How to Bridge the Gap Between the Boardroom and Boiler Room
In a beautiful boardroom with a striking view of lower Manhattan, a group of well-dressed real estate executives have gathered to evaluate a new technology. This system has been proven elsewhere to streamline maintenance and repairs, save money, and reduce tenant complaints. “It sounds nice, but our guys are the best, they keep our buildings running just fine,” declares the president of the portfolio.
“That’s not true, our guys work hard, but every day is a new fire to put out. I don’t know how much it’s costing us, but there’s no way things are ‘just fine’,” the head of operations thinks to himself. "In fact, I don’t even know what’s going on in our buildings half the time, how could he be so sure?”
The blissful ignorance of the president is understandable. For him, the company’s assets are performing well on all the metrics that he cares about – vacancy rates are low, rental rates are rising, and the balance sheet is strong.
But the reality behind the scenes is a different story. There are chronic issues that are addressed with band-aid solutions. It’s anybody’s guess as to whether maintenance vendors are fulfilling the duties stipulated in their contract. The head of operations gets inundated with calls from his on-site teams asking questions about how to troubleshoot malfunctioning motors, where the power source of an air handler unit is, or which systems automatically shut down after a fire alarm goes off. Tenant complaints are frequent and are the most common source of information for what equipment needs repair.
The costs of all these inefficiencies have never been fully quantified. But in the manufacturing sector, which places a much greater emphasis on equipment performance, an estimated 22% of every dollar spent on maintenance is wasted. It’s hard to imagine that commercial real estate is performing better (it’s likely much worse). In terms of savings, the most concerted effort to date, led by JLL, found a 545% ROI for preventative maintenance practices compared to reactive maintenance.
Maintenance today is based largely on trust. However, trust combined with zero transparency and an inability to quantify performance is a recipe for waste, both intentional and unintentional. Technology can not only streamline maintenance activities, it can facilitate accountability by bridging the gap between the boiler room and the boardroom.
In terms of operating a building, there is no bigger blind spot than the ongoing work performed by maintenance vendors. Even in the largest and most successful real estate portfolios, those in charge of operations simply have no way of monitoring the work done (or not done) as part of their maintenance contracts.
For the most part, vendors come and go as they please. Even on-site operators largely have no idea when vendors will arrive, what they do while on site, or when they leave. At the end of the day, all that is provided is a list of tickets that specify hours worked and a short description of activities. There is simply no way to verify whether any of it was completed or if the hours billed are accurate.
This is especially common with routine preventative maintenance because, unlike an emergency repairs, when contractors are finished, it’s not obvious that anything has been done. Vendors are notorious for dramatically inflating the hours they’ve worked or skipping preventative maintenance and billing for it anyway. It would be great to say that you get what you pay for, but this does not appear to be the case; even the most expensive services have been found skipping maintenance and inflating hours worked.
Recently, vendors that inflate their work hours have been held accountable.
How? Well, as the saying goes: men lie, numbers don’t.
When performance data about critical systems is unlocked with building sensors, it’s a simple exercise to compare that data to vendor tickets and calculate the discrepancies. The irony is that if the portfolio mentioned earlier had implemented the technology they were evaluating, they would know how badly they needed the technology. As it stands, they are stuck with, as Donald Rumsfeld famously said, unknown unknowns.
Holding outside vendors accountable is a powerful and relatively straightforward initiative (once the data is unlocked). Getting buy-in internally can be a little trickier.
There are two powerful motivations behind internal resistance to technology. For one, the blissful ignorance of the president keeps the heat off. If things don’t get too out of control, jobs are secure, and everyone is happy. This isn’t the ideal mindset for employees in an organization, but it would be naïve to think that job security is not a factor in behavior.
The second force is a valid wariness of what’s known as “worse before better.” This is the idea that implementing new technology will necessarily take a short-term hit to productivity as operators, who are already stretched thin, learn the new software, update processes, and begin correcting for old inefficiencies. Interestingly, the aversion to ‘worse before better’ is the same reason that preventative maintenance gets skipped in favor of putting out existing fires.
These concerns can and should be addressed in tandem with adopting technology. In order to bridge the gap between the boardroom and the boiler room, it’s important for executives to approach the initial results of the heightened transparency without judgement. Without dispassionate acceptance of the facts and guarantees that the initiative is an effort to make everyone better at their jobs, both worlds will continue to be incentivized to keep things opaque.
Perhaps the greatest irony of the president expressing great confidence that everything is going smoothly is that operators can’t always tell if equipment is running smoothly while standing right next to it!
When data about critical systems become unlocked, algorithms can detect all sorts of early warning signs that are invisible to human senses. Whether it’s short cycling, loose belts on motors, rapid changes in temperature, phase imbalances, etc. the full spectrum of things that go wrong in buildings is nearly limitless.
Bridging the gap between the boardroom and the boiler room doesn’t mean that the president of the portfolio needs to know that Chiller 2 is experiencing short cycling. It means that he should not blindly say that his guys are the best and leave it at that. He should be able to point to specific metrics such as mean time to repair (MTTR) and mean time between failures (MTBF), just like he does with leasing, to inform his opinion.
It’s time that owners and operators faced a hard truth: they don’t know what’s happening in their buildings or where the money they spend is really going. Sometimes this is creating a breeding ground for rampant cheating by third party maintenance vendors. In other cases, on-site operators have not been provided the tools to act proactively and are forced to react to emergencies and tenant complaints.
The first step is acceptance. Owners should be willing to listen to their executives in charge of operations to understand where the portfolio could be losing money. If the truth turns out to be worse than expected, it’s important to remember that without the right technology, accountability, and metrics in place, the job of building maintenance is very challenging. On the other hand, once the information gap between the boardroom and boiler room is closed, there is a tremendous opportunity to create asset value and differentiate the portfolio among competitors.
Interested in unlocking your building’s data to add accountability to your maintenance costs? Schedule a demo of Enertiv’s building operations platform today!