||The Third Resource
by John O'Shaughnessy
People and money are two resources enterprises either manage well
or pay a high price for neglecting. The third resource, property,
is very often under-managed by many businesses and public-sector
organizations. A new main committee has formed within ASTM on
Property Management Systems (Committee E53) to create standards for the many aspects of managing the third
For nearly a year the National Property Management Association
(NPMA) has been working with ASTM to establish a new standards committee,
dedicated to the development and documentation of standards, practices,
and systems for use by property professionals and resource managers,
and to advance the field of property management. The new ASTM
Committee E53 on Property Management Systems is the result of
Property management is a specific branch of resource management.
To gain a clearer understanding of this field it must be viewed
from the context of managing critical resources. A brief overview
should help establish the position of property management within
the broader resource management arena.
What Is Property Management?
Resource management is the art and science of managing the three
primary resources critical to the success of most enterprises:
people, money, and property.
Property management refers to all of the knowledge, skills, processes,
and systems directly related to the management and administration
of this third resource throughout its life cycle, from initial
acquisition to final disposition. It includes capital assets as
well as real and personal property, both tangible and intangible,
when used across a broad spectrum of public and private enterprises.
These include federal, state, and local government agencies; medical
facilities; universities; and commercial, industrial, and service
organizations. It includes all types of propertyboth capital
and expensethat are considered critical to the successful accomplishment
of an enterprises goals.
Property management and administration is a field bound by legal,
regulatory, financial, and contractual requirements, and is governed
by a variety of both practical applications and ethical principles
and considerations. The purpose of the new ASTM Committee E53
is to document and codify the best processes, practices, tools,
techniques, measurements, and systems as standards of performance
in the field of property management and administration.
The creation of a standards committee specifically focused on
the management and administration of property, as defined above,
is a milestone in the field of property management.
This venture will provide much-needed exposure for this critical
and often little-understood area of resource management. There
are few unexplored areas for improvement in business today. The
third resource is definitely one of these.
The Three Resources
Property management and the opportunities it presents to managers
everywhere can best be understood from a resource perspective.
As observed earlier, most endeavors require three fundamental
resources: people, money, and property (or assets). The timeliness,
adequacy, and effectiveness of these three resources ultimately
determines the success or failure of the venture.
The First ResourceThe first resource, people, is well understood and accepted as
a critical element in the success of most activities, particularly
when related to the conduct of business. Too many or not enough
people (not in the right place at the right time with the right
skill set, or worse, ineffectively or inefficiently utilized)
could spell disaster for a business. Literally hundreds of books
are available on the management of people in a business environment.
Undergraduate and post-graduate programs are available at most
universities for the effective management of human resources in
a business environment. There are literally dozens of metrics
and measures of effectiveness for determining the adequacy, productivity,
efficiency, and effectiveness of both the workforce and those
that supervise or manage them. All of this has a foundation of
professional training and certification programs geared to improve
the people resource management skills of individuals at all levels
and from all disciplines.
The Second ResourceThe same is true for the second resource: money. Again, not enough
in the right place, at the right time, and at the right rate,
can quickly lead to failure. Money spent on the wrong things can
have equally costly consequences. Like the first resource, there
are undergraduate and postgraduate programs at universities all
over the world addressing the effective management of money in
the business sector. Countless metrics, performance measures,
and standards have been established and many have been incorporated
as law. There are library shelves of books published on the subject.
Often, a managers performance ratings and bonuses are based in
large part on how well they manage their financial resources.
As is the case with people resources, financial management is
taught across all disciplines. Managers, regardless of their primary
field of interest, are expected to be competent in the effective
management of this vital resource.
The Third ResourceThat brings us to the third resource: property. Although it holds
much of the same potential as the other twoto function as a powerful
enabling force or a serious impediment to the success of a ventureit
is seldom managed as one would any other critical resource. In
many instances it is ignored until major problems arise, caused
by the lack of attention to this resource. There are no degree
programs and very few courses available on the subject. The NPMA
Standard Property Book is one of the very few comprehensive books
available today on the subject. There are only a handful of metrics
and measures and, with the exception of a few specific areas in
the public sector, there are no published standards of performance.
