Tag Archives: Kate Forsyth

Electric Bills Shouldn’t Keep You in the Dark

Rubber stamping electric bills is a secret no one wants to talk about; not you, not the company you work for and certainly not the utility company who bills you!

Electric bills can seem mind boggling when your area of expertise is managing buildings versus kWh and demand fees. You need answers now and utility companies are usually as illuminating as a blown generator. Understanding the anatomy of a bill sheds visibility on why your expenses are in or out of line with your budget.

First, there are four basic types of charges:

  • A Service Charge is a catch-all fee that’s charged on every bill for operational costs such as printing, overhead, customer service and maintenance.
  • The Energy Charge is a standard measure of a unit or kilowatt hour (kWh). The kWh = the measure of electricity you use x the length of time you use it.
  • A Power/Fuel Cost Adjustment is a way for utility companies to charge back operational expenses that fall out of budget. Example, if the expense of running a power plant is more than budgeted, your bill will be adjusted upwards by a proportional share to cover those expenses.
  • Demand Charges can be a large part of your electrical bill. A demand charge is based on when you use your energy and whether you’re using it during a ‘peak’ demand time. If you have a bill related to a piece of equipment that requires significant energy during specific periods of ‘peak’ time, this could adversely impact your bill.  Whereas, if your equipment uses relatively equal energy all the time, your bill would be less impacted. Peak demand use = big bills.

The last critical piece to understand is the rate structure and whether it’s correct or the best option available. There are seasonal rates, tiered rates, time of use rates, and now “real time” rates on smart meters. In addition, there are commercial rates and residential rates. By finding your rate type on your bill and reading the utility provider’s rate structure you can better understand what you’re paying and why:

  • A seasonal rate goes up or down based on the time of year. For example: A utility may charge a higher electrical rate in summer versus winter.
  • Tiered rates generally charge customers more if they use more and less if they use less.
  • A flat rate is simple; it won’t fluctuate based on usage and time. It always stays the same.
  • Time of use does fluctuate depending on when you use it. For example, a utility provider may charge more for residential clients in the mornings and evenings when most people are home and using the most electricity. Or, a commercial client may be charged a higher rate from 9 AM to 5 PM when office equipment is at its peak use.
  • “Real time” rates on smart meters are based on the actual time you use the electricity against the actual cost a utility spends at that same time to generate the electricity.

Armed with basic knowledge you can better dissect your bill. You may even find that you qualify for a lesser rate, such as a commercial or residential rate based on your usage patterns. Maybe you can adjust a high energy consuming piece of equipment to run at a cheaper time without impacting performance? Aim a strong light at your next big electric bill and see if there’s an opportunity to take power over your utility expenses.


 

Kate Forsyth
Dir
ector of Energy Management and North East Sales Representative

Kate joined the Minol team in August of 2009. She currently oversees the Energy Management Program with a special emphasis on utility provider bill payment, cost avoidance and green initiatives.

Prior to joining Minol USA, she was employed by REIT AvalonBay Communities, Inc. for more than 20 years where she was responsible for increasing water, sewer, electric and gas collections via onsite associate training; augmenting utility reimbursements by instituting a collection and training process, creating and implementing a new utility recovery program, Hot Water Energy, as well as developing a reinstatement and centralization of the collections programs for AvalonBay’s portfolio which consisted of 54,746 apartments. While with AvalonBay, Kate also successfully lobbied for the passing of the submetering law in Massachusetts in 2005.

 kforsyth@minolusa.com | 410.292.7132

Statistic: EIA 2012 AEO Annual Energy Outlook Table 19; EIA 2009 RECS, Table CE1.1.

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New Construction Utility Expense Management

Getting Your Asset Off to a Good Start from the Ground Up

What if on Day One of the earth moving on your new community you didn’t have to touch the utility aspect of the site?  And, if you wanted to understand what accounts have been created you only need to go to one place to see everything – from what utilities are set up to your current spend? And, what if you could outsource doing everything from powering up the accounts for the trailer right down to installing the last meter woodneeded at the lowest, possible rate available?

Introducing an Energy Manager to the construction team mix in the planning stages will help establish a strong utility expense management structures that carries throughout the life of the investment.

Finding the right person requires a basic understanding of the scope of work and practical benefits. They must have the knowledge to educate you on technology options, as well as the fine details associated with this complex service.

