Corporate Real Estate and Facilities Management: Its all about - PowerPoint PPT Presentation

A Presentation to the Atlanta Chapter of the International Facilities Management Association Corporate Real Estate and Facilities Management: It’s all about Value July 20, 2005 Vik Bangia Managing Director CB Richard Ellis Global Corporate Services The views expressed herein are the author’s own and not necessarily those of CB Richard Ellis

Starting off on the right foot… Starting off on the right foot… CAN WE ALL AGREE? CAN WE ALL AGREE? “Perfect” people are frozen in “Perfect” people are frozen in mediocrity. mediocrity. Imperfect people are free to Imperfect people are free to grow. grow. 1

Starting off on the right foot… Starting off on the right foot… Value is: Value is: � Perceived � Perceived � Believed � Believed � Communicated * � Communicated * What Does Value Look Like to you? What Does Value Look Like to you? 2

Starting off on the right foot… Starting off on the right foot… Pictures of Value: Value Meal in Hong Kong Pictures of Value: Value Meal in Hong Kong Photo source: Internet 3

Starting off on the right foot… Starting off on the right foot… Pictures of Value: Pictures of Value: Photo source: Internet 4

Starting off on the right foot… Starting off on the right foot… Pictures of Value: Bargain Shopping Pictures of Value: Bargain Shopping Photo source: Internet 5

Starting off on the right foot… Starting off on the right foot… Pictures of Value: Freedom to Move About the Country Pictures of Value: Freedom to Move About the Country Photo source: Internet 6

Starting off on the right foot… Starting off on the right foot… Typical Marketing Textbook Definition Typical Marketing Textbook Definition of Value: of Value: � Varies depending on the consumer � Varies depending on the consumer � Is based on perception rather than reality � Is based on perception rather than reality � Is a tradeoff between investment (ie: price � Is a tradeoff between investment (ie: price and what you get (ie: the benefit). and what you get (ie: the benefit). 7

Starting off on the right foot… Starting off on the right foot… Typical Marketing Textbook Definition of Value: Typical Marketing Textbook Definition of Value: � An equation: Value = Perceived Benefit/Cost � An equation: Value = Perceived Benefit/Cost � If Cost goes up and Perceived Benefit stays the same, then � If Cost goes up and Perceived Benefit stays the same, then the perceived value goes down. the perceived value goes down. � If Perceived Benefit goes up and Cost stays the same then � If Perceived Benefit goes up and Cost stays the same then perceived value goes up. perceived value goes up. � If Perceived Benefit goes up and Cost goes down, perceived � If Perceived Benefit goes up and Cost goes down, perceived value goes WAY up! value goes WAY up! (Ignoring Conspicuous Consumption!) (Ignoring Conspicuous Consumption!) (By the way, Cost is not perceived – it’s real!) (By the way, Cost is not perceived – it’s real!) 8

Starting off on the right foot… Starting off on the right foot… My definition of Value: My definition of Value: The perception that a The perception that a function, process, business or function, process, business or deliverable is strategically, deliverable is strategically, intrinsically, and dynamically intrinsically, and dynamically aligned with a stated need. aligned with a stated need. 9

Starting off on the right foot… Starting off on the right foot… Measured in FM by: Measured in FM by: � The degree to which FM contributes to the � The degree to which FM contributes to the company’s core business objectives company’s core business objectives � The degree to which FM and Real Estate � The degree to which FM and Real Estate integrate their work streams and present integrate their work streams and present themselves as a unified team themselves as a unified team � The degree to which FM is recognized as a � The degree to which FM is recognized as a strategic contributor strategic contributor 10

Starting off on the right foot… Starting off on the right foot… Perception = Reality Perception = Reality � Real Estate = “Professional” � Real Estate = “Professional” � FM = “Maintenance” � FM = “Maintenance” 11

Stubbing our toes… Stubbing our toes… Quotes from: Quotes from: Wither FM? – A Delphi Study of Wither FM? – A Delphi Study of the FM Profession & the Industry the FM Profession & the Industry by Andrew Green and If Price by Andrew Green and If Price Source: Wither FM? – A Delphi Study of the FM Profession & the Industry by Andrew Green and If Price. MCB University Press, 2000 12