Some aspects of property management are well defined, but most
are not addressed except by practitioners in the field. One exception
is the financial tracking and reporting elements in support of
the Security and Exchange Commission and Internal Revenue Service
requirements. These are fairly clear and qualified people supported
by capable financial systems exist for this purpose. However this
element of property management is more a part of the second resource
than the third.
What Is Included in the Third Resource?
What are the items that are recorded, controlled, managed, reported,
and administered by property management professionals? Mostly
they are the assets acquired by an organization to perform or
support its primary mission. These include items that are purchased,
fabricated, borrowed and/or leased, and which are used by the
organization to achieve its strategic and operating goals. Most
often these things are referred to as property.
The federal government has further classified property into two
types and five major categories. The two general types are real
and personal. Real property refers to real estate: land, buildings,
and permanently installed improvements such as sewers, side walks,
parking lots, lighting poles, etc. Personal property addresses
everything else that doesnt meet the definition of real property.
The five classes of federal personal property are 1) agency peculiar
property (items designed and produced specifically for a particular
agency of the government), 2) facilities (generally commercially
available equipment, but may include real property), 3) material,
4) special test equipment, and 5) special tooling. (See the sidebar
to the right for definitions of each of these.)
While companies doing business with the United States government
are very familiar with these classifications, those outside the
government contract community have little familiarity with them.
In the commercial world, the terms property, plant, and equipment
have been established as classifications for depreciation and
tax purposes. These are further divided into real estate or facilities,
capital assets, and expensed and leased property. Property of
a capital natureitems costing over a preset threshold and having
a life expectancy greater than two yearsare called fixed assets
by the finance folks. These are the ones reported in the companys
financial statements each year. There are numerous sub-classifications
including office equipment, production machinery, tooling, test
equipment, computer and peripherals, software, etc. Below this
level of classification there are myriad special circumstances
that require additional classifications. In general, all of these
are to support record and reporting requirements, and the financial
treatment of these items.
Who Manages Property?
The role of property management is very much a matter of perspective,
as any good property administrator will quickly confirm. Even
the terms property administration or property management are
not standardized. The terms property control, property management,
property administration, asset management, and fixed asset accounting
are all widely used. Within private industry, the property folks
may (depending on the company) report to the finance, materials,
contracts, facilities, or operations directorates. Again, depending
on the company, they may report directly to the vice president
or director level or they may be parked in an obscure corner of
the organizations hierarchical chart. Companies that realize
the benefits and value of managing the third resource have property
managers at the director level and in their corporate offices.
Their primary mission is to coordinate the property management
activities across the companys divisions, in much the same way
that a corporate human resources director or finance controller
interact with the divisions now. The lions share of an organizations
understanding of and concern for the third resource can be determined
by the placement of the property function within that organization.
Property Management Today
Most of the structure that defines the property management field
has evolved from government legal, regulatory, and contractual
requirements that were enacted to resolve problems before litigation.
(As one might expect, they were actually enacted after litigation
that did not find in the governments favor.) Some of these cases
date back to the Civil War years.
It should be noted that the term property management as used herein
does not include enterprises devoted primarily to the management
and administration of commercial properties such as real estate
sales, hotels/motels, or apartments/condominiums. Although they
clearly meet the description above, these enterprises are not
currently part of the objectives of the ASTM property management
Property management today has evolved from control and accountability
of assets to a much more complex and technically challenging field.
Many companies today are viewing themselves from their stock investors
perspective along with the more traditional methods. The third
resource has a direct impact on these calculations. Companies
employing a value based management measurement process usually
have senior management bonuses tied to an economic index. Inadequate
attention to the third resource has a direct, decidedly negativeand
often maskeddouble impact on this index. Excessive capital and/or
ownership costs adversely impacts the index and therefore the
To gain a competitive advantage in the new global marketplace,
companies have downsized, rightsized, merged, partnered, and outsourced.
