53 min read

🎧 #040: Jeremy Macdonald on sustainability, ESG, and where analytics fit

“The more time we spend going to answer a hot/cold call, the less time we spend taking care of key issues and making sure the facilities really runs right. And you can't send a person around fast enough to check all the things that your technology solution can check. It's just not even practical to think of all the different things… So there is a huge payback for every single person that tries to do monitoring-based commissioning. It hasn't really failed yet… Um, I'll go back on that. Failure points are if you do nothing with the data.”

—Jeremy Macdonald

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Episode 40 is a conversation with Jeremy Macdonald, Global Energy and Sustainability Director at ISS.

Summary

While we love to talk about future technology on this show, this is another episode like last week’s where we're bringing in a service provider that is driving the implementation of technology today.

We talked about the ins and outs of outsourced facility management companies, and how they serve building owners and occupants.

Then we took a bit of a deep dive into today's trends around sustainability, ESG, and where analytics fits into the equation.

  1. ISS (2:52)
  2. Joe Gaspardone on transactional vs nontransactional markets within CRE (13:34)
  3. U.S. Green Building Council (39:50)
  4. Fast Company article on energy consumption of unoccupied buildings (1:02:27)
  5. James’ article: How can analytics go mainstream (1:04:59)

You can find Jeremy Macdonald on LinkedIn.

Enjoy!


Highlights

  • Why buildings are so far behind: mixed up incentives (3:08)
  • ISS - facilities management and workplace experience, not to be confused with the International Space Station (4:19)
  • Intro to the world of FM / PM (9:29)
  • How money exchanges hands in different outsourcing scenarios (13:18)
  • ESG (28:58)
  • Thinking about waste and energy, hard engineering and soft services (32:35)
  • Waste tech (33:56)
  • How analytics fits in (41:02)
  • KPIs for outsourced facilities managers that analytics folks should be aware of (55:40)
  • Obstacles to rolling out analytics-based services, and strategies to overcome them (59:39)
  • Some things to look forward to in 2021 (1:01:50)

Music credit: Dream Big by Audiobinger—licensed under an Attribution-NonCommercial-ShareAlike License.


Full transcript

Note: transcript was created using an imperfect machine learning tool and lightly edited by a human (so you can get the gist). Please forgive errors!

James Dice: [00:00:03] hello friends, welcome to the nexus podcast. I'm your host James dice each week. I fire questions that the leaders of the smart buildings industry to try to figure out where we're headed and how we can get there faster without all the marketing fluff. I'm pushing my learning to the limit. And I'm so glad to have you here following along.

This episode of the podcast is brought to you by nexus pro nexus pro is an annual or monthly subscription where members get exclusive writing podcasts and invites to members only zoom gatherings. You can find info on how to join and support the Without further ado, please enjoy this episode, the nexus podcast.

Episode 40 is a conversation with Jeremy McDonald, global energy and sustainability director at ISS. While we'd love to talk about future technology on this show, This is another episode like last week where we're bringing in a service provider that is driving the implementation of technology. Today, we talked about the ins and outs of outsource facility management companies and how they serve building owners and occupants. Then we took a bit of a deep dive into today's trends around sustainability ESG, and where analytics fits into the equation.

Without further ado, please enjoy it next as podcast, episode 40. All right. Hello, Jeremy. Welcome to the nexus podcast. Can you introduce yourself for us?

Jeremy Macdonald: [00:01:31] I sure can. Thanks for having me here today. Uh, joining you from a background of architecture, procurement, I've been the client and now I'm the operator, uh, and your podcast seems to focus on how do we find the connection point across this industry?

How do we advance it? And I hope my background helps us do that today.

James Dice: [00:01:49] Yeah. Yeah, definitely. can you talk a little bit more about those, those specific jobs

Jeremy Macdonald: [00:01:54] where you came from? Yeah. Yeah. I mean, architecture was the fun one to get started on where I was designing buildings and going through school for that.

I went to Berkeley and graduated from there and then moved on to designing homes for about three years. and then, wanted to run an architecture firms. So I got a business degree and then leaving the business degree, actually focused a little bit broader. And we got hired by Adobe to do procurement.

So instead of being the architect, I was hiring the architects and the general contractors for lots of cool projects around the world. And then that turned into the services as well. So that was my introduction to this world of outsourced facility services. And after doing the global RFP for facility services for a major software company, I then had the chance to flip and be an operator on their team.

So I got to inherit the contracts. I set up and realize how bad they were and how big of a gap there could be between what you write down on paper. And then what happens day to day in your facilities. Um, and after that I left and went to ISS. I've been here for about three years now, helping our company deliver those facility solutions to all of those, clients around the world.

James Dice: [00:03:01] Got it. Got it. I'm excited to unpack this with you. That's so many different perspectives on, on the industry. So given all of those different perspectives, why do you think buildings are so far behind on the techniques?

Jeremy Macdonald: [00:03:15] I mean, it's a big question, right? But it's a good place to start. Um, I think the biggest reason is mixed up incentives. So  So let's, let's say for a minute that you do own your own building. Now you have a pretty aligned incentive structure to make what happens in the building.

Great. But you still have an incentive to make it as cheap as possible. So sometimes there's a barrier there, but when you don't own your building and you lease, and many of us find ourselves in that situation, you have the value that's being delivered from whoever's paying for the lease. Uh, and whoever's giving the lease is not the same value that our people in the building need.

And so those technology solutions to things that make a seamless workplace experience, those aren't necessarily the top priority for building owners or people signing, building leases and looking at the total cost there. So that's how I think of the mixed up incentives. We're trying to create seamless technology integration that leads to better outcomes for me, especially around sustainability.

And that's hard to do because different stakeholders have really different needs for the value created in this industry. Totally. Yeah. I love

James Dice: [00:04:18] that answer. So what is, ISS, and what does that even stand for? And then what does the company do and where are you guys located and all that. Can you

Jeremy Macdonald: [00:04:26] take us through that?

Yeah, absolutely. If you Google ISS, we won't be the first hit probably, but if you Google ISS facilities, you will find us because the international space station is pretty popular. Um, but the good news is ISS is a, a Danish facilities management company. Uh, we create awesome workplace experiences and we've been doing it for over a hundred years.

So it started off a long, long time ago with physical security cleaning and things like that, and grew throughout a long period of time and aggressively. To the point where we now have over a half a million employees and we're open over a hundred countries and we work with some of the big names, you know, in the world of facilities.

I would say if you're trying to think about what's different about ISS, how can I remember them? It's that we came from a background of cleaning. We grew into full facilities management, and now we are doing a lot of workplace experience in addition to facilities management. other people come to this industry from a different path.

Maybe they're doing real estate transactions or project management. And so then they step over into the operational side, but that's, what's unique about us. We don't do those kinds of things. We truly do focus on operating facilities in the best way possible. Got it. And you mentioned what does ISS stand for at this point?

It's just ISS. Don't have to worry about what it's saying. Okay.

James Dice: [00:05:46] All right. Um, and Wally, I'll put a link to the show notes for everyone to both types of

Jeremy Macdonald: [00:05:50] both ISS is,

James Dice: [00:05:52] um, well you mentioned workplace experience. Can you explain what that means? cause the way I'm thinking about it is like, You know, you talked about cleaning and stuff.

