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A conceptual link among facilities management, strategic management and project management
Chung Yim Yiu
Department of Real Estate and Construction, The University of Hong Kong, Hong Kong, Hong Kong
Abstract
Purpose To identify a distinctive knowledge-base of facilities management (FM) based on a conceptual framework of the market-and-rm dichotomy. Design/methodology/approach By reviewing literatures in classical management and project management, the evolution of the management theories and FM discipline highlights the identity of FM. Findings Recognize the lack a distinctive knowledge-base in FM discipline. This paper puts forward a conceptual link among FM, strategic management and project management from a market-rm perspective. Four strategic roles of FM are identied for future research, namely the sourcing of services, the sourcing of workspace, the sourcing of funds from infrastructure facilities; and the sourcing of performance. Research limitations/implications This conceptual framework paves the road to establish a distinctive knowledge-base of FM. Practical implications To revamp the concepts of FM and to make the discipline sustainable. Originality/value To establish an identity of FM and to channel resources to some research domains. Keywords Strategic management, Property management Paper type Conceptual paper

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Received February 2008 Accepted June 2008

1. Introduction Facilities management (FM) discipline is facing a serious identity crisis. Price (2002) raised a warning on the fad-decay of the FM meme. In fact, Nutt (1999) has pointed out seven problems of the FM discipline, yet there is no signicant improvement so far. The rst problem is that FM operates in an ever widening and ill-dened sphere of activity. For example, IFMA (2005) grouped the responsibilities of FM into eight major functions and Chotipanich (2004) provided a diversied-scope-of-FM services, which is composed of nine groups and 61 services. They spread across the disciplines of strategic management, building technology, construction procurement, nancial and accounting, telecommunication, human resources, etc. Since it is impossible for one to be competent in all these multi-disciplinary and multi-professional areas, FM loses its focus and identity. Nutt (2000) contended that the lack of a unique knowledge base is the cause of the identity crisis. However, he did not suggest a solution. McLennan (2000), on the other hand, argued that FM stands at a potentially powerful position because FM has the knowledge of physical facilities performance

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with the knowledge of business objectives, operations and support services. This argument is also not convincing because the knowledge of physical facilities technical performance is the distinctive knowledge-base of building professionals and not belong to FM. At least, it does not form part of management knowledge. This paper therefore puts forward a novel conceptual framework which identies the unique pillars of FM which differentiates it from classical management theories and project management theory. It paves a road to establish a distinctive knowledge-base of FM which justies it as an individual management discipline. Before putting forward my argument, the typical denitions of the three management disciplines are provided as follows:
Facilities management is the practice of coordinating the physical workplace with the people and the work process of the organization; integrates the principles of business administration, architecture, and the behavioral and engineering sciences (International Facilities Management Association, 2007). Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives (David, 1989). Project management is the application of knowledge, skills, tools and techniques to project activities to meet project requirements, where a project is a temporary endeavor with a nite completion date undertaken to create a unique product or service (Project Management Institute, 2008).

As shown in the above denitions and detailed in the following Sections 2 and 3, which are reviews of the literatures in the search of identity of FM and a brief overview on the evolution of the classical management theories, institutional economics theories and the project management theories, most of the management theories are developed on the assumption of the existence of a subject organization (rm), but project management is not. This paper contends that FM is a hybrid of strategic management and project management, Section 4 then develops a conceptual framework integrating the three management regimes by taking this market-rm concept as the theoretical basis. Section 5 articulates the unique identity of FM. Section 5 gives a conclusion. 2. Literature review Nutt (1998) raised the concern on the knowledge deciency of FM: FM continues to be reliant on borrowed management concepts on one hand, and on the results of building performance research on the other. There was also a special issue in the Facilities journal in 1999 addressing the context and the future of FM. Nutt (1999) further put forward his urge for collaborative research but still relied on the diversied-scope-of-services framework. Grimshaw (1999), on the other hand, argued that FM is to manage the changes that are taking place in the relationship between organizations, their employees and their facilities. Then (1999) also urged for a strategic view instead of an operational view of FM. Although Grimshaws strategic approach managed to get rid of the diversied-scope-of-services burden, yet he was pessimistic in searching for a unifying theory for FM supported by its own body of knowledge. Nutt (2000) reconciled Grimshaws strategic approach and re-engineered FM as a resource management at strategic and operational levels of support.

