrating people, place, process and technology”. This definition seems more to be inclined to overall business strategy because of the integration of people, place, process and technology to ensure good facilities management. Looking at the interesting definition on business strategy by Johnson et al. (2009) we see that strategy contains the direction and scope of an organization over the long term, for achieving advantage in a changing environment throughout configuration of resources and competences with the aim of fulfilling stakeholders' expectations. This definition on strategy shows us the same points of interests as the definition by Cotts et al, namely the aspects of the configuration of resources and competences (for instance people, place, process and technology) for realizing effective management.

Barrett and Baldry (2003) say that facilities management has traditionally been regarded as the poor relation within the real estate, architecture, engineering and construction sector. This is because it was seen in the old fashioned sense of for example catering, cleaning, repairs and maintenance. According to the aforementioned definitions I can state that nowadays facilities management covers more than only providing services. It's also about changes, supporting processes and committing to the overall business strategy of an organization. Maybe it is important to find a certain balance in all aforementioned aspects in the several definitions, for realizing the most efficient way in managing facilities.

Aforementioned definitions display that the fundamental principle of facility management is often likely to be complex and mostly it affects multiple disciplines to ensure functionality of the build environment. Facility management also concerns the support of the primary processes and it mostly requires an integrated approach. In practice, facility management bring recourses, skills, technology and ideas together to achieve business objectives and deliver business benefits. Simply said; facility management can move an organization from where it is now, to where it needs to be in the future to meets its business strategy and -objectives (Atkin and Brooks, 2009). But how are these complex daily facilities management performances be measured in order to know if facilities provide value for money and provide qualitative support to the primary process in the working environment?

Brian Atkin and Adrian Brooks (2009) states, that quality of facilities management manifests itself in many ways. If users or customers were asked to define what quality meant to them in the context of a facility, there would be as many different definitions as there were users. In order to overcome this potential problem, facilities managers need to focus closely on users and customers to elicit their view on what quality means to them. In many situations, it is possible to substitute the word performance for quality. Facilities performances are ways of focussing on what users and customers really expect and mean by quality. In the context of services and facilities, quality is something that can be defined and determined as performances.

Performance measurement emphasizes the quantifying of an action, whereas measurement is the quantification and action leads to performances. Performance measurement emphasizes the process of quantifying the effective control and monitoring of facility processes and services (Maas and Pleunis, 2006). Simply put, performance measurement includes activities to ensure that facility objectives and goals are consistently being achieved in an effective and efficient manner. Performance measurement is developed as a means of monitoring and maintaining organisational control, which is the process of ensuring that an organisation pursues strategies that lead to the achievement of overall goals and objectives (Amaratunga et al., 2000).

The process of performance management is the following: from the strategy, policy, and objectives set out by the facilities organization, goals can be formulated. These goals must be made enforceable and measurable. By appointing critical success factors (CSF), it is possible to define which criteria must be met to achieve these facilities goals. For monitoring and managing these goals, key performance indicators (KPI) should be defined. Key performance indicators are specified measurable results and serve as the basis for monitoring processes and management reports (Maas and Pleunis, 2006).

Interesting philosophies that have been discussed in the academic world as well as in the business world are about performance measurement systems as a tool for delivering strategic objectives, such as The EFQM Excellence Model (European Foundation of Quality Management, 1992) or the Balanced Scorecard (Kaplan and Norton, 1992). These models are discovered and accepted in the last decade by many organizations as the integrated management models for effective operating and directing organizations (Ahuis and Diepman, 2006). In this research project, the focus lies on the Balanced Scorecard as a management framework for measurement of operational performances.

In a paper about performance evaluation in facilities management, written by Dilanthi Amaratunga, David Baldry, and Marjan Sarshar (2000), a number of points are defined based on their research which need further clarification and investigation in further research. One of these points is about reviewing of common goals, critical success factors and performance measurement relevant to facilities management, in the context of the application of the balanced scorecard. They say that research is necessary for identification if the Balanced Scorecards is appropriate to other levels within the facilities management unit and consideration of the implications of using different Balanced Scorecards at different levels in a facilities management organisation. They have stated the hope that the outcome of further research will enable academics and practising managers to assess whether the Balanced Scorecard is likely to be successful in facilities management.

Therefore, in this project, I will investigate performance evaluation in facilities management, whilst the main discussion is about the application of the balanced score-card (BSC) concept as a widely used management framework for measurement of operational performance within facilities departments. Furthermore, this thesis identifies this framework as a strategic management system for facilities management. The main purpose of the research is to attempt to apply a Balanced Scorecard into the daily facilities management practices of a case study and to learn about performance assessment and its outcomes, for instance which performance indicators or ratio's are most effective to find for facilities performance measurement. [1]

In accordance with aforementioned, it is expected that development of an appropriate balance of performance measures to support the critical success factors of a facility management organizations is complex and it affects multiple disciplines. Because of this, the research question of this project thus is the following:

To what extent will the Balanced Scorecard be auseful instrument to measure performance measurement for facility management and which success factors and key performance indicators are most effective to find for efficient facilities performance measurement?

I am looking for the most effective and efficient outcomes of performance evaluation in facilities management.

When I mention outcomes, I do not specifically mean only the application of the Balanced Scorecard in practice. With outcomes, I mean a critical review of the best to find goals, critical success factors and performance measurement relevant for professional performance measurement within the profession of facilities management. The Balanced Scorecard will be used as a helpful framework for assessing which outcomes are best to find.