That's on the FM side and workplace experience would be on what I, if I'm picturing an office building, right. I'm picturing like property manager. And for some reason I always delineate between the property managers, fonts abilities and the FMS responsibilities. And so on the occupant side, the tenant side, what do you mean by that?

Can you explain what, what workspace

Jeremy Macdonald: [00:06:22] experience means? Yeah. I mean, we could, we could go on for a long time. It's pretty expansive. Um, we, we tend to separate our services categorically into like hard and soft services. And maybe this will be a similar for you. The heart services are making sure the equipment is doing what it's supposed to be.

And then the soft services are a little more around the day-to-day experience you have, um, is reception something that makes you feel great when you come in? Hmm, and reception and many other things are these touch points that exist in your daily experience in any facility you visit, or whenever you do get to visit your facilities again.

And so when we think of workplace experience, it's making sure all of those must haves that we often overlook. Like, is it the temperature, the humidity,  So it's hard related services to equipment of the building. Are they then also just as good on the soft side? Is it clean? Is it nice? are the people you're talking to pleasant and helpful.

Um, and do you come into work and feel enabled to kind of be the best version of yourself or are things getting in your way because they're not clean, right? Or they're too cold or the lights hitting you right in the eyes. When you're trying to stare at your monitor. Got it. Okay,

James Dice: [00:07:29] cool. Yeah. I want to talk a little bit more about that, but first you, do you guys just serve office buildings or your, your clients kind of all over the map as far as vertical

Jeremy Macdonald: [00:07:38] as you go.

Sure they're fun. The variety is part of what makes it exciting. some we work with a lot of clients in different segments. We focus on life sciences, so there's lots of lab research and, um, office in that scenario, industrial and manufacturing is big for us.

So that's your specialized cleaning services and other services for large clients around the world, too. Uh, airports are also in our scope as well as hospitals in different countries. We're in so a lot of different areas of expertise and it gives us a chance to bring what's unique across different business segments and find innovative solutions.

Hmm.

James Dice: [00:08:12] Cool. Yeah. I just got introduced to this concept called extensibility and it was in this interview with a Honeywell executive, but he was talking about how, you know, they serve all these different verticals. Honeywell does obviously, and there's like core facets of technology that span across all those different verticals.

And he was like, what we do is try to find. You know, features or feature sets or different solutions that are vertical specific, but they sit on top of, you know, the same technology stack, which I thought was really interesting way to think about it because, you know, there are core components of, running a building and the technology instead of building that totally span.

Cool.

So I want to hit your, like, this is going to be a little bit of a James education, session a little bit, um, or we'll get into some technology pieces, but I think it's be good for me to understand better how businesses like yours function.

And I think that will then lead us into, you know, What obstacles there are for technology, what obstacles there are for sustainability, those types of things, because there are lots of, ways in which, like you said, the incentives don't get necessarily aligned and we have to work to overcome those obstacles.

So. Can you just describe, like I said before, my understanding is like there's two sides of the shop FM and PM. And is that pretty much standard across the board? And do you guys do both and do you always do both and can you just kind of like explain how the business works?

Jeremy Macdonald: [00:09:46] Yeah, absolutely. So FM, in this case, facilities management PM being property management, uh, for us we do lots of property management.

We're probably not going to be collecting rents or charging rents, and that might fall under property management as well. but everything else, I guess, is, as people say from soup to nuts, right. Is part of facilities for us. And if usually we've been asked at some point already about every potential service there could be, and yes, we probably do them.

Okay. If you're, if you're thinking about the industry as a whole and, and doing the education, I think we could go to the commercial model that's in place for facilities outsourcing in general. Okay. Um, and so clients come to us with usually one of two value propositions that they're trying to meet either.

They want a better service level, like higher satisfaction than what they've got now. And they're not concerned about necessarily doing it cheaper. Or it's the other way around. They're kind of happy with where they are, but they're looking to save a lot of money so they can invest it in something that's a little more core for them.

So we see both, right. Are we trying to do more for the same, or are we trying to do the same for much less? Um, and if clients come to us thinking of course, that they can do a whole lot more with a whole lot less than we have to kind of set expectations and figure out what they're really trying to do.

James Dice: [00:11:04] And when you say clients, you're talking about the building owner that is then hiring a company like you to manage their portfolio.

Jeremy Macdonald: [00:11:11] Yeah, but, um, I would say I'm focused a little bit more on the building user. So the less the lessee, the person who leases the building and in many cases, the owner is in fact, the same person hiring us, but I'm not thinking of them like a landlord.

I'm thinking of them more like, um, they're just treated differently than I've seen a lot of landlords treat their building, right? It's not an asset on their balance sheet. It's a workplace where they're creating their company's mission. Got it.

James Dice: [00:11:36] Yeah.

Jeremy Macdonald: [00:11:37] Huge differentiator. I think so. Um, and then we're focused on their values and what they're trying to do more than we're focused on maximizing the return on their assets though.

At the end of the day, when we maximize the return on their physical assets, it helps their balance sheet, which increases the value to their shareholders. It's just a different way we focus. Got it.

James Dice: [00:11:57] Got it. And there are other companies like you that have different focuses. Can you kind of explain the differences there?

Jeremy Macdonald: [00:12:03] so. When you think about a company and sorry, this is going to go pretty big, but companies go through evolutions, right? There are startups. And then they're kind of, they reach a point of being really successful. Then at some point they're reinventing themselves and that cycle continues.

And so if a company reaches a certain level of maturity, they're going to decide. We shouldn't be, we've been our own floors anymore. We should hire a janitor for that. Um, and that's kind of like, why does outsourcing exist? Well, cause core activities should be performed by the core business and non-core activities should be outsourced to someone else that really can do it that way and has a passion around it.

So here we are with the concept of outsourcing and then can we turn those activities into something that helps elevate the business as well? right. So if, if whatever company is trying to do something for their mission, how they clean the building is not a direct contributor, but for us, we can link how we clean their building into their core mission.

And that becomes our core as well. And I think it leads to a much better solution for our clients. So for us, it's something that really matters. And for them it's not their core focus. And I think by having two parties who are really passionate about both topics, you get better outcomes. Hmm.

James Dice: [00:13:17] Cool. So part of what I'm understanding about this, like the way that money exchanges hands in these types of outsourcing scenarios is that there's the building owner or the asset manager is trying to make a return on the investment.

Right. So they're trying to, um, I think Joe grasper, Doni on a previous episode called it transactional, like I'm trying to buy a building improve upon it. And let it appreciate and then sell it later. Can you explain how that works and how you guys think about those sorts of, investment strategies for buildings?

Jeremy Macdonald: [00:13:50] Yeah, absolutely. That touches a lot on the world of sustainability that I'm in. So I'm going to lean a little bit on that to answer your question. Um, the model for us is around, you know, if you build a building, it's got a certain life on your balance sheet and the cool thing about buildings is they appreciate it.

So at some point you've got older equipment in there and you have to decide is the investment. Isn't building it up in some ways, making it more efficient for me, this is where sustainability hits. If we buy a new equipment and make it more energy efficient, does that mean that we'll be able to sell it for more or are we able to lease out the space for more short answer to that question is yes.

