The Business Case for “Living Asset” Management

Ben­e­fit­ing Orga­ni­za­tions and Their People

As pub­lished in Expert Busi­ness Advice

By

Scott L. Girard, president

Lan­dE­con­ics, Inc.

Every­one these days talks about sus­tain­abil­ity.  Indeed, many cor­po­ra­tions and juris­dic­tional agen­cies demand sus­tain­abil­ity in struc­tures, processes, and even land­scapes.  The real chal­lenge in busi­ness though, is con­vinc­ing the uncon­vinced man­age­ment team that sus­tain­abil­ity goes well beyond the usual emo­tional “feel good” response to the issue, and indeed makes good busi­ness sense in ways that will add sig­nif­i­cant value to the bot­tom line.

 

So, what is “liv­ing asset” man­age­ment and why is it impor­tant?  Why is it more impor­tant than it has ever been before?  Why do we need to focus on it?

 

Most of us are famil­iar with the term “asset man­age­ment.”  It gen­er­ally deals with the man­age­ment of col­lec­tive invest­ment instru­ments such as stocks, bonds, and mutual funds.  In the area of facil­i­ties man­age­ment, it involves decision-making focused on the high­est value strate­gies for the use and care of cor­po­rate assets – tak­ing into account the respec­tive life­cy­cles of the assets.

 

So, just what are “liv­ing assets?”  Sim­ply put – liv­ing assets are trees, shrubs, and other veg­e­ta­tion pur­chased and placed on a piece of real estate.  When cared for and nur­tured prop­erly, their value increases sig­nif­i­cantly over time. For exam­ple, it is not uncom­mon for that tree you planted five-years ago for $65, to cost five times that amount ($325) to replace it with a like-sized spec­i­men today…and that is just one tree.  Often an asset man­age­ment firm will help clients by lay­ing out clearly defined steps to enhance per­for­mance and reduce costs.   The same is true when deal­ing with liv­ing assets.

Old Growth

Photo Credit: Nicholas_T; Flikr

It is a fis­cal fact that life-cycle costs for land­scape main­te­nance far exceed design fees and instal­la­tion costs.  Too often com­pa­nies are shocked to learn the costs asso­ci­ated with main­tain­ing their newly com­pleted land­scap­ing.  At Lan­dE­con­ics we employ applied eco­nom­ics as a design tool that pro­vides a win­dow into pro­jected annual main­te­nance costs.  This pro­vides pre-emptive pro­tec­tion for our client’s cap­i­tal invest­ment in land­scape fea­tures, thereby pre­vent­ing the costly cycle of reac­tive main­te­nance – even before the design is complete.

 

At Lan­dE­con­ics we believe that sound finan­cial deci­sion mak­ing goes well beyond sim­ply cal­cu­lat­ing and review­ing the ROI of a sus­tain­able land­scape.  Since finan­cial resources are finite, pru­dent fidu­ciary respon­si­bil­ity dic­tates that a com­plete under­stand­ing of a project’s invest­ment be reviewed in terms of the high­est and best use of those finan­cial resources.  This requires an even deeper under­stand­ing of finan­cial ‘lingo’ includ­ing the cal­cu­la­tion of net present value (NPV) and inter­nal rate of return (IRR) of any poten­tial invest­ment or expen­di­ture in order to ensure max­i­mum return on the investment.

 

Our premise is that our coun­try is in a period of rapid change.  Change is all around us – in our polit­i­cal sys­tem, in our eco­nomic sys­tem, in our insti­tu­tional rela­tion­ships, in tech­nol­ogy, in pub­lic atti­tudes, in our client’s expec­ta­tions.  Those respon­si­ble for land­scape sus­tain­abil­ity and man­age­ment must now think about them­selves dif­fer­ently.  At Lan­dE­con­ics we are mind­ful of, and fully embrace the fact that what we decide today will have sig­nif­i­cant and long last­ing con­se­quences, both in terms finan­cial and envi­ron­men­tal results for our clients and their liv­ing assets.

 

The pri­vate sec­tor uses all man­ner of tools to eval­u­ate their finan­cial health because they worry about the bot­tom line, they worry about mar­gins, they worry about how much money they have to run their busi­ness, and they worry about how much profit they are going to make.  And increas­ingly, the same can be said for the pub­lic sector.

 

As ‘liv­ing asset” man­agers, we are con­stantly engaged in help­ing our clients under­stand the hor­ti­cul­tural require­ments of their spe­cific land­scape, thus enabling them to make informed finan­cial deci­sions, and elim­i­nate waste­ful­ness  through inno­v­a­tive land­scape design and main­te­nance strate­gies.  We pro­vide tools that will serve to max­i­mize the cost-effectiveness and sus­tain­abil­ity of a land­scape man­age­ment pro­gram, ensur­ing that ini­tial cap­i­tal invest­ments do indeed pay-off over the life­cy­cle of the land­scape.  As such, sav­ing our client’s money with­out com­pro­mis­ing the cre­ativ­ity, appear­ance, via­bil­ity, and sus­tain­abil­ity of their “liv­ing assets” is our stated Mis­sion at LandEconics.

