Asset ManagementI think there is an issue that needs to be clarified urgently. I recently attended the Euro FM conference in Madrid Spain, and Keith Hamer of Sodexo gave a presentation on their implementation of ISO  55,000. Why is this important to Facilities Managers? In the Facilities Management world, Asset Management has ISO 55,000 as the standard for technical maintenance, The ISO Standard for FM has been a long time coming.

What is clear is there seems to be a lot of confusion around the difference between Asset Management and Facility Management. Let me help you understand that they are the same, but they are different. As management disciplines, Asset Management (AM) and Facilities Management (FM) have a great deal of common ground especially since from an operational perspective, FM often includes technical maintenance management.

Daily Responsibilities

The day-to-day operations and responsibilities in FM and AM are similar to a significant extent. On an operational level, FM and AM manage many services in the areas of maintenance, operations, safety, logistics, and technical infrastructure. Both Asset Managers and Facility Managers also use shared management concepts like Asset Utilization Rate, Asset Register, Asset Replacement Value, Total Cost of Ownership, Criticality Condition Index; they utilise similar analytical techniques, methods, procedures, IT solutions.

AM and FM also perform corresponding management functions such as strategic planning, risk management, service management, financial planning and control, performance management, quality management, change management, project management, energy management, outsourcing, benchmarking, etc.

So where is the difference?

AM’s align assets with the primary production processes and set up return on assets (ROA) targets for the whole organisation. FM’s develop and implement the asset management strategy in all support operations to the organisation’s primary activity.

Five factors

There are five major factors determine the difference between asset management and facilities management.

1. The Type Of Assets Managed
2. The Purpose Of The Assets Managed
3. The LifeCycle of the Assets
4. The Organisational Goals Of The Assets Owner/Investor
5. The Assigned Scope Of Operations

1. Type Of Assets Managed

ISO 55,000 is an all-encompassing quality standard which can be used to manage all types of assets including financial assets, people, processes, information and brand assets these and others are generically referred to as intangible assets and would fall under Enterprise Asset Management (EAM). Assets may also include such thinks as natural assets including minerals, location, etc.

And herein lies the major difference, AM is defined as “the coordinated activity of an organisation to realise value from its assets, ” and this includes all asset classes natural, tangible and intangible assets.

FM is restricted to physical assets, as such FM is often inaccurately regarded as a subset of AM. As this blog is for the facilities and workplace management profession, we will confine ourselves to how both disciplines deal with physical assets.

As physical assets go there are two main types;

Immovable assets

  1. Vertical real estate offices, retail, industrial, etc
  2. Horizontal real estate, urban parks, playgrounds, sports facilities, etc
  3. Infrastructure networks -power, water, roads, sewerage, transport, etc

Movable assets

Those items that are not permanently attached to the immovable assets- plant, machinery, equipment, Tools instruments, vehicles, etc.

2. The Purpose of The Assets Managed

Assets that are used to carry out the primary business functions-Real estate, production machinery, and equipment, plant, facilities tools, etc. and there are the assets that are used to carry out support business functions-buildings, transportation vehicles, workplace facilities, IT equipment.

If you compare the European Standards for Facility Management EN 15221 (1–7), to the Asset Management Standards ISO 55000, it is clear that AM and FM functions, professional responsibilities and methods are comparable and similar to a high degree. The difference is in the scope of application is evident. Asset Management is applied to both primary and support business processes; While FM is focused on support business processes, this may appear to give asset management the superior portfolio. However, it would be a mistake to underestimate that whilst not core, support or context as I prefer to call them, processes can be critical to the organisation.

Differences

Asset manager

Asset Manager’s scope of work are all assets utilized by both primary business and support business functions of company/organisation, and so for the Asset Manager, the principal objective is to maximise the return on assets and the utilisation rates. Her priority is to improve maintenance productivity and optimise equipment reliability as per the client’s production/primary business target. The Asset Manager’s focus is on achieving the Investor’s profitability objectives which necessarily involves minimising Capital expenditure on those assets. The asset manager it is not primarily concerned with the operating cost incurred by the asset.

Facility Manager

For the Facility Manager, the principal objective is an optimal work environment, as such the Facility Manager’s priority is to improve the user‘s primary business productivity and effectiveness through all the assets which support the main activity of the company/organisation. To do this, the Facility Manager is focused on the End User/Occupier’s workplace needs and demands while optimising operational (OPEX) and capital expenditures (CAPEX). This is one of the major differences in the hierarchy of the objectives of the Facilities Manager versus the Asset Manager.

