Home > Issue by Date > October 2008

Focus Group Recommendations May Boost Prestige

Centralize real estate and facilities management? Yes! Track assets worth $5,000 or less? Not so much.

By William Manning

james V. O'Connor

Recommendations by a recent focus group of two dozen corporate real estate and facilities management (CRE/FM) professionals may hold the key to boosting a company's efficiency, increasing its stock price, eliminating wasted effort, and adopting best practices that aid in achieving corporate strategic goals. The focus group was conducted by Boston, MA-based ARCHIBUS, Inc. at its annual users' conference. Moderated by Mark Gibson, director of corporate real estate at Ernst & Young and Larry Simpson, director of the ARCHIBUS Real Estate Center of Excellence (RE-COE), the event took place earlier this year in Washington, DC.

One of the primary tasks for the group was to come up with answers and analysis to the following key operational questions:
• What are the top questions your senior executives/internal customers are asking you to answer? Can you?
• What top issues associated with real estate and facilities could move your company's share price by 5%? How would you track them?
• What are the top items CRE/FM professionals track that management doesn't ask for, but should?
• What are the top things you track today that are of no use whatsoever?

There is potential to generate substantial savings for organizations where CRE/FM professionals can come to the table and make strategic decisions with C-level executives. How significant could that savings be? Great enough, say the co-moderators, to make it worthwhile to examine where recommendations and reality intersect.

Top Executive Questions
So what were the burning questions asked by internal customers and top management? Could focus group participants answer them? In order of importance, they were:
• What is the cost of storing fixtures, furniture & equipment (FF&E) vs. reuse/resale/donation?
• What is the importance of introducing workplace strategies to provide appropriate workspace to job roles (mobile vs. fixed), reduce churn, etc.?
• What is the impact—and benefit—of green initiatives on employee retention, energy/construction cost reduction, and organizational environmental strategy?

That first question was a bit of a surprise to Gibson, who observes, "In my experience, FF&E is not usually high on CEO agendas. It doesn't represent a huge cost or deliver a significant benefit when changes are made." The second and third questions were more relevant, "since they have much more impact on the top and bottom lines, respectively."

All companies had workplace strategies of some sort in place, but well balanced approaches that factored in personnel space needs were less common. The right space in the right place was ideal, as long as strategies were refreshed, communicated, and enforced thoroughly and regularly.

As for sustainable design initiatives, Gibson interjects, "Going green to lower energy costs was seen as a bottom line driver with a worker retention side benefit, since it appeals to newer generations of employees. Furthermore, people are no longer saying it's too expensive to go green or that the payback period is too long. Green is more of a core value than it used to be, and it may be less of a cost issue with new construction (at least when compared to older building retrofits)."

While these three questions may be valid, not many CRE/FM professionals can answer them. Worse, these managers tend to bring up matters that are peripheral to the strategic operations of the business, thus reinforcing the impression they are reactive rather than proactive.

How To Boost Share Price By 5%

Members of the focus group were next asked what they would recommend to boost their companies' share prices by a theoretical 5%. They offered these suggestions:

• Centralize real estate and FM functions;
• Develop and maintain three year rolling portfolio, capital, and energy plans;
• Increase employee retention (the cost of losing an employee is often 50% of their annual salary);
• Adopt alternative workplace solutions (like hoteling or telecommuting);
• Establish a system to monitor risk management;
• Institute automated asset management; and
• Shorten the cycle of integrated acquisitions.

Gibson notes, "Centralizing real estate and FM functions can produce a savings from 25¢ to 50¢ per square foot. And having the right portfolio, capital, and energy plans will give greater clout to facilities managers (fms)."

Improving retention strategies, however, loomed surprisingly large in the minds of focus group participants despite the fact it is under explored. "It costs between 30% and 50% of workers' annual salaries to recruit them—that's a huge number," says Gibson. "Designing an attractive work space and offering options like telecommuting can be a big recruitment and retention aid."

What Management Doesn't Ask

Sometimes, it's lack of curiosity that kills the cat, at least that's what some focus group members observed. They cited these important, but rarely asked questions:

• What is the level of employee satisfaction with the building environment?
• What is the optimal square foot/person allocation? What would the impact of better design efficiency be?
• What is the churn rate by division?
• What are departmental growth trends?
• How can a company improve employee retention?
• What is the best way to track the number of mobile and/or temporary employees?
• What should space standards be?
• What is warehousing availability?

"Optimizing square footage per person is an obvious plus, and so is reducing departmental churn due to the loss of employees," says Simpson. "Companies often don't realize how expensive it is to move people. If they did, it wouldn't happen nearly so often."

Gibson praises design efficiency through office standardization to reduce costs and business disruption significantly. "I've seen companies adopt universal space planning to the extent that all office space for particular job categories and purposes is identical, whether it is executive offices, worker cubes, meeting rooms, or anything else.

"The plug and play nature of standardization saved one company more than $12 million ($7 million on moves within the building and $5 million on moves between buildings). Now they pick up and move entire floors overnight and can reconfigure work groups more easily to reflect client changes. They've got box moves down to $50 each."

The Top Time Wasters
According to the focus group, there were many time wasters that had no bottom line impact and diverted attention from more important matters. The top seven candidates were:

• Number of furniture panels;
• File zones;
• Overly "granular" employee data;
• Equipment valued at less than $5,000 (for tracking purposes);
• Face plates;
• Vent penetration; and
• Distance between buildings for maintenance personnel.

"If items like unused furniture panels are just sitting in warehouses taking up space, at however many dollars a square foot, it's smarter to dispose of them and free up valuable storage area," Simpson explains. "And although it seems counterintuitive, when the cost of many corporate assets is in the hundreds of thousands of dollars, there is a diminishing return in tracking assets worth a few thousand dollars or less." [For more information on furniture reuse, see the article entitled, "Quality, Cost, Sustainability," which can be found online.]

Gibson disagrees with the number figure, but interjects, "I think the few thousand dollars number is too high—$500 may be more like it—but the principle is still good. Realistically, though, what you gain obviously depends on what the short- or long-term value is of what you're tracking."

Powerful Memos
While these aforementioned areas were the most significant for the focus group, there was also the need for professionals to present concise communications to sell their ideas. According to the moderators, that kind of one-two punch could significantly raise the CRE/FM departmental profile within an organization.

"And," Gibson remarks, "it will help to have real estate seen as an asset and not a liability...finally."

Simpson adds, "Corporate real estate and FM professionals aren't consulted often enough, and it's too bad, because they can be much more than lease trackers and Mr. Fix-Its. They track key performance indicators and other metrics that can be analyzed and applied to operations. Their insights can, therefore, have a significant impact on the company's bottom line.

"Reducing a policy recommendation to a one page summary and a four page brief doesn't hurt, either," Simpson advises. "With executive face time at a premium, informed but concise communications is part of the formula for gaining that all important seat at the C-level table when strategic real estate decisions are being made."

Manning (William_Manning@archibus.com) is a research fellow for the ARCHIBUS Real Estate Center of Excellence, based in Boston, MA. For more information on this organization, visit www.archibus.com.

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