Those of us in the corporate sector are no stranger to the chargeback strategy. Since its conception, facility managers and accounting departments have always viewed this as an opportunity to create accountability and transparency, gaining a deeper understanding of business allocations and costs. Such transparency enabled organizations to effectively fund and reallocate resources to match the momentum of business changes. But, at a time where businesses are in a constant state of evolution, often moving and sharing resources spanning the entire organization, how effective are the old chargeback strategies?
Let’s first start off by taking a look at the theory and goals behind space chargebacks.
What are Chargebacks?
Also known as Facilities Cost Allocation (FCA) a chargeback is the facilities management strategy in which departments are internally billed for their spatial usage. The goal was to identify and communicate departmental costs and, in turn, reduce inefficient use of space. When implemented as a management tool, rather than simply another accounting process, facility managers added value to the organization through a better understanding of how space is being allocated and identifying costs associated. This “cost awareness can benefit the company as a whole by reducing costs, and can help the facilities department avoid unnecessary work by allocating resources more closely in line with their original, budgeted purpose.” The chargeback strategy, for many, aligned core business values with organizational resources, allowing for more effective and efficient use of all resources.
Charging back was not designed to penalize the workforce for resources and real estate used, nor was its goal to create a source of profit. It was created for the facilities management team to ensure their workforce is productive in the most efficient way possible, while maximizing company profits. It was about increasing awareness as to where the budget is allocated and improving cost strategies. In today’s business environment, where workspace dynamics are continuously evolving and expanding, many facility managers are finding they must adjust their strategies to match these growing needs.
Chargebacks in the Evolving Workplace
The concept of understanding resource usage is nothing new for facility management professionals. This knowledge is used to forecast future needs, plan for annual budget meetings, and to ensure everyone has what they need, when they need it. And for many, the FCA strategy works like a well-oiled machine that has evolved over time. But if you are considering adopting such a strategy at this point in time, there are a few things to consider.
“While a common approach is to charge departments and other users for the space they occupy and the services they use, this can both complicate the underlying objectives and introduce behaviors that are not in the best interests of the corporation as a whole.”
When the chargeback strategy was initially designed, space was allocated by department, with each individual assigned their own workspace. The chargeback process grouped allocations based on department; and it was a great tool for bringing awareness regarding what was being used and how, offering real data for making informed business decisions. With the emergence of mobile tools, these departmental walls have slowly been broken down, making way for a more collaborative workspace; an environment in which project teams are comprised of individuals with varying strengths and from multiple departments. This transformation has forced management teams to adjust their mindset regarding space and asset allocation.
Reevaluating the Space Allocation Strategy
As greater emphasis has been placed on workspaces becoming collaborative and cooperative, a similar shift of emphasis from departmental structure and cost center level to space usage, coupled with workforce necessity, has occurred. The productivity of the worker is paramount and the arrangement of workspaces is shown to have a substantial effect on this metric. Therefore, in order to truly analyze space utilization from every angle, facilities teams are developing different ways of considering how to allocate space, with particular interest focused on the different workspace groupings and the personal dynamics within them.
Historically, our clients utilized their chargebacks through the “space cost center” where each department (and each individual) was assigned their own space. This was a great way to reconcile how much real estate each department was using and how many people were utilizing the space. You could identify if a department was underutilizing their allocations and make revisions accordingly. But as the workspace evolves, so too, must our mindset and our tools.
While the concept is still the same, our “cost space center” has been renamed “category” so that facilities managers have the flexibility needed to define their own categories. The view has been expanded to allow for more flexibility, with the ability to define different groupings. Employee X might be working on multiple projects, moving from space to space as needs arise. Rather than assigning him to one department, it is more effective to group him in multiple categories, based on specific projects, job title, or job description. This flexibility empowers the facility management to run better analytics and visually see the relationships which will, in turn, allow them to make better decisions regarding how to enhance the work environment.
This “big picture” allows for more precision in their cost-cutting efforts, expanding efforts to maximize on ALL resources. Chargebacks are now able to be addressed more as billing and tracking of spaces per employee and become tools for examining the needs of the individual, as well as the organization.
Chargebacks still have their value and place, and will continue to be a valuable tool for data analysis of space usage. But with so much more flexibility occurring in modern business practices, there has to be a shift in the ways the assets are being applied, the spaces allocated, and the needs of the workers addressed. Make sure your big picture is also focusing on all of the small scenes which make up the whole.