However, Nutt reiterated the lack of a distinctive knowledge-base in FM to underpin best practice, to advance the eld, and to bridge the gap between its promise and performance. Price (2002) also attributed the fad-decay of FM to the over-diversication of the meaning of FM. He suggested a paradigm alignment to strategic business from the existing operational FM. For example, he suggested considering FM performance in relation to the outcomes rather than the outputs of core business success. Kaya et al. (2004) also echoed Prices advocacy and presented a World-Class-Facilities-Management framework for assessing FM performance. They even suggested reframing FM projects as business projects so as to involve the participation of senior management. More recently, another special issue in the Facilities journal in 2004 addressed the new alignment of FM. McLennan (2004) posited that the lack of conceptual management framework is the reason why FM remains misunderstood in the general business sector. Unfortunately, instead of developing a distinctive FM knowledge-base, McLennan opted to align directly to the service management discipline. Chotipanich (2004) reviewed comprehensively on models which link FM to the core business of the organization at the strategic level. Nevertheless, most of them emphasized the requirement of senior management support to this board-level FM, but they did not tell why senior management should delegate authority to FM. Worse still, this approach makes FM performance directly overlap with that of strategic management. This paper contends that something should be managed by FM only when FM knows it better than other disciplines. FM cannot survive by either: . integrating a diversied scope of operations; or . struggling with senior management for authority. FM must have its own distinctive knowledge-base and a unique identity in contrast with that of strategic management and building professionals, if it is going to sustain and evolve. The identity of FM is identied by reviewing the evolution of management theories in the following section. 3. Review of management theories 3.1 Classical management theories The development of classical management theories can be summarised into four schools of thoughts, namely, the scientic management theory, the human relations approach, the systems theory and the contingency theory. Interestingly, all of them were developed on the assumption of the existence of an organization (or a rm). They are briey outlined below. Frederick Taylor (1911) introduced the scientic management theory. It emphasizes the legitimization of authority; rewards upon competence and the adherence to rules set out in a hierarchical rm. Henry Fayol (1919 [1949]) developed the modern operational management theory and dened management functions as to plan, to organize, to command, to coordinate and to control the process of a rm. Weber (1924 [1968]) further posited that an organization is a power structure in which the authority of control is vested in the organization hierarchy. However, they focused on production process and neglected the persons who carried out the process.

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Elton Mayo (1880-1949), on the contrary, put forward the human relations approach and carried out the well-known Hawthorne experiments to study the importance of the satisfaction of employees to the rms operation (Scott, 1992). It recognized the disparity between the employers goals of an organization and the employees goals pursued by the subordinates. Motivation and leadership theories were then developed. Then, McGregor (1960) and Burns and Stalker (1966) synthesized these ndings to become the theory X and Y; and the mechanistic versus organic organization theory, respectively. Besides, the process and the people, there is also a relationship between the rm and its environment. Considering a rm as comprising a set of interacting sub-systems, Barnard (1968) mapped out a systems theory. The systems theory concentrates on interaction, interrelationships and integration of sub-systems into a whole (Kast and Rosenzweig, 1979). Since the systems theory was originated from the biological science by von Bertalanffy (1969), which presumes a xed boundary among sub-systems. Ackoff (1971) perceived an open system as one has a permeable boundary and there are exchanges between the system and its environment. Lawrence and Lorsch (1967) led the development of the contingency theory which posits that there is no one organizational structure which suits for all rms. Management has a key strategic role in adapting the organization to its environment. They contended that differentiation and integration are ways to optimize a rms performance. Mintzberg (1989) categorized the level of differentiation and integration into ve congurations of organization, viz. Entrepreneurial, Machine, Diversied, Professional and Innovative. This approach breaks down the boundaries of sub-systems within a rm and highlights the managers role in differentiating and integrating intra-rm sub-systems. However, all schools of thoughts in classical management were founded on the assumption of the existence of rms as shown in the emphases above. 3.2 Institutional economic theories In contrast, classical economics theories were built on the fundamental assumption of the existence of markets. For example, Adam Smiths invisible hand of market price mechanism founded the capitalism. The existence of rms was not questioned in economic studies until Coases (1937, 1988) query on why entrepreneurs choose to set up rms instead of transacting in the markets. The query led to the development of the institutional economics theories. High transaction costs, such as the costs in discovering prices, negotiating and contracting, makes it worthwhile for an entrepreneur to direct activities under a broad grant of discretionary authority (Miller, 1992).
Thus, some people are granted with coercive authority or coordinating responsibility to induce others to do what they would not otherwise nd it in the interest to do.