Theyve implemented process and quality improvement programs to
support their strategic and operating goals: total quality management,
just-in-time inventory control processes, Malcolm Baldrige National
Quality Awards assessment processes, lean manufacturing, theory
of constraints, Kanban, six sigma process improvement schemas,
value based management, and, the latest entrant into the improvement
game, value based six sigma. All of these, and the many other
improvement programs not mentioned here, are specifically focused
on the first two resources. Until now the third resource has remained
The Few Government Standards Are Not Enough
Within the federal government, interest in the management and
administration of the publicly funded property under its control
is well documented.
The National Aeronautic and Space Administration, the Department
of Defense, and the Department of Energy all have well-defined
property management guidelines and performance criteria. As good
as these performance standards are, they have limited application
in the commercial world. Government agencies have the stewardship
responsibilities for all of the property purchased with public
funds. The Federal Acquisition Regulations and supplements that
are the basis of the governments property criteria require equal
treatment for a washer valued at $0.001 and a special test set
valued at $1 million. These regulatory requirements are grounded
in public law and, although effective, they may not be cost efficient.
As mature as these government systems are, there has been significant
increase in interestand in some cases alarmover the need to
drastically improve them. Congress, through committees and legislation,
has also expressed its concern, principally in terms of the accuracy
of reports regarding government property and the accuracy of the
financial reports of all property owned by the federal government.
Similar regulatory changes have been enacted affecting state governments,
universities, and even hospitals. A testimony to the complexity
of managing the third resource can be found in the governments
seven-year struggle to obtain approval for a much needed new government
In the private sector, legal and regulatory directives govern
the field of property administration. Both IRS and SEC require
that records of all capital be maintained and reported. Of course,
as was discussed earlier, the stockholders also want this information
to assess the status of their investment. These may be regulatory
requirements, but these practices just make good business sense,
But, surprisingly, the concept of managing, rather than recording
and reporting, assets is not addressed in these regulatory documents.
In most instances resource managers at all levels are held accountable
only for the first two resources. It is a rare occurrence to find
a company with systems, processes, metrics, and measures of effectiveness
to actually manage the third resource throughout its life cycle.
Those few that have embraced the concept of managing their assets
are true pioneers.
Most businesses have a significant investment in the third resource,
with little in the way of management beyond the administrative
and accounting duties dictated by law or regulation. Essentially,
investments in assets are considered sunk costs to be depreciated
and later to be disposed of. In most companies little is known
about the life cycle costs between acquisition and final disposition
as these costs are obscured in indirect cost pools. Often, management
policies dealing with the second resource, money, have an adverse
effect on the third resource. Typically managers at all levels
are measured on how well they manage their people and budgets.
Few if any are measured on how well they manage the property under
their control. It is a rare occurrence when a program manager
is required to manage and report on all three resources in support
of specific program goals.
Still, there are selective areas of property resource management
in the commercial manufacturing world that use well-developed
and documented resource management systems. As a result, their
importance and impact are well understood and these systems are
well refined and documented. Material is one of the few classes
of property that can claim a well-developed, documented, mature
resource management system. It is measured and managed at all
levels of a company, particularly companies that are in manufacturing
or related businesses. The material management process begins
during the proposal phase and extends throughout the business
life cycle of the product. However, the knowledge gained from
these matured systems has not been extended to all of the property.
Given these limitations, the formation of ASTM Committee E53 on
Property Management Systems demonstrates the advantages of out
of the box thinking. This endeavor takes a major step toward
launching property administration into the mainstream of resource
Virtually every organization and function that requires property
resources to cost effectively reach their goals or remain competitive
in the global marketplace will reap enormous benefits from participating
with the E53 committee in the development of standards, practices,
and systems for the successful management of the third resource.
Certainly all will benefit from the products being developed by
this newest entrant into the standards world. //
Copyright 2000, ASTM