Facility Management's (FM) Role in Sustaining Recovery

Investment capital will become more available as global economies emerge from extended malaise .  Competition for that capital will be intense.  Important and challenging business and social issues are present everywhere we turn.  A growing and aging world population, demographic and power shifts, healthcare costs and capacities, geopolitical stress and transition,  the protection and sustaining of natural resources to name just a few.  The list could go on and on, each important on its own merits.

Therein lays the problem.  The list is long, capital is short.  There is not enough money available in all of the world to fix all of the world’s problems.  What are we to do?  What role can FM play in the search for solutions?

FM has a responsibility and a need to lead in the development and implementation of effective solutions.  While we are not charged with saving the world from all of its ills we are the stewards of a large portion of its assets, represented by the existing built environment, new facilities and the natural resources consumed in their development and operation.  How we exercise this responsibility is determined by our day to day actions and the decisions we make. 

How then shall we go about contributing in a manner that informs our organizations, elevates FM’s leadership role, properly preserves and deploys capital, and stewards natural resources for which we are both consumers and interested in sustaining?  Here are a few thoughts.

Recapitalize the built environment:  As recovery makes investment capital available we must make good decisions about where and how to invest.  Much of that investment must be in recapitalizing the existing built environment, including facilities and infrastructure.  It is too large and too important to do otherwise.  Further, recapitalization extends the useful life of assets and avoids unnecessary diversion of funding to new development, which also lessens consumption of resources.  Your job:  Perform condition assessments and develop informed strategies and plans.

Improve FM’s financial skills:  As capital comes available there will be enormous competition as long pent up initiatives in all areas of business reach for the same resources.  New product development and maturation, sales, marketing, research and talent will all be consumers of what is a finite resource for every company.  FM’s ability to understand the business as a whole and develop solutions that solve enterprise problems and make economic sense will be a lever for increased capital flow to projects that make a difference.   Your job:  Improve financial analysis capabilities inside FM and develop strong links with your CFO.

Build effective business cases:  Effective business cases begin with objective analysis of accurate business data which leads you to the right projects and initiatives.  Once you have the right capital investment strategy and portfolio it is up to you to effectively make the case and gain executive approval.  The very best plan and strategy in the world is absolutely useless if not acted upon.  Too often FM fails in gaining project approval because it does not present a balanced and compelling case.  Your job:  Improve or add effective communication and presentation skills to the FM suite.

Develop a long term budget lens:  Not that FM can drive this one, but we can encourage and inform the dialogue on investment return.  The traditional short term focus on investment return marginalizes long term benefit generation.  Investors require a quick return so we build projects and operate in ways that maximize short term return.  Sometimes in doing so we accelerate future capital deployment.  Not paying attention to a growing deferred maintenance backlog is one example.  That backlog will most likely continue to grow, asset condition will continue to deteriorate, and eventually (sooner rather than later) it will need to be replaced.  The short term focus also works against adopting new technologies that improve building efficiency.  In today’s world of rapidly changing technology this issue is not to be discounted.  More efficient buildings provide greater productivity, lower operating costs and higher occupancy rates, each a key competitive lever in its own right.  Your job: Present business options that explain Total Cost of Ownership over the entire life of the asset.

Improve your sustainable profile:  Sustainability has moved deep into the consciousness of the business world primarily because it makes good business sense.  Nearly everyone cares about doing the right thing, but when you can do the right thing and improve competitiveness and the bottom line you have a real winner.  That is why your Board of Directors is putting pressure on leadership (and don’t think they aren’t) to improve sustainability.  You should be doing it for yourself as well.  Sustainable initiatives can improve quality, lower operating cost, allow redeployment of resources, extend life cycles and a host of other good outcomes that you care about because they make your life easier.  FM is one of the biggest levers for sustainable performance and should be one of its biggest champions.  Taking a leadership position on an important issue with executive level visibility which provides social and business benefits improves FM’s credibility and perception as a savvy and visionary partner.  Your job:  Become a Subject Matter Expert in sustainability and how it can be leveraged to improve your business.

Innovate:  Innovation can be a game changer.  Whether it be by integrating technologies in a new way, rethinking your business/service model, developing new space paradigms that improve collaboration, or partnering with other parts of your business to add value – all have potential to improve FM’s performance and value.  Innovating, however, requires taking risks, something that many FM leaders are reluctant to do.  Risk is minimized by thorough due diligence and that should be your approach.  Have a good idea?  Think it through.  Engage others.  Model it.  Run a small pilot project.  Innovate!  Your job:  Be alert and receptive to new ways of doing old things, and new ways of adding value in your area of responsibility.  Be willing to fail on occasion on your way to wins that make a difference.