Information asymmetries and externalities, resulted from the specialization of labor, are causes of the high transaction costs. The term market failures becomes an icon which explains why hierarchical organizations exist. It also explains the presence of a rewarding and punishing system in lieu of the price mechanism. Cheung (1983, 1985) further explained the different management structures of economic organization by

different contractual arrangements. This approach aligns market and rm into one single contractual theory. 3.3 Project management theory Another strand of research on project management also helps understand the market-rm dichotomy. Project management theory was developed alongside with the systems theory by the Tavistock Institute in the 1950s, due to the idea of differentiation and the management by task in the contingency theory. Kerzner (1984) has considered the three alternative approaches to project management: organized by functional department, by project, or by a matrix structure. He concluded that matrix organization is the best structure in terms of accountability, loyalty and communications. Project management was then become a new discipline of management study emphasizing the dynamic management of non-repetitive or temporary activities for the purpose of meeting a single set of goals (Cleland and King, 1983). Yet, it is still developed on the assumption of a xed rm boundary, i.e. intra-rm operations. Later on, construction project management theory was developed to study inter-rm operations. The organization in a construction project is always transient and dynamically changing (Miller and Rice, 1973; Bennett, 1985), the use of an independent project manager to coordinate construction projects has become popular. Winch (1988) highlighted the inter-rm characteristics and the reliance on contractual rather than administrative governance in construction project management. Winch argued that:
[. . .] management theories do not apply in construction project management due to the fact that:
.

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Project is made up of a multiplicity of organizations, all of which have different economic interests. Differentiation in the project is between rms, not within them. Thus, integration is across market relationships. Theory and practice of project management were not originally designed to handle differences between rms, only differences between functional departments within a single organization.

Walker (1996) further categorized the construction procurement strategies into 42 different matrix of organizational structures for different level of integration among client, design team and contractors appointment. In principle, they can be understood by considering the transaction costs in different contractual arrangements among rms. 4. Facilities management framework More and more studies in FM shifted the focus of FM practice from operational services towards strategic resource management. For example, Then (1999) identied the four principle components of FM, namely: (1) Strategic facilities planning. (2) Strategic asset management. (3) Asset maintenance management. (4) Facilities service management.

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Functions of FM include evaluation of asset and service performance, and decisions on procurement options, build-maintain-dispose options, space-allocation options, out-sourcing options and asset portfolio. Unfortunately, they did not address any reasons or distinctive knowledge-base of FM which makes FM the most appropriate candidate to carry out these strategic tasks. Yiu (1998) opined that all these strategic tasks can be regarded as the management of a market-rm spectrum. Bridge (2000) also considered this market-rm dichotomy as a make-or-buy decision. Classical management theories assume an organization which makes products or services, while construction project management theory assume a client who buys goods and services from consultants and contractors by means of different contractual arrangements. They are the two ends of the spectrum. This spectrum ranges from the establishment, or continuation of, factors of production that are directly controlled by the organization, to the indirect control of the same factors via the appointment of an alternative organization [or via the market] (Bridge, 2000; bracket mine). With the recent growing concerns on rising occupancy costs and the trend towards outsourcing on non-core business, FM can be a good candidate to carry out the strategic role if we have a distinctive knowledge-base on how to source and evaluate between intra-rm administrative governance (strategic management) and inter-rm contractual arrangements (construction project management). The performance of FM also becomes differentiable from that of strategic management, construction project management and building professionals under this framework. Figure 1 shows the conceptual framework depicting the relationship among FM, strategic management and construction project management. FM is founded on a distinctive knowledge-base on the management of the market-rm spectrum. This paper also derives four strategic roles of FM from this market-rm management. They are: (1) The sourcing of supporting services (strategic outsourcing). (2) The sourcing of workspaces (space management). (3) The sourcing of funds from infrastructure facilities (project nance and investment). (4) The fourth pivotal role of FM is the continuous assessment on quality and performance of facilities and institutional arrangements.

