THE POWER OF POSITIVE VALUATION
MANAGEMENT
Take a good look at the techniques we traditionally use in the fire service for reporting our activities. Much of what we do we report in a negative sense—in terms of fire losses, displaced people due to fire, jobs or businesses lost due to fire, and the costs of maintaining fire protection. We are not reporting the positive aspects of fire protection but rather focusing on the negative aspects of fire itself: losses and costs. So naturally the public tends to view fire protection in a negative light — as some evil that, like taxes, results in the loss of their expendable income. We must carry the cause of fire protection forward and change the attitudes of those who pay for our services.
POSITIVE VALUATION
Tom Brennan, editor of Fire Engineering, wrote in his Editor’s Opinion (June 1989): “[The fire service must be] able to market what we do in terms of positive dollars turned and not negative fire-loss costs. The public and its political leaders(s) must be able to weigh cost-cutting against loss in profitable municipal income. We must redesign how we report what we do and do it in positive cash flow dollars.”
Instead of using traditional reporting approaches, which highlight staggering fire losses and exorbitant costs for maintaining fire protection, Brennan suggests a better method of reporting—a method that has the potential of turning public perception of the fire service and its mission in a more positive direction: positive valuation. Report in terms of fire saves instead of fire losses. The fire service has used positive valuation for years in terms of life safety. Extending this principle to the financial parameters of fire protection activities entails the reporting of the dollar values of property, tax base, jobs, and even lives saved by municipal fire departments from the destruction of fire.
Positive valuation serves two purposes: (1) It presents fire protection in a much more positive light, and (2) with the positive cash flow retention values established, any adjustments in fire protection levels can be balanced against the effects of such action on community economics.
Positive cash flow does not need to be recouped from the pockets of municipal taxpayers. Fire saves reflect the positive cash flow value of municipal fire protection services. When viewed from the aspect of positive cash flow from fire protection services balanced against negative fire losses, municipal leaders have an analytical tool. This tool could become crucial in justifying increased fire protection measures, which will in turn increase the positive cash flow stemming from reduced fire losses.
What fire service managers must show with positive valuation reporting is the financial value of the losses prevented by the fire protection system. The parameters of this reporting can be quite complex and must be established with regard to hypothetical fire losses. It is the undamaged portion of the property involved that will start receiving some attention in terms of its value. Fire officials must establish guidelines concerning how far the hypothesized fire loss could have extended in the absence of fire protection. Then they subtract the actual loss from the potential loss. The result is the positive value of fire protection services—the cash flow and property valuation kept in the community through loss prevention.
Be sure to set realistic parameters of hypothetical fire losses. While it is true that in the total absence of any fire protection an incident could conceivably destroy an entire community, such extremes of reporting will distort the data and bias the reader against your intentions.
GATHERING DATA
Obtaining the information required for positive valuation calculations requires some research. Property owners willingly may provide such information, but fire officials may need to look elsewhere. It is important to obtain assessed property values. This information is available at the county courthouse. Insured values also are important. Keep in mind that the property owner may want such information to be kept confidential.
Industrial and commercial fire incidents demonstrate the effect that community fire protection can have on positive municipal cash flow. Business and industry constitute the backbone of the community and mirror its economic health and vitality. A major loss of industry because of a shutdown, move, or fire is a major setback to any community. Jobs are lost, tax base is lost, and expendable income of resident employees is negatively impacted. Some comprehensive analysis is possible that takes into account all of the factors affected when an industry or commercial establishment is spared from the ravages of fire by fire suppression forces. Included is the direct value of property saved as well as the indirect value of retained jobs, salaries, tax base, and municipal cash flow. It requires effort to gather such data, but it is necessary to assess positive valuation accurately.
Saving lives is the ultimate goal of fire protection. Add the factor of a life saved to a fire scenario, and the entire picture changes dramatically. Whether a monetary value can be affixed to a human life is the subject of much debate. John R. Hall Jr., in his article “Calculating the Total Cost of Fire in the United States” (Fire Journal March/April 1989), suggests the figure of $1.5 million as the value of life. Fire service managers may wish to incorporate such values into positive valuation reporting, but realize that assigning a dollar sign to a person could result in considerable public criticism.
Positive valuation data is the best way to show what the local fire protection system is accomplishing to positively impact the welfare of the community through fire loss prevention. Such information is best publicized through the three reports commonly used by fire departments: media reports, situational or special reports, and annual reports.