But you still have to build a business case around how much of an improvement and why. So I think that's where we come in to help support all of those business cases. And we'll do facility condition reports that will tell you life of your assets, how long we think they'll last. Is this the kind of equipment that you should run to failure because it's cheaper that way in the long run?

Or is it the kind of thing you should replace now? Because there's huge efficiency gains. And so we'll help build that business case for whoever owns the building. Uh, and from there it can contribute to their overall capital strategy and what they're trying to do. Got it. Does that answer?

James Dice: [00:15:05] Yeah. So I guess a caveat, a second question would be like, is there an incentive for the outsource company to, um, do they make money off of that increase in transaction or that increase in asset value?

Or is it just the building owner that does that? I'm sorry, this is just one of the questions I have about this model.

Jeremy Macdonald: [00:15:25] Sure. I hope everyone finds it as interesting as we do, right. Um, yeah, the. The first part is, our whole business model can be based on how much it costs to operate a building. And then there's generally a rule of thumb that, you know, for how much it costs to lease, you can then set up how much does it cost to operate?

Yeah. So if my company is getting paid off, that there's a good chance. Total revenue goes up for us in a nicer building. There's more services, there's higher standards to perform, and there's an expectation that. They're more money will be spent and that's good for us cause a bigger share of the wallet or a bigger budget probably means more revenue for us.

Um, and so I think that kind of gives us a reason right there to want to operate the best buildings and to keep them in the best condition possible. Okay.

James Dice: [00:16:12] okay. So if I have a technology upgrade or energy efficiency upgrade or a healthy buildings upgrade, one of the things that I'm confused about here is like, who pays for it?

So like, is it the building owner or is it you guys, or is it the tenant? how do those play

Jeremy Macdonald: [00:16:27] out? Sure. The easy one is where the person who owns it is also the main user. And in that scenario, you'll figure out and then you'll have it sort of an internal hurdle rate around anything we invest in.

We expect to make this much money, and then I'm doing, how much are we going to spend? How much money is it going to save us and flipping it back to what's that equivalent for that return. And they can make the decision that way. That was supposed to sound simple. Uh, the secondary one where you're trying to lease the space.

You'll, you'll typically link the renewal of your lease or an extension of your lease with the landlord to get them to invest in something. So that's a common one, right? We want new this or that. We'll extend it for three or four years, if you pay for it. And then negotiation ensues, utility companies are willing to pay for some things right now, though.

And in that scenario, maybe a landlord is willing to pay for something because a utility company has an incentive to give the money back. So you start to step into a whole world of incentives. That can be pretty tricky. And if you're a tenant, you just have to think about your workplace experience. you have certain values for your company?

You have the kinds of places you want to work and healthy buildings is a really good example of that. Um, if you want to be healthy, then you should have snacks that are potentially better for you than, a real influx of sugar. And so you shouldn't probably go to your landlord and say, change our snack program, because most likely the landlord's not paying for it.

Anyways, you're going to look at your own budget and decide on those kinds of investments. So if it's a big building investment, you'll typically start with the landlord and try to get them to pay for it. And if you can't, you'll consider that investment for yourself. And depending on how that structure of your leases, you may have the control over the facility and you can do what you want to it.

And other times you'll still need their approval to invest your money in their building.

James Dice: [00:18:15] Totally. And you're highlighting why it's difficult to kind of make broad sweeping claims about the industry. Like the industry needs to do this, but really what, what, I always find that in situations like this, like when you're describing this to me, it's super complicated and it changes from building to building.

Is that a good way to

Jeremy Macdonald: [00:18:32] describe it? It's a great way to describe it. I mean, one of the things we work on is a monitor based commissioning solution. It seems so obvious to everyone who hears the pitch. Right? If we monitor the way we're consuming energy and all of our equipment, then we'll probably find inefficiencies and there'll probably be significant enough to pay for the software.

And I'd say few years from now, that'll be a much more standard offering than it is right now. But if we agree on a business case, is the landlord paying for it? Is the tenant paying for it is the utility company willing to pay it back? Does the investment upfront pay for it? And how soon do we need the same payment back in the same year?

And so we get really good at seeing all the different pathways to, finding someone that will pay for that solution. And then we kind of track them all down in order of who's more likely to pay for it. And at some point usually you find a solution and you move forward and then you move on to the next part.

James Dice: [00:19:25] Got it. I love that. That's such a great example, too, because it even comes out of different budgets, like the cost and the benefits.

Jeremy Macdonald: [00:19:31] that's the biggest challenge to me on the energy efficiency side. And now that you mentioned the ask it at the beginning, but I only think of it now, our facilities teams are making decisions about what things to do, but they don't usually control the utilities budget.

Like it comes out of a different cost center within the corporate structure. So you invest money and you save a ton of money, but those savings don't hit your same cost center. So you can't use them how you want, or you need an agreement with your finance team that you do get them back. And as a facilities, outsource company, we're in the middle of that sometimes too.

If we save them a lot of money, we tell them, you should be happy. We saved you a lot of money and they'll say, yeah, but it came out of my utilities budget. So all I did was spend money and again, mixed incentives. Wow.

James Dice: [00:20:16] Yeah. So besides incentives, what other sort of with the way that your clients are set up to hire you and then like your goal within sustainability and energy is to sort of drive these projects that we're talking about.

What other inhibitors to these projects are you seeing with these types of

Jeremy Macdonald: [00:20:35] inhibitors to sustainability and getting sustainability approved? Yeah. Yeah. I mean the biggest one comes from changing directions from a governmental perspective. Um, you know, depending on who's in office, you get very different messages around sustainability.

And because of that, you get a lot of executive orders and no matter which side of the party system you're on the executive orders will generally switch back and forth and that's really hard. And so for the last couple of years, what I've heard people saying is, well, You know, maybe if someone else gets elected, there'll be a lot of money for this kind of work.

And so it's an easy reason to push it off for a little bit. Um, but now, with the change in the presidency here in the United States, people are still kind of wondering, maybe we should wait a couple of years to see what incentives come out. And I feel like if we always find an excuse to wait because of changing policy, we'll fail to make any real progress, no matter who is in charge of anything.

James Dice: [00:21:30] But is that a root cause of that? Like what budget, how are we going to pay for it? And they're looking externally to find sources of funding, essentially.

Jeremy Macdonald: [00:21:38] Um, so if I, the way you ask your question makes me think of. Will there be a budget number somewhere that federal is giving States to distribute for energy efficiency stuff.

And that is a big part of it, but when it's, when it flip-flops a little bit, it's not usually a decision that's made through policy. It's a decision that's made through executive orders and those can be given and taken a little faster. So it's like we want good policy developed by both parties together so that we get a longterm plan.

And even that's been hard for us to do here. And I assume it's similar in many countries around the world facing those same challenges. Totally. The finance parts, a little easier. There's actually many companies that exist whose sole purpose is to use their investors money, to invest in, energy efficiency projects for large companies.

So instead of a large company kind of spending its capital upfront, This third-party finances, everything and pays itself out of the energy efficiency gains, and that allows people to move faster. So the financing isn't always the hardest part, actually. Yeah. And that's something that

James Dice: [00:22:43] I've, I've kind of been out of that side of our industry, like for a couple of years now.

