Moneyball – Applying it to Facilities Management by Chris Payne
Thursday, February 18th, 2016
In 2002, the US baseball world was forever changed by the success of the Oakland Athletics team. With a salary bill of 41 million dollars (US) – compared to 125 million dollars (US) paid by the New York Yankees – the Oakland team got comparable results to some of the biggest teams in major league baseball. They also achieve a record-setting winning streak of 20 games and overcame the odds to win the American League West that year. All of these achievements were despite losing three of their strongest players at the end of the previous season. Why? ‘Moneyball’
So how could an underdog team rise to such prominence despite only having a fraction of the available resources that other teams had?
Faced with losing some of their strongest players and a limited budget, the General Manager Billy Beane employed the principles of sabremetrics in selecting his team. Sabremetrics is named after the statistical analysis work carried out on behalf of the Society for American Baseball Research, (SABR) and uses extended comparisons of various metrics to identify correlations between performance, individual and team attributes.
The principle of sabremetrics has often been dismissed as a means of selection criteria, with a long-standing preference instead to select individual players based on evaluations of their specific performance. Yet there is no disputing that the Oakland Athletes achieved great results in 2002 using a combination of Beane’s management style and the principles of sabremetrics, prompting a sea-change in how analytics and processes are used today for team selection and play strategy.
The story of the 2002 success of the Athletes has been written about in Michael Lewis’s 2003 book Moneyball and made into a film of the same name in 2011. The principles have also been extended into other major sports such as American football, soccer and even hockey as a means of applying meaningful metrics to achieve results. Where these strategies are deployed, the teams are often said to be playing Moneyball.
So how can we learn from Moneyball within the facilities management marketplace?
Within FM we rely on a team philosophy for the undertaking of key projects. Yet rewards are typically biased upon the individual as is the selection process. Additionally, the means of measuring the success of the project and valuing the strengths of the individuals are based upon simple metrics such as profit or net-promoter-score results. The Moneyball philosophy encourages us to look beyond this to determine better metrics that underpin success.
So what would these metrics be?
Extending the measures of contract success
Understandably, it is easy to distill things down into easily measurable results such as profit margins, but the Moneyball philosophy encourages the exploration of underlying trends and approaches that drive these results.
Olivia and Sterman (2001) suggested some of these extended metrics when they devised their formal model to measure service quality. Their approach incorporates metrics such as:
- Service delivery; including time to complete an order or task
- Service capacity; including attrition rates, hiring delays, experience levels and time to adjust labour levels
- Employee responses; including the effects of workload on time per task, the effects of fatigue and the influence of work intensity
- Service quality; comprising of customer expectation, employees quality expectation and the effect of quality on attrition
- Initial conditions; including the amount of experienced personnel, perceptions of effectiveness and desired time per task
Kaplan and Norton (2007) observe too that improved customer satisfaction in turn leads to “loyal customers and increased market share, which directly affect the bottom line”. Their strategic “balanced scorecard” model considers multiple groups of metrics to measure this satisfaction, including:
- Internal business process
- Learning and growth
Their approach champions the philosophy that all of these areas are inter-dependent and that financial measures are driven by a combination of the experience of individuals within the team, the processes in place and the relationship with the customer.
Moving beyond KPIs and SLAs
It’s true that most FM contracts have some form of additional measurements in place to monitor the success of service delivery. KPIs and SLAs are commonplace throughout the industry and often determined to match the demands of the customer. Where these fall down though is in the comparison between different customers, teams and sectors. It can be exceedingly challenging to compare the success of one contract against the failure of another. Too often poor performance, bad feedback and low margins are dismissed as being as a result of a personality conflict or improper pricing when the reality is usually some underlying trait that can often be remedied to the benefit of all parties. Identifying the cause though is challenging unless there is a consistent basis in place for comparison and analysis.
This is the Moneyball approach for facilities management and the key to delivering consistent performance, improved customer satisfaction, better margins and a differentiated approach.
The wisdom of Billy Beane
In closing, it’s appropriate to mention some of the Oakland Athlete’s general manager’s philosophies on the Moneyball approach:
- No matter how successful you are, change is always good
- The day you say you have to do something, it’s too late
- Know exactly what every team-member is worth to you and how they contribute to the overall performance
Are you ready to play?
Chris works in a consulting capacity to help facilities management providers embed more efficient ways of working within their delivery contracts. With a strong focus on innovation, he contributes to improvement activities through the development of frameworks, software systems and technology to capture and incorporate new ways of working that saves cost and enhances operations.
With over 25 years of experience working on the built environment, Chris has comprehensive insight into the construction and maintenance of facilities within a number of industry sectors, including: social housing, critical environments, defence estates, food processing and commercial office space. In recent years, through the successful delivery of consultancy projects, he has helped clients secure more profitable work by moving beyond standard delivery approaches to find new ways of adding value to facility end-users and occupants.
Based near Glasgow in Scotland, he travels extensively to support an international client base.
Chris Payne is a founding partner in the multi-disciplinary Global Facility Management Alliance. This consortium of FM consultants facilitates broader strategic support for larger clients and projects of greater complexity.
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