I will try to answer my research question by looking at a specified case, where I will conduct a case study research in collaboration with the facility management department of Centraal Boekhuis. This case study will focus on testing how Centraal Boekhuis works with performance measurement related to its facilities management strategy, and how it best can work with the balanced scorecard. The explanation for this case study can possibly be found in qualitative data, for example the study of business documentation and reports that are in stock within the company about facilities strategy, its business strategy and performance measurement. The exploratory part of the research describes the testing of the Balanced Scorecard within Centraal Boekhuis, to see if the balanced scorecard is applicable for facilities management performance assessment and which goals, critical success factors and performance measurement relevant for professional performance measurement are best to be find.

In the theory section, I will extensively explain the theory on performance measurement, performance measurement in facility management, performance assessment, the balanced scorecard, and the theory on facilities strategy, critical success factors, and key performance indicators. Interesting literature on goals, critical success factors and performance measurement relevant for professional performance measurement are critically reviewed and compared with my own study findings on these issues. However, I will first give some necessary background information and explain why I have chosen to study the current case situation of Centraal Boekhuis for my research project.

BACKGROUND

This project aims to contribute to the profession of facility management in general, and the theory that will be used might be applicable to several (facility management) organizations. However, the project is a case study on Centraal Boekhuis. In order to make sure that readers who are not familiar with Centraal Boekhuis can follow the arguments, a short overview of Centraal Boekhuis will be provided. I will also offer some background information on the facility management department of Centraal Boekhuis. At the end of this section I will describe why I have chosen to study the current case situation of Centraal Boekhuis for my research project.

CENTRAAL BOEKHUIS

Centraal Boekhuis is a (leading) logistics service provider in stocking, storage, distribution and transportation of books. More than 500 publishers and over 1500 booksellers use the service facilities for distribution, transportation, information and administration. For publishers is Centraal Boekhuis the entry into the Dutch and Flemish (book) markets. For booksellers in the Netherlands and Flanders, Centraal Boekhuis is theprovider of the assortment of Dutch-language books, general as well as educational or scientific books, and a selected range of foreign-language books.

Besides taking care of stocking, storage, distribution and transportation of books, Centraal Boekhuis also offers administrative or financial services. For publishers the company organizes complete stock and sales recording, invoicing and debt collection. Booksellers as well benefit from a broad range of information technology services. The majority of Centraal Boekhuis' services are integrated in a single automated system (CB Online), so customers have access to the operational and management information they need, focused on their company's business processes.

Upon request, Centraal Boekhuis will also arrange the storage, distribution and transport of office supplies, stationary and greeting cards. All logistic activities and processes are linked with the transport centre's delivery network. The centre's range of services includes processing special offers and returned goods, (temporary) storage, order picking and carrying out special mailing campaigns with value-added logistics.

The Transport Centre of Centraal Boekhuis organizes transport from and to countries outside the Benelux. In England is a consolidation point bounded, where shipments from 1600 English publishers intended for Dutch bookshops are collected and forwarded to the Netherlands. This enables Centraal Boekhuis to offer customers attractive services. Shipments from Germany and America are transported along similar lines.

HISTORY

For over 135 years Centraal Boekhuis have been the logistic partner in the Dutch book trade. In 1871 the Vereeniging ter Bevordering van de Belangen des Boekhandels (VBBB) in Amsterdam lay the foundations for Het bestelhuis van de Nederlandsche Boekhandel, presently called Centraal Boekhuis. Publishers send their boxes with books to that warehouse of books, where the boxes were distributed across the Netherlands.

Many years later, in 1926, the VBBB decided to found Centraal Boekhuis in Amsterdam. Well-established publishers were obliged to store their books in the central depot of Centraal Boekhuis in Amsterdam. From now on the book stores and publishers could order their books with Centraal Boekhuis from one central point in the Netherlands. In 1973, because lack of space, Centraal Boekhuis grounded their company in Culemborg, where the company nowadays is still grounded. In that same year is Het Bestelhuis and Centraal Boekhuis merged into one company: Centraal Boekhuis B.V.

ORGANIZATION

The daily management of Centraal Boekhuis is directed by the Senior Management Team (SMT). The lead direction of the 5 Senior Managers is directed by a Chief Executive Officer, namely Hans Willem Cortenraad. They have weekly meetings to discuss the company' policy and how this policy is best directed to the line managers. The Senior Managers are directly responsible for the various divisions within the company. The line managers will direct the division policy to their employees. In a schematic way it will thus be structured:

Chief Executive Officer:

  • H.W. CortenraadChief Executive Officer

Senior Management Team:

  • Jaco Gulmans Human Resources Management
  • Ronald Janssen Information Communication Technology
  • Harry van der Linden Finance & Controlling
  • Marinus Ploos van Amstel Account Management & Marketing
  • Cees Pronk Logistics
  • Egbert Guis Project Management

Centraal Boekhuis in figures (2009)

  • Full time employees: 579
  • Publishers: 500
  • Booksellers: 1500
  • Available Dutch titles: 80,000
  • Number of copies delivered per year: 60,000,000
  • Number of delivery addresses per day: 2500
  • Number of packages transported per year: 4,500,000
  • Number of pallets transported per year: 300,000

FACILITY MANAGEMENT DEPARTMENT

The daily facility management of Centraal Boekhuis is overall directed by the Senior Manager Human Resources (HR). The Senior Manager HR informs the Board of Directors, and the Senior Management Team regarding the direction and strategies of the Human Resources- and facilities department. The manager of the facility services department will direct the division policy of the facilities services. The facility services manager is thus responsible for strategic, tactical and operational control of the facilities department (Centraal Boekhuis, policy plan Facility Management, 2010).