The principal objective of Facilities Management is an optimal work environment Click To Tweet

3. The LifeCycle of the Assets

In broad terms the life cycle of an asset it is as follows

  1. Planning and acquisition
  2. Operation
  3. Maintenance
  4. Decommissioning and disposal

Asset Management deals with all four stages of the life-cycle for all assets. While the asset life-cycle model for the total cost of ownership is a central theme in the FM arena, in reality, this is one of the major differences between in-sourced and outsourced FM. In outsourcing, the FM is confined to the operations and maintenance cycles. Historically the FM has been excluded from the planning and acquisitions stage. There is now a recognition that this is shortsighted.

There is a growing trend to involve FM in the earliest part of the life-cycle. Operational expenditure on a facility in its lifetime accounts for over 85% of the total investment. The initial capital expenditure is therefore often overstated and emphasised in the development process. The involvement of therefore of the Facilities Manager at the outset can, therefore, deliver significant cost advantages for the owner occupier. For this reason, Public Private Partnerships or PPP’s lay such a heavy emphasis on the early involvement of the facilities management operator in the development process.

4. The Organisational Goals of the Asset Owner/Investor

The Facility Manager and the Asset Manager have differing priorities due to the organisational objectives of their different Clients. It is this perhaps not as profound as often stated and comes down in reality to the hierarchy of tasks and goals as the major differentiator between the Asset Manager and the Facilities Manager.

In the private sector, Asset Managers work for investors who own or lease real estate and assets for the cash flow from operating income and the gain in value during their ownership term. Investors may consist of individuals, entrepreneurs, corporations, investment funds or a variety of trusts. The Asset Manager has the luxury of having a Single entity as a client, the Investor,

Facility Managers work for the leaseholders or owner occupiers of real estate, which may consist of private sector companies, individuals, public sector entities, central and local governments, NGOs, etc. FM differs from AM in its client relationships due to the need to serve three different masters.

Facilities & Asset Management differ due to the need to serve three different masters Click To Tweet
  • The Client is the C-suite (strategic level);
  • The Customer is the corporate/organisation unit that specifies, orders and pays for the facility services. Typically this may be a single entity or any combination of procurement, operations, internal FM, corporate real estate (CRE) (tactical level)
  • The End User is the individual who receives the facility services, which may well be an employee, customer or supplier of the business, or even a visitor to the buildings/facilities (operational level).

Deyan Kavrakov, FRICS categorises the prioritisation of the differing in his article ‘Asset and Facility Management Spot the Difference’ as

The Asset Manager will, therefore, prioritise their goals as follows:

  1. Asset Value – minimise Replacement Asset Value ratio (RAV), thus maximise Return on Net Assets (RONA)
  2. Capital spending – achieve optimal Capital Expenditure level while balancing Risk and Performance
  3. Operations & Maintenance – target optimal MTBF (mean time between failures) and maximise primary business process reliability;
  4. End user/Occupier – maintain sufficient user feedback to achieve the first three objectives.

The Facility Manager prioritises their agenda (as far as the physical assets are concerned) in a significantly different order as compared to the Asset Manager.

  1. End User/Occupant – ensure that FM services are optimal cost/quality ratio and directed to supporting high productivity of primary business processes and end users
  2. Operations & Maintenance – operate and maintain the property/asset in support of the Occupier’s core business activities and end users demand continuous, effective and efficient workplace environment
  3. Asset Value – preserve and maintain the value of the asset/property based on the whole lifecycle:
  4. Capital spending – secure an optimal level of capital expenditures to achieve the first three goals.

5. The Assigned Scope of Operations

Asset Management

AM’s prime interest is in enhancing effectiveness and efficiency of the physical assets performance and production processes. The Asset Manager does not include management of services directed to the Employee, End User, Customer, Occupier. The currency of their business is the physical asset only.

Facility Management

Unlike Asset Managers, Facilities Managers provide an ever-growing level and variety of multiple support services to Clients, Customers and end users, including visitors, and suppliers, contractors as well as the Client’s customers.

As any FM appreciates this brings a level of complexity when dealing with human beings, that is all directed to improving End User/Occupier productivity and provide an adaptive workplace environment to meet the changes in competitive marketplace and stakeholders demands.

Both AM and FM target improving return on capital, but AM’s priority platform for achieving it, is asset maintenance & reliability management;

FM’s priority vehicle for accomplishing it is facility & end user service management.

This week’s Question: Is one discipline a subset or a subordinate to the other? let me have your thoughts below in the comments section.