Friday, October 30, 2009

Understanding Facilities

Anticipating three presentations in November, a discussion of facility planning in this blog seems timely.

On November 13 I’ll be joining an architect, a project manager and a museum director to present “What You Need to Tell Your Architect” at the New England Museum Association annual conference in Nashua NH.

On November 4 and 18 I’ll be doing a two-part webinar on facility planning for nonprofits (1:00pm Eastern) as part of the Wednesday Webinar series. Part 1 will focus on an overview and key concepts; I’ll be joined in part 2 by Randall Reaves, to look at some of the decisions and options encountered in developing a project. For more information and free registration click here .

The basic idea of all of these presentations is that trustees and senior staff need to know what they are getting into, and how to avoid the unnecessary costs and risks that encumber almost all nonprofit projects. Facilities are an extraordinarily expensive solution to any need. If you need to build—or think you might—there are ways to reduce costs, risks and stress, and increase the benefits from a new or renovated facility. Many of these actions are not things that you’d know to consider if you don’t build regularly; some will likely be overlooked even if you have a full-time facilities department.

The Order of Things

For many organizations, the first reaction to any perceived need in facilities is the instinct to hire an architect (or even a design-build contractor). Unfortunately, the design skills that an architect can offer are only one factor in a wise, cost-effective, and long-term solution to facilities issues. And they are far from the first step.

Design and construction are expensive acts of execution; major expenses (and major mistakes) can be avoided by starting with the most fundamental steps of institutional planning and following them in sequence, to make certain that all of the right questions are being asked. The needs and answers that initially seem obvious often miss the real opportunities.

The first step should be some form of strategic planning, followed by program planning, and business planning. Only with a fully current consensus on vision and strategy, reinforced by a clear evaluation of program needs and a tough and thorough business plan, can an institution hope to conceive, design and build the right facilities—if, indeed, facilities are the right solution at all.

Once you have brought all of this planning up to date, you will be in a position to evaluate the need for a new facility. When thinking about any new project, the first question to ask is whether there are non-facility solutions that might address the problem without incurring the extraordinary expense of construction. Can functions be shuffled to re-balance under-used areas with over-used ones? Can an existing building be transformed more cheaply than a new one can be built? Or vice versa?

Define the project

If construction is unavoidable, what is needed to define the project?

Often nonprofits identify some very general issues and expect an architect to figure out the details. Left to their own devices, architects will necessarily invent forms and functions that represent only a limited insight into the needs and wisdom of their client. If architects are given clear and precisely articulated goals, they may well be able to reflect the aspirations of their clients in striking ways. And not necessarily at any greater cost.

An institution is best served when it prepares an architectural program and a project budget before selecting an architect. A well-developed program document will help you first to budget the project and then to measure the design work against your goals. The traditional quantitative program lists all of the spaces required—down to utility rooms and closets—with their purposes, detailed characteristics, areas in square feet, all of the equipment needed, and important adjacencies (spaces that should be next to each other for proper functioning).

Beyond these quantitative parameters, it can be effective to develop a qualitative program, as well. This qualitative program can consist of the character of spaces, values of the organization, and messages to be communicated. By articulating carefully issues of function, expression and meaning, the qualitative program can mold the facilities of an institution to support its mission.

The program should be used to frame a project budget, which should be incorporated, along with the program, into the contract with the architect to assure clarity and accountability. As with all subsequent budgeting, this should be a comprehensive project budget, not just a construction budget. It should include construction costs, soft costs (all fees, furniture, and equipment), an allowance for contingencies (a figure that is gradually consumed or reduced during design and construction) and, ideally, a building operation and maintenance endowment. Such an all-inclusive project budget is the only way to avoid misunderstandings and surprises.

Assess capacity

Once you have defined the project, you can assess whether you have the resources to support it or a modified version of it. Most obviously there is the question of financial capacity. You will likely want to conduct a fundraising feasibility assessment to ascertain an achievable goal for a capital campaign. You may be willing and able to borrow a portion of the funds needed for the project. If so, there may be a variety of possibilities available to you, from bank lines of credit to state-sponsored revenue bonds. Under certain circumstances, you may wish to consider a loan from your own endowment.