And so I know it's kind of moving faster where a lot of people are wanting to get in and invest in projects like that. So can you kind of update me for, like, how does, how does that work? And like, what's the latest on. how easy it is to get financing. And who are these companies? Are they local or are they nationwide or how

Jeremy Macdonald: [00:23:05] does that work?

Sure, sure. Um, well, let me start over for a second. So companies tend to want to improve their sustainability performance and a lot of this will be relevant as you become. A little more well-known as a company, people started assessing your brand, uh, your commitment to factors like environmental, social, and governance with regards to your company's performance.

And so when you start to look at those things, there are some general trends you may decide to be a part of. One of them I'm seeing a lot is we want to reduce how much waste we create by 2025. Okay. And a lot of companies are thinking about how do I get to zero waste certification by 2025 right now?

Okay. And there will be some cost involved in that. Um, the other big one is we want to be net zero by 2040, or we want to use energy that is clean. So by 2040, all the energy we use is, um, emissions free. Uh, and that will be challenging to do potentially with the way the energy market grows. So to make up for that, you can buy some credits that can help offset your carbon potentially as well, or other emissions that you have.

So once you have that in place, you start to look at how much is it going to cost me to make these changes to my operations. Um, I need to get rid of a lot of material that can't be recycled. How do I do that? There may be an investment required, the same thing on the energy side. So if I want to have, uh, zero emissions for my building, the first thing I need to do is reduce unnecessary energy use.

So I want to get rid of my old fixtures. Um, I wanna get rid of my old lights. I want to get rid of my old equipment and make it as efficient as possible, and maybe even invest in equipment for onsite production, like solar or wind mills, so that I can create my own clean energy. And I am not dependent on the grid.

All those things that I just listed are much more capital intensive. And it may not make sense for the company to take out a huge loan to do those kinds of things. Um, and so if you build the plan from present day to 2040, and you look at this roadmap of all the things you have to change, it can feel like, wow, it's going to really be 15 or 20 years until we can do this.

the energy service companies that come in, um, and maybe I'm using the acronym wrong, but ESCOs, if you're going to gather more information around it, they have investors who are willing to make those investments up front. and they are a varying size, right? There are all kinds of people that operate in this market and some want to fund it and then execute the project.

Some want to do just the funding and have other parties execute the project. So depending on what you need, there's lots of different options you can do. But then as the financial model is set up, your utility bill goes down from lots of the things I listed, maybe not all, but lots of them. And those differences, the utility company or the ESCO company, then receives that difference back to them or the lion's share of that difference back to them until they've paid back that initial investment plus the interest that they charge.

So the benefit is lower emissions faster. Lower cost as well, and a good return for the ESCO. So it's a pretty good model, but, I find that clients are initially very excited about the concept and then mad about it at the end. And I'll try to describe it. Cause we'll say you could do this now. Right? You can have less emissions.

You can have a little bit less cost and we show how much money can be saved by these initiatives. And then they immediately want to save all that money. They don't want to give a large percentage of it to the company that invested in it for them. They want to keep it for themselves. Right. Uh, so it's kind of like, shoot, do I want to go really fast?

Do I want to have a bigger return for my investment? And again, that moment. Switches who we're talking to. If it's an ESCO, it's a financial decision and we're talking to certain people at a company usually, and then they'll tell the operators or the building users. Here's what we're going to do. And we're really good at operating.

We'll just do that. Um, if it's the owner user in this case, not like a landlord, right? But the owner is the same person using the building. Then it's now we have like a core function, decision being made and the operators are first in line for, at saying operators a lot. The facilities team, the client facilities team is first in line to kind of make that decision and then escalate it up to the CFO level.

And so it changes the approach and the timing.

James Dice: [00:27:31] Got it. And is, the ESCO model became more popular on the private sector side of things. So I have a history. I I've worked for a different ESCOs before, but it was pretty much always on public sector

Jeremy Macdonald: [00:27:43] side of things. Okay. I'm not enough of an expert to know the answer to that.

Um, I'm curious how it's changed since you were in there. Well, I do. I just

James Dice: [00:27:53] think in a lot of your clients are on private sector. Maybe, maybe

Jeremy Macdonald: [00:27:58] no lots are, but we find that, um, since we operate, we're much more likely to help a company invest where it's owning and operating and where we're helping a landlord make that decision.

And I think the landlord companies have a few partners already for what you're describing. So if they were going to go down that route, they wouldn't need us to make that decision. We get much more involved when the owner operators the same. Got it.

James Dice: [00:28:22] Interesting. Hey guys, just another quick note from our sponsor nexus labs. And then we'll get back to the show. This episode is brought to you by nexus foundations, our introductory course on the smart buildings industry. If you're new to the industry, this course is for you. If you're an industry vet, but want to understand how technology is changing things.

This course is also for you. The alumni are raving about the content, which they say pulls it all together, and they also love getting to meet the other students on the weekly zoom calls and in the private chat room, you can find out more about the course@courses.nexus lab. Start online. All right, back to the interview.

Cool. So let's talk a little bit real quick about ESG.

So it's becoming more and more popular to use that term because it's, there are lots of tailwinds behind it. can you explain ESG? How do you think about it? Um, and then how does it, impact the facilities side of things and the technology side of things in the building?

Jeremy Macdonald: [00:29:18] Yeah, definitely. Um, what we'll do an education style, right? So we have assessed risk of companies since forever trying to figure out where we can get the best investment return for all of ourselves. and ESG is another series of risks that is getting a little more attention because, these factors seem to be more important.

Recently, one is environmental risks. The S is for social and the G is for governance. Um, and environmental is critical, right? If you're producing chocolate candies and the environment around your farms is getting hotter and hotter, you're going to need more water. You may be at risk for kind of catastrophic things that happen.

We've seen more fires, we've seen more droughts, things like that could really destroy your business. And so what looked like a great investment at first has a greater environmental risk than you realized. And now you've lost all your money or the company's underperforming, right? That's kind of the focus.

Social risks. Right. Are you dependent on a labor market? That's not really fair. and are you kind of going to be stuck at some point having to fix that? Um, you, you can see all kinds of examples of this around the world, and then last would be governance. And I think of that more like, are you able to escalate problems within your company quickly and resolve them?

Or are you likely to have someone try to cover it up, who then tries to cover it up, who then tries to cover it up? And eventually, eventually your CEO knows about it and can't tell the market or something horrible like that. Right? And you have a scandal on your hands. So if you have the right controls internally, when mistakes happen, you can fix them and you can tell all the stakeholders you're supposed to.

And the issue is resolved instead of becoming a governance risk that puts your whole business model in danger. And that's ESG. Right? And we, we look at those factors a lot and there's great agencies out there that evaluate those. if you're publicly traded your company's probably scored by those other kind of watchdog agencies.

And you can look and see if, if you're working for a company that does well in these areas or not. Hmm.

James Dice: [00:31:19] Is there are very important areas. It's it seems like to me though, when I've, when I've read up on ESG from a facilities perspective, it's just the E pretty much. Right. Is that, is that like how it plays out for you guys?