Life Is A Balance Act

“The best and safest thing is to keep a balance in your life, acknowledge the great powers around us and in us. If you can do that, and live that way, you are really a wise man.”  -  Euripides

It has been a busy summer at the office and there are no signs of a slowdown anytime soon.  New projects and schedule pressures, the annual management exercise commonly known as “budget planning,” and preparation for significant life changes have all been on the front burner of late.  Sometimes it seems as if everything in life is on the front burner.  What happened to the back burners?  Where did they go?

A few days ago I was having a conversation with a friend and he was relating his own tale of “life lived without balance.”  Offering him sound advice (I thought) I reminded him that balance is an elusive standard and to the extent we equate our level of happiness to the time balance of our lives we are likely to be disappointed.  Worse yet is when we feel guilty over the lack of time balance.

My theory is this:  Balance is achieved when the moments and events that we value most in life are rich and have deep roots that touch us emotionally and spiritually.  It is not about equal time.  It is about the quality of our relationships and experiences.

As a project manager I structure nearly everything I do.  I develop schedules, juggle resources and people, strategize, collaborate, and mitigate risk.  I plan the work and work the plan.  But never in a single project plan have I seen a task labeled “be in balance.”  In fact, my experience is the opposite.  The demands of professional life compete with and often trump those of my personal life.  If I am to be happy, healthy, and balanced I must find a way to tip the scales in my favor.

In other words, it is up to me.  I must take responsibility for my own balance, happiness and sense of fulfillment.  And so must you.  Recognizing that there are times our lives will be weighted primarily in one area allows us to focus that time more efficiently.  Getting through that period as quickly as possible and then taking time to rebalance our relationships and recharge our own batteries is important.

Time imbalance can occur for any number of reasons.  Project deadlines, business travel, health crisis, and personal pursuits such as after-hours education are all examples of life and work realities.  Each brings its own bit of stress.  The issue is not avoiding them, because you rarely can.  But you can learn how to make the most of time that is available to you in ways that maximize its value.  For me that means quiet solitude, a morning stroll on the beach with a cup of hot coffee for company, or time spent with my wife when there is nothing particular we have to get done.  For you it might be playing Frisbee catch with the dog, hanging out with friends, or reading that book you’ve been staring at for months. 

Whatever it is that works for you, put it to work.  As Albert Einstein said, 

“Life is like riding a bicycle. To keep your balance you must keep moving.”

One FM’s View of the Immediate Future

As part of an annual scan process we go through in preparation for the beginning of the budget season our organization takes a hard look at the financial world around us. Right now it’s not a pretty picture. Pick an indicator - residential or commercial real estate, manufacturing, job creation – they’re all in trouble. Okay, we know that. But what does it mean for FM's?

Capital to fund projects is going to be hard to come by. The majority of large projects will stay on the back burner as emphasis remains on improving the bottom line through productivity gains and cost savings. Projects that do make it through the approval gauntlet will most certainly be under increased pressure to meet or beat budget and schedule targets. Given current economic indicators corporate capital is expected to remain constrained through at least the next two years.

Commercial real estate will remain in distress through 2011. Default rates continue to rise and are expected to reach 5% this year with the bottom not coming until 2011 at the earliest. That means even tighter credit at a time when many commercial loans are due to reset. Landlords caught in the squeeze are in trouble. Watch your landlord relationships and their financial health. Their risk is your risk. It might be your opportunity as well.

Emphasis on cutting costs and boosting productivity will escalate. Many companies have made the easy cuts and still have to improve to survive, but additional staff cuts run the risk of so deeply depleting the talent pool as to be too risky. For others, the need to improve is a key to competitiveness even if they have so far remained unscathed. Companies will dial up Continuous Improvement initiatives, but the initiatives must demonstrate hard gains through specific metrics. This will include second tier metrics to make certain that credit is not claimed for gains in one sector, cost as an example, at the expense of another, i.e. quality or revenue.