Figure 1. FM is the management of the market-rm spectrum

These four strategic roles of FM are derived from the eight competent areas proposed by the IFMA, but they are re-grouped by putting the emphases on this market-rm management. Thus, FM is redened as the formulation, implementation and evaluation of market-rm decisions on the sourcing of space, services, funds and performance. The following sub-sections articulate the future FM research directions on these four strategic roles of FM. They will show that these four strategic roles of FM are currently a vacuum in both theory and best practice guidance. Neither strategic managers, project managers nor contract managers get hold of the knowledge-base to make these decisions, as they are standing at the two ends of the market-rm spectrum, and no one cares about the in-between. There have been very few research particularly on this market-rm decision area, let alone any best practice guidance in the industry. 4.1 Sourcing of services strategic outsourcing Outsourcing, in-sourcing and co-sourcing are key words in FM, they are different ways of sourcing supporting services. However, instead of blindly advocating outsourcing, FM has to develop its own theory in explaining why under certain circumstances, outsourcing can out-perform in-house provisions. Unlike the IFMAs (1994, 1997, 2001) reports on benchmarking of operations and maintenance, which show the percentage and areas of outsourced services only, we need more scientic results and advice on making outsourcing decisions. There have been some pioneer works done by scholars in this direction. For example, Bridge (2000) put forward a make-or-buy framework on core competence and strategic outsourcing. Domberger (2002) provided a comprehensive evaluation guide on outsourcing strategy by incorporating institutional economics theories. Usher (2004) differentiated outsourcing from out-tasking by offering a management model. Klein (2004) also provided a review on empirical studies of this make-or-buy issue. Unfortunately, the economists transaction costs approach is abstract and still offer no practical guidance. This distinctive knowledge-base is developing in FM and it will certainly become one of the key performance indicators of FM. 4.2 Sourcing of workspace space management With the market-rm concept, an organization may not produce goods or services itself, workforce and workspace are therefore not necessarily required anymore. Much more exible approaches in workspace management are sought after. Bradley and Woodling (2000) forecasted a demand for intelligent workspace, which is short-stay, exible offer, high value-added serviced accommodation. McGregor (2000) also highlighted the transient work patterns undertaken at different venues and at dispersed locations in future workspace. Langston and Lauge-Kristensen (2002) reviewed six types of space management strategies, namely, traditional cell, multi-site, shared space, hotel space (or just-in-time ofces), free address (or landing site), and virtual ofce (or satellite ofces telecentres and home). It is not merely a lease-or-own decision. However, it is very seldom noticed that construction projects always involve transient work patterns. Intelligent workspace concept has long been commonly implemented in construction site management. Unfortunately, there are few theorization developments on construction workspace management. It shall form a core research focus of FM.

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4.3 Sourcing of funds from infrastructure facilities project nance and investment FM is paying more attention to resource management. Fund sourcing from infrastructure facilities is therefore regarded as the nancial resource trail of FM in Nutt (2000). First, outsourcing releases a tremendous sum of supporting infrastructure costs. Existing workspace provides a novel source of funds in nancing new projects. Besides, down-sizing, dis-investment, sales and leaseback, letting out and change of use of existing space, real estate investment trusts, private nance initiative/public-private partnership, infrastructure funds and bonds are some of the new channels heavily discussed in FM journals (Nutt, 2000; Jones, 2000, etc.). Yet, very few research have been done on this area in FM. The exibility in sourcing of fund for and from infrastructure facilities is unprecedented and untapped in the classical management discipline, but the huge need in nancing infrastructures and developing novel project nance channels in East Asia countries has been reported and urged by many international organizations, such as ADB (2007) and JBIC (2007). Advanced studies in nance, such as real options theory and nancial engineering concepts, are cornerstones for future development of FM in this area, but it requires novel FM theory and best practice guidance specically on these new vehicles of investment. 4.4 Sourcing of performance quality and performance assessment Managing the market-rm spectrum is a dynamic decision process which changes over time. A continuous assessment of the performance of the sourcing of services, workspace and funds is of paramount importance. It does not only assess the performance of facility itself, but it also evaluates the performance of the institutional arrangements as well as the performance of FM itself. They demands benchmarking for comparison, and sophisticated tools for assessments. Nowadays, benchmarking has become one of the benchmarks of FM. For example, IFMA (1994, 1998, 2001) has published operations and maintenance benchmarks every three years. Numerous quality assessment tools and benchmarking standards have been developed. A large-scale study on the benchmarking metrics of facilities is also underway by Ho et al. (2000). Unfortunately, almost all studies in this area focus on the performance of facilities and are at operational level. There are few investigations on assessing the performance of institutional arrangements, let alone the performance of FM. They probably forget that the former is the knowledge-base of building professionals, not of FM. Only the latter two are the cutting edges of FM, but they are blank. Space audits, energy audits and building performance audits may be important tasks of FM, but the audit of FM performance is even more important yet is ignored. 5. Conclusions FM discipline is relatively young in comparison with other classical management disciplines. However, FM is often considered as the management of facilities, which is simply a branch of the property management discipline with emphasis on building engineering. For example, facility management is dened in the Wikipedia (2008) as the management of buildings, physical plant and services. The term facility management is [considered as] similar to property management, but often applied only to larger and/or commercial properties where the management and operation is more complex. As a result, FM profession has no distinctive knowledge-base, but borrows from property management theories and building professional practices.

