Asset and Facility Management - Literature review Example

Asset and Facility Management Author’s Name: Author’s Institution: Date: Asset Management (AM) Historical Background According to IBM Global Business Service (2007, p.7), asset management has undergone metamorphosis over the years. For instance, they note that 15 years back the lane, the discipline was called equipment management, 30 years down the lane it was referred to us as plant maintenance and presently it is referred to us as enterprise asset management. In 1970s, the process was large a paper based concept where it was factored in as ‘necessary evil’ with key focus being corrective maintenance. From the earlier phase of 1970s, the discipline moved a notch higher to automation in 1980s. This referred to as an early automation stage. This incorporated new technologies like software systems. In the 1990s, the discipline moved systemised management where the focus was to look at root causes instead of corrective measures. On the same stage, there was a focus on components. From 2000, the discipline embraced a paradigm shift with the focus being lifecycle awareness. In this perspective, the holistic approach of cradle to grave was born (see appendix 1). Present: Roles and Characteristics of each Player UBS (2012, p.4) developed a comparative table that distinguishes old practices and the current new ways (see appendix 2). This table outlines how the current practice addresses issues like investment content, product categorisation, investment teams, client base and distribution teams. They note that in early 1990s, the profession focused on equities and bonds thereby giving little consideration to other options (p.5). However, as a result of tough economic conditions, there has been a paradigm shift. Currently asset manager is expected to “offer exposure to specific asset classes or sub-classes either through a benchmark beating active fund or through a benchmark-tracking, low-fee passive fund as opposed to positive real returns of 1950 to 70s (p.11). One approach that has gained paramount position currently is the integrated approach. This approach recognizes the input of various stakeholders in producing a holistic output. Future Considerations The future of asset management lies on how well it will embrace these factors. Hence, as a recommendation, the profession should initiate strategies such whole life circle assessment and sustainability reporting. It would be prudent to adopt sustainability approach. The other concern is how the profession will align the roles of asset manager with globalisation. The reality is that globalisation has changed how people conduct business. Asset management is done in context of local and global phenomena can give business owner an advantage that is hard to copy (Too, Harvey and Too, 2010, p.235). Facility Management (FM) The past Facility management emerged in the early 1980s after the formation of an international association (IFMA). In the earlier years before then, facility management was not recognised as a profession since it was a reactive profession Tay and Ooi (2001, p.357). They note that since 1980s, facility management has grown gradually as a discipline and profession within the larger property and construction industry. The growth is associated with development of facility management institutions. For instance, these institutions include BIFMA in the UK, JFMA in Japan, IFMA in USA and FMA in Australia (p.357). Despite of the depiction that facility management is a young profession, there are indications that people engaged subconsciously in facility management. For instance, (Keane, nd, p.8) notes that in 1960s Herman Miller created a corporation with the goal of solving problems related to furniture. Moreover he introduced functions like ‘action office’ (p.11). In 1970, two critical happenings shaped the profession and the discipline. These included the decline in the use of independent, free standing dividing screens in the office and introduction of technology at workplace (p. 12). It is acknowledged that Herman Miller works gave birth to National Facility Management Association in the U.S (p.13). Present: Roles and Characteristics of each Player On average, it estimated that facility repair accounts for 15% of the total expenses. This is a considerable amount. The role of facility manager comes in as a preventive personnel instead of corrective one (Koo, 2002). The current role of facility managers is to integrate five important functions. These functions include technology, people, process and place so as to ensure functionality of the built environment. This process borrows heavily and combines principles of the engineering profession, architecture and behavioral sciences (Keane, nd, p.21). These functions are mainly applied at work place through an integrated approach as a means of enhancing performance through preventive measures instead of corrective measures (Tay and Ooi, 2001, p. 359). For further detail on roles see appendix 3. How Roles Might Evolve The concern of what will be the talent required of facilities manager so as to be relevant and continue playing the strategic support function to a given organisation. In answering this question, it is prudent to determine the forces will influence the industry. In this context, questions like what are the most critical forces emerge, what roles should facility manager play in shaping these roles and what are the possible future scenarios for institutions in need of facility management. Based on these concerns, the following factors emerge: information technology, resource scarcity and environmental deterioration. This means that FM has a changing and these roles have to align to the latter factors. Secondly, Harmon-Vaughan (1995, p.7) asks two interesting questions, what will be the role