FM service providers are still under pressure. Virtually every firm you depend upon for service or support is under financial duress. Some have improved their position over the last year and most will make it through, but some will not. Keep a close eye on those that are most critical to your operations or present large financial risk should they fail. One way of doing this is to include corporate financial health information in your routine monthly or quarterly contract reviews. They will expect you to be asking so don’t be shy about it. You should be monitoring key ratios, borrowing capacity, credit rating and stock value as a minimum.

Opportunities exist to gain contract concessions. It might be a lease as noted above or renegotiating terms with your largest outsourced service providers. In most cases FM’s will have several of these opportunities. Your goal here is to drive down the cost of the contract in exchange for considerations in their favor such as extending the term of the contract, while maintaining enough resource to get the job done without endangering quality.

Adoption of alternative office strategies will become more common. Even organizations that traditionally have not ventured into this territory will do so. Companies will analyze occupancy and presence data to understand the scale and scope of stranded real estate investment. For companies who need to grow doing so without real estate expansion will become a priority. Densities will increase with shifts in office entitlement policies and standards.

Smart FM’s will watch the scoreboard. You may not consider yourself an economist but now more than ever you need to understand the basics of how business works in this very interdependent world. You should be watching basic market indicators relevant to your business and thinking strategically about risk and opportunity. FM’s should be knocking on the CFO’s door with observations and trends, and proposing actions to take advantage of opportunities and/or mitigate risk. You don’t have to have details. Demonstrating that you are keeping your finger on the pulse and understand what the data potentially means to your business will raise your own stock and protect the company’s as well. Go knock on the door, don’t wait to answer the phone.

Leaders Who Serve

Over three decades ago our second son was born. I still remember that day and the emotions that came with it, but I also remember a very important leadership lesson I learned that day.

Serving in the Air Force and home between overseas tours I was fortunate to be there for his birth. I hadn’t been able to be there for our first so this was a special moment for me. But there were problems. We were scheduled to have the baby at a small community hospital on the northern outskirts of Phoenix. Just a few days before the birth the doctors became very concerned about some abnormalities and advised us that this may be a difficult one. They weren’t as worried about the birth as they were about what would happen immediately after, concerned that the baby would need a full blood transfusion. This small hospital did not have the capability to do the procedure, and due to legal and insurance issues we could not have the birth at the only hospital in the area capable of the procedure.

We were concerned of course. I was struggling not to show the depth of my concern to my wife, but I was worried. We were alone and this was about the biggest trial we had faced as a couple. She was depending on me and I couldn’t let her down.

At the hospital the labor took a long time. At some point I felt I needed to get outside and get some fresh air. It didn’t look like anything was going to happen soon and I felt I needed a break, so I stepped outside. To my surprise, there sat a U.S. Air Force rescue helicopter on the pad with the crew standing around. The flight crew along with a medic and nurse, just standing around. I thought they must have just brought an accident victim in and were waiting to return to base, so I went over to talk with them. Most of these were guys I knew.

That’s when I learned the lesson in leadership. They hadn’t brought in an accident victim. They were on a “training mission,” one arranged by our squadron C.O. They were there, with the flight plan already filed, waiting to take my new baby to a downtown hospital capable of doing the blood procedure if needed. I was stunned. I barely even knew our C.O. and had no idea he even knew we were expecting, much less that there was a problem. I still don’t know how he found out. But I know what he did, I know what it meant to me, and I know what it taught me.

One of a leader’s most important jobs is to remove obstacles that hinder the success of others. Too often we see leadership positions as a zenith of power and influence. Some see the leader’s job as that of being “super boss,” pressuring and pushing, mandating and demanding. Some focus on goals and trends, analyzing information to ferret out the levers that when pulled will steer the organization on a new course. Still others will tell you that a leader’s job is to envision and motivate. I suppose all of those are true and needed at certain points, but there are also leadership characteristics that I don’t think change with the circumstances. For one, leaders care. They care about their people, they care about their community, and they care about what affects them.

Leaders who understand this know the value of serving others from the leadership role. They understand how that commitment engenders commitment in return, how that loyalty reaps loyalty, how the humility of serving someone else can elevate the server as it honors the one being served.

Leaders with a servant attitude succeed, don’t think they don’t. Look around and you will see them. Leaders who genuinely care and are passionate, leaders to whom people gather because of shared values, goals and partnership. These leaders are not weak. To the contrary they have the strength of their values to undergird them when hard choices have to be made. They have something else as well – they have the trust of those they lead because the trust has been earned through shared experiences.

