7/16/2012 2:06 PM
What is the true value of your time as a facility manager? What is the value of your employees’ time?
The obvious answer to these questions is based on the hourly salary plus employee benefits paid to you or the employee. Your employer has determined a value for your services and pays you accordingly.
But when you are choosing between facility planning, efficiency, and maintenance activities, how do you determine which activity you should spend your valuable time on?
To answer this question, we need to consider a fundamental aspect of economics: opportunity cost.
In any decision with at least two options, opportunity cost is the option(s) you choose not to pursue. It is not always measured in dollars, but often by what you give up. Here is a YouTube video that briefly describes the concept.
Now, let’s look at a facility management example that includes both monetary cost and opportunity cost. In order to save energy, assume that you choose to have an employee in your department spend two hours daily scheduling HVAC equipment for individual events/rooms for the following day. We can represent the monetary cost of the labor as:
Labor cost = 2 hours x Employee cost (salary, insurance, taxes, office space and equipment, benefits, etc.)
Note that the employee cost includes much more than just the employee’s salary. Forgetting to include the cost of insurance, payroll taxes, office space, and other benefits is a common mistake. To have an accurate picture of the monetary cost, you must consider all of the employee costs.
But after you have added up all of the monetary costs, you still do not have a complete picture. You must now add the opportunity cost.
Labor cost = [2 hours x Employee cost] + Opportunity cost
What is the opportunity cost? It is whatever else the employee could accomplish during those two hours. So if the employee could be replacing old inefficient light bulbs with LED bulbs, performing equipment maintenance, or working with contractors on a remodel project, that would be the opportunity cost.
The question then becomes, what is the value of your employee accomplishing those other tasks – and how does that value compare to the value of having the employee schedule HVAC equipment instead?
In many cases, the value of scheduling HVAC will be substantial because of the energy savings. Running HVAC in individual rooms for specific events can often save a facility a lot of money over running an entire building all day long. So this savings often justifies the expense of having an employee schedule HVAC for individual rooms/events rather than working on other facility tasks.
But what if the same amount of energy savings could be achieved through automation, freeing the employee to accomplish other tasks? Then the value of the automation would be:
Value of automation = [2 hours x Employee cost] + Opportunity cost
And what if the automation allows you to avoid one scheduling mistake each day that causes you and your department stress? Then the value of the automation would be:
Value of automation = [2 hours x Employee cost] + Opportunity cost - Stress
So when you are evaluating potential labor savings from automation such as Events2HVAC, don’t be a Dilbert boss. Make sure that you are considering all of the costs related to your department’s time.
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