Jeremy Macdonald: [00:31:32] So it's our biggest area of focus for our clients. Um, as a company like ours, we assess ourselves for the ESG all the way across. So like, if you're looking at the various agencies, you'll see ISS performs really, really well in this area. And I'm super proud of that when it comes to our clients. Yeah.

We're focused on environment. So that's where, uh, I was mentioning earlier the goals around zero waste or net zero energy. Those are the kinds of goals that will show up. And if you're an investor, you're thinking, Oh, well, there'll be admissions. If admissions ever start costing more, if there's ever a cap or a carbon trading policy, that's going to make everyone spend a lot more money.

So I want to be invested in the company that already has zero emissions. Uh, and waste could be the same way. Cause at some point, you know, the Pacific garbage patch is going to touch California and we'll have to do something about it. And companies will have a much higher cost around the waste they're creating and its environmental impact.

So if you can take care of these problems now you'll have a huge competitive advantage. A few years down the road. When, when those things get caught up.

James Dice: [00:32:35] Totally. I think when the nexus audience thinks about buildings, I think there's a lot of people that are sort of leading with energy efficiency and leading with optimizing systems control systems, that type of thing.

Um, There aren't a lot of people that are thinking about waste and adding technology to that, or are really, developing solutions around it. So how are you seeing those two things play out? Are those two different people that you're then having assessed the buildings are those two different types of solutions?

Um, The way you've described to me in the past is like, energy is hard engineering and waste and sustainability is like soft services and they're like two different things. How does, how does that show up for you?

Jeremy Macdonald: [00:33:19] Yeah, sometimes I feel like Dr. Jekyll and Mr. Hyde, cause those, both those things do report into me.

Um, so I need to be able to fit on both sides of that, dichotomy that you described. I described, and I think it's accurate. Um, so my team has engineers and building controls people, and they are generally interested in solving problems around the harder stuff of the building, harder surfaces, not harder necessarily technically.

Uh, and then, yeah, the other half of my team is focused on waste and it feels like that's softer. So I will reinforce that, but I think to everyone does love solving problems and gets interested in figuring it out. I'll spend a second on the wayside. There's actually some really interesting technologies that exist out there that we're we're playing with right now.

One is around, um, a waste system. So one of the biggest problems with your waste is that people throw things in the wrong bin. and so. I did that last time I was thinking

James Dice: [00:34:13] about a meeting or something that I just had, and I have two shoots in my building and I had recycling in one hand and trash in the other hand.

And I just put them both in the wrong.

I know it's the worst.

Jeremy Macdonald: [00:34:28] I just set it on the air too. I know. And people make fun of me cause I'm always pulling water bottles out of the garbage side and putting them back in the recycle side of things. And I did a little bit more of that before everything was, was worried about COVID. but yeah, so you can walk up and the camera can scan the thing you're holding and tell you what bin to put it in.

And it enhances those rates and. It takes a second longer, but it's also a second to engage your audience and you can put messages in that, help them feel a little better about their decision to recycle properly. You can promote your company or some message for internal communications. That's important that we, and it just gives you a chance to make throwing something away, not a mindless activity, but something that contributes in a small way to a better sustainability performance.

Um, you can do man. There's so many different things we can do when it comes to waste and they're fun and challenging. and then of course, on the energy side of things, I would say those are more like let's use a spreadsheet and let's calculate a change. Let's look at the use profile of this equipment and figure out how to optimize it in one way or another.

Um, so I just think you need specialists in both areas and the risk to our whole industry is if we try to lump sustainability into just one function and think it is somehow going to encompass everything, we're set up to fail. At some point, sustainability has gotta be embedded into the various functions that we're performing.

And as our company, that's what I'm trying to do. It's not make all things sustainability report to me, it's make sure that the way we deliver engineering is sustainable and waste services is sustainable. And so on down the list until we can keep track of all of it and then report on it centrally, that's what I'd like to be able to do better.

James Dice: [00:36:06] Got it. And I'm curious on the wayside. So, you know, I come from an energy management background, right. So it's always start with a meter and then benchmark and then go deep into the areas that, have a high benchmark in score or not as good benchmarking score and then dive in, you know, and monitor after that.

So what does that look like on the waste side? When there isn't necessarily something to measure and if you do, you're measuring it, what. Uh, I've done like lead audits, right? Where you, where you audit a trashcan and that type of thing. But that's not really technology. That's like humans digging through the trash.

So how, does it work? What's the process and the waste.

Jeremy Macdonald: [00:36:46] Sure. I'm just picturing you being so, so unhappy with the waste meters. Oh, it's no secret to our industry, but the way waste is tracked is not nearly as accurate as we all wish it was. Um, so when we're trying to see how much garbage we create, a lot of those are these small drops in a bucket that add up to the, you know, the thousands of tons that a large company may create in a year.

And those drops in the bucket. It turns out when you get down to that granular level, it was like, we emptied the dumpster. Okay. Well how much did it weigh? We don't know. Was it full? We don't know. Like we emptied the dumpster. So you got charged for one dumpster and you're taking one dumpster load on to your dataset.

Right? Right. And if it was half full, you never knew. Um, so there's all kinds of innovations around tracking. How much is actually in there, and that can be paid for because you only get charged for what you pay for. and you can schedule fewer pickups. So, you know, you're always getting a full load, picked up, um, all of these things come back to the meter part of it.

So if we can start tracking things more accurately, then we can truly account for it in a more effective way and just tracking your waste effectively. And I know it's an old management Maxim, but what gets measured gets done. Really applies to these things and with waste, it can be very much out of sight.

Out of mind, it gets thrown in the bin. Even the bag might not be transparent. So it's gone from there and we don't think about it. And that is the main problem that we don't do very much in that area. Sorry, I got carried away. I don't even remember what your original question was.

James Dice: [00:38:20] No, that's helpful.

That's helpful to understand, like there, there are new ways to measure waste and track it and. Understand where you're at, then you, then you could improve upon

Jeremy Macdonald: [00:38:31] things later. Yeah. But I'll sorry. I'll add to that. That there's a big piece of that is digging through the waste still. Right? So, um, a lot of it gets recycled, but everything that doesn't ends up in a dumpster and ends up in a landfill.

So we'll go to a site. If you're in Canada, you've got to do this every year. Anyways. So again, back to the legislation piece, but here in the U S it's not required in the non-hazardous side of things. So we go and we open up garbage bags and we dig through them and we categorize and figure out what the biggest types of waste are that are still going to the landfill.

And then we work backwards through the value chain to figure out where they came from and if we can eliminate them in the first place. Uh, and that's, that's just the hard work of it, because at some point you get through the easy stuff. And you've got really unique materials that are a by-product of whatever you're creating at your site.

And you have to think about product and process innovation to eliminate those kinds of materials. And all of a sudden, the world of managing waste has circled back around to become a core component of a company's value creation process. And that's where I think we can have a huge benefit to her.

James Dice: [00:39:38] I love that.

Yeah. for anyone that's done that sort of, uh, Going through the trash exercise. I feel for you cause I've done it too. it's it's no fun. I used to volunteer, for a U S GBC United States green building council in St. Louis. And we did a couple of ways to audits back

then.

Jeremy Macdonald: [00:39:57] Um, if you'll indulge me for a second on that one, we once had a complaint that we were throwing recycles into the garbage.