The key characteristics of the way facilities services are offered by the facility management department of Centraal Boekhuis, is to support the customers' needs in stocking, storage, distribution and transportation of books. Centraal Boekhuis have many facilities services, ranging from building management, reception, mail room, security, accommodation management, catering but also facility services like maintenance management and technical services. Most of the supporting facility services of Centraal Boekhuis are outsourced for creating a higher service level.

Besides the day-to-day operations of the facilities of Centraal Boekhuis, the facility management department of Centraal Boekhuis also provides services like Custodial Services, Mail Services, and Utilities and Energy conservation. The facilities service department offers a facility desk, a central service point, which provides a proclamation service for the internal customers. The facility desk is a service for customers where they can report questions, problems or suggestions concerning facilities services. The facility desk subsequently will try to solve the concerning reports.

The mission statement of the facility management department of Centraal Boekhuis displays that the facility department makes a differentiation between strategic, tactical, and operational management, with also continuing interaction with the core business and the environment of the organization.

Maas and Pleunis (2006) recognizes that strategic facilities management should be based on strategic, tactical and operational management levels, as well as there has to be a certain focus on internal and external processes, aspects and developments. The facilities management department of Centraal Boekhuis has lately changes its way of directing and managing the facilities services. The department has been split into three management levels (strategic, tactical and operational) and will make usage of management tools in order to direct and manage the facilities department efficiently.

The board of directors of Centraal Boekhuis (2009) has formulated a covering policy on performance measurement for the strategy period 2009-2011, whereas this policy among other things is focused on active control of processes with help of high quality management information. This policy is subsequently also stated for the facilities management department of Centraal Boekhuis for the plan-period 2010 (Facility policy, 2010 - 2012, Centraal Boekhuis). The problem is that facility management for Centraal Boekhuis is complex and affects multiple disciplines. Therefore it is difficult to describe performance evaluation in facilities management, and it is hard to define which goals, critical success factors and performance measurement are relevant to measure facilities performances optimally.

LITERATURE STUDY

In this section, I will first present a hypothesis about performance measurement for facility management. Then, I will explicate the theory on which the hypothesis is based. I will do so by first offering some information on performance measurement and its history, and then present important theories on performance measurement in facility management, including theory on the balanced scorecard and facility management strategy. In order to make the hypothesis plausible, the theories which I will discuss are mainly focussed on performance measurement in relation with facility management.

HYPOTHESIS

I will test the following hypothesis:

“The balanced scorecard can be usedfor performance measurement for facility managementwhilst the process of using the balanced scorecard will in consequence function as a helpful framework in finding the most effective success factors and key performance indicators for efficient facilities performance measurement.”

This hypothesis claims the search for the most effective and efficient outcomes of performance evaluation in facilities management. When I mention outcomes, I do not specifically mean the application of the Balanced Scorecard in practice. With outcomes, I mean a critical review of the best to find goals, critical success factors and performance indicators relevant for performance measurement within the profession of facilities management. The Balanced Scorecard will be used as a helpful framework for assessing which outcomes are best to find in facilities management.

PERFORMANCE MEASUREMENT

When studying the literature about performance measurement it is notable that this topic is broadly discussed. Performance measurement is a topic which is often discussed in the business world as well as in the academic world. It is for that reason that there are many definitions to be find in the literature about performance measurement. Several of them will be treated in this research. According to Leeny et al (1995), performance measurement is literally the process of quantifying action, where measurement is the process of quantification and action leads to performance. Sink discussed performance measurement in 1991 as a “mystery… complex, frustrating, difficult, challenging, important, abused and misused” function. Performance of a business or organization is a function of the efficiency and effectiveness of the actions which it undertakes, thus performance measurement can be defined as the process of quantifying efficiency and effectiveness of actions. Though, these definitions displays that performance measurement remains a very broad topic.

For example, as displayed by Neely in 2002, there have been appearing new reports and articles about performance measurement at a rate of one every five hours per working day since 1994. It would be no surprise that recent years researchers have developed new approaches of measuring performance, such as activity-based costing (Kaplan and Cooper, 1997) and shareholder value (Rappaport, 1986). Other researchers have developed performance measurement theories, such as the performance pyramid by Lynch and Cross (1990) or the macro process model as discussed by Brown (1996). One of the most recent developed and widely discussed framework for performance measurement is the performance prism, developed by Neely et al. (1996, 2002).

Though, according to Neely et al. (1995), performance measurement is rarely defined. When studying their comments regarding performance measurement definitions, they propose the following definitions in which they clarify performance measurement: performance measurement, a performance measure and a performance measurement system. These definitions can be explained as the following:

  • “Performance measurement can be defined as the process of quantifying the efficiency and effectiveness of action.”[2]
  • “A performance measure can be defined as a metric used to quantify the efficiency and/or effectiveness of action.”
  • “A performance measurement system can be defined as the set of metrics used to quantify both the efficiency and effectiveness of actions.”