Anyone involved with new construction has experienced the hazards, frustrations, and hair pulling while trying to understand utility bills.

Benefits of Employing an Energy Manager from Day One: 

  • A controlled set up of utility accounts at the right time with the correct, lowest rate available is obviously the best case scenario. Let’s face it, construction companies have the accounts set up at the last minute, rarely worrying about whether the rate is correct. This is a temporary gig for them. You will manage or own the asset long term. An Energy Manager can handle set up based on the construction schedule, on time, at the right rate. No frantic phone calls and unnecessary delays to the project. And, if an issue arises, the Energy Manager sits on the phone with the utility company – not you.
  • The centralization and accessibility of data in an energy management software system is imperative. Imagine no more digging through piles of paper bills trying to find the one number you need. Also, with data being captured correctly and in detail, the ease of accessing it for monthly variance analysis and annual budgets is a breeze. Reports on usage, rates, expenses and exceptions is possible. And, so is making data-driven decisions.
  • Streamlining of A/P processes and the alleviation of work for the accounting and construction, teams, i.e., the rubber stamping of bills versus skilled, audit reviews before payment. For example, the initial paperwork to create accounts, important continuous service agreements and the creation of a standardized process with one point of contact for construction and management can all be handled by an experienced energy manager.

A central point of contact smooths the transition from construction to management with business rules dictating the allocation of bills to be paid based on certificate of occupancy acceptance:

  • Once operational, the Energy Manager continues to add value by eliminating work load for management and expertly handling all your utility needs:
  • Continuous bill auditing using defined metrics. Utility providers never stop making mistakes and rate errors or leaks left unnoticed will cost you big if undetected. Issue resolution on behalf of management is also a critical component. Early detection of problems, such as leaks, and quick resolution are vital to quality utility bill management.
  • Negotiation of procurement contracts is more than just calling brokers and looking for the lowest price. There are dangerous pitfalls of low kWh/high extra fees. A seasoned Energy Manager is crucial to avoiding costly mistakes. Important steps will include reviewing historical usage patterns for your portfolio, aggregating load to gain maximum deal, determining hedging options, scrutinizing hidden fees, finding reputable brokers to contact, manage and negotiate the proposal process, and ultimately present the best options for your consideration. Once a provider is chosen, the Energy Manager maintains and manages the contracts going forward.
  • Failure to connect management and billing. This shouldn’t be a manual process completed on site. Management teams are busy and will miss opportunities to capture all failures to connect problems. An Energy Manager uses a software program designed to capture all failures to connect based on rent roll data versus bill service periods. These would then become exceptions and billed out with an additional penalty fee where allowable by law.
  • If the data is centralized, a budget should be created at an account level based on historical usage patterns, current rate and researched increases triggered to occur in the month forward when actually taking place. Further, anomalies from the previous year, such as leaks, credits or true ups should be scrubbed so the next year’s budget isn’t skewed. This is not the common practice of last year’s expense plus 3-5% increases. It takes a seasoned energy management veteran’s depth of knowledge in utilities to create a realistic budget.

In conclusion, efficient and effective utility bill management is a reality. An Energy Manager will make sure your management associates never open another utility bill envelope.  They will save you time and money and likely make you even more money. Paying a utility bill can cost you upwards of $15 per bill to process. Considering that utilities comprises 16% of your expenses, finding a good energy management program should be a top initiative and not an afterthought.

Kate ForsythKate Forsyth
Director of Energy Management
410.292.7132   kforsyth@minolusa.com

Kate joined the Minol USA team in August of 2009. She currently oversees the Energy Management Program with a special emphasis on utility provider bill payment, cost avoidance and green initiatives. Prior to joining Minol USA, she was employed by REIT AvalonBay Communities, Inc. for more than 20 years. While with AvalonBay, Kate successfully lobbied for the passing of the submetering law in Massachusetts in 2005.

How to Calculate and Increase the Cap Rate on Your Multifamily Asset

The financial market has changed in the past decade with an emphasis on less speculative valuing of investment properties and more reliance on hard numbers. Investors evaluating multifamily assets are far more conservative in valuing a potential purchase for income growth in both the short and long term.  As a result, it is critical to understand a property’s net value and continually look for areas to improve cash flow.

