Office utilization: Who should be involved in managing real estate decisions?
We hope the previous chapter makes the case for a team approach to maximising the value of office space. Clearly, that means bringing together people with different skill-sets and experience to pool their ideas and know-how. To ensure that any diverse group of people work together well, it’s a good idea to set out roles and responsibilities, and that is certainly true when embarking on a corporate change programme. Your office real estate is such an important asset, altering how you use it – or even deciding to divest yourself of some of it – can have a very significant impact, both on the bottom line and on other critical efficiency and productivity measures.
For that reason, key management must be fully involved at the highest level across the C-Suite. Here then is our guide to the roles and responsibilities for each director. We also look at how those roles and responsibilities will change in response to the global technological and cultural influences shaping tomorrow’s corporations.
Our belief is that there is a triangle that symbolises the traditional and emerging roles of the C-Suite in office real estate management. Its three corners are finance (still hugely important, of course, hence its position at the top) but now underpinned by HR and IT.
Having said that, we begin not at the top of the triangle but with the person at the top of the tree.
It is only natural, you might think, for the CEO not only to have ultimate responsibility for office real estate but also to take a keen interest in its management (office utili ation), and yet it is remarkable how many organisations let important strategic office utilization decisions slip down the delegation ladder.
Why does such an important asset as a corporation’s office real estate get short shrift at the top level? Is it that Chief Executive Officers and Managing Directors are unaware of the scale of wasted space and the potential cost savings? Perhaps so, but even if the CEO has read that 30 per cent of office space is wasted, he or she may perform a quick calculation and decide to focus on other priorities. That erroneous calculation goes like this. If real estate only accounts for, say, 25 per cent of your overhead, cutting costs there by a third only equates to total saving on overheads of around eight per cent.
This approach is flawed for several reasons. Firstly, the 30 per cent figure for office utilization occupancy that is widely accepted across the industry may seem dramatic – so much so that many corporations find it hard to believe – but in reality, it is actually quite modest. We know from experience with hundreds of corporations worldwide that far larger amounts of space can often be freed up by intelligent application of flexible working backed by effective technology. In fact, savings of 60 per cent or even more are possible.
Secondly, the other 75 per cent of a corporations’ assets are going to take a lot more time and energy to reduce. After all, they have had the CEOs’ and CFOs’ almost completely undivided attention for years, if not decades, with many costs honed to the bone through successive economic downturns. In other words, the potential costs savings from reorganising your office real estate are going to be much easier to realise than anything you can achieve by cutting costs elsewhere. This is especially true as there is now a strong body of evidence against which you can benchmark your own office utilization. Add to that the opportunity to use specialist expertise and space monitoring technology, and there has never been a better time to review your office space use.
Thirdly, and most importantly, restructuring your office space presents opportunities beyond the obvious cost savings on leases and rates or the potential to free up capital by divesting yourself of part of the asset. As we have said before, effective flexible working has the potential to make the organisation more agile, invigorate employees, attract high-calibre recruits, increase productivity and – when tied to smart building technology – to reduce energy and other building management costs.
When it comes to driving and managing change, it is time for the CEO to take the helm
A significant reason that CEOs do not grasp the nettle is that real estate is one part of the business that might be expected to take care of itself. After all, practically every corporation that has a significant investment in office space will employ a real estate/facilities management (FM) team, whether internally or outsourced or both.
Admittedly, leaving the day-to-day running of your office space to the people who have it in their job description is a completely justifiable piece of hands-off delegation. However, when it comes to driving and managing change, it is time for the CEO to take the helm. Yet even getting the opportunity to do so can require the CEO to be more proactive in this area of the business than hitherto. He or she may also have to overcome institutional intransigence to move the corporation towards a better, different way of managing office real estate.
For one thing, it is possible the real estate manager may not want the CEO to be involved in any review of office utilization because he or she doesn’t understand or can’t explain the implications of flexible working. Another reason the FM team may try to shield the CEO from the issue is that – like many over-worked managers in other roles – they fear being saddled with a new set of responsibilities for themselves or their team without additional staff resources.
People have busy day jobs. Few people want to be the leader or driver for something that can look like a daunting new initiative. Neither do they want to rattle cages by bringing ideas up the ladder.
So the CEO needs to be aware of the potential benefits of investigating and implementing flexible working. He or she must be committed to direct budget to the process, including bringing in experts to apply their specialist know-how and technology as well as increasing organisational capacity to meet the challenge.
The C-Suite executive who is most likely by far to be in charge of an office utilization review has almost exclusively been the Financial Director, at least until now. There are now signs that this is beginning to change, as you’ll see in our other roles and responsibilities sections. Nonetheless, for now and foreseeable future, the FD still has responsibility for the organisation’s real estate/FM team, so reviewing any significant change in the way the asset is managed will certainly form part of his or her remit.
As you would expect with the job title, the FD is someone who appreciates the direct financial drivers, so the potential for cost savings can certainly be expected to pique his or her interest. The FD should indeed see it as one of his or her key responsibilities to properly manage any real estate asset or liability. The FD’s cooperation will also be required to make available budget to survey how the company is using its real estate and to design and implement a change programme, as well as installing technology to manage the new working system into the future.
Opportunities to impact positively on a company’s finances can be nuanced
Of course, cost savings – however obvious they may be – can’t always immediately be realised where there is a long-term lease or for whatever reason, you find yourself stuck with a particular real estate asset. Even so, the opportunities to impact positively on a company’s finances are sometimes more nuanced than the obvious ones of terminating a lease or selling a building.