In the end we were fortunate that our child did not need the procedure. Two days later I took home a healthy and beaming Mom and baby. But we could have needed it. And if we had the resources were there, put in place and arranged by a leader who cared.

Meanderings and Musings

Do you enjoy your work? I do. In fact, I often tell people that I feel like the little kid who grew up and didn't have to give up his Tonka toys. And I mean it. Sure, it's challenging and sometimes downright hard, but I love what I do.

Right now I am very thankful to have a place to go do it everyday. I've been bored and I've been busy. Busy is more fun and pays better.

I was reminded last week that not all toys are Tonka toys, be they big or small. If you're as left-brained as I am toys come in all kinds of forms. Last week it was a six sigma refresher course and man, did we have toys to play with! Fishbones, X-Y Matrix, FMEA sheets and on and on and on. Yeah, it was fun.

I've been thinking about my next car. Naturally I want it to be green but hey, I'm a speed freak too. What's a guy to do? How about this?

OK, a slight diversion here. What I really want for my commute is one of these. Not bad for a home built, eh?

Speaking of Continuous Improvement projects (we were, right?) I must admit to a failure. Last year I took on a large project mainly out of frustration with the status quo. The result was predictable. Any time you try to "boil the ocean" you shouldn't be too surprised when it doesn't work. And this project didn't deliver the goods. But, we still achieved a lot. Project checklists, design and building standards, a PM toolkit in our collaboration environment, staff who can now process map with the best, a shorter cycle time on major project provisioning processes. I'll take those results as a satisfactory "silver medal." And I will remember to check the size of my ego the next time.

I am thinking about my FM friends on the U.S. east coast and wishing you all well. I'll bet you've built up some pretty good arm strength these last three weeks with all the snow shoveling. Keep your chin up, Spring Training camps are open in Florida and Arizona - better days are just ahead.

I am helping a non-profit with a site search and have been playing around with GIS tools. We're not quite where we need to be in the shareware world yet but they are moving fast. Assuming you are familiar with Google Earth and Google Maps, try doing a batch upload of target information. There are a few sites that try, but none that I've found that do it well. Anyone have advice?

"The Age of Consumer Capitalism" by Roger Martin in the current issue of the Harvard Business Review suggests that corporate attention to shareholder value over the past three decades has actually hurt shareholder value. In a nutshell, "next quarter" decisions motivated to improve shareholder value often come at the expense of decisions that improve customer value. In the long run customers vote with their purchasing decisions and then....guess what happens to shareholder value. Seems so simple, doesn't it?

OK, that's enough for this week. Work hard, and enjoy it.

We Have Choices to Make

My wife and I are expecting again. Well, to be honest, our son and daughter-in-law are expecting again but at this stage of life we get to share in the joy too. And a joy she (our first “she”) will be. It got me to thinking. Here I am about to welcome my fifth grandchild into the world. Me! It seems like the last time I checked I was twenty-something and about to teach the world a thing or two.

There has been a lot of teaching since then and I’ve been in the student’s seat for virtually all of it. I’ve learned new things about love, loyalty, sacrifice, and friendship. I’ve learned that life is rarely as difficult as it sometimes wants us to believe, as long as we believe. With a reservoir of faith and strength greater than our own we can and often do overcome and achieve, usually in spite of the obstacles. This is not to say that life is easy, but we often make it more complicated than it needs to be. It is not easy, but it is really very simple.

Right now the economy and its various forms of fallout have us spiraling. While we say we think it has begun to turn upward again no one expects an early return to the old normal. That may never come, and why should it? In fact, why would we want it to? After all, the old normal led us to the current normal and frankly, it’s not so great.

So I asked myself, what would create a new normal that would restore and renew us? The answer is very simple. People would do what they say. Decisions would not be based on greed. Everyone would know that they are accountable and what that means. Value would be attributed to those who create real benefit. We would focus more on the things that unify us than on the things that divide us. We would teach our children that life, not things, have value. We would understand that behavior has consequences. We would know that we are responsible for each other and accountable to each other. We would act with the knowledge that ideals are powerful and can change the way we behave, the way we love and yes, the way we do business.

An idealist, you say? Unabashedly so, but also a pragmatist. I’ve lived the life I’ve lived. I’ve seen technologies and the seduction of success come and go. I’ve witnessed countless “next best things” and movements. And what I see left is people. I see me and I see you. I see that we have power to make choices and the capacity to choose those ideals that are good and reject those that are not. I see that we have a wealth of experience and knowledge and that new horizons call to us. Horizons that will excite us, challenge us, and reward us. I see that we have the opportunity to create something new.