While market location and prospective neighborhood improvements are enticing, today’s buyer is more interested in the capitalization rate (Cap Rate) as a true measure of worth. Cap Rate is defined as the ratio of a property’s net income to its purchase price. The obvious first step in understanding a property’s value is to calculate the Cap Rate.
Cap Rate Calculation

Let’s take this example:

A property of 300 rental apartments with a gross annual rent of $300,000

According to a 2013 NAAHQ survey, a master metered community spends about 46% of its income on operating costs. Of that amount, 13% is utilities. Conversely, a submetered or individual metered property spends about 53% of its income on operation costs with a cost of 6.2% for utilities.

A master metered property with an income of $300,000 will spend $138,000 in
operating expenses

A submetered property with an income of $300,000 will spend $158,000 in
operating expenses

The value of a property is calculated using a Gross Rent Multiplier or GRM.  If the property is in a good neighborhood with good occupancy, take the Annual Income x a Range of 9-11 multipliers to get what the property value should be.

GMR = $300,000 x 11 = $3.3 million

Now put it all together to get your Cap Rate:

Master Metered Property with a Net Operating Income of $138,000/$3,300,000 valued asset
= 4.27% Cap Rate
Or
Submetered Property with a Net Operating Income of $158,000/$3,300,000 valued asset
= 4.8% Cap Rate

8 Tips to Increase a Property’s Income and Reduce Expenses to Improve the Cap Rate:

  1. Never underestimate relentless collection actions – For example, if your residents know you will begin to call, email and send letters 5 days after the rent was due, they will know you mean business.
  2. Carefully screen all residents through a proven application process to avoid delinquent payers and property damage.
  3. Additional income opportunities, with little to no investment, such as coin operated laundry machines, paid parking for premium spots, storage, pet deposits and premium apartment locations are easy to implement on new move-ins and renewals.
  4. Utility recovery can be done two ways where allowed by law: submetering and allocation. A 300 unit community with a cost of $397 annually per unit and a $35,100 investment will recoup about $31,266 the first year, $85,737 year two and $97,387 year three assuming a 2.5% turnover and a 15% common area expense. Simply put, submetering requires an investment and measures each apartment’s utility use, allowing the owner to bill the resident back. A typical payback is 12-13 months. Allocation has no investment and is a billing method that assigns a portion of the utility expense to each apartment based on a number of possible calculations: by occupant count, square feet, number of bathrooms, etc. All residents signed up at move in and renewal would result in net income.
  5. Conservation of common areas in the area of lighting, building envelope, insulation and central system upgrades can greatly reduce utility expenses. Each likely upgrade would need to be carefully vetted to determine the payback so you would know exactly when to expect an increase in income.
  6. Reduce vacancy. Keep in mind that every day an apartment sits vacant on a rent of $1,000 per month, you are losing approximately $33. At a 5% vacant rate, that’s $495 a week and $14,850 a month. Make sure your leasing staff is dedicated, skilled and focused on leasing as a top priority. To borrow a hospitality phrase – “Heads in beds!” – is what the daily goal should be.
  7. Raise rents annually so residents expect an increase and are prepared for it. A lower, consistent annual increase is better than trying to increase rents drastically and losing residents.
  8. Property improvements: If there is an improvement you can make that you can charge for and show a payback within a reasonable period, consider it.

It’s worth taking the time to determine and understand your Cap Rate. Once you do, you can review your options for increasing income. Each property has the potential to increase its Cap Rate. The question is how will you make it happen and what’s the best way to do it?

Kate Forsyth


Kate Forsyth

Director of Energy Management, Minol
410.292.7132
kforsyth@minolusa.com

Kate joined the Minol USA team in August of 2009. She currently oversees the Energy Management Program with a special emphasis on utility provider bill payment, cost avoidance and green initiatives. Prior to joining Minol USA, she was employed by REIT AvalonBay Communities, Inc. for more than 20 years. While with AvalonBay, Kate successfully lobbied for the passing of the submetering law in Massachusetts in 2005.

Illuminate Your Lighting Efficiency

Shedding the Light on Energy Savings

The EIA says 50-75% of your utility expenses are for electricity and of that, approximately   21% is just lighting. If you spend an average of $100,000 annually on one building that adds up to $21,000 just to keep the lights on! By simply making your lighting 25-50% more efficient, you could save up to $10,500 each year.