There is also an interesting vision on performance measure by Hronec (1993) where he defines performance measures as the vital quantifications on how well the activities within a process or the outputs of a process achieve a specific goal. Subsequently, the need for integration of the different measures is supported by Hronec too (1993), whereas a performance system is defined as a “tool for balancing multiple measures (cost, quality and time) across multiple levels (organization, processes and people)”.

As mentioned earlier, a performance measurement systemcan be defined as the set of metrics used to quantify both the efficiency and effectiveness of actions. [3] The most notably performance measurement frameworks are the balanced scorecard (BSC) by Kaplan and Norton, (1992 and 1996a) and the business excellence model, developed by the European Foundation of Quality Management in 1992. According to research of Bernard Marr and Gianni Schiuma (2002), the dominance of the Balanced Scorecard concept is immense. The Balanced Scorecard seems to be the most influential concept in the field of performance measurement. It is also for that reason that my research focuses on putting the balanced scorecard to the test as a performance measurement system for facilities management.

However, at the end of each of the management processes of these frameworks, the users of the frameworks have only decided what to measure, but nothing has been implemented yet. Achieving implementation and embedding of performance measurement can be done with help of a performance measurement system. Performance measurement systems are developed as a means of monitoring and maintaining organizational control (Nani et al, 1990), which basically is the process of ensuring that an organization pursues strategies that lead to the achievement of overall goals and objectives (Kaplan and Norton, 1996).

Kaplan (1991) stated that an effective performance measurement system should provide timely and accurate feedback on the efficiency and effectiveness of operations. When applying a performance measurement system such as the balanced scorecard in practice, it is thus important to look at what to measure and to apply a certain focus on continuous improvement. In many cases the continuous improvement is mainly shaped by the management model of continuous improvement Plan, Do, Check, Act (PDCA), or also called the Deming Circle. The Deming Circle (1950) is named after Edwards Deming, but originally it was developed by Walter Shewhart (1939). The model gives a representation of the iterative process of continually working on improvements, and is formed by the facets Plan-Do-Check-Act. This principle states that to achieve goals, a continuous development process must be notified of: making plans of actions, the execution of planned actions, checking the results of the actual planned actions, and, if necessary, timely adjustments of the plans.

Performances

FACILITY MANAGEMENT STRATEGY

Performance measurement is ultimately about realizing and implementing strategy (Neely, 1994). Therefore, a more exploratory analysis about (facility management) strategy is necessary to place strategy realization in the context of performance measurement.

The traditional literature about business strategy is often about the general definitions of business strategy, where organizations focus on where they want to be on the long term (mission and vision) and how this is achieved (goals and objectives) (Alblas & Wijsman, 2001) in order to gain competitive advantages. The current literature about strategy describes more that strategy is about the importance of achieving advantage in a changing environment throughout configuration of resources and competences with the aim of fulfilling stakeholders' expectations (Johnson et al., 2009). Aforementioned shows that the current literature on business strategies discusses the importance of the characteristic aspects change and configuration (Kloosterboer, 2005). The relative context between business strategy and changes is an important aspect that must be taken into account before I continue my research.

According to Bryan Atkin and Adrian Brooks (2009), Change Management is the key towards innovation of organizations. In order to make progress and achieve greater efficiency and better value for money and to be more effective or competitive, organizations have to do things differently and have to make changes. Atkin and Brooks (2003) characterize facility management as an essential aspect for managing and reducing the inherent risks associated with change and innovation. Therefore changing organizations need facility management for making those strategic changes.

In accordance with research executed by Johnson et al. (2009), formulating strategy can be thought of as having three main elements: understanding the strategic position of an organization, making strategic choices for the future, and managing strategy into action. These three elements in developing strategy are widely used in the business world and many organizations just follow these steps in order to be successful in making strategy.

Understanding the strategic position is concerned with identifying the impact on: strategy of the external environment (product and markets), an organization's strategic capability such as resources and competences (strengths and weaknesses), and the expectations and influence of stakeholders (corporate governance). The strategic choices element involves the options for strategy in terms of the directions in which strategy might move and the methods by which strategy might be pursued, for example, strategic choices about entering new markets or strategic choices about developing new products. Strategy in action is concerned with the methods by which organizations pursue their strategies and that chosen strategies are actually put into practice. Critical success factors (CSF) and key performance indicators (KPI) are required to control the way in which strategy is implemented and to ensure that strategies are implemented according to plan.

Also Critical Success Factors (CSF) for the facilities department must be identified. These critical success factors are expressions of accomplishment that represent either progress towards - or success in reaching - goals (Ahuis and Diepman, 2006). A critical success factors helps a manager to implement strategy by justifying the stated goals. Subsequently, with help of Key Performance Indicators (KPI), goals are obtained and realized. Key Performance Indicators help an organization define and measure progress toward organizational goals and are quantifiable measurements that reflect the critical success factors of an organization (Geelen, 2004), such as ratio's and monthly figures of costs.

