The term “benchmark” was originally used to describe a point related to elevation. We now use it to describe the measurement and comparison of all sorts of data.
In the apartment business, utility benchmarking is a hot topic. But, what does it mean? Is it a code word for something else? Is it just a fancy term for measure? How do you do it? Once you’ve done it, then what do you do with it? I’ll offer answers, but by no means are they absolute. This is my interpretation of benchmarking and how I’ve used it to manage utility expenses and their recovery.
I’ve heard people use the term benchmark when they really meant manage. So when talking about utility benchmarking, they were really talking about utility management. These terms are not interchangeable. Utility benchmarking precedes utility management. It’s the measurement that determines where to focus our energies.
How do we get to that measurement? Start with what is readily accessible.
We all have financial data in our accounting systems. Start there. But we look at that all the time. What is going to make the data stand out?
By simply grouping properties, first by property type, they by cost per apartment unit, you will see your most costly properties rise to the top. Then calculate an average cost per unit, by property type, and that is your “benchmark.” Everything over that average is your new area of focus.
There are a number of third party products that can help with benchmarking, as well. In the early days of utility management, solutions were manual and time consuming. Now companies are sophisticated in their data collection and reporting. Also, utilities are cooperating and enabling vendors, and owner/managers, to collect and share utility data electronically. This allows utility managers to simplify the process and get right to measurement and management.
Third party vendors also have helpful dashboards that compare your data to the rest of your portfolio, and to the rest of their client database. This gives you a clear picture of how your properties stack up both internally and to the greater industry at large.
No matter how you do it, internal spreadsheets or high-tech, third party tools, utility management is a valuable and necessary process. You can also find the latest government-mandated benchmarking laws and their requirements at: nwp.com/benchmark