And I wanted to solve this once and for all, cause you hear it every once in a while in the world of facilities. So I bought those tile devices that you can sync to your phone. Okay. And threw them away on purpose so that we would know if they ultimately ended up in the correct bin or not. So one was sinked for the recycled garbage and one for the regular.

And I was willing to sacrifice those tile devices. But I did not tell my facilities team that. So, not only did we prove that we were recycling and landfilling properly. We also had my team climbing in the dumpster to pull out the tile devices and rescue them for the next round because they didn't want to throw anything away.

And I felt really bad about that and I bought them all lunch, but you got to give good instructions. because yeah, these teams of people solve the dirtiest grossest problems at our sites. So it's not beyond their scope to get something out of the garbage generally, as long as it's safe. And, we have to think about that when we do our waste audits, it can be messy.

Yeah, that is awesome.

James Dice: [00:41:01] Cool. so I want to circle back on what you talked about earlier, the example around monitoring base commissioning. So. I've done a ton of episodes on this podcast about analytics, different types of analytics. And so I wanted to ask you how that shows up for your clients and how you serve and packaged services around analytics software, and how that works.

Jeremy Macdonald: [00:41:25] Yeah, absolutely. So, uh, at ISS we're generally trying to self perform, and I'll, make this distinction because I think it helps the overall explanation. The, the idea is that if we're doing the work. Then those people understand the core business. They understand the value that we're creating for our client.

They can get training, development, promoted, et cetera. And that's always what we're trying to do. But when it comes to something like monitor based, commissioning, it's really technology specific and we need a really good partner for that, that can do it right. I don't want my team trying to write algorithms based on.

One of the systems out there and kind of constantly trying to build it for each client. We have, I want a really good technology solution. So we have to figure out how to integrate them,  pick that partner, and then make sure that those solutions are able to be integrated into our overall dataset and technology and reporting.

So that it's a beautiful product that our clients receive in yet. Okay. And that's the hard part, right? The hard part is actually. The brains behind monitor based commissioning, but it is still hard to get all of that to come together to be a holistic package.

James Dice: [00:42:31] So what is the whole package for you then?

So you have. We don't need to get into like the specific software, but you have a software provider. And then how do you wrap services around that to then take, like you said, what do you take to your client, I guess? And how do you sell it to your client? Yeah,

Jeremy Macdonald: [00:42:48] we'll touch on a few things. We've talked today.

So the first part is we're trying to convince them this is better for their business overall. Right. And that's usually a financial payback. Okay. And we find that we easily save. 4% of total energy costs by putting monitor based, commissioning in like that's the low end of a range. Um, I'd like you could pick that it's like picking money up off the ground and do usually a building is large enough that 4% pays for that cost.

Okay. Plus your, your fees. Yeah. Okay. Um, I'm wondering if I'm touching on topics. I really shouldn't talk about to the industry, but I, I feel like this is stuff that matters and I want everyone out there, whether they're hiring ISS or not to realize that monitor based commissioning is something they should be doing for their buildings already, because you can pay it back just on the financial side of things, but separate from that, you are going to have equipment that runs better and last longer.

And it's not just replacing a piece of equipment. If the thing you have to replace is on the roof. Now you need a crane and there's an incredible amount of costs that can be avoided by operating our equipment longer. And I know I've made an argument already about getting more efficient equipment, but there's also a place for making sure things we have invested in have their full asset life and many things just because they're older, still highly efficient if we operate them correctly.

So. And on top of that, now you have, if my equipment is running the way it should, then most likely my building is going to be better balanced, which means as a facilities team, you're not going to be getting people on one side of the building who were too cold complaining. And the people on the other side who are too hot.

And the more time we spend going to answer a hot cold call, the less time we spend taking care of key issues and making sure the facilities really runs right. And you can't send a person around fast enough to check all the things that your technology solution can check. It's just not even practical to think of all the different things.

They'd have to go try and see firsthand, but you can pull all of that data into a software solution and crunch it and be able to know it needs to be done. So there is a huge payback for every single one, a person that tries to do monitor based commissioning. It hasn't really failed yet. Um, I'll go back on that failure points are, if you do nothing with the data.

so that is where you have to come in to have an integrated solution. And you're going to want reports so that you know, what faults are being identified by your software solution. Some of those faults can be easily resolved by your team. Some might require capital investments, and now you've got to have good governance internally to escalate those kinds of issues and get quick resolution.

And then we typically run a aging task report. So if something's been identified by the system and nothing has been done about it as that time goes by, and that task sits there for longer and longer, it needs to get escalated at the right moment in time. Why is nothing being done with this? We know something could be better and we're not doing anything about it.

What's the holdup. So that kind of tie in make sure that the value you could be creating is in fact realized. By the people at the site most monitor based commissioning is don't auto resolve things, right? Maybe that's a future state where the intelligence can then make the changes to the way you're operating.

But I think for now we like having the control over our systems and seeing what's done to identify problems, but not to resolve them automatically.

James Dice: [00:46:13] Totally. So when you guys go to your clients, you're selling based on obviously like quick payback, energy costs, savings, right. That then pay for the service, but you're then saying, Hey, by the way, there's these other

Jeremy Macdonald: [00:46:27] value

James Dice: [00:46:28] streams as well that come from it.

Yeah. Got it. so what, like, what does your team look like? Like you selected that software provider. Do you then staff, a group of people that are like the analytics nerds that are then supporting all of your client's buildings? Or how does, how does that work? That's

Jeremy Macdonald: [00:46:48] a great way to describe it.

Okay. So There's there's different levels that could be done. Right? So I won't jump too deep into like, is it a super high touch or low touch kind of model, et cetera. But typically you're going to need a controls person who can go in and understand the data coming out of the monitor based commissioning tool.

They do an incredible amount of diagnosis, but they don't do everything. And so you need that controls person who understands what might be happening. Connected to that data and can help get the last little bit, um, and then typically they'll be the person who assigns resolution priority. You know, um, you can auto assign, right?

We know this thing is wasting more energy than that thing. So we'll do the thing that's wasted post energy first, that's kind of obvious, but you do want the human component in there too, to keep track of all the different things and to appropriately ignore faults that are identified as well. Right?

You may choose to operate your building in a way that's slightly less efficient than designed. Yeah. For example, if you wanted to circulate more air during times of COVID, you might have fans running all the time. That should be shut off. And now your fault detection or your monitor based commissioning is saying every day, this is wrong.

This is wrong. This is wrong. You need someone that can step in and make sure the specific use cases are being addressed as well as just the most efficient operational method.

James Dice: [00:48:11] Got it. So then you have these analytics nerds and we'll call them. I usually call them that. Um,  yeah, it's an endearing term. Um, so then you have the ISS people that are also the building operators as well.

So they're going to be on a different team, right? So then are the analytics nerds giving them a list of things that they need to go focus on? Or how does the implementation side of things work for you guys?

Jeremy Macdonald: [00:48:38] Yeah. At first, it's a little bit of the old teammate stuff, right. Of like we're going to storm up and get in each other's way for a second.