As I look to our collective past I am encouraged. We are not the first to suffer hardship and turmoil. The fact that we are only proves that we are humans living in an imperfect world. What matters most, I believe, is what we decide to do about it.

It really is simple. Do the right thing, the right way, for the right reasons. Give each other the freedom to hold our own beliefs. Celebrate a life in common. Have the courage to succeed.

Simple. Not easy. Vital.

Commercial Real Estate Catches A Break, Or Does It?

New guidelines recently issued by U.S. government agencies are directed at preserving the health and welfare of banks holding commercial property loans. The CRE market sector is in trouble with thousands of properties representing nearly a trillion dollars either in default, foreclosure or bankruptcy. The crisis represents a greater risk to the nation’s banking industry than the residential mortgage collapse.

The FDIC, Office of the Comptroller of the Currency and the Federal Reserve have intervened with new guidelines that ease the pressure on banks. Essentially, they relaxed the definition of “performing” loans so that properties experiencing problems with cash flow, equity, or extended delays in selling can still be counted in this category. That means they will not be counted in “non-performing” categories and thusly not affect bank ratios negatively and push holding institutions into failure.

It gives the lending institutions a chance to work with their Commercial Real Estate (CRE) debtors in a more problem-solving manner, encouraging extensions, work outs and the like.

Good news, right? Yes. Well, maybe.

It is true that banks catch a break on this one, but what is really happening here? Yes, it helps ease the immediate pressure and that is important not only to the banks, but to their commercial and individual investors and customers as well. Taking the pressure off this way means the government does not have to come up with another trillion dollar rescue program – at least not for now.

But it does have the sense of “extend and pretend” about it. The numbers aren’t changing at all. These new guidelines don’t make properties any more valuable or speed a recovery. They are more about avoiding or delaying a collapse.

There is an opportunity cost to the market, however. Large capital has been staging on the sidelines waiting for distressed properties to become available at bargain (some would say rational) prices. This move by the Fed and other agencies will keep many properties out of the sale arena. That means new capital will not enter the system and brokers, architects and contractors will remain on the sideline. There will be a direct effect on rising and extended unemployment rates in these labor sectors.

Allowing CRE to undergo the kind of failure that residential real estate experienced would be yet another catastrophic blow to the economy, especially to those invested in organizations holding large CRE liabilities. On the other hand, it would have allowed properties to be purchased at prices which enabled the revitalization of not only the properties themselves but also an important labor segment, which in turn would have had a positive affect on the economy at large.

The economic crisis we still endure is a very complicated matter. There are no easy choices. In this instance the government acted to support the financial system. Let’s hope it turns out to be a wise decision.

A Shifting Global Economy - Who’s Gaining and Who’s Losing?

You need look no further than the large corporate merger and acquisition scorecard to see that economic power is shifting around the globe. Ken Smith’s article in the June issue of the Harvard Business Review makes the case nicely and points to both risks and responses. But first, who are the gainers and the losers?

Gainers		Losers
France	$234B	U.S.	-$220B
Spain	$101B	U.K.	-$187B
Belgium	$79B	Canada	-$158B
Switzerland	$67B	Netherlands	-$111B
Germany	$53B	Turkey	-$24B
UAE	$37B	Chile	-$13B
Japan	$33B	Czech Republic	-$11B
Luxembourg	$30B	Hong Kong	-$9B
Australia	$20B	Indonesia	-$8B
China	$15B	Ukraine	-$8B

As with any shift scenario this one presents opportunity and risk. Organizations involved will need to work out operational details, resolve cross-border governance and decide how deep the shift will go. Will executive management location for the acquired unit remain or move to the gaining country? That is a key decision since moving the executives means that other key support functions such as Finance and Corporate Real Estate are likely to follow in order to maintain strategic and operational alignment.

Competitors will feel pressure to match an acquisition if they percieve a need to match either growth or offering expansion. Doing so smartly can help maintain competitive balance, executing poorly can create competitive separation.

As these M&A’s occur CRE and FM groups are challenged to keep pace. Operations must be aligned; and reporting and management systems must be integrated or shifted. Portfolio strategy and key alliance relationships will inevitably be affected, and CRE’s/FM’s must be proactive in doing so.