REPORTING EXAMPLES
We will use the hypothetical city of Sunville as an example. This routine media report, which is probably one of the most common yet crucial publicity reports, describes a residential fire: “The Sunville Fire Department responded to a house fire at 4th and Main at 6:15 p.m. Fire officials report extensive damage to the structure with estimates of $20,000 or more. A smoke detector alerted residents to the fire.”
Now let’s take a look at the same fire reported in a more positive way: “The Sunville Fire Department responded to a house fire at 4th and Main at 6:15 p.m. The fire department was successful in preventing S 50,000 of fire damage to the structure and its contents. Residents were alerted to the fire by a smoke detector installed by Sunville firefighters during the department’s Detection Days promotion three years ago.”
The second example conveys the positive results of effective fire suppression. Yet daily the news media airs thousands of reports similar to the first example.
Suppose that Sunville experiences a major fire at ABC Industries. A media report traditionally says: “Fire officials are blaming a malfunctioning circuit board for a fire at ABC Industries last evening. The fire caused extensive structural and equipment damage of more than a quarter of a million dollars. All 30 employees are out of work due to the incident.” It doesn’t say anything positive for the fire service, does it?
Now for a different perspective: “A fire at ABC Industries last evening was cause by a malfunctioning circuit board. Industrial property worth more than $2 million was saved by the actions of the Sunville Fire Department. Production at the plant temporarily has been suspended for repairs. Plant officials report that the 30 Sunville residents employed at ABC will be back to work in two weeks.”
The second report shows the positive cash flow impact of community fire protection services. Such positive valuation reports can change negative perceptions of the fire service.
Catastrophic and large-loss fires tend to have a noticeable impact on the public and municipal administrators. In such circumstances, there usually is limited opportunity for reporting any positive facts. This is no reason to gloss over such an incident. The best response is for fire officials to detail what actions, in terms of private fire protection and fire prevention efforts, could have prevented the tragedy. Often it takes such tragedies to jolt some people into reality concerning the potential consequences of fire.
Fire service managers put considerable effort into reports. The method of reporting they use for special reports and year-end reports is a direct reflection on municipal officials and the department. Reports are an opportunity for fire service managers to influence the reader.
Sunville is a community of 50,000 citizens with a fire department consisting of 45 full-time firefighters. A traditional year-end report would summarily appear as follows:
Sunville Fire Department Annual Report
Expenditures
Employee Benefits and Salaries
Equipment Purchases Maintenance, Upkeep, and Supplies
Total Fire Protection Costs
Cost per Capita Total Alarms for Fiscal Year Total Fire Loss for Fiscal Year Average Fire Loss
$1,350,000
90,000
60,000
$1,500,000
$30
$700
$4,900,000
$7,000
What is positive about such reports? What does it tell citizens or city officials about the department’s effectiveness? How can this data be used to evaluate the possible consequences of service manipulation through increases, decreases, purchases, or hiring?
If we combine some information concerning the positive valuation of fire protection services with the annual report, we get a whole new perspective:
Sunville Fire Department Saved Life and Property Valuation for Fiscal Year
Valuation of Property’
Saved 59,500,000
Valuation of Municipal Property Taxes Saved
Valuation of Jobs, Expendable Income Saved
Valuation of Life Loss, Injuries Prevented
Total Valuation of All Saves
S 1,000,000
S 3,000,000 $1,500,000
$15,000,000
Comparing the S1.5 million spent to maintain the fire department against the S15 million in property, income, and life saved from fire destruction shows an investment return of 10:1. In just one fiscal year, that constitutes a pretty fair investment return. Having such information and using such ratios provide fire services managers with a few more tools for leverage. It sends the message that an investment in fire protection is a savings investment that keeps positive cash flow in the community.
With the positive valuation methodology, fire service managers can provide concrete examples of how increasing the investment in fire protection may substantially increase retained community cash flow through fire loss prevention. Reporting and analyzing does require a little more effort, but the effort is more than justified.
It’s time for the fire service to begin viewing its operations with a business eye. Some may have the feeling that the fire service is a necessary public service and therefore is exempt from sound business principles. In the past this attitude may have worked, but today our public simply will not accept it.
Society views all endeavors with an eye toward a profitable bottom line. The fire service manager must demonstrate the positive valuation of fire protection services against the cost of those services. It will provide you with some vital information to judge the effectiveness of service levels and demonstrate the profit potential of fire protection services through fire loss prevention.
