Downturn? Some Say Opportunity

We are all in the business of making lemonade these days. I am hearing more anecdotal evidence that the beginning of the end of our current economic mess is in sight, but I am not yet a believer. Several of my friends in the design and construction industry point to an uptick in proposals but none of them are yet signing much new business. They interpret the increased RFP activity level as a sign that good things are about to happen. Maybe. Or maybe it’s a sign of people wishing and hoping good things will happen. Who knows? Time will tell, and I hope it tells a happy story.

In the meantime, however, there is still much each of us can be doing, using the urgency created by our current state to make changes to our future state. As CRE’s and FM’s we are responsible for assets that comprise a large portion of the economy. We know for example that real estate is typically the second or third largest cost item, behind talent and sometimes technology, for most companies. It is not uncommon that RE represent 50% of a company’s balance sheet and the operation of those assets can account for 20% of a typical income statement. Big numbers you say? How about this one: Fortune 2000 companies are responsible for over 1 trillion square feet of space. In other words, we design, construct, manage and operate trillions of dollars worth of assets.

To state it another way, we make a very large contribution to the welfare of our respective organizations, and have a responsibility to steward the resources entrusted to us with great wisdom.

So how do we do that, especially in times like these? There are a host of ways, I suspect you will find one or more of these suggestions appropriate for your circumstance.

· Increase portfolio efficiency: In the eighties I spent several years building large corporate campuses and facilities for my employer. Then it all began to crash. We shifted from expansion to contraction and worked hard to redeploy real estate. We analyzed the entire portfolio and consolidated, focusing on strong business units. We got rid of space that was dragging down the balance sheet and were ruthless in doing it. Net result: Fewer sites and greater density, and significant cost reductions.

· Centralize control: When times are tough you need to make better decisions, make them faster, and strive to integrate them across the enterprise. It is certainly possible to do all of that in a decentralized organization, but you will fight fewer battles, make progress and reap benefits much faster by centralizing authority over strategies and implementation tactics.

· Don’t accommodate change, drive it: As noted in an earlier posting here, tough times can also represent opportunity. People are more likely to listen to ideas and more open to large scale change. As those responsible for a large asset base we have a responsibility to do much more than just manage the day-to-day details of operations. We are responsible for envisioning what’s better, what’s next, what’s needed that no one else is thinking or talking about. We are responsible for bringing it to the table, socializing the concepts and promoting positive change that contributes to the well being of our organization. Put your change agent hat on, roll up your sleeves and get to it!

European FM Standard – EN15221

When globalization developed momentum it quickly over ran most organization’s ability to track operational and portfolio data in a coherent manner. Recall also that the break up of the Soviet Union both added political instability and introduced new business energy into the Eastern European region. Stir that pot just a bit and you have one very interesting recipe. CRE/FM teams raced to support business expansions in an often times chaotic environment. Making it more difficult was the lack of comparative data. Forget about trying to normalize against Western measures, we often couldn’t normalize between two Eastern countries. Each, it seemed, had their own business calculus. They measured space differently and often something as simple as that had no standard within a country.

OK, so what you say? That was then, this is now. Why does that matter?

While multinationals have done a good job of integrating portfolios and operations across national boundaries in the region there has still been a lack of cohesiveness. Standards tended to be determined on a company basis, not on a national or regional basis.

That is changing with the emergence of EN15221, the European standard for FM. With first elements released several years ago it is already well rooted. New elements build on an impressive body of work and expand the reach of standardization. It includes specific standards for Terms and Definitions, FM Agreement, Quality, Classification, Process and Area and Space Measurement. This standard enables consistent, meaningful and actionable information and data tracking across thirty countries on the European continent.

As desirable as the outcome may be, it will not be easy. Thirty countries. Thirty different ways of doing things. All moving to one standard, all having to change long held definitions and methodologies. There’s that word again. Change. I expect there will be a fair amount of “dust in the air” as they say in the construction business, but it will be worth every bit of it when everyone speaks the same business language.

Cost Benefit Analysis Tips

Summer approaches and I’m loving it. Ah, the sun, the sand, the sea! Yet I wonder. How can a season that includes things as pleasant as baseball, beaches and barbeques share time with something as dreaded as the annual business planning cycle?