It sounds easy and it is. Below are some steps to get you started:

Step 1:   Determine how much you are using and spending

lighting-tipIt’s critical to know what you are doing now so you can assess opportunities for energy savings later.  You will need 12 months of common area bills that include the building’s interior lighting.  This should include all account numbers, billing date cycles, number of days in each bill, usage in kWh and demand kW, and expense. At the end of each month, calculate the rate by dividing expense by usage. This will give you a base analysis for where you are now versus when you initiate your lighting cost avoidance program. If possible, include a hyperlink to actual bill images to be referenced later as needed.

Step 2Complete a building lighting audit

You need to know what type of lighting you have, how often it’s in use and where it’s located.  A building diagram with notes is very helpful.  It is best to do the audit both during and after business hours. Below are some examples of questions to answer:

  • Are lights off in unoccupied spaces? (Stairwells, parking levels, fitness centers, business centers, party rooms, offices, basements).  There may be opportunities for reduced or sensor lighting.
  • Are lights in the models on sensors or timers to be off when unoccupied?
  • What are the model, types, and usages for your lighting fixtures in the main hallways and business areas?
  • What are the hours when lighting is used in business areas, hallways, basements, storage, garage, fitness, and business rooms?
  • Are you installing energy efficient lighting in vacants when turned?
  • Do you have the number of fixtures, number of lamps per fixture, type/number of lamps per ballast, wattage?
  • What dates were fixtures installed and what is their condition?
  • What is the daylight availability (windows near lighting)?
  • Are the tasks performed in the space (critical or secondary)?

Step 3: Low hanging fruit: Consider where you can change lighting hours, add motion sensors, timers, light reducers and use energy saving lamp bulbs.

This is the easiest, least expensive step you can make.  You know you can’t rely on people to remember to turn off lights but for a small expense you can make sure lights not used are off or energy reduced during day light hours or evening hours. Sensors, light reducers or timers in models, business centers, fitness facilities, basements and storage areas are key energy savers.  Even in the garage and stairways, you can usually install light reducing devices that will use half the energy when not in use without violating any safety requirements. Make sure you rid every lamp of incandescent light bulbs – these not only use more energy to light the space, they put off 2-3 times the heat and last a fraction of the life of an energy efficient bulb.

Step 4Hallway lighting

Hallway lighting can easily account for a large chunk of your common area electrical bill.  By choosing the best lighting for the task you can reduce your usage by 20-50%. If the fixtures are well-maintained, it may be worthwhile to research your options for replacement bulbs that would fit and be more energy efficient. If it’s time for replacement, you may pay for the new fixtures in energy savings within a reasonable time. A simple pay back analysis can help you determine what your best option might be:

To calculate a simple payback on your investment, divide the cost of the new fixtures by the annual cost savings using current rates. You have already determined your annual usage and rates in Step 1.  Now, you can apply the energy savings by installing the new equipment to the usage once

you have that number divided by the cost of the investment.  Easy Tip: Hallways and ceilings painted in light reflective colors increase the light glow and help reduce energy usage.

Finally, once you’ve completed Steps 1-3, it’s recommended to consult with lighting experts on your findings and determine the most efficient next steps toward energy savings. You and your budget will be glad you shed some light on your energy expense!

________________________________________________________________________________________________________

Kate Forsyth
Director of Energy Management and North East Sales Representative
410.292.7132  Ι  kforsyth@minolusa.com  Ι  linkedin

Kate Forsyth_thumbnailKate joined the Minol USA team in August of 2009. She currently oversees the Energy Management Program with a special emphasis on utility provider bill payment, cost avoidance and green initiatives.

Prior to joining Minol USA, she was employed by REIT AvalonBay Communities, Inc. for more than 20 years where she was responsible for increasing water, sewer, electric and gas collections via onsite associate training; augmenting utility reimbursements by instituting a collection and training process, creating and implementing a new utility recovery program, “Hot Water Energy, as well as developing a reinstatement and centralization of the collections programs for AvalonBay’s portfolio which consisted of more than 150 properties. While with AvalonBay, Kate also successfully lobbied for the passing of the submetering law in Massachusetts in 2005.