Commercial Real Estate – There is Bad News and Good News

Jones Lang LaSalle just released a forecast that both sobers and offers hope. In short, more pain to come but a commercial real estate recovery is on the far horizon.

The numbers tell the bad news side of the story. Commercial property sales during the second quarter of 2009 totaled $5.2 billion, $25.5 billion lower than 2Q08 and $109.5 billion lower than 2Q07.

On the good news side of the ledger JLL projects a slow paced turnaround beginning in 3Q10 which they expect to take a full decade to mature.

If accurate then we have another nine months of decline to endure before commercial real estate begins its rebound. That is an optimistic forecast compared to what we are hearing from most other prognosticators. Some project that CRE will not begin a turnaround for three years in a best case scenario. One advantage of a slow paced recovery is that it will have a more conservative, some would say more rational, financial foundation than we saw in the euphoria that preceded the crash. Let’s hope that no one has an appetite left for risk taking of the kind that exposed us to the current fall.

What is the bottom line on this message? Simple. Keep your seat belts fastened and watch the dashboard very closely.

http://www.zacks.com/stock/news/25189/Jones+Lang:+CRE+Boom+Next+Decade

Influence: The Capital of Leadership

This article is taken from archives and goes back nearly twenty years. It’s premise, however, remains valid today. Influence pays long term dividends. The article has been updated only to add a more recent historical reference.

Today’s volatile capital markets are affecting us all. We listen daily to market reports to determine what has happened during the trading day - and lately that has been a lot! There have been large swings up and down. A six hundred-point drop in one day sends commentators spinning into a spiral of “what ifs?” and each of us is forced to re-evaluate our investment strategy. Then a quick resurgence settles nerves, we blink, and go on about our lives. Yet, in the background, there is a recognition that things aren’t like they used to be, and probably never will be. The world’s capital markets are re-defining themselves and we are along for the ride.

Each of us, however, possesses another kind of capital. We spend it, give it, receive it, and collect interest on it everyday. It is the Influence we possess - our ability to have an impact and make a difference in the world and lives around us. And in this case, we choose on a moment-by-moment basis where and how it is invested.

My guess is that most of us have little idea of the amount of influence we carry. I recently received an e-mail, one of those great stories that make you stop and think. It was about a very simple act of kindness and the life-saving, life-changing impact it had - all of which was unknown to the person performing the act. In this particular true story, a young man was a student at a new high school where he simply did not fit in. Teasing, intimidation and mockery were his daily diet. Alone in a new school and not able to make friends, he was miserable. Walking home one day he dropped his books. Another young man saw this, crossed the street and offered to help. Assisting his new acquaintance he helped the boy home. Over time the acquaintance became a deep friendship. Years later this young man sat at his high school graduation ceremony listening to the Valedictorian, the boy he had helped that day, describe the impact of friendship on his life. He was stunned to learn that on that fateful day his friend was walking home with the intent of committing suicide. This class Valedictorian, captain of the baseball team and honor student had been in such despair that he was about to do the unthinkable until a simple act of kindness changed his course.

The point of this story? The boy who performed the act of kindness had no idea of the dire circumstance that was playing out, yet his action though casual and unplanned had an enormous impact. In short, he was unaware of the influence he was having. I think the same can be said for most of us. Here are a few simple thoughts on Influence for you to consider:

Everyone Influences Someone: At every level of our lives we are in constant contact and interaction with others. Even the most introverted person cannot escape the reality that they personally influence thousands of people. But beyond casual influence, there is a purposeful influence that is a key to leadership. This kind of influence is thought out and implemented by design, not haphazardly. Its motivating desire is to help shape the thoughts, development and character of those being influenced.

We Seldom Know Whom or How Much We Influence: Although these questions are generational, you can ask them of people and get immediate emotional responses: Where were you when Pearl Harbor was attacked? Where were you when President Kennedy was assassinated? Where were you when the Challenger exploded? Where were you on 9/11? Those were big events; we expect them to be indelibly written in our hearts. But there are in each of our lives a host of smaller, character-building, career-enhancing and life-defining moments and relationships that the entire world doesn’t know about. In my own life I think instantly of a high school teacher, a friend of my parent’s, a fellow aircrew member, and a mentor in my professional career. Each of these has left a mark on my life that will never be erased – none of them set out purposefully to do so.

