Budget Wargames & ‘Conflicts’ 2024

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From the Editor.

The difference between a wargame and an actual conflict is that one simulates actual damage and loss and in the other it happens for real.

In 2024, in the world of facility budgets, too often the wargame has become a ‘conflict’ and both people and plant / equipment are suffering.

Prices for everything from fossil fuels to spare parts have been and are still skyrocketing. Yet for various reasons budget funding has not increased or has even dropped.

This is generating untold levels of stress in facility departments and companies. Just look at facility manager profiles in LinkedIn. Where FM’s used to remain in jobs for several years before moving on, many are now changing jobs in a couple of years or less.

Where companies have fixed budget contracts with external contractors, the agreed ‘equation’ is now broken. They simply cannot provide the same level of service for the same money.

So, where does you company / facilities department now stand?

Is your wargame still working out to plan or are you now engaged in a ‘conflict’ that you possibly do not realise is happening??

Dominic Murnane CEO

CompassAFM

?I regularly visit facility departments and over the last 18 months I have seen some big changes. I can often feel the tension and stress in the air as soon as I walk in. With both costs and administrative demands increasing rapidly, core facility operations are becoming compromised similar to the days of the financial crash in the early 2000’s. However this time there are better solutions available.

Budget Wargames

In facilities a Budget Wargame can be defined as “A strategy game?in which two or more managers and / or companies command opposing ideas in the determination of a value on future budget expenditure.”

?This happens every year in facilities whether between the facility manager and their CFO / CEO or between the facility manager and a 3rd party contractor. For many years this has worked out pretty well for both sides and the facilities department was able to perform as expected. This started to change for the worse in 2023 and is continuing through 2024. Prices have skyrocketed and still are climbing.

?It is now becoming impossible to maintain the same performance levels within the same budget. One or the other has to increase or decrease. If the budget cannot be increased, then the performance will most likely decrease.

Within an organisation, when communication between C-Managers and facilities has established that the budget cannot be increased to the required level, there is usually an understanding of where cutbacks will occur. This may not be the case with a 3rd party contractor.

Budget ‘Conflicts’

?In facilities a Budget ‘Conflict’ can be defined as “A conflict between 2 parties where the original agreed structure can no longer be maintained leading to a reduced capacity to sustain facility operations.”

?Why is this called a ‘Conflict? Because in conflicts, people get hurt and damage is sustained and this is what is happening in facilities departments now. Whereas in a real conflict both sides are totally aware of what is happening, however in facilities this may not be the case and one party may be quite unaware that a ‘conflict’ is ongoing.

Stopping ‘Conflicts’ from starting

For some organisations conflicts’ don’t happen as there are sufficient funds available to increase budgets to maintain the level of performance from their facilities department / contractors.

?Unfortunately, for many this is not possible. Too many times the ‘conflict’ has started without discussion between parties and the consequences may only become known many months later. In such a case trust and more has been lost and can be difficult to repair.

It is vital that communication begins before one party starts actions without informing the other. Because, in the end just like a real conflict, only communication and compromise can end it.

In the following scenarios, let’s look at the potential for ‘conflicts’ and how they might be avoided.

?Scenario 1 – In House Operations

?In this scenario a company uses primarily inhouse staff for repairs, maintenance and administration. The company cannot afford to increase the facilities budget to required levels.

The biggest mistake C-Level Managers can make is seeing that a facility department manages to work within budget and then seeing if they can reduce the budget further.

If C-Managers have made the decision not to increase or to decrease the facilities department budget, they cannot expect the facility manager to make C-Level decisions to work within that budget. Communication is essential with regard to cutting services or deferring high cost expenditures. Knowledge is essential in understanding the function and necessity of core plant and equipment. Savings can always be made but a full operational analysis in needed to identify these. Sometimes simple changes can result in 5 or 6 figure savings. These savings can then be allocated where better needed.

?Want to find out more about an Operational Analysis - Click Here?

?Scenario 2 – In House Admin, Sub-contractors

In this scenario the facilities inhouse staff are primarily administrative and only carry out basic repairs, PPM maintenance and larger remedial works are carried out by sub-contractors. The company cannot afford to increase the facilities budget to required levels.

?Sub-contractors ARE NOT going to reduce their profit margin when having to work within the constraints of a tighter budget. They have to maintain the financial integrity of their own business and will find ways of reducing their own costs. How these ways are identified and implemented will rarely be communicated to their client. There is very high demand for various trades at the moment, so a contractor forced to work on a tight budget may well move on to a better paying customer. This can potentially leave the original client in a crisis situation. Maybe leading to the dangerous decision to engage a cheaper but lower skilled contractor as a replacement.

Like Scenario 1, good communication, facilities team knowledge and an operational analysis are key elements in identifying a solution(s).

?Want to find out more about an Operational Analysis - Click Here?

?Scenario 3 – In House Admin, Facility Management Company

In this scenario the facilities inhouse staff are administrative and all remedial works and PPM maintenance is carried out by a facility management company. The company cannot afford to increase the facilities budget to required levels.

Too many times I see FM companies working on a unilateral basis. They forget they are the vendor NOT the company owner. Often the company has little information as regards to the ongoing maintenance of their plant and equipment and are usually denied access to the FM company’s CMMS as a source of this information. The company is ‘forced’ to trust the FM company, rather than the trust being earned. Often on contract renewal, I have seen the FM company retain / use the information gathered over the year(s) as a bargaining tool rather than giving it to the company if their contract is not renewed.

Companies can make the mistake on engaging an FM company on determining the value of services provided. Up to 50% of the contract value can be retained by the FM company as their profit margin.

In this scenario, trust and good communication are the most important factors. Both sides should agree to an annual operational analysis to maintain and improve on this relationship.

??Want to find out more about an Operational Analysis - Click Here?

In every business agreement or scenario there is always a “winner and a loser”. If the “losses” are acceptable according to the wargame and there is no conflict then all is good. However when one side manipulates the wargame to their greater benefit then the result may be conflict. C-Level managers and facility teams must be aware of the potential for a conflict to occur or recognise if one already exists. The best way to do this is an operational analysis.

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