 

We have proven time and again that “Green” prin­ci­ples of sus­tain­abil­ity become dra­mat­i­cally rel­e­vant when tied to the finan­cial results dri­ven by cost-effective liv­ing asset man­age­ment.  In the process of doing so, we have seen a vast num­ber of the “uncon­vinced” become con­vinced  that sus­tain­able land­scapes do indeed make good busi­ness sense in ways that add sig­nif­i­cant value to the bot­tom line.

Investors vs. Users

Prop­erty Man­age­ment & Facil­i­ties Management

Dif­fer­ing Goals; Same Out­come With “Liv­ing Asset” Management!

Jim Ricker, Vice Pres­i­dent, Cor­po­rate Ser­vices with Cre­saPart­ners, wrote an arti­cle about the dif­fer­ences between prop­erty man­age­ment and facil­i­ties man­age­ment.  He stated that the for­mer work for investors who own real estate for the cash flow from oper­at­ing income and for the gain in value dur­ing their own­er­ship term”, while the lat­ter work for “the users of real estate who either own or lease their prop­er­ties”.

Mr. Ricker out­lines the goals of each group as being pri­or­i­tized in oppo­site order from one another:

Investors:

  1. Income — max­i­mize income from operations
  2. Value — increase the value of the property
  3. Cus­tomer rela­tions — main­tain ten­ant rela­tions to help max­i­mize occu­pancy and cash flow
  4. Oper­a­tions — effi­ciently main­tain the prop­erty in order to achieve the first three goals

Users:

  1. Oper­a­tions — main­tain the prop­erty in sup­port of the res­i­dent busi­ness units, with an empha­sis on ensur­ing that assets reach their use­ful lives and that inter­rup­tions to the busi­ness units are eliminated
  2. Cus­tomer rela­tions — ensure that ser­vices are cost-effective and geared toward sup­port­ing the busi­ness units
  3. Value — main­tain the value of the prop­erty in the event that it becomes sur­plus and avail­able for disposition
  4. Income — not a pri­or­ity, unless sub­let­ting of sur­plus space is involved

Now, here’s the Good News for both groups:  Prop­erly man­ag­ing the “Liv­ing Assets” on a cam­pus will pay­off in each area!

(I’ll present these in alpha­bet­i­cal order)

Out­comes of “Liv­ing Asset” Man­age­ment
  • Cus­tomer rela­tions — The land­scape serves to estab­lish the “first impres­sion” of a prop­erty.  It also pro­vides a set­ting for work­ers to be reju­ve­nated, either by enjoy­ing the out­doors, or sim­ply by look­ing out a win­dow.  By imple­ment­ing a liv­ing asset man­age­ment pro­gram, own­ers can be assured that these ben­e­fits accrue in an effi­cient, cost-effective manner.
  • Income — When the hor­ti­cul­tural require­ments of the land­scape are opti­mized to be in har­mony with the bud­getary require­ments of the orga­ni­za­tion, the waste is elim­i­nated, and the land­scape can thrive with­out requir­ing an inor­di­nate expen­di­ture each year.
  • Oper­a­tions — Ongo­ing oper­a­tional costs are sim­ply a real­ity when it comes to main­tain­ing the grounds of a prop­erty.  But, these can (and should) be done with an under­stand­ing of what specif­i­cally is dri­ving the costs.  With illu­mi­na­tion, wise decision-making is made pos­si­ble, and the orga­ni­za­tion reaps the ben­e­fits.  With proper plan­ning, the ini­tial cap­i­tal invest­ment in the land­scape can grow into a mature set­ting — reach­ing its full life expectancy (rather than strug­gling for sur­vival, or worse yet, being butchered and hav­ing its life cut short by overly zeal­ous, but unin­formed main­te­nance personnel).
  • Value — with the proper “Liv­ing Asset” man­age­ment, the landscape’s value increases over time as it grows and matures, pro­vid­ing a beau­ti­ful set­ting that can be enjoyed and appre­ci­ated by all.

There’s a whole lot more to “Greening-Up” your prop­erty man­age­ment com­pany or facil­i­ties man­age­ment depart­ment than merely installing energy effi­cient appli­ances and light bulbs, pur­chas­ing “green energy” from your local util­ity com­pany, and using green clean­ing prod­ucts!  If you’re seri­ous about it, take a look at your land­scape — it will look green, and save you green­backs if you take the Lan­dE­con­ics™ approach to man­ag­ing your “Liv­ing Assets”.

Management Suite

Graphic by Leo Reynolds from Flickr

What is Landscape Architecture?

Hear what the Brits are say­ing — they “get it”!

From the web­site “I want to be a land­scape archi­tect” by The Land­scape Insti­tute, sup­ported by CABE Space (The Com­mis­sion for Archi­tec­ture and the Built Environment).

Kudos to these folks!  Want to be:
  • Green?
  • Inspired?
  • Inno­v­a­tive?
  • Influ­en­tial?
  • Cre­ative?
  • Sus­tain­able?
  • Play­ful?
  • Tech­ni­cal?
  • Vision­ary?
Then visit their web­site to learn more about this won­der­ful profession!