Over our 40-year history, our EnergyCAP utility bill accounting and energy management solution has been at the core of many success stories. We have a library of case studies and webinars that share a small portion of those stories. Review those resources, and you’ll quickly notice a common theme that is instrumental to each organization’s success: centralization.
A Harvard Business Review article noted that the decentralized-vs-centralized argument has been a part of organizations “at least since Jethro advised Moses to distribute responsibility to various levels in the hierarchy (Exodus 18:1-27).” Proponents of a decentralized organization or operation typically cite one primary advantage: operating independently allows each branch or agency to be more responsive to its specific constituents or customers. It’s a valid argument, and in some scenarios, decentralization is warranted. The question we urge organizations to consider is, “Does the value of increased control and responsiveness at a local level outweigh the benefits of a centralized utility bill processing and energy management operation?”
We frequently hear about the failures and weaknesses of decentralized utility bill and energy management programs:
- High labor costs due to redundancy and insufficient training
- Slow bill processing resulting in costly late fees
- Missed billing errors (e.g., double-billing, incorrect rate schedules, etc.) due to lack of management expertise and historical data
- Inability to benchmark facilities organization wide to identify energy inefficiencies
- Lack of organizational awareness; no big picture view of energy consumption and cost
- Poor process standardization and quality control
The costs incurred by the issues cited far exceed any benefit associated with a decentralized program. Thomas Ochtera, Energy Coordinator for the City of Westminster, CO, provided the following description of the city’s decentralized program: “Utility bills were processed at the departmental level with little or no analysis. By the time bills made it through the A/P system, double-billing, late payments, and fees were frequent occurrences.” James Bush of Lexington-Fayette Urban County Government stated of the county’s decentralized operation, “Analyzing energy use and cost at a granular level was difficult, because the available data was rolled-up at a collective bill or divisional level. A bill would have to be large enough that you’d remember it being atypical for it to get flagged for review.”
Sound familiar?
On the flip side, the benefits of centralizing an organization’s utility bill processing and energy management initiatives around a comprehensive energy management information solution (EMIS) are substantial:
- Reduced labor costs due to streamlined or outsourced utility bill processing and payment
- Elimination of utility bill late fees
- Ability to identify, track, and resolve billing and account issues before the bills are paid
- Management by skilled energy professionals who are focused on meeting organizational goals or mandates
- Access to comprehensive data enables proactive management, not reactive firefighting
- Facility benchmarking is automated, informative, and actionable
- Data visibility motivates building occupants to conserve and buy in to conservation and sustainability initiatives
Ochtera estimated that centralizing bill processing around EnergyCAP and integrating with the city’s A/P system would save $40,000-$60,000 per year in labor costs alone. According to Janet Purchase, former energy manager at Riverside County, CA, centralizing the county’s program enabled them to audit utility bills upon receipt, and as a result, they have avoided costs of nearly $500,000. Streamlined utility bill processing produced savings of more than $115,000 in just three years. The cost to process one utility bill decreased from more than $5.00/bill to just $1.70, saving the county more than $48,000 annually.
The case for centralizing utility bill processing and energy management is a strong one. If you’re still not convinced it’s appropriate for your organization, I suggest following recommendations documented by McKinsey & Company. In a 2011 article titled “To centralize or not to centralize?” the authors recommend asking the following questions:
- “Do external stakeholders or laws require it?”—In the industry sectors commonly served by EnergyCAP, energy reduction mandates are common. Has your organization directed you to achieve energy reduction goals by a specified date? If so, then you can answer “yes” to this question and centralizing your energy management operation is recommended.
- “Does it add significant value?”—If you’re confident that centralization will increase profits or reduce expenses by at least 10%, then you should do it.
- “Are the risks low?”—Some fear that centralizing a process removes control from local agencies or offices, limiting their ability to respond quickly to issues and concerns unique to them. If you feel that the risk of creating a bureaucratic operation that is slow and unresponsive to localized needs is low, or at least overshadowed by the potential gains in efficiency and economies of scale, then this is also a “yes.”
The experts at MicKinsey & Company suggest that answering “yes” to any one of the three questions most likely justifies centralization. If you answered “no” to all three, then centralization may not be the right move for your organization.
In a challenging time, when many organizations are being asked to do more with less, centralization of utility bill processing and energy management is a change that can deliver positive long-term results. If you’d like to learn more about how our EnergyCAP-based solution can help, contact us or download our Field Guide, “How Much Will You Save with an EMIS?”
Whether you want to license software for a DIY process or outsource your utility bill processing, EnergyCAP can be the foundation of your energy management program.
Campbell, Kunisch, Muller-Stewens. (2011, June 1). To centralize or not to centralize? Retrieved from
https://www.mckinsey.com/business-functions/organization/our-insights/to-centralize-or-not-to-centralize#
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