As an example, we worked with a major insurance company as it was intending to move premises. At some point, the management made the decision to cancel the proposed move and to stay put to save on the costs involved with the relocation. That could have been that, but instead the company decided to create a budget to reorganise its current premises, and to bring in our know-how and technology to ‘sweat’ the existing asset.
Another less obvious cost saving is to be found in the satellite office. The exponential rise of co-working spaces in big cities on both sides of the pond and elsewhere has given organisations an easy ‘out’ when they feel they are running short of space, but it’s not ideal. The whole idea of having people physically in the same space is so that they can work collaboratively and interact face-to-face with other teams and management. So, rather than put ten new people into a co-working space or a small office in a separate building, look to flexible working to find a way to absorb those people into your existing space. A fast-track four-week survey of your current office will immediately highlight how that can be done as well as pointing you to many of the other benefits that flexible working has to offer.
Head of Real Estate/FM
Like any game-changing new concept, a major office utilization review could be regarded as disruptive. Flexible working has already begun to transform the office real estate market, and for people in office management roles, it could revolutionise job descriptions.
For heads of real estate and facilities managers, the changing workplace might well be viewed as an opportunity or a threat. For those with the opportunity mindset, it’s a chance to align their roles with mission critical processes and vogue themes, hugely increasing their visibility at the top level. Flexible working is in many ways a product of the digital transformation of business. Likewise, smart buildings are one manifestation of another big business issue. The move towards ever greater energy efficiency has come mostly in response to governmental and consumer pressure but also as a conscious decision by some corporations to gain a competitive and reputation advantage. Taking on a new kind of job spec that has these big issues at its heart will make the real estate manager’s role much more strategic.
An exciting opportunity for real estate managers and FMs willing to embrace change
For those real estate managers and FMs willing to embrace change, new ideas about office utilization are an exciting opportunity for career development. For others, the future may be about managing the physical space that’s left once the smart aspects of real estate have migrated to someone else’s job description.
We completely understand that just maintaining the status quo means work is already hard enough for many real estate managers/FMs, without venturing into pastures new. However, we urge you to make the case for additional resources, internal and external, to move your organisation forward. We all need to overcome that natural fear of change and to take responsibility. It’s our great hope that people in real estate roles see the rise of flexible working, together with all the associated technology around smart buildings, as their chance to shine.
CIOs (and beyond)
All the factors we have looked at regarding office utilization so far are leading to a trend that we are just beginning to see with CIOs becoming increasingly involved in real estate decisions and change management. As technology and buildings become more intertwined, we expect that trend to continue and, ultimately, to see a new management role combining the CIO’s building-related responsibilities with those of the Head of Real Estate.
Digital transformation has given people the freedom to work flexibly with access to the cloud and distributed telephony. This has had a massive effect on real estate. People demanding the opportunity to work flexibly is a powerful driver for change. Now, the technology has evolved to a stage that companies can respond to that demand. This is why we are seeing traditional one-person, one-desk set-ups replaced with collaborative spaces because when people have the opportunity to work alone anywhere, having a place to work together is the real justification for investment in real estate. That’s why we come to the office.
The Human Resources Director and others in the HR team will come to be much more involved in real estate management than they typically are today. Much in the way that the technology-related aspects of real estate bring the CIO to the table, so the people-related aspects should make HR a much more integral part of the office utilization and management process.
You may be surprised to learn that this is not already the case, but our experience is that having an HR director or senior person properly involved is the exception rather than the rule with most corporations still relying on their real estate team under the directorship of the FD to manage their office space.
Meanwhile, with flexible working on the rise, HR finds itself getting to grips with new issues, such as managing remote working, including how to manage safe working practices at home or in external locations such as cafes or the member lounges of professional organisations. How do we ensure we look after staff welfare when people are in the office less frequently and therefore harder to monitor? How can we keep up to speed with how new ways of working such as fluid teams? How are other organisations adapting their offices to provide different kinds of collaborative spaces. How is the idea of agile working evolving, and how can we make the correct decisions about what will work best in our organisation’s space and cultural environment?
We strongly believe HR should be closely involved in real estate decisions
These questions are too important to be side-lined while someone else makes decisions about a new office layout.
Apart from working from home and the casual use of external space, HR should also keep its eye on satellite offices. As mentioned in the Financial Director section of this chapter, this is an area that is often neglected by companies in our experience. Satellite offices – whether in co-working environments or traditional office space – should be monitored just as vigilantly as your core real estate.
Instead of being seen as a way to devolve responsibility to the co-work or office provider, they should be considered part of the organisation’s own real estate and managed as such. That ought to include installing desk sensors linked to the corporate real estate database so that you can monitor usage. That will demonstrate to staff that you have them covered, and a small number of desk sensors in your satellite space will be inexpensive as you’ll benefit from economies of scale because of the numbers of sensors in your core office space.
We strongly believe that HR should be closely involved in real estate decisions. Too often, HR Directors and their teams have been seen as a potential obstacle to real estate rationalisation by raising challenging questions about the working environment that those traditionally responsible for real estate decisions would prefer not to tackle.
Bringing HR into the mix is an absolutely crucial step in breaking down the silo mentality and bringing genuinely joined-up thinking to the business of office real estate management.
For HR, transforming office real estate should be seen as a well-being opportunity. It is up to HR Directors and their teams with the backing of the CEO to take more control of how it all works in the interest of the business and its people.
The bottom line
In conclusion, big office real estate decisions shouldn’t be made by a single department. It’s crucial to involve all concerned to minimise the risk of getting it wrong and maximise the opportunities presented by new ways of working.