Borrowing may seem a much more palatable option if the project offers significant revenue-generating potential, so you will want to quantify this possibility. A real-time, interactive financial model can be extraordinarily useful at this stage, allowing management and board to test and visualize consequences for a variety of scenarios.

In addition to financial capacity, you will also have to ascertain whether you have the available real estate. If you have an existing master plan, this may be a simple question that has already been examined. If you do not have a master plan, you should consider whether you can afford to work without one.

Who will be involved in the project?

Trustees and administrators who have not been involved in an institutional design and construction project often have no idea of the complex nature of the work required. By the time they find out, they may have incurred significant unnecessary expenses.

A project needs to be planned administratively as well as physically. Unless you are a large enough an institution to have an established facilities department staffed with project managers and support staff, additions to staff are likely for anything but the smallest of projects. (Costs associated with these new positions should be considered among the “soft costs” of a project.)

The primary need will be for a project manager with the experience and authority to manage the process, facilitate communication among all parties, make most of the operational decisions, and channel the decisions that require executive or board approval expeditiously and with clear analysis of options and repercussions. Some of these tasks may be beyond the skill set of a facility project manager; it generally helps to have a senior staff member act as project director to make or facilitate major decisions. Depending on the size of the project, you may need part- or full-time bookkeeping and accounting help, and staff support for the project manager. Depending on the skills and experience of the project manager, on large project an out-sourced “owner’s representative” may also be needed. (It is also possible to hire outside professionals for the entire project management function.)

Beyond the direct project staff issues, a major project also will affect the overall rhythms of management and governance in institutions not accustomed to building. It will be important to define clearly a hierarchy of levels for engaging executives and board committees in design decisions and tradeoffs, and especially in financial decisions. Once design and construction begin, delays in decision-making and changes of direction can be very costly. The more clear and streamlined the process the more likely you will stay on budget, on time, and happy with the results.

In my next post I’ll look at the project delivery decisions that we’ll cover in the webinar on November 18.

Friday, October 16, 2009

Integrated planning

“For every complex problem there is a simple solution; ...and it is always wrong.” Despite the truth of H.L. Mencken’s pithy observation, complex problems can often be factored out into components that can be addressed straightforwardly.

Nonprofits often turn to strategic planning when they see the need to examine what they do and perhaps make some changes. They may need to address a pressing problem or they may be looking to take advantage of a perceived opportunity or to adapt their services or programs to emerging needs or a change in funding. Some of the time strategic planning is precisely what is needed.

At other times, though, strategic planning does not offer the tools or format that can best address the critical issues. When planning objectives are poorly defined, and the tools are not well understood, frustration and failure are likely.

Strategic planning means different things to different people. We place strategic planning into the larger context of integrated planning. By articulating several different kinds of planning and orchestrating them into a comprehensive planning framework, nonprofits can use the concept of integrated planning to develop a more effective planning process and achieve more meaningful results.

At the core of integrated planning are strategic, program, and business planning, the why, what and how of the organization.

Strategic planning is essentially broad- based consensus-building around mission and goals. It draws all stakeholders into a discussion that reinvigorates the sense of communal purpose.

Program planning develops services, programs and delivery mechanisms, and identifies the resources needed to implement them. Much of this work needs to be dealt with very lightly in strategic planning, at the policy level. The details are the prerogative of the executive director and professional staff.

Business planning is as crucial for a non-profit institution as it is in a for- profit business. A business plan details the means by which the organization is to be supported and sustained, determines operational feasibility, and provides the staffing, financial, market, and operational details required. Business planning typically is the responsibility of the Executive Director, CFO, and the board.

There is clearly overlap among these areas of planning, but an understanding of the differences can make planning efforts far more effective.

A regular, integrated cycle of strategic, program and business planning cultivates a culture of planning, which focuses the efforts of the entire organization on critical strategic issues. A comprehensive approach to integrated planning encompasses a number of other areas that support improved management structures and more effective board oversight: organizational development, identity and branding, advancement, human resource, and technology planning, and facility planning.

For more on integrated planning, see and sign up for our next webinar on this topic. If the date for the linked webinar has passed, look for an announcement of our next round of Wednesday Webinars.