It raises an identity crisis of FM as highlighted in Price (2002). Although there have been many conceptual frameworks put forward for FM, they are either borrowing from some other disciplines or struggling with senior management for authority. In short, they are arguing what should FM be and not why FM can be. This paper, on the contrary, puts forward a conceptual framework on the market-rm dichotomy which articulates the link among strategic management, construction project management and FM. FM is regarded as the management of the market-rm spectrum. Four strategic roles of FM are identied, they are the sourcing of services, the sourcing of workspace and the sourcing of funds from infrastructure facilities; and sourcing of performance. This model is crucial to the future development of FM because it identies the unique identity of FM and drains the resources to establish a distinctive knowledge-base. FM researchers and practitioners have to work together to study the effects of different market-rm decisions on the on the performance of the four sourcing areas. FM theories and best practice guidance on this market-rm decision making process shall also be developed.
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Price, I. (2002), Can FM evolve? If not, what future?, Journal of Facilities Management, Vol. 1 No. 1, pp. 56-69. Project Management Institute (2008), Homepage available at: www.pmi.org/info/ Pp_OPM3ExecGuide.pdf (accessed May 29, 2008). Scott, W.R. (1992), Organisations: Rational, Natural and Open Systems, Prentice-Hall, Englewood Cliffs, NJ. Taylor, F.W. (1911), The Principles of Scientic Management, Harper, New York, NY. Then, D.S.S. (1999), An integrated resource management view of facilities management, Facilities, Vol. 17 Nos 12/13, pp. 462-9. Usher, N. (2004), Outsource or in-house facilities management: the pros and cons, Journal of Facilities Management, Vol. 2 No. 4, pp. 351-9. von Bertalanffy, L. (1969), Systems Theory: Essays on Its Foundation and Development, Braziller, New York, NY. Walker, A. (1996), Project Management in Construction, BSP Professional Books, London. Weber, M. (1924), in Guenther Roth and Claus Wittich (Eds), Economy and Society: An Interpretive Sociology, Vol. 3, Bedminster Press, New York, NY (1968 trans.). Wikipedia (2008), Facility management, Wikipedia The Free Encyclopedia, available at: http://en.wikipedia.org/wiki/Facilities_management (accessed May 29, 2008). Winch, G. (1988), The construction rm and the construction project: a transaction cost approach, Construction Management and Economics, Vol. 7, pp. 331-45. Yiu, C.Y. (1998), Discuss the relationship between the evolution of project management in construction and the evolution of management theory, Land and Construction Management Coursework, Department of Real Estate and Construction, The University of Hong Kong, Hong Kong (unpublished). Further reading Galbraith, J.K. (1985), The Anatomy of Power, Corgi Books, London. Systems Gap Working Party Report Association of Project Managers (1984), Closing the Gaps in Project Management Systems, Butterworths, London. Corresponding author Chung Yim Yiu can be contacted at: ecyyiu@hkucc.hku.hk

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