I will now discuss the profession of facility management in the context of corporate strategy. The essence of facility management is to support the execution of an organization's strategy to deliver support to the primary process (Maas and Pleunis, 2006). The research of recent literature shows us that facility management is nowadays recognized as one of the most important business processes within organizations (Barrett and Baldry, 2003). It is for that matter that organisational changes and the application of facility management for realising those changes must be linked to the overall business strategy of an organization, in order to accomplish business strategy, goals, and objectives. Simply said; facility management can move an organization from where it is now, to where it needs to be in the future to meets its business strategy. To meet the organizations expectations, facilities management departments need to do a better job of developing facility strategies (Atkin and Brooks, 2009). The strategy of the facility management department thus must be aligned with the corporate business strategy, with also continuing interaction with the core business and the environment of the company (Maas and Pleunis, 2006). A facility strategy must be aligned with-and responsive to-business plans and objectives while demonstrating the significant value associated with the facility assets of the organization. Without an understanding of the strategy of an organization and where it is heading, it is very difficult to know whether or not facilities are managed properly and how the facilities department can best support the company's goals and objectives. Such a strategy alignment will inform the facility manager what changes to facilities are needed to support the organization more effectively.

The strategic level of facility management concerns the long term direction of the facility management department. Also the strategy of facility management departments consists of a mission, vision, goals, and objectives. The vision of the facility management department is the desired future state of the department. The goals of the facility management department are a general and concrete aim in line with the mission and vision of the department. Whether or not the strategic actions and thus the vision and mission of a policy plan will actually be realized, depends on the extent to which management teams manages this policy plan into daily practice. Critical success factors and key performance indicators helps the facility management department to define and measure progress towards the management process.

These critical success factors are expressions of accomplishment that represent either progress towards - or success in reaching - goals. Such a critical success factors helps the facility department to implement facility strategy by justifying the stated goals (Ahuis and Diepman, 2006). Subsequently, with help of Key Performance Indicators (KPI) goals are obtained and realized, and it helps the facility department to define and measure progress toward departmental goals. Also in this context are the key performance indicators quantifiable measurements that reflect the critical success factors (Maas and Pleunis, 2006). Strategy development and planning are ongoing processes. Armed with the information of abovementioned, the facility manager can fine tune the outcomes, refine the steps, verify the information, and repeat (Maas and Pleunis, 2006). This process gives a representation of - and is in line with - the iterative process of continually working on improvements of the Deming Circle, as also described in the first paragraph of this chapter.

As mentioned earlier, Critical Success Factors (CSF's) are the critical factors or activities required for ensuring the success of a strategy of an organization. Also on departmental level are critical success factors needed to state whether or not the (facility) manager manages its policy plan successfully into daily practice. The following critical success factors helps to implement facility strategy and determine whether or not the strategy of the facilities department can be achieved. According to Herman B. Kok (1999), there are eight success factors [4] to be mentioned for facility management strategy, namely:

  • Cost control management;
  • Integrated services;
  • Integrated quality management;
  • Professionalism;
  • Customer Focus;
  • Customized work;
  • Flexibility;
  • Market conformity.

PERFORMANCE MEASUREMENT IN FACILITY MANAGEMENT

THE BALANCED SCORECARD

During the case study research of this thesis I will put the Balanced Scorecard to the test, whereas I will try to find the best to find critical success factors and performance indicators relevant for performance measurement within the profession of facilities management. Thus, the Balanced Scorecard will be used as a helpful framework for assessing which outcomes are best to find in facilities management. It is for that matter important to provide a literature study about the Balanced Scorecard, in order to provide information about this framework and in order to asses how to apply this framework in a case study situation.

During the late 1980s and early 1990s, managers began to reject financial measures and were searching for new ways of measuring organizational performances. As also stated by Medori (1998), only using financial performance measures for steering organizations will lead to inadequacies. Many organisations recognise that only using cost systems is inadequate for keeping up with today's powerful competition (Kaplan and Norton, 1992). Traditional performance measurement systems are not providing managers with the information they need to measure and manage other important competencies that drive competitive advantage. Traditional financial systems are proving to be of increasingly limited use to managers who want to manage and improve critical business processes. That is why many organizations highlight the importance for keeping track on performances in other key areas of their business, other than only financial competencies.

The approach of the balanced scorecard is therefore fundamentally different then that of the traditional performance measurement systems. While financial measures are included, the scorecard targets also other leading indicators. Morris (1999) explains why that is important: “in business, it's important to have a balanced approach. You shouldn't just measure financial targets or performance targets to find out how well you are doing. You have to look across the board”.

The Balanced Scorecard is developed by Robert Kaplan and David Norton in the year 1992 whereas they presented their first article, "The Balanced Scorecard - Measures that Drive Performance." Since 1992, Kaplan and Norton have produced several other articles and books, all elaborating on the initial article about the Balanced Scorecard. The Balanced Scorecard approach insists that management track four different types of measures: Financial measures, Customer measures, Internal Business (Process) measures, and Innovation and Learning measures. By using the Balance Scorecard approach, organizations identifies corporate objectives within each of the four categories. Subsequently, the management then aligns hierarchy by assigning each manager his or her own scorecard with more specific objectives in each of the four categories. When properly used, the system focuses every manager on a balanced set of performance measures.

According to Ahaus and Diepman (2006), the Balanced Scorecard is a system or framework which integrates measures of customer satisfaction, process performance, product or service innovation and finance. Or also stated by Kaplan and Norton (1992), the balanced scorecard is needed for “a balanced presentation of both financial and operational measures”. The balanced scorecard translates an organisation's mission and strategy into a comprehensive set of performance measures that provides the framework for strategic performance measurement and management. The balanced scorecard measures are built around the following four perspectives:

  • Customer - what do existing and new customers value from us?
  • Internal processes - what processes must we excel at to achieve our financial and customer perspective?
  • Learning and growth - can we continue to improve and create future value?
  • Financial - how do we create value for our shareholders?