of design become in a world of work unbounded by physical space”? Will the facility manager and designer become extinct or exalted? These two statements elicit a mixed reaction. The first concern and are that facility managers should take serious is the growth of virtual offices. This growth if not well anticipated might mean reduction in job quantity if the focus of facility managers is still on large corporate, commercial institutions, educational institutions, government, local authorities and medical institutions. This means organisations will look at facility managers who can provide services that would make their employees comfortable at home (Harmon-Vaughan, 1995, p.6). Property Management (PM) Evolution Proper property management emerged with the growth of urban centres and industrialisation when societies shifted focus from agrarian based economy to industrial based in late 18 century to early 19 century. It is the urban migration that created this demand for store, rental houses and offices since these people were not able to build or purchase their own houses, but to rent. The rental boom of 1920-1922 occasioned with growth of cities created an impetus for property management. During this time owners of buildings grew rich and thus, could afford holidays. It is during their absence that they required rent collectors (property managers) who would then collect rent for them at a commission. The next phase was occasioned with the depression associated with the two world wars. The banks reposed most of the houses built on loans (Krumm, 2001, p. 277). It is here that real property managers emerged since they realised that they could improve the income of their clients by improving the property, reducing operating cost and bargaining for higher rents. Present: Roles and Characteristics of each Player Property management is concerned with “daily administrative, technical and commercial management as well as maintenance activities” (Krumm, 2001). The current role of a property manager is restricted to rental properties that are income generating properties. The rationale for this engagement is based on the fact that managing properties require unique skills which the owner might not have. In this regard, the goal of a property manager is to “manage property efficiently with the objective of securing the highest net return for the property owner”. To attain the later, the property manager has to act as the owner’s agent and hence, is discharged with the mandate of organising or conducting lease, collecting rent, marketing of the property/ space to prospective tenants, refurbishment of the property so that it looks attractive and habitable, ensuring basic & critical services are operating well, addressing tenants concern, book keeping and paying property expenses like utility bills, employee salaries & property taxes. The Future Boyd (2002 cited in Hefferan & Ross, 2010, p.377) postulates that the future of of property managers is greatly tied to their ability to adapt to evolving and dynamic industry demands, globalisation and communication. Based on this realisation, Hefferan & Ross (2010, p.377) observe that while the fundamentals will remain the same, there will be great need to remodel courses and engage in re-training. This implies that the future roles of property manager lies greatly on how they adapt to changing industry demands, globalisation and information technology. For instance, with the growth of computer aided technology in management of property, the property managers have to re-model their approach so as to fit within this framework or they become obsolete. Corporate Real Estate (CRE) Evolution of CRE Hwa (2003) outlines how corporate real estate management has evolved overtime. He provides a timeline with 5 distinct phases. These include custodial, entrepreneurial, administrative, managerial and strategic. Before 1970s, the main the main framework of CRE was custodial approach. In the 1970s to mid 1980s the focus was entrepreneurial. In this context, companies realised they could exploit their properties for commercial gain beyond the parent company. The third was the administrative one which coincided with the massive restructuring of corporate in the 1985to 1995. During this phase, non core functions including properties were disposed off. The restructuring and layoffs meant that the office space requirements were downsized because of reduced need. The same observation is affirmed by (Krumm, 2001, p.277). The fourth phase is the managerial approach. This emerged in the lasts half of 1990s stretching to 21st century. In this regard the shift focused on how work place can be used to enhance productivity. This was though in the line of outsourcing so as to accommodate growth and change. The last is the current approach is the strategic view. Present: Roles and Characteristics of each Player The current focus of CRE is how it can contribute towards achievement of strategic goals of the business. It is seen as means that connects resource inputs and customers. The same view is affirmed by Willis (2008 cited in Too, Harvey & Too, 2010, p.235) who posits that “corporate real estate is today regarded as an important strategic resource which can provide business with a difficult resource to duplicate”. Willis (2008, p.40) notes that the essence is how a CRE manager is able to transform the property portfolio of affirm so as to enhance their market share and improve shareholder value. In this regard the role of CRE manager is to align it with organisations strategic plan by “creating flexibility in the CRE portfolio, running CRE as a cost or profit centre, auditing & revaluing CRE, using specialist IT programs for CRE management and the use of outsource services providers” (p.42 & 41). Evolution in Future Business estate is the firth resource