The Greenhouse Gas Story Explained – Part 1 in a 3 Part Series

Scientific leaders have long been concerned about the effects of greenhouse gases (aka GHGs). The existence of GHGs was discovered by Swedish scientist, Svante Arrhenius, in 1896 when he first proposed that fossil fuel combustion may result in increased global warming.  Graham Bell continued to warn in 1917 that “[The unchecked burning of fossil fuels] would have a sort of greenhouse effect” and “The net result is the greenhouse becomes a sort of hot-house.” While its effect continues to be a hot topic for debate, the science behind the emission of green gases is based in fact, as is the Environmental Protection’s Agency regulatory stance.

The debate about the greenhouse effect primarily began with the Supreme Court ruling in 2007 that GHGs could be regulated by the EPA if it was determined these gases were harmful to humans. In 2009, the EPA proved that increased temperatures would lead to an increase in infectious diseases, water scarcity, damage to plants and animals grown for food, wilder weather patterns and other negative effects to natural processes. One year later, the EPA began tailoring regulations to lower the amount of GHGs allowed to be emitted.  Between the years of 2011 to 2014, the EPA began to require states to draft State Implementation Plans (SIPs) to lower emissions. In 2020, each state’s clean power plans will be in effect.

How is the greenhouse effect defined?

In an ideal scenario, the earth absorbs about 50% of the sun’s heat and the remainder is reflected back into space by clouds; however, fossil fuel burning (natural gas, coal, oil) creates gaseous compounds that hold infrared radiation causing thermal radiation (heat). The result is the earth’s surface temperature rises above normal levels because less of the sun’s heat can be reflected back into space. It is believed that even one degree can make a big difference to planetary conditions.

How might this impact a business?

The ruling by the EPA in 2009 requires that any corporation or institution that emits more than 25,000 metric tons of carbon dioxide per year must track and report GGreenhouse Gas EffectHG emissions to the EPA.  Many small businesses will not fit this criterion; however, larger multifamily projects may meet the criteria. In order to know whether you fall under the EPA’s regulation, you need visibility which requires tracking utility usage in a meaningful, accurate way. The second step in this process is to upload that data into the EPA’s e-GGRT Data Reporting System annually.

There are 3 scopes of emissions that need to be measured and reported to the EPA. Scope 1 and 2 emissions are required to be reported to the EPA.

Scope 1 Emissions:  These types of emissions are referred to as “direct emissions” and are created on site by the owner or controlled by the corporation or institution.  This would include the production of electricity, heat, steam in boilers and furnaces, as well as energy leaks. It also may include the transportation of products with corporate owned vehicles. Approximately 90% of the businesses required to report to the EPA fall into this category.

Scope 2 Emissions:  These types of emissions are referred to as “indirect” emissions.  These result from the purchase of utilities by a corporation or institution from a utility company.

Scope 3 Emissions:  These types of emissions are anything not covered in scope 1 or 2 and mainly refer to purchased materials, transportation and fuels or the use of sold products. This type of emission reporting is optional.

The point of all this data gathering and analysis is to move forward in 2020 with State implementation Plans (SIPs) to reduce carbon emissions. By tracking and reporting what is being emitted now we can work on ways to significantly reduce emissions. States are deeply involved now in drafting their proposed plans to further regulate how much carbon waste can be released by a corporation or institution. Investigate and educate your stakeholders on the proposed state regulations so you can plan accordingly. The majority of large businesses have started drafting business plans to implement carbon emission reduction now with hard deadlines for capital improvements, alternative clean energy sources or innovative changes in business strategies. Your business will soon be required to operate differently and more efficiently. Now is the time to prepare for a cleaner future.

Kate Forsyth

Kate Forsyth is Director of Energy Management for Minol. She can be reached at kforsyth@minolusa.com 

Top 10 EASY Ways to Save Energy in Common Areas

Preparing for another winter is not something we want to think about while basking in the last days of summer, but it pays to plan! The Farmer’s Almanac forecast was spot on last winter and it looks like a cold winter is in store for many of us in 2014. Preparing for colder temperatures is essential to avoid budget busting utility bills for your common areas such as hallways, gyms, lobbies and business centers.

