Times are hard, and the consensus is that things are going to stay much the same for the foreseeable future. Depending on your outlook, this can be regarded as an ideal time to change, challenge the conventional management wisdom of the past and forge a new path. For others, the issues are more immediate; fire fighting at best with continued demand on cost reduction while limiting compromise on customer service value. Regardless of your outlook, it is time to look in the dark corners and challenge the sacred cows.
Of course there is no single simple solution. However, the following is a simple guide to help develop a greater understanding of your portfolio by learning to measure performance effectively. This is not a panacea to all cost woes and value-added virtues, but it should form part of a comprehensive Corporate Real Estate (CRE) strategy. The aim is to gain an understanding of where you are as a business, how you may realize more value and most importantly, forge strategy moving forward.
What Do I Want to Know, and What Do I need to Know?
Too often, this question is not asked early enough, which leads to an information overload, a drain on resources. This is all about the ‘so what’ factor — there is no point measuring everything and hoping that somewhere, somehow, the answers will jump out at us. This predicates a top-down approach, aligning measurement with strategy. Doing otherwise is rather like looking out the side window while driving the car — you won’t always get to where you intended. Functional areas should have a set of management metrics that allow the delivery of services to be controlled; cross-functional measures should help to coordinate functions (e.g. manage suppliers), while the senior team needs seven to nine critical measures to track progress and signal the need for intervention.
Can It Be Measured, and If so, How Often should It Be Measured?
The next step is crucial, as it underlines the value of the outputs you will derive from the exercise. The key to successfully measuring performance is to work backward from your required target and question every step if you are indeed measuring what you intended to measure.
For example, financial performance against budget is not a measure of efficiency but of reliability. Also note the time and resource implication of data collection; the value of the information must be greater than the cost of collection. Once a means of measurement has been established, one must then consider how dynamic the data is that will determine the frequency of collection.
Who Needs to Know What?
Communication is vital in ensuring maximum value is gained from the exercise. There are numerous ways of communicating performance — graphs, tables, performance dashboards, KPIs. Increasingly, firms are making more use of internal publications, focus groups and intranet sites. Suffice it to say some are more effective than others. The key is to know your audience and communicate the right information clearly — a mistake often made (along with measuring everything possible) is to overload people with too much information. This is counterproductive and invariably undermines the core value of the whole exercise. It may sound cliche, but less is more. Again, it helps to break out your target audiences across the organization — suppliers, staff, senior management and the board. Take note that each will have different views of what is important and what they need to know, as well as how much time they can spend digesting the facts. Make it simple and to the point.
Review, Plan Strategy and Challenge
Once you have established your measures, collected the data and communicated your findings, you have completed the first stage — you know where you are as an organization. From this point, comparisons can be made across your organization, strong performers can be identified, best practices understood and areas of underperformance addressed. Benchmarking is a critical tool in calibrating the internal view and looking at the competitive advantage CRE can offer. Finally, because organizations are dynamic, what is measured should be reviewed regularly, checked and challenged to ensure they remain aligned and relevant to the business needs.
Lab Space Case Study
IPD Occupiers has been working with 10 pharmaceutical organizations , including AstraZeneca, from the public and private sectors to help them classify and analyze their laboratory space. AstraZeneca’s benchmarking group for the EMEA facilities maintenance business contains members of both public- and privatesector organizations with a significant research and development component.
What Do I want to Know, and What Do I Need to Know?
The goal across each of the organizations was to identify where waste could be trimmed down to reduce the overhead of the R&D function. The first area for analysis was the occupational efficiency of this area of the portfolio. Laboratories can be configured in many different ways, and within AstraZeneca alone, there were seven high-level lab types defined for their own management purposes.
To make measurement and comparison possible, we needed to simplify the classification in a way that would make sense across the industry. The end result was a six-fold split, which includes categories like bench labs, throughput labs, instrument labs and general activity labs. This provided the standard approach required to reconcile the various space definitions being used to measure R&D buildings, working down from the external to the internal, and then classifying the various types of useable and non-useable space.
From this point, all of the participants were able to brainstorm common definitions for classifying and measuring lab space. Examples included space occupied per employee; the ratio of write-up to laboratory space; and the relativity of bench labs to hood labs in chemistry buildings, as indications of how effectively the organizations were using property. These are now recognized as a primary resource within many of the businesses. These metrics are a reflection of the recent changes in the pharmaceutical industry; the idea that ‘space is no object’ has now gone away — now space equals cost.
Can It Be Measured, and If so, How Often Should It Be Measured?
Once the definitions for measuring and classifying space were agreed upon, each study participant put together a set of sample data to test the robustness of the system, to produce preliminary results that would be interesting in their own right and to give an indication of the potential for performance measurement and, in due course, benchmarking. Key performance criteria included the allocation of space to functions and activities, the utilization of space and the balance of space within buildings.
Who Needs to Know What?
The pilot exercise identified immediate findings in terms of the relative space distribution across activities and functions. It also informed the refinement of definitions and metrics. To date, communication of the results has been limited to smaller working groups and teams within the participating organizations.
However, the framework established will be a vital tool in both understanding the resources employed in each area and reviewing ongoing requirements with occupying departments.
For more information on this topic, go to CoreNet Global’s Knowledge Center Online.
Performance Metrics: Attaining Corporate Real Estate’s Holy Grail
Increasing Collaboration and Decreasing Churn: Optimising Organisational Performance
Review, Plan Strategy and Challenge
By utilizing a classification standard, it was possible to begin to review current operating models outside of organizational labels and in doing so, look for more productive ways of allocating resources across the business. In the future this can be fed into designs for new facilities. The goal is not to cut costs, but to identify waste and thereby release resources that can be better used elsewhere. Transparency enables communication, communication drives improvement.
In the long run, the goal is to see lab space benchmarking extended to the area of occupancy costs, as well as to help address issues like environmental impacts. We would also like to be in a position to assess the affects of restructuring overall portfolios — for example, through the current rationalization program of sites — in terms of space-use metrics. This kind of analysis will be fundamental in developing more efficient and effective real estate strategies going forward.
It is vital that the CRE industry move beyond ‘easy to measure.’ While not everything is readily measurable, a better understanding of every area of the portfolio is possible with a strategy-led approach.
About the Authors
Mark Jervis is Business Development & Reporting Group Manager for AstraZeneca and leads the evolution of efficiency and effectiveness measures across the European property portfolio. He addresses opportunities for improvement and views robust measures, their correct interpretation and resulting appropriate action.
Glenn Corney is a director with IPD Occupiers and is responsible for the company’s occupier services in the U.K. and Ireland. He specializes in the development of performance frameworks that measure the impact of property and facilities on core business.