The Balanced Scorecard approach can be introduced by stating a vision on the four perspectives. The vision will be made by asking the questions listed above. Subsequently, the vision will be further developed by stating measurable success factors, performance indicators, and targets. [5]

The balanced scorecard seeks linkages between the financial outcomes (lag indicators) and the non-financial outcomes (lead indicators). The Balanced Scorecard Also seeks linkage between departmental goals, personal goals, and goals of the overall strategy (Ahaus and Diepman, 2006). The four perspectives of the scorecard permit a balance between short-tem and long-term objectives. It also tries to permit balance between desired outcomes and the performance drivers of those outcomes, and balance between the objective measures and softer, more subjective measures. The multiplicity of measures on a balanced scorecard seems somewhat confusing to some managers, but properly constructed scorecards contain a unity of purpose because all the measures are directed towards achieving an integrated strategy (Kaplan and Norton, 1992). The Balanced Scorecard is structured as displayed in the figure below (see figure 3).

In any business customers are very important. The customers determine the sales of any organization. It is for that matter that the customer perspective looks at the organisation through the eyes of its customers. The central question in the customer perspective is what do existing and new customers value from us? The Balanced Scorecard demands that managers translate their general mission on customer service into specific measures that reflect the factors that really matter to customers (Kaplan and Norton, 1992). The customers' perspective concerns four categories: time, quality, performance and service, and cost. In order to get feedback in how well organizations are doing, customer satisfaction measurement, for example, is one of the generic outcome measures.

The internal processes perspective is about what processes must excel to achieve financial and customer focus.

Therefore, the internal processes perspective reports on the efficiency of internal processes and procedures. Customer-based measures are important, but they must be translated into measures of what the organisation must do internally to meet its customers' expectations (Kaplan and Norton, 1992). When an organization controls its processes sufficiently, the organization is able to respond to market demands and is able to achieve the desired financial outcome. A proper balance between people, resources, and methods, will in the medium term lead to results. The measures should be focused on the internal processes that will have the greatest impact on customer satisfaction and achieving the organisation's financial objectives.

The previously described perspectives are developed for the short and medium term. The learning and growth perspective focuses on the continuity of an organization in the long term. The learning and growth perspective deals with research and development issues such as intellectual assets, market innovation and skills development. The question which organizations should ask themselves is: can we continue to improve and create future value? The innovation and learning perspective is required in order to recognise that the customer perspective and the internal process perspective are constantly changing. Competition requires that companies make continual improvements to their existing processes and are able to introduce entirely new processes with expanded capabilities (Kaplan and Norton, 1992). The organisation thus must continually seek to learn, to innovate, and to improve every aspect of the organisation and its business, just to maintain their current and future competitive situation (Amaratunga et al., 2000).

The financial performance measures define the long-run objectives of the business unit (Kaplan and Norton, 1992). Financial performance measures indicate whether the organisation's strategy, implementation, and execution are contributing to bottom-line improvement. The main question of the financial perspective is how do we create value for our shareholders? The financial perspective revolves around questions like: are we able to survive as a company? Can we continue to grow as a company? Can we offer our shareholders value for money? What should we do to make our shareholders happy? Ultimately, the shareholders of an organization are most interested into the profit performance of the company. Because of the financial interests of a commercial organization it is important to translate performances of an organization in the common unity of money. But according to Kaplan and Norton, financial measurements alone are insufficient. It is therefore that the limitations of financial control systems are more than compensated by the other perspectives of the Balanced Scorecard. But the financial perspective, however, is the main instrument of any company with a profit target.

In 1997, the scientist Kurtzman stated that 64% of the companies he studied have implemented a kind of performance measurement that is in accordance with the balanced scorecard. Recent surveys show that companies use the balanced scorecard as a means to a variety of goals. The Balanced Scorecard is mainly used for:

  1. the execution of business strategy;
  2. the clarification of strategy;
  3. the identification of strategic opportunities;
  4. the alignment of the budget with the strategy;
  5. better matching the strategy with the company;
  6. the company to regularly audited and where necessary, to adapt strategies.

As mentioned earlier, performance measurement attempts to address how organisations should manage strategy into action. Strategy could significantly influence organisation's success by simply making clear how strategy can be implemented into daily practices of an organisation's (Kaplan and Norton, 1993). The Balanced Scorecard is focussing on how to translate the organisation's strategy into measurable goals (Ahaus and Diepman, 2006). By first analyzing the strategy of an organization, then subsequently set up performance measures to monitor performance, and then subsequently set up targets for improvement, it is possible to link measurement to strategy. The following figure illustrates this process (see figure 4 on the next page about linking measurement to strategy, Kaplan and Norton, 1993).

The sample template shown in figure 4 is offered by Kaplan and Norton in 1992, but they highlight that the precise format of the Balanced Scorecard will probably differ for each organization and situation. The biggest task for organisations who are attempting to introduce a Balanced Scorecard is to devise a set of measures explicitly linked to its own strategy. Therefore, for implementing the Balanced Scorecard it is essential that the concerning strategy is accepted within the organisation and by its management. Thus, the Balanced Scorecard acts as a framework for implementing strategy.

What is my vision of the future?