The Best Investment in the Future is a Proper Influence Today: The question is never whether you will influence someone, rather it is twofold: Who will you influence, and who will you allow to influence you? I count myself fortunate to have had mentors who decided to invest themselves in my life and career. It is a partnership, and not always an easy or comfortable one. This investment runs in both directions, unable to be given if the intended receiver is unwilling. An appropriate challenge to each of us is to consciously think about whom it is that we wish to be influenced by in our professional career. Who is it that models the professional development and character that you wish to attain? How can your relationship with that person be strengthened so that you can closely observe how they have obtained and share their influence, and be in a position to gain from their experience?

Influence Is a Skill That Can Be Developed: Yes, there is hope! Leadership and Influence are inexorably linked, you cannot have one without the other. Fortunately both are learned skills. There is no course or class, no diploma to mark your passing to a “position of influence.” It is one result of your experiences as you think about, envision, plan, and live the life you choose. Your career will bring success and success will bring recognition. With recognition comes the opportunity for influence on a wider scale. Do you know what your personal “Influence Quotient” is? Do you know where you need development in order to gain more influence? Do you know how to exercise your influence? Have you engaged in an influence development partnership, either as a mentor or the one being mentored?

Financial markets will fluctuate on a day-to-day basis and the value of the capital invested in them will vary greatly. But the investment decisions we make with our “Influence Capital” are under our direct control, captive to no one else. What we do with them will go far in defining the quality of our lives and our leadership.

“Influence.” We all have it. How are you investing yours?

Most Companies Not Prepared for Lease Accounting Rule Changes

Although timing of accounting changes has not been resolved yet and likely remains several years away, the impact of the changes to corporate balance sheets will be significant. A recent survey jointly conducted by Jones Lang LaSalle and CoreNet Global indicates that 99% of respondents have not yet evaluated the impact of proposed changes on their balance sheets and P&L statements. Twenty-three percent said they were not even aware of the changes.

See http://www.globest.com/news/1478_1478/insider/180564-1.html for more information.

“We Live in Interesting Times”

Don’t we though? We are celebrating the original Moon Walk, an African-American sits in the Oval Office, and the Dodgers have the best record in the major leagues for crying out loud. When was the last time that happened? Yes, these are interesting times indeed. Not always so pleasant though, eh?

This past week was full of meetings and as I am sure sometimes happens to you, I realized at the end of the week that there was a common theme. In each meeting there was conversation about where we are, where we are headed; and what values, strategies and actions will help move us in the right direction.

There are lots of data points to think about, and we should all be doing exactly that as we endeavor to take care of our own little corner of the world.

Commercial Real Estate Defaults Rising Stories are everywhere you look stating that commercial RE is “the next shoe to drop” in the economic crisis. With properties entering or already in default status having nearly doubled since the beginning of the year many would say the shoe has already hit the deck. Real Capital Analytics, Inc. reports that 5,315 buildings representing $108 billion are now in default, bankruptcy or foreclosure. Those making the direst predictions have already pegged this as the deepest failure in U.S. commercial property market history with potential economic impact that dwarfs the residential crisis. Some analysts predict $90 Billion to $140 Billion in losses to securities backed by commercial property loans. Depending on who you listen to the turnaround in this market is 3-4 years away since recovery here will follow recovery in other market sectors such as manufacturing and retail.

CRE’s and FM’s should see risk in this predicament, certainly; but there may also be opportunity. Check the financial health of your landlords and develop contingency plans for their failure. Some may have opportunities to leverage the landlord’s difficulty, offering to extend terms in exchange for concessions. Others may consider buying when the cost is right.

“Extend and Pretend” Programs Only Defer the Inevitable The delay actions currently being proposed and implemented largely fail to solve or effectively deal with underlying problems. We are crafting ways to defer solutions because of the pain and displacement doing so now will cause. We may be releasing immediate pressure but at what cost? The bills will still come due but with added cost in financial and human terms.

When possible avoid falling into the trap. It is like any other conflict, business or interpersonal. The longer you wait the harder it gets. In this case extending the crisis will impinge future options and diminish future capability. Organizations that can avoid “extend and pretend” scenarios will have big advantages over competitors who are forced to play the delay game.

Expect Increased Taxes Governments world wide are running large deficits and few are monetizing them through liberal use of their printing presses. That’s good, but it does mean that the ability to pay the bills will have to come from somewhere. Guess where that will be, Mr. and Mrs. Tax Payer.