If you would like to preserve as much of your Summer as possible and lose as little as possible to wrestling with dueling spreadsheets, then understanding how to clearly present your case is important. You want to build strong and meaningful cases, and spend your time on the ones that really matter - those that will directly support core objectives.

As simple as these tips may sound, you would be surprised at how often they are forgotten or ignored when Cost Benefit Analyses (CBA) are prepared. Here they are, put them to good use.

· When you have multiple options always include a decision tree at the front end of the CBA.

· Use the decision tree to help tell the full story, illustrating why you have selected only the most beneficial for full analysis.

· Make sure the analysis is objective. Include all valid alternatives.

· Tell the story clearly. What are you trying to do technically? What are the objectives? What will you be able to accomplish as a result of the project that you couldn’t otherwise?

· Use understandable language and metrics. Simplify so that your non-technical decision making audience will actually understand what you are saying and why it is important. Use metrics that they care about; cost per end unit, shareholder value, etc.

· Include only marginal costs, do not include sunk costs.

· Answer the “Why now?” question. Differentiate between what you must do now that enables future steps and what can be delayed. Define the cost of doing now vs. delaying both in money and opportunity.

· Match the complexity of the CBA to the cost/benefit/risk of the project. Scale the process so that you are doing the most analysis on those items that carry the biggest risk.

· Do not spend more on the analysis than the marginal benefit of the project (a common trap in analytical organizations).

· Identify the consequences of various scenarios and the cost of those consequences.

I think you get the point. CBA’s are a fact of life, but you don’t need to make them more difficult than needed. Keep it simple, clear, and compelling. And use all the time you save to enjoy the season’s more amenable pursuits.

Strange Buildings of the World

Without meaning to offend the creators of these masterpieces (some really are) I refer you to http://villageofjoy.com/50-strange-buildings-of-the-world/ where you will find more pictures like this of buildings and homes that someone, oddly enough, thought were a good idea at the time. Although some are serious buildings (The Guggenheim, etc.) many are whimsical in the extreme.

The point? There is none. Simply enjoy and be bemused at the creative and (not always) good sense displayed by the design community world wide. Who says we don’t have a sense of humor?

Vision and Belief Inseparable from Leadership

We often talk about “the vision thing” when discussing keys to good leadership. It is correct that we do so because a vision of a preferable future is what drives us to accept the challenges of making changes required to achieve that new future. But vision alone is not enough, and vision held only by the leader or top echelon is doomed.

Recently I met with a leader who is searching for a way to help move his organization out of its complacency and on to bigger things. It is one of those situations where there is a general feeling that something is about to happen, but what it is remains unknown. The “what” is becoming clear to one person, however, the leader. And now he is struggling. Why? Because he isn’t certain others will get it, want to get it, or will know what to do with it if they do get it.

In other words, he doesn’t believe in his people. And without that belief the vision will be unrealized.

It is an interesting dynamic, isn’t it? The leader must have credibility at all levels of the organization in order to be effective. People must believe that the leader knows what they are doing, trust their integrity and accept their decisions even when they do not necessarily agree. That requires belief. The leader, on the other hand, must believe in their people or they will never be able to successfully transfer the vision of a better future to them.

One of the more difficult aspects of vision casting is that the instant you begin to release the vision to others you lose some degree of control over it and the outcome. Leaders must release it to others before it can take form and become reality. As others receive it they will interpret it in their own way and adapt it. It is in this way that a vision held at the top becomes a widely held vision that motivates acceptance of change, gaining momentum and moving the initiative forward.

If the leader does not have faith in the people then it will be very difficult to release the vision to them. The people must believe in the leader or they will not follow. The leader must believe in the people or they lead in title only and live a lonely existence.

When my children were young and learning their multiplication tables they would sometimes come to me for help or to show off. Every once in a while they would make up big numbers and try to stump me. I turned those around to teach them another life lesson. I used to show off with the zeroes.

72 x 0 = 0

845,386 x 0 = 0

1, 487,568 x 0 = 0

943,584 x God = God

God x you = all the computers in the world can’t hold that number

A leader’s vision x 0 = 0. The vision must be released, and that requires belief – in both directions.