  1.  Sealing the building envelope (windows, doors, entrance ways and ceilings) is essential to energy and cost savings. Lack of proper insulation is a significant factor in common area heating and cooling loss. winter-outlookAn easy thing to overlook is proper insulation. This can often be done in-house very inexpensively by rolling out new insulation in ceiling spaces. Proper ceiling insulation can save as much as 20% on your heating and cooling bills.
  2. Maintaining central systems is critical. Because heating and cooling accounts for up to 56% of your building’s energy cost, make sure the HVAC is running at peak form BEFORE winter hits. Even if you need to pay an expert to do a winter checkup, it will be well worth the expense in energy savings and verifying your system can handle the upcoming chill. Tips for HVAC preventative maintenance.
  3. The Environmental Protection Agency (EPA) estimates that windows account for up to 25% of a building’s energy loss. The proper use of awnings, blinds, insulated curtains, UV window tinting in southern exposures with large expanses of glass, as well as the sealing of air gaps can have a significant impact on energy loss through windows. While windows with an Energy Star rating is ideal and can have a huge impact on your bills, it is often cost prohibitive for properties without proper budgeting.
  4. The Energy Information Administration (EPI) estimates that 21% of electric bills are related to lighting. Upgrading lighting to energy efficient bulbs is something to consider before the darker days of winter are here. There are many ways to do this inexpensively without resorting to a “capital improvement” level expense. Tips for maximizing lighting efficiency.
  5. Motion sensors are probably the lowest cost and easiest, instant energy saver in common area spaces. Why leave a light on in the model unit, gym or storage areas if no one is in there? Investing just a few hundred dollars in these devices can give you a rapid return on investment.
  6. Resealing doors with new weather stripping and capping unused power outlets are another way to stop the cold from sneaking in. Another place to address in common areas is any vent that central fans or unused air conditioning vents that meet the exterior of the building. When closing the vent is not enough, install shutter seals on the inside of the vent and make a note to remove them in spring.
  7. Phantom power or vampire load refers to energy used by equipment and appliances that are idle. Large appliances, office equipment rarely used and computers left plugged in overnight can account for as much 10% of your electric use. Conservation-TipSimply unplug rarely used items. You cannot find an easier, cheaper way to save energy!
  8. Replace appliances in common areas and offices that are more than 5 years old with Energy Star rated products. That old refrigerator may still work but it is costing you more in electricity annually than a newer, more efficient model. The same holds true for that gargantuan office copier from the 90’s in your leasing office.
  9. Programmable thermostats are AMAZING! These Wi-Fi thermostats can be easily installed, set up and programmed from anywhere. Program them to turn down the heat or A/C during evening hours. You can save as much as 10% or more in HVAC usage.
  10. Water conservation/leak detection is a commonly overlooked opportunity to save as much as 25% or more in water waste.  For example, after 5 years a toilet that was a 1.6 gallon per flush creeps to a 2+ gallon flush!  Have an experienced technician or plumber recalibrate the flush mechanisms. Also, faulty/cheap toilet flappers degrade quickly and leak over time. Replace them at least annually and use a better grade of product.  Lastly, replace old faucet washers that cause drips and aerators with low flow devices.

By taking time out this fall to do this energy savings work you may have a different conversation with your owners when it’s time to review the financial statement.  Instead of facing the heat of “Why are you over budget in utilities”? You will have the opportunity to explain how you achieved such great savings. And that would be a far cooler conversation by far!

Critical Thinking

A Pragmatic Approach to Critical Thinking in 5 Easy Steps
The Benefits of Evidence Based Decision Making


Early in my career I was told that I wouldn’t be promoted to the next position because I had not demonstrated an ability to critically think. I had no real idea what “critically thinking” meant; however, being underestimated is a great motivator for me so I began exhaustive research on the subject. After outlining the concept into clear steps, I then had the opportunity to apply what I had learned to a decision the company was trying to make regarding whether to outsource a process or continue to do it internally. The results that came back were impressive and when I walked my supervisor through my findings she was pleasantly stunned. I was promoted shortly thereafter and have used this valuable skill ever since to make solid business decisions.

So what is critical thinking anyway? Critical thinking, in a practical application, is applying a method to help solve a problem or answer a question by eliminating bias, uninformed, partial or even prejudiced thinking. It’s human nature to bring past experiences and current motivations to the decision making process so how do you apply an unbiased and clear thought process to a business scenario?