Then we're going to form into a team and then we're going to perform really well. So, yeah, I mean the old model of like the engineer kind of knows what's happening at the chief engineer, engineers, technicians, not all is still really relevant and a lot of our best, people monitoring the commissioning are people who have been technicians and engineers at some point, and really like the technology side of things or the control side of things.

So they stepped more into a role like that. Cool. So typically they've got common backgrounds, common language, and it only takes a second for everybody to realize this is like a fun tool to use and we're going to do cool things. Um, but it can have more stakeholders than that where the client needs to weigh in.

We can bring in specific engineers when replacement issues are, are coming. You know, what equipment should we replace with? Which one is more efficient? What's got a better return. So maybe we bring in some. like hired guns for a minute. Like our engineering team can come in and consult as well. And then some of our clients, it is us doing the work.

Sometimes we're just the soft services and not the hard services, for example. So now we're working side-by-side with our customers to do some of that higher level stuff. That's more core to their business. If they're in manufacturing, then they're engineering. Is essential to the product they're creating.

And again, this is the fun area where now what we're doing as part of the facility is also core to what they're providing for their company. I see. I

James Dice: [00:50:05] see. That's what you meant by that. Yeah. So are you then since you're serving different, so I'm assuming like a corporation would have, like a sustainability professional that you would then interface with.

Uh, that would be another stakeholder that might care about this data or these analytics. Right. Are you then. Also serving other people besides an individual facility operating team with the analytics software

Jeremy Macdonald: [00:50:30] for the most part apart, it's how you described it. It's mostly the facilities team. And then oftentimes there's a central sustainability function and they spend, since they trust us on the facilities side, they spend most of their time looking at the S and the G in the ESG model.

We said, They're not coming in to work on it directly, but they have set very clear requirements around the data that they need by the end of the year. So we're helping to track all of the utilities data, and then all of the waste data going through it all year long. Why are there variances?

Why is it more or less than previous time periods and then having all those explanations ready so that when a company does its annual reporting and typically sustainability is annual, there's not like a quarterly sustainability report. Um, they are ready with all of that. It gets audited by third-party accounting companies, right?

Like the big time auditors come in and take a look at this as well. So we have to be ready to use their format and answer their questions, but those are the main stakeholders. Got it.

James Dice: [00:51:26] Very cool. Yeah. I've seen that happen where there's the initial resistance of the, kind of the old way of operating the building.

And then like you talked about the engineer, the technician, and. I've seen other organizations that have done that same thing, where you make the analytics super user, uh, you know, one of the guys essentially, and he's then introducing the techno or she, but usually he is introducing the technology to them from the same team, essentially.

Right.

Jeremy Macdonald: [00:51:55] Whereas reduces some barriers.

James Dice: [00:51:58] Yeah, I've seen it the other way around too, where you have like an external commissioning agent for instance. And I've been that external commissioning agent before where it's just like, it takes a lot longer, I guess, to get on the same team then if you have, like an operator, that's just becoming the super user.

Jeremy Macdonald: [00:52:16] And I agree with what you're saying, you know, you made me think of something else you've asked before. Like, why is it hard for buildings to adopt technology? and now we're talking about the people behind it and the roles they have and how it contributes. And I feel like I've thought of ISS. Like it grew up from operational perspective.

Other companies have grown up from a transactional perspective, but are any of the companies that are big and established facilities management companies, did they start off as technology companies? And maybe if they did, they would be really good at the technology implementation. Um, but there are some companies out there that have, I've started more on the technology side of things.

so if they're not all bought out and they become some of the huge providers, maybe you will see some of the technology adoption. You're curious about.

James Dice: [00:52:59] Yeah, maybe. So speaking of technology, a technology that goes hand in hand with analytics is usually the CMMS, you know, analytics provide some insight and then the work quarters created to fix that.

Right. How do you guys approach that? And have you gotten into integrating the two or what's the process like to sort of keep track of all the different opportunities?

Jeremy Macdonald: [00:53:20] Yeah. Integration is the key part. So when you look back at your assets, you want to see. As a building owner, I think is the perspective.

I'm assuming here, you want to know that key equipment pieces in your building have been well cared for all the preventative maintenance has been done. And, um, oftentimes our entire reputation is on the line. If some key piece of equipment didn't have its useful life that it was supposed to. Right. so you have these big, critical pieces of equipment and we've been keeping logs in our CMMS since forever for that equipment.

So it's, it's the owner's data, but we're obviously taking care of it. And now we're adding a new technology that can make sure that equipment is optimized at all times. Right. we're monitoring it and making sure it's commissioned all the time, not every five years or the, or once when the building is created.

So you want to be able to get that huge data set that you have now, you know, every five minutes you're pulling these interval of data versus like we did a PM last month, we did a PM last month, we did a PM last month. And so there's a mismatch still, in my opinion, in the industry in how do we make this voluminous data we have now effectively combined with kind of the data we had before.

How do we keep the history of all that together in a way that's efficient? And I'd say that's still being figured out. The easiest way to do it in the short term is you have that huge data set separate, and then you link it with your work order system. So the task that monitor based commissioning is identifying gets entered into your system for your CMMS.

And there's a link back and forth so that if you want to dig deep into the other data, you can. Yeah. And thank goodness for that, right. Because some of our systems can't handle that much data anyways. Okay. It's just different. Yeah. And that's the way we do it too, at this point. Um, we don't necessarily want automated work order creation yet, because as I mentioned, you can get a lot of faults that you don't want to do anything about for now.

And you need someone to say, Nope, no action for now. If that automatically created work orders, then your facility management companies would start failing their KPIs around completing work orders on time, because you could in theory have many, many, many things come out. Especially when the system is newly commissioned to run.

And that would be a bad outcome for everyone. Yeah. Yes.

James Dice: [00:55:39] Can you talk more about that? I think that's one thing that people that are new to this sort of world don't understand is the, like how these sorts of KPIs are baked into the contract for the

Jeremy Macdonald: [00:55:50] facility manager. Yeah, sure. I mean, when you outsource, you want to know that it's being done right, but you don't want to have to watch it all the time anymore.

That's the whole point of outsourcing it. So you agree upon key things you'll measure. And if those things are performing at the level you expect, you can assume everything else is happening, how it should. Right. There's obviously financial measures. Like we don't spend more money on operating the facilities than we said we would.

That's an really easy one to measure because the bill comes higher, low. But when it comes to work orders, everything a facilities management company does is tracked through our work order system. And there's all kinds of work orders. There's things that are planned in advance and there's things that are reactive.

And, you know, you have to respond immediately to something reactive or it wouldn't have come up. But on the planned ones, there's always the risk that your provider might defer some of that plan maintenance, or they don't get to it. They said they would, but they didn't. So. Instead of having to worry about all that, you know, which workers there are.

And you can see that at the end of every quarter or month or whatever period we're measuring, we have completed all preventative work orders, 99% on time or something like that effect. It's pretty high KPI for that case. Yeah. And it's a key, if that wasn't the case, we actually put our, our compensation at risk of us reaching these KPIs.

So it's not just something we feel bad about, but we actually lose money if we don't make them. so that gives a high degree of confidence to our ultimate client that we're doing a good job. the nuance there for monitor based commissioning is that, you may have 500 fans. In your building and you may have them all turned on to full bore for some reason or another on purpose.