Stubbing our toes… Stubbing our toes… “FM is a low value, low skill “FM is a low value, low skill function and thus an function and thus an anathema to existing anathema to existing property professions.” property professions.” Source: Wither FM? – A Delphi Study of the FM Profession & the Industry by Andrew Green and If Price. MCB University Press, 2000 13

Stubbing our toes… Stubbing our toes… “FM is still concentrating on “FM is still concentrating on the micro and ignoring the the micro and ignoring the macro.” macro.” Source: Wither FM? – A Delphi Study of the FM Profession & the Industry by Andrew Green and If Price. MCB University Press, 2000 14

Stubbing our toes… Stubbing our toes… “Can FM move from being a “Can FM move from being a support service to being support service to being strategic. I believe it cannot.” strategic. I believe it cannot.” Source: Wither FM? – A Delphi Study of the FM Profession & the Industry by Andrew Green and If Price. MCB University Press, 2000 15

Stubbing our toes… Stubbing our toes… “FM does not present an “FM does not present an consistent image.” consistent image.” Source: Wither FM? – A Delphi Study of the FM Profession & the Industry by Andrew Green and If Price. MCB University Press, 2000 16

Stubbing our toes… Stubbing our toes… “75% of the people you talk to “75% of the people you talk to in [this company]…think FM is in [this company]…think FM is all about running [mail] all about running [mail] rooms, [cafeterias], security, rooms, [cafeterias], security, etc. and is very low margin etc. and is very low margin work.” work.” Source: Wither FM? – A Delphi Study of the FM Profession & the Industry by Andrew Green and If Price. MCB University Press, 2000 17

Understanding the Message Understanding the Message Bottom Line: Bottom Line: If FM is perceived as a low If FM is perceived as a low margin, “maintenance” margin, “maintenance” function, then it is seen as: function, then it is seen as: - Non-core - Non-core - Non-central - Non-central - Un-important - Un-important - “Outsource-able” - “Outsource-able” 18

The Reason I’m Here The Reason I’m Here Perception = Reality! Perception = Reality! True, but… True, but… Change = Opportunity! Change = Opportunity! 19

The Question for Today The Question for Today Are you comfortable in an ever- Are you comfortable in an ever- changing environment? changing environment? It is changing and has changed It is changing and has changed over the past 30 years over the past 30 years 20

Evolution of the CRE Function Evolution of the CRE Function STRATEGIC PHASE: 2002 • Alignment of Corporate Real Estate Goals with Corporate Strategic Objectives MANAGERIAL PHASE: 1995-2002 FM IS HERE • Focus on the Workplace and Productivity (or here) Connection • Management of Real Estate Function • Adapt to Growth and Change ADMINISTRATIVE PHASE: 1985-1995 • Efficiency • Cost Containment BUT NOT HERE • Performance Enhancement ENTREPRENEURIAL PHASE: 1970-1985 • Pursuance of profit in the Real Estate Source: Market Roulac, Stephen, E., “Corporate Property Strategy is Integral • Overall Company Needs Not Always in To Corporate Business Strategy,” Journal of Real Estate Research Focus (July/October 2001) – Published by 2003 Corporate Executive Board “From Backstage To Spotlight” FACILITIES ADMINISTRATION PHASE: Pre-1970 21

Evolution of CRE Outsourcing Evolution of CRE Outsourcing FM becomes Strong Candidate for Outsourcing Up to 1980’s Today 1990’s 2000’s & 1980’s Out- Out- Alliance Tasking Sourcing Partnerships Beyond? In-House Services Tactical Vendor Bundled Out- Strategic The Future provided in- Relationship Tasking Partnership Improved reporting house One-off contracts Examples include Examples include and management for low value- Janitorial, RE, Building Mgmt, information, enhanced added services Landscaping, Lease Admin, A/R, business processes Leasing + A/P, etc and partnership Database Admin, operating model etc. Value Delivered 22