To my

shareholders

Financial

perspective

To my

customers

Customer

perspective

To my

internal processes

Internal

perspective

To my ability

to learn and growth

Innovation

and learning

If my vision

succeeds, how will I differ?

What are the critical

measurements?

Kaplan and Norton have recently published Strategy Maps: Converting Intangible Assets into Tangible Outcomes, the third book in their series (Kaplan and Norton, 2004). Kaplan and Norton define strategy maps as the logical architecture of cause and effect relationships between factors for success, converted into the strategy of an organization. As also described earlier, in a series of articles and books, Kaplan and Norton have been looking for a methodology that seeks to align a (balanced) set of measures to an organization's strategy, where this methodology is called the Balanced Scorecard. Thus, the order in which the four perspectives of the Balanced Scorecard are presented is used as a fixed sequence. Results obtained in the lower perspectives are considered drivers for higher strategy perspectives. This creates a chain of cause-effect relationships that can be schematic visualized using a so-called strategy map. [7]

BALANCED SCORECARD IN FACILITIES MANAGEMENT

It isn't completely clear which departments of an organization can exactly use and deploy the balanced scorecard in practice. It is for that matter interesting to study if the Balanced Scorecard will be useful for operational performance measurement in facilities management. Yet there are indications that the Balanced Scorecard is appropriate to deploy and use for facility management performance measurement. The fundamental principles underlying of the balanced scorecard is to ensure that departmental strategic goals and objectives are aligned with the long-term strategy of an organization for successful implementing the goals and objectives (Kaplan and Norton, 1992). As stated by Atkin and Brooks, (2009), to meet the organizations expectations, facilities management departments need to do a better job of developing facility strategies. As mentioned by Maas and Pleunis (2006), for optimal facilities performances, the strategy of the facility management department must be aligned with the corporate- business and operational strategy, with also continuing interaction with the core business and the environment of the company.

Thus, a facility strategy must be aligned with-and responsive to-business plans and objectives while demonstrating the significant value associated with the facility assets of the organization (Maas and Pleunis, 2006). These definitions further identify the possibilities of applying Kaplan and Norton's Balanced Scorecard into daily practices of facilities management.

Also the fundamental ability to quickly implement strategy into business and to adjust strategy, makes the Balanced Scorecard a useful framework for implementing strategy. But how could the Balanced Scorecard be used in the profession of facility management? Amaratunga and Baldry stresses in a article about using the Balanced Scorecard for facilities management, that in par with the original four perspectives of the Balanced Scorecard, the following four questions can be asked in the context of facility management, whereas these perspectives should look at several facilities management functions: [8]

  • Customer - how do the facilities users see us?
  • Internal processes - how efficient and effective is the delivery of facilities management services?
  • Financial - how is the facilities management function managed in terms of value for money
  • Learning and growth - how does the facilities management function continue to improve in itself and to assist the core business

They say that “given the characteristics of the facilities management environment, recognising and satisfying the needs of the core business is vital for long term survival. To ensure satisfaction of various customer needs, it is essential that facilities management identifies, focuses on, and monitors key performance indicators.”

The study findings of Amaratunga et al. (2000) display that, according to the process outlined by Kaplan and Norton (1992) for developing a Balanced Scorecard, the data collection within the hierarchy of the facilities management and other customers was structured by three main stages:

  • Facilities management's vision and corresponding objectives;
  • It's relationship to the core business;
  • Critical success factors in relation to these objectives; and
  • Development of an appropriate balance of performance measures to support the critical success factors.

Peter Barrett (1992) has identified in an earlier study that there are certain goals which are common to most facilities management organizations. This evidence suggests a need for a Balanced Scorecard approach, which adequately reflects the characteristics, goals and critical success factors of the facilities management organization. Furthermore, their paper addresses the applicability of the Balanced Scorecard into facilities management as a performance assessment tool. They say that “the adoption of this process would be a major change initiative in most organizations.” Kaplan and Norton (1992) provided a very useful generic model in the form of their Balanced Scorecard. They also provide an overview of common strategic objectives and measures for the four perspectives of the Balanced Scorecard in a facilities management context (see also appendix 2). [9]

Other literature on using the balanced scorecard within facilities management is displayed by Maas and Pleunis (2006). They say that facilities management's ability to measure and analyse performance management should be conducted in accordance with four perspectives, namely the customer perspective, the internal processes perspective, the financial perspective, and the personnel perspective. Three of the four perspectives are derived from the four perspectives of the Balanced Scorecard. Only the focus on learning and growth is replaced for focus on personnel because in providing services to the operational process the staff comes in direct contact with the client, and therefore it is important that attention is paid to job satisfaction of personnel and that there will be attention to the training of staff.

In this research, I will try to find out what the influence of the balanced scorecard haves on performance measurement in facilities management and which success factors and key performance indicators are most effective to find. I will test the hypothesis to see if the balanced scorecard can be used for performance measurement for facility management and if the process of using the balanced scorecard can function as a helpful framework in finding the most effective success factors and key performance indicators for efficient facilities performance measurement.

In conclusion of the literature study, the most important aspects to take into account when executing the case study of this research are:

  • presenting reasons why performance measurement is important in facilities management;
  • present a new frame of reference for the most wide applicable goals, success factors and performance indicators for performance measurement in facility management;

RESEARCH METHODHODOLOGY

See also page 63 of Ahaus and Diepman, 2006, how to create a vision!