You're venting out some thing that happened in the building. So you would get 500 flags out of your system. And then those 500 would automatically be work orders. And even if you knew they were not correct work orders, someone still has to go in and click each one and say, Nope, close it out. No, close it out.

I mean, you think, why can't you just close out all 500? But do you really want your facilities management company just swiping 500 work orders off the list? Or do you want them to go through and say why they're taking them off the list? So if you ever dig into that, you need to be thorough and have a good audit trail.

So you want to make sure you're setting yourself up for success without, giving yourself many, many unnecessary work orders. It's an administrative nightmare.

James Dice: [00:58:13] Totally. Yeah. That's the case where we're not quite ready for the full, you know, the full integration of these two different systems. Um, I'm not going to go down this rabbit hole, but this same thing happened when I was at REL.

It's one of the biggest analytics implementations anywhere. I walked into a building that had analytics installed and I get into the facility managers room and I was just there to do basically. Third-party M and V on some totally unrelated project, basically.

And, uh, I walk into the facility managers room and he starts literally yelling at me about the analytics and how it was creating all these work orders. Cause he was an outsourced facility manager and they were basically just ignoring it, like one of his tasks. First thing in the morning was to log in and.

basically clear all of the analytics produced, uh, work orders out of there because basically just like, these are not relevant, essentially. He wasn't even reading them because no one had thought to say like, well, there needs to be a filter in there that just decides whether they're they're real.

It needs to go. Yeah. Yeah. So it's

Jeremy Macdonald: [00:59:18] definitely seen that show up.

James Dice: [00:59:20] So. kind of closing things down here. What other obstacles have you had? Cause I know you guys are pretty, you're at least it's only been a couple of years since you started rolling out these types of analytics based services.

So what other obstacles have you hit and what sort of ways have you got around

Jeremy Macdonald: [00:59:37] those? Sure. Um, specifically around monitor based commissioning. Yeah. Um, You want to be set up and aligned for success with your customer. And many people listening to this will know about the concept of bested outsourcing, right?

Where you want an outsource partner, but you don't want to like punish them. You want them to succeed. And we want our clients to succeed because that leads to a much bigger business that we all get to participate in. And that's, that's the critical part for monitor based commissioning too. We want to create a system where everyone can succeed.

So. If the facility is not operating efficiently and everybody knows it, monitor based, commissioning will now make that very visible to anyone whoever wanted to ask. Right. And maybe that's the facility management providers fault. Maybe we've been ignoring something. Maybe we've been ignoring it because the owner said, no, don't worry about that.

Uh, we'll let it, blah, blah, blah, blah, blah. So. You can't hide things as easily when there's huge transparency into your equipment. And if you've set up a model where you're antagonistic with each other, now you're going to be fighting about whose fault it is that it's not done the right way. I've also seen this happen when it comes to an incentive.

If we promise this will pay back a lot of your energy costs, and then we get into a fight about the tool. We may then try to be line item, editing, different initiatives that came out of our tool. I'll give you an example. I'm not a specific example, but let's say we came back and said, this software solution saved you 10 different initiatives last year.

And there's a huge dollar savings with that. But then the person who receives that says, uh, you know, of these 10, five of them don't really count because you should've known about it anyways, or why did it take you the software to see this? And now we're fighting about the payback period of these initiatives, right?

We've set ourselves on a model that just isn't going to work and it's painful and no, one's happy about it. So you need to set up a good contract from the beginning. You need to think ahead about how it's going to work. And then agree on how to measure performance. And that just sounds like basic management, but, um, yeah, it's hard.

James Dice: [01:01:49] Totally. All right. So kind of closing out here. What are you excited about in 2021? in terms of building technologies and

Jeremy Macdonald: [01:01:58] sustainability? Yeah. Well, I think this moment, right, COVID has revealed to us the criticality of remote facilities and management and. If you have systems that enable your technicians to take action from a distance, if you can log in and affect things to occur without having to be onsite, you are so much more nimble and so much more able to reduce your electricity or energy consumption that it will be a huge advantage for the companies that have it versus the ones that don't.

Um, fast company pro um, shared an article about a month ago, talking about how most buildings are using more than 90% of the energy during COVID with no one in them that they were using before COVID with everyone in them, right? Yeah. The lights are on as much. The equipment's running as much and you can't just turn off the air conditioning.

Like buildings will be too quickly. You have to maintain a certain quality for your interior exterior. Um, but. It also, shouldn't be that high of a percentage. we should have a way of doing this, then we should be able to act faster. And there's a big return on that investment. So as companies are starting to think about what's my right real estate strategy, maybe they're downsizing because they don't think they need as much physical space.

They can also get much more nimble in how they monitor the space that they do have and able to adjust it.

James Dice: [01:03:14] Cool. I love that answer. So last question, the. flip side of my question I asked earlier is why building technology is behind? Like, why is it behind the flip side of that is like, what's the, what's the thing that you think needs to change to unlock it.

And what, what do you think is going to happen in 2021 or needs to happen in 2021 to unlock things?

Jeremy Macdonald: [01:03:34] That's a really great question. I'm stalling for a moment. That's okay. It seems like with facilities for many years, we've focused on, I mentioned before, are we doing like a greater satisfaction level with the same amount of money being spent on the budget?

Or is it the other way around? We are happy with our facility, but we're outsourcing because we want someone that can do that same thing for much less. But at some point, when you keep thinking every year, we'll reduce a few percent out of our budget over and over and over again, we'll find more and more efficiency gains.

You reach an inflection point where you may have to invest more for later on, much bigger gains. And that to me is kind of a moment we're hitting right now. What has to go, right? We have to think about our facilities in a way. That's not just what is the bare minimum we can do, but you know, what is the right level we can do to make sure we're really delivering our value?

Could we prove productivity? Could we prove greater company performance overall through our better facilities? My answer to that question is yes. Uh, it took me a second to frame it though. Right. And it's hard for us to make those links, but we can't keep just thinking about reducing costs.

Um, we also have to think about how do we increase value and what's the return on those experiences. Yeah.

James Dice: [01:04:50] wrote an article two weeks ago and I called that specific piece of the puzzle. I called that the path to business value. I think I called that. but like, yeah, moving from expense to top line revenue in some way.

Um, I agree. W we we've kind of been marginalized, uh, in the past and these types of products can easily get marginalized

Jeremy Macdonald: [01:05:12] analyzed ourselves. Right. I think we're always, this happened all the time in the architecture business too. It's like we're negotiating with our peers. We're all saying we can do the same, just as good for a little bit cheaper, but at some point we need to change that story and the opportunity will finally be recognized that we can do.

Much much more with a little more versus a little, a little less.

James Dice: [01:05:34] Totally. Well, thanks so much for coming on the show, Jeremy, this is

Jeremy Macdonald: [01:05:37] fun. Yeah. Thanks for your time. I look forward to hearing them all.

James Dice: [01:05:45] All right, friends. Thanks for listening to this episode of the nexus podcast for more episodes like this, and to get the weekly nexus newsletter, which by the way, readers have said is the best way to stay up to date on the future of the smart building industry. Please subscribe@nexuslabs.online. You can find the show notes for this conversation there as well. Have a great day.