after the 4 major ones (Hwa, 2003, p.4). The business world is changing rapidly as result of globalisation. Globalisation has allowed firms to locate different production functions across the globe through captive outsourcing. Moreover, the evolution of communication technology will greatly shape how companies view on CRE. (Hwa, 2003, p.6) posits that globalisation will influence the rate of restructuring of companies. Hence, in the near future, the role of CRE will be how it is able to fit in the new strategy so as to act as strategic advantage. Thus, the future role is to provide a feedback loop between real property performance and managerial action. This implies a shift from function to process by thinking globally and acting locally. Strategic Asset Management (SAM) Evolution of Strategic Asset Management (SAM) According to Herrmann (2005, p.113) strategic management emerged in the 1960s as means of strategic adaptation to the ever changing business environment. In relation to asset management, the concept found its way in the 1980s (Too and Tay, 2008, p.951). Jolicoeur & Barret (2004, p. 42) observe that asset management came into the limelight in the mid-to late 1960s. Before being adopted in the practices of commercial entities, the concept was first practiced in the management of public assets. For instance, Too and Tay (2008, p.951) indicates that strategic asset management was incorporated in Britain in 1980s and 1993 in Australia. The growth of this concept is based on the need of aligning the assets of the organisation with its strategic positioning. Thus, it is argued that the field emerged strongly in the late 1990s with the focus being the whole life cycle assessment. Present Roles of Strategic Asset Manager According to Jolicoeur & Barret (2004, p.42), strategic asset management currently involves “maximising value to a property or portfolio of properties from acquisition to disposition within the objectives defined by the owner. This concept uses strategic planning, which includes investment analysis and operation and marketing analysis, as well as the positioning of a property in the marketplace in accordance with market trends and conditions”. The hallmark of strategic asset management is to offer strategic support to the organisation so that they can have a competitive advantage over the competitors. The current role of strategic asset managers in aligning assets with organisational objectives is the whole life assessment cycle (Too and Tay, 2008, p.951). In this perspective managers take into consideration the impact of the asset from a holistic perspective. How Roles Might Evolve Most assets occupy space from a spatial dimension. All assets grounded on space to an extent interfere with the natural environment. The future role of asset managers is tied to not only how they will integrate them as a strategic advantage, but also how they will ensure the sustainability issue is addressed. This will be able to reduce the issues associated with the built environment. Thus one key role that SAM managers will play is sustainability reporting, occupational health and safety and environmental auditing. Secondly, the next frontier that will change the roles of SAM Managers is their ability to leverage on tools and methodologies such as analytics so as to pinpoint risks and appraise risks and financial performance. References Harmon-Vaughan, B 1995 Tommorow’s workplace: anywhere, anytime. Facilities, vol. 13, no.4, p. 6-13. Hefferan, M & Ross, S 2010, Forces for change in property education and research in Australia, Property Management, vol. 28, no. 5, p. 370-381. Hwa, T 2003, The reorganization and restructuring of corporate real estate. 9th Pacific RIM Real Estate Society Annual Conference (20-11 January, 2003). Brisbane, Queensland, Australia. IBM Global Business Service 2007, The evolution of asset management: finding the right best practice is not all theory. White paper, viewed 26th March 2013 from http://www- 935.ibm.com/services/uk/igs/pdf/best_practices_in_asset_management_final.pdf . Jolicoeur, P & Barret, J 2004, Coming of age: strategic asset management in the municipal sector, Journal of Facilities Management, vol. 3, no. 1, p. 41-52 . Keane, T (nd). The evolution of the facility management field, viewed 26th March 2013 from http://www.safma.co.za/portals/0/conference2011/Evolution_of_FM_Overview.pdf. Koo, W 2002, Thinking like a CFO: prevention pays, analysis shows, viewed 26th March 2013 from http://www.facilitiesnet.com/maintenanceoperations/article/Thinking-Like-a-CFO- Prevention-Pays-Analysis-Shows--1505. Krumm, P 2001, History of real estate management from a corporate perspective. Facilities, vol. 19, no. 7/8, p. 276-286. Tay, L & Ooi, J 2001, Facilities management: a “jack of all trades”? Facilities, vol. 19, no. 10, p. 357-362. Too, L., Harvey, M. & Too, E 2010, Globalisation and corporate real estate strategies. Journal of Corporate Real Estate, vol. 12, no. 4, p. 234-248. Too, E and Tay, L 2008, Infrastructure Asset Management (IAM): Evolution and Evaluation. In Haigh, Richard and Amaratunga, Dilanthi, Eds. Proceedings CIB International Conference on Building Education and Research, pages pp. 950-958, Heritance Kandalama, Sri Lanka. UBS 2012, Asset management research: Evolution of the asset manager, viewed 26th March 2013 fromhttp://resources.news.com.au/files/2012/11/07/1226512/353826-evolution-of- the-asset-manager-ubs-global-leaders-insights.pdf. Willis, P 2008, Corporate real estate practice in Australia, Journal of Corporate Real Estate, vol. 10, no. 1, p. 40-53. Appendices Appendix 1: Evolution of Asset Management and Corporate Thinking Source: IBM Global Business Service, 2007, p.7 Appendix 2: The Changing Phase of Asset Management Source: UBS, 2012, P.4 Appendix 3: Roles of FM Source: Keane, nd, p.21 Read More