Based on the literature of Baarde and Goede (2001), the research on behalf of this thesis is categorized in a preliminary research study, a literature review, and a case study research. For the execution of the case study research are various data (re)sources used, namely in-depth interviews and the study of business documentation and reports of Centraal Boekhuis.

The preliminary research study has given multifarious insights in for example the company of the case study, but also insights about the performance measurement, the Balanced Scorecard, operational facilities performances, and facilities strategy. In the preliminary research study is a critically literature review completed and several managers of the human resource division have been interviewed for creating a basis for this research. The products of the preliminary research study are a defined approach of the case study research, a description of the company.

This following describes which research methodology is chosen to research aforementioned topics. Furthermore the way on how data is collected and analyzed will also be described in this chapter. I will also define the research method where I describe more detailed how data will be collected, who it will be collected from, and how the collected data will be analysed.

The case study research can be categorized in descriptive- and exploratory research study methods (Sanders et al, 2009). The descriptive study of this case study is defined by the research of qualitative data, for example the study of business documentation and reports that are in stock within the company about facilities strategy, its business strategy and quality management. The exploratory part of the research describes the research methods in depth interviews with management.

In order to test how Centraal Boekhuis works with performance measurement related to its facilities management, and how it best can work with the balanced scorecard and Total Quality Management, the following will be carried out. I will arrange in-depth interviews with about five representatives of the human resources department of Centraal Boekhuis. In these interviews, I will attempt to learn more about the execution of performance measurement and quality management, related to the facilities strategy of the facilities department. I will also elaborate on the concepts of Balanced Scorecard and Total Quality Management. The Human Resources department of Centraal Boekhuis contains several layers of management and operations levels. Therefore I will interview numerous managers as well as facilities members to make the outcome more reliable and suitable to analyze. The following employees of the Human Resource department will be interviewed:

  • Jaco Gulmans (Senior Manager Human Resources)
  • Karel ter Burg (Facility Manager)
  • Leo van ‘t Pad (Building maintainer and coordinator)
  • Irene Mercx (Facilities administrator)
  • Arno Hartog (head of the Maintenance Department)

The final names and the exact number of interviews is of course dependant on the willingness of the department to cooperate. The in-depth interviews are a very important part of my research. In these interviews, I have the possibility to ‘keep on asking', to get deep into the matter. Only in these interviews, the representatives can really explain how Centraal Boekhuis executes performance measurement related to its facilities strategy and the Balanced Scorecard and Total Quality Management.

The selected research approach for the study and comparison of the contents of Total Quality Management and Balanced Scorecard can be characterized mainly as conceptual analysis. The discussions will be based on literature review.

Analysis plan & validation

Besides relevant literature, the actual research will be based on a case study with in-depth interviews.

The answers of the in-depth interviews will be analyzed. In this analysis, I will of course be looking for the answer to my research question: To what extent will the Balanced Scorecard be auseful instrument to measure performance measurement for facility management and which success factors and key performance indicators are most effective to find for efficient facilities performance measurement?

With face-to-face interviews, it is hard to predict what you will be analyzing exactly. However, by asking ‘to the point' questions, the interviews will be focused on the organization and its facilities performance measurement and quality management, which will certainly lead to answers which are relevant to my research - whatever the exact answers are. The results of the in-depth interviews will be compared with the current situation of Centraal Boekhuis, so it is possible to create applicable contributions and results for Centraal Boekhuis.

Constraints & limitations

The analysis plan for thesis is not entirely clear yet, because I do not know what kind of data I will have to work with. When the interviews and web surveys are not representative I will elaborate on my literature study and I will analyze some interesting statements issued by respected managers, or other interesting statements relevant to the research. If available, I will analyze relevant data presented by organizations on performance measurement and quality management in relation with facility management. In the months June and July the in depth interviews will take place. I also will use any data related to business strategies, facility strategies, quality management, and performance measurement in stock within Centraal Boekhuis, et cetera.

If aforementioned data does not become available, I will look for other ways to make my statement plausible. I will analyze the results of research that has been done by others, in which the several subjects of my thesis will be attended to the matter. Moreover, I will also use research of others, such as the one of Hannula et al. on Total Quality Management and Balanced Scorecard or the research of Baldry et al. (2000) on performance evaluation in Facilities Management using the balanced scorecard approach.

RESEARCH RESULTS

CONCLUSION & DISCUSSION

RECOMMENDATIONS

REFERENCES

Ahaus & Diepman (2006), Balanced Scorecard & INK-managementmodel, published by: Kluwer, Deventer NL (third edition)

Alblas & Wijsman (2001), Gedrag in organisaties, Published by: Wolters Noordhof, Groningen NL (third edition)

Amaratunga, Baldry, Sarshar (2000), Assessment of facilities management performance - what next? Published by: MCB UP Ltd

Amaratunga, Baldry, Sarshar (2000), Performance evaluation in facilities management: using the balanced scorecard approach, Published by: RICS Research Foundation, London UK

Atkin & Brooks (2009), Total Facilities Management. Published by: Wiley Blackwell, Hoboken US (third edition)

Baarda & de Goede (2001), Basisboek Methoden en Technieken, Handleiding voor het opzetten en uitvoeren van onderzoek. Published by: Wolters Noordhoff, Groningen NL (third edition)

Barrett (1992), Development of a PostOccupancyBuilding appraisal Model, in Barrett

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