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.