Are You Ready? The Role of Information Systems to Develop a CRE Strategy and Support Your Organization

August 19, 2010

 

Are you ready? More to the point, are your information systems ready?

Ready for what you ask? Ready to provide you and your organization with the critical actionable business intelligence needed to address the convergence of issues facing CRE professionals today:

  •  The intensifying focus real estate will receive from the senior management as a result of the sweeping accounting changes coming into effect in January, 2012 that will capitalize future rent obligations bringing millions/billions of dollars onto the balance sheet;
  • The increasing need for organizations to reduce real estate related operating expenses thru lower occupancy costs; and,
  • The desire among corporate leaders to achieve environmental sustainability through LEEDS certified design principles, effective energy management and building efficiency.

Each of these dynamics on their own offers unique challenges but, the combination will demand visibility of costs down to the invoice level. And, summary level “executive dashboards” to measure, manage and act by implementing initiatives that will deliver desired results.

This “thirst for data” will place demands on your information systems like never before. It will require a massive aggregation of information from RE/FM point solutions, IWMS systems, your company’s ERP system, energy utilization and materials management systems and the now famous “super duper, one-off, excel spreadsheets” or legacy access databases that too many people currently rely on. Compounding the challenge of tapping into these potential sources is whether you have consistent data across the portfolio on properties you self manage and those you don’t.

WOW! A daunting task indeed. The key for you and your CRE team is to access, source and deploy a solution or solutions that calculate the components that comprise your total costs of occupancy and measure the financial performance of all owned and leased facilities.

As importantly, these solutions will help you answer the inevitable questions you will be asked in the coming months:

  • “what is our total costs of occupancy and how can we reduce it?”
  • “what is the future rent obligation of our leased facilities?”
  • “how can our real estate assets contribute to achieving environmental sustainability?”

My suggestion is to get ready, NOW!!! Don’t wait to be asked. The steps to get ready may include:

  • Create a multi-disciplined team of professionals (RE, FM, Accounting, IT, Operations, outsourced service providers, etc.) to fan out across the enterprise to assemble the data
  • Work backwards from the reports being demanded by senior management to populate the detail under the column headings
  • Determine where the occupancy cost information is currently being held and figure out how you can access it
  • Develop the key performance indicators required to make strategic decisions – you can’t manage what you can’t measure
  • Prepare reporting mechanisms for the data senior management hasn’t asked for but will need to get an accurate picture of facility operating costs
  • Develop a plan to get clean, reliable and consistent data across the entire portfolio (don’t underestimate how hard this one will be)
  • Focus energy on displaying the synthesized data – what will the dashboards look like
  • Make an honest assessment of your current systems and get the necessary budget to fund a comprehensive information system or integrated solution that will deliver the metrics to develop and implement a CRE cost reduction strategy
  • Get a clear understanding of the reporting demands you will need to comply with the changes to the lease accounting standards
  • Establish a rigid and attainable timeline to complete the process
  • GET GOING NOW

Our industry has never been challenged as much for information than now. The ‘back of napkins’ and ‘shoebox records’ won’t work anymore. Management will demand a higher level of sophisticated reporting that we’ve never seen. The time for action is NOW…Are you ready?

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Budgeting Season Fodder – Preparing Your CRE Portfolio and Your Department for Performance Measurement in 2011

August 3, 2010

While most of the country is enduring record heat, the Brits are “on holiday” and many folks’ summers are beginning to wind down you and your CRE department will be cooped up in FY2011 budgeting work sessions.

Fun, right? Hard work? You bet but, the following are some factors about performance measurement you may want to consider for the upcoming year.

In a recent newsletter article published by UK-based IPD Occupiers, the developers of the International Cost Code, they cited some dynamics that may be utilized when applying performance measurement to your real estate portfolio. And, measuring the value the CRE department brings to your organization:

  • Performance measurement and benchmarking can drive improvement in the short term while these tools can act as sensors to identify the need over the longer term on how to do things different.
  • Effective portfolio management requires vigilance to insure occupancy costs are understood while resources and space is maximized. To achieve this will require an efficient process to capture real estate metrics according to industry definitions including cost, space, resource and environmental performance measurement.
  • There is a growing view that current metrics are not aligned strategy – what is required is clarity of purpose and not more data. At a recent IPD conference, University of Cambridge’s Andy Neely was asked about today’s CRE departments, “they’re drowning in data and thirsting for insight.” He continued, “I don’t think measurement should be used as a control system. It’s much better when it’s used as a learning system. What the data should provide is more insight into what is going on within the CRE organization – so we can see how to make things better.”
  • Information systems have sophisticated capabilities, but when CRE professionals begin to align measurement to strategy there are often gaps between strategy, measurement and reward demanding greater flexibility of performance measurement systems.
  • Performance measurement is now an integral part of organizational life, and part of the management toolkit. Very few CRE/FM professionals will not be involved in some part of the performance measurement process. But the key is what’s being measured not just what is easy to measure?
  • Managing information is about getting the right information to the right people at the right time in order to make the right decisions.

In order to analyze the content of performance measurement systems, IPD has developed the Property Performance Matrix grid which maps five zones of influence for the CRE team – cost, space, assets, the CRE team, and societal impact – against five differentiated performance goals – efficiency, effectiveness, flexibility, service delivery reliability, and sustainability.

It should be possible for all CRE performance indicators (KPIs) to be placed within this matrix. This provides a framework for listing performance measures based on the desired organization outcome and creates an integrated view of CRE performance.  It also provides guidelines for assessing existing scorecards or performance frameworks, and identifying the degree of alignment between strategy and measurement.

A few things are inevitable – the 2011 budgeting process will end at some point; there will be a growing motivation by senior management to demand that your portfolio will be measured for efficiency, regulatory compliance, occupancy cost reduction and environmental sustainability; and the CRE department’s performance will be measured by the value you bring to the overall organization.

Are you prepared to support your organization like never before? Are your systems collecting the right information in order effectively manage the portfolio and the people who manage it? Are you ready for the pending changes to the accounting standards? Can you answer senior management’s critical questions about occupancy cost reduction? Are you prepared to present information about your portfolio’s financial performance to management they didn’t ask for but, should have?

The answers to these questions may make some great whiteboard session fodder during the next few weeks of budgeting sessions. And, may challenge to take a new approach in the coming year.