The five easy steps below can help guide you through the critical thinking process:

A place to think – This seems simple but trying to find a place where you can focus and think is easier said than done! You need a dedicated space to lay out your thoughts so they can be revisited without loss of data. Personally, I find that using my office walls to lay out the process allows me to see a visual flow. I’ve tried a white board and that worked well too but I often run out of space. If you prefer a more technical method, there are many project programs available, but additional training, practice and investment are often required. The important thing is you use the tools that work best for you.

Clarify the question – This is an area where you want to spend most of your effort. When developing the primary question, there should be no doubt what it is you are trying to discover. For example, asking “What can our company do to make accounting more efficient?” is far too broad and unclear. A better question might be “By outsourcing our utility bill payment, will we reduce accounting expenses without sacrificing accuracy”? A sample guide is provided at the end of the article.

Additional questions will inevitably happen. It’s important to park those questions into a separate space and determine their relevance to the original question later. If these questions pass the relevance test, you can place them under functions or processes when appropriate to be answered as you progress through the process. If a question is not going to help answer the central problem, put it in the parking lot to be addressed at the right time.

Outline all the functions – Dig deep. Outline all of the functions of the process currently being used to accomplish the task, the costs associated, departments impacted and any resulting issues or inefficiencies related to the current process. If you’re not the subject matter expert, call in your team mates who are and ask for their feedback. Don’t go beyond this step. Remember that you are only gathering information gathering. Stay away from forming assumptions and only document functions and costs. Take your time because you don’t want to leave off a part of the current process. Start with your top most categories, then move to sub-categories of each process, function and cost.

Example:
  1. Processing a utility bill: Start by mapping the entire process by step, time, number of people, hourly rate, overhead expenses per person, postage, IT support, etc.
  2. Calculate the inefficiency costs that can be proven, i.e., late fees on bills. Don’t include any perceived inefficiencies that can’t be proven.

Scrub the information– Review all data collected and challenge any piece that isn’t supported by data you can prove or confirm. Look for opposing points of view. The best you can do to prove a point is to hear the other side and attempt to refute those points with facts. You may learn you’ve missed something vital to the main purpose of your research. This is the stage to discover and address those issues.

Document your conclusions– Use precision, detail and evidence. Ask yourself “If I were to believe the empirical evidence only, what does it say”? Clearly outline the positive and negative aspects of what your findings are. Take a last look for any assumptions not based in fact and discard them. When you have eliminated extraneous information, all this is left should be unfailingly apparent. You should have a highly defendable business case to back up your recommendations and/or decision.

Remember that your goal is evidence-based decision making. People are often resistant to change based on their personal motivations, experiences, and sometimes fear. A great acronym to apply to this process is remember is FEAR = False Evidence Appearing Real. By following these steps, your critical thinking will take you past assumptions and into an answer founded in evidence.


Kate Forsyth_thumbnailKate Forsyth
Director of Energy Management and North East Sales Representative

410.292.7132  ι  kforsyth@minolusa.com

Kate joined the Minol USA team in August of 2009. She currently oversees the Energy Management Program with a special emphasis on utility provider bill payment, cost avoidance and green initiatives.

Prior to joining Minol USA, she was employed by REIT AvalonBay Communities, Inc. for more than 20 years. While with AvalonBay, Kate successfully lobbied for the passing of the submetering law in Massachusetts in 2005.


Critical Thinking Guide

  1. Purpose.
    1. What is the purpose of the project? Is the purpose clearly stated or clearly implied? Is it justifiable?
    2. State your purpose clearly, refine.
    3. Distinguish your purpose from related purposes.
    4. Check periodically to see if you are on target (in the reasoning exercise).
    5. Is the purpose significant and realistic?
  2. Resolve the problem.
    1. State the question or issue clearly and precisely.
    2. Express the question in several ways to clarify its meaning and scope.
    3. Break the question into sub-questions.
    4. Distinguish questions that have answers from those that are a matter of opinion and from those that require consideration of multiple viewpoints.
  3. All reasoning is based on assumptions.
    1. Clearly identify your assumptions and determine whether they are justifiable. Is
      that true? How do we know that is true?
    2. Consider our assumptions are shaping our point of view.