Here in California we are living the realities of all of these situations. Past failures are coming home to roost and it hurts. Services are being reduced, important programs slashed, unemployment and foreclosure rates are surging. Eventually we will find a way out but all of us, families and businesses alike should realize that “we” are going to be a big part of the solution. Many companies are taking a strong look at their tax liabilities and while working to minimize them they are also increasing allowances to accommodate new taxes and increasing rates on existing taxes.

Like the man said, “we live in interesting times.” I don’t know about you but I certainly hope no one ever looks back and calls these “the good old days.” While my grand parent’s and parent’s generations lived and eventually succeeded through the Great Depression, I have no desire to pass this one on to my heirs or theirs. Of course it’s tough. But it will be easier now than later.

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.

The Many Sides of Leadership

Leadership is often defined as a study in contrasts. One way of expressing this sentiment is thinking of knowledge sets as the science of leadership, and behavioral sets as the art of leadership. Said another way, knowing what and how is the science of leadership, knowing when is the art of leadership.

Like a pure diamond, good leadership exhibits many facets and clarity regardless of the environmental situation. Those who understand the art know when to turn each facet toward the light so that it becomes the one reflecting energy. Other facets fade to background as it takes center stage. They have not disappeared, they are simply waiting their time.

Strategic vs. Operational

There are times when planning for the future should be paramount and the leaders drive is a positioning effort. Long range planning, investment in innovation, merger and acquisition, R&D emphasis and new product development are hallmarks of the strategic planning phase.

In contrast, operational focus is centered on driving results in the near term. Understanding and managing the details of day-to-day operations is key. Project implementation, cost reductions, efficiency improvements and honing process systems become the order of the day.

Autocratic vs. Enabling

There are times when a forceful posture and behavior is both appropriate and needed. A classic example would be during a time of crisis, but there are others as well. Taking charge, making decisions and giving strong direction pushes the organization to perform at a higher level and/or accelerated pace. Leaders using this tool set high expectations of their staff and demand performance that matches.

The servant leader, however, focuses on removing obstacles so others can succeed. This may be an appropriate style after a change vision has been adopted and the leader is freeing others to implement the new strategy, for example. In this case what matters most is a common view of the big picture. The leader’s role once this is attained is to free others to implement the vision, giving them leeway in how they do so as long as the core tenants and outcomes are maintained.

The point is that none of these styles or behaviors is exclusive of each other. All have their time and place and just like the facets of the diamond each will have their turn in the light. As a leader one of your prime goals is to always know which is right for the time and situation at hand.

Tracking CRE Economic Trends With One Click

Well, maybe not one but pretty close to it. The best indicator tracking site I’ve seen on the web is at Calculated RISK. This blog tracks economic indices of all types including jobs, markets, home starts and sales, construction activity, imports exports, office vacancy rates, architectural billings, miles driven and a host of others. Historical information on each is presented in a chart with accompanying summary comments. The blog also contains an extensive list of links to other economic information and opinion sources.

Why is tracking this data important to you right now? If you have CRE in your responsibility portfolio then you are charged with understanding market conditions and trends, and how they may affect your organization from strategic, tactical and capital perspectives.

Now more than at most times staying abreast of the financial environment is critical. Here are a few current articles from other sources that should be of interest as well.

Commercial Property Faces Crisis (Wall Street Journal)

U.S. Office Vacancies Hit 15.2% - and Rising (Wall Street Journal)

Defaults Rise as Worst Is Yet to Come for Commercial Property (Bloomberg)

Soros Says Commercial Property Values Will Fall 30 Percent (Bloomberg)

Manhattan Office Market Vacancies Could Rival 90’s (Reuters)

What is the point of all these links to depressing news, you ask? Not to depress you but to make sure you are staying informed. It is too easy and too tempting to stick our heads in the ground when times are tough. That’s not what you’re getting paid to do. Get your head “up and locked” and be aware of what’s going on around you. You won’t be able to recognize risks and opportunities if you’re not looking.

Besides, it won’t always be bad news. You won’t want to miss the party when all the trend lines start heading back up.

Investing 101

Ever thought about how life's best answers are usually the simplest (notice I did not say the easiest)? For example, investing. Want more money? Deny yourself and save some of what you have. Want more energy? Expend the energy you have in exercise until you're exhausted. Want trust from others? Give them yours first. Want love? You know the answer already, don't you?