Common executive missteps in real estate and workplace strategy

March 2017 – CEOs need to start thinking differently about their real estate and its link between people, process, technology and business results.  Typically, growth or an expiring lease triggers the conversation about staying or moving and this leads to discussions about a workplace transformation.  As Peter Quinn, Corporate Real Estate Advisor at McKinney Advisory Group, said, “A key question we ask the C-suite in the beginning of their real estate journey, is ‘Are you looking for a new address, or for a new way to address your business?’”  If it’s the former, then an organization is more apt to leave money on the table and miss business opportunities. The latter requires strong leadership and an early alliance between people, place, process and technology strategies.

In a previous FM Link article entitled Crafting alliances: Enabling better CEO decisions in real estate and workplace strategy, I wrote about the solution to this problem.  This article focuses on some of the root causes with the intention of helping companies understand the reasons why some workplace strategies fail.  The problem starts when early conversations are confined to either too narrow an audience or the incorrect audience in the planning stages.  And, this problem is perpetuated by:

  • Lack of understanding about how a workplace change can impact business results
  • Abdicating strategic leadership responsibilities
  • Inappropriate use of vendors
  • Inadequate leveraging of key business functions
  • Lack of data and metrics (too narrow a perspective from silos)
  • Lack of understanding of change management versus change communications

Let’s explore these frequently interrelated issues in more detail.

Lack of understanding about how a workplace change can impact business results

Unfortunately, when approaching a workplace transformation, most companies do not approach their move thinking about how it can move multiple business needles.  They lack clarity of vision, cross-functional strategic alignment, data-driven decision making, long-term thinking and a coordinated execution with a formal alliance.   A proper strategy and execution plan – one that aligns business, people, place and technology strategies and data – can deliver unexpected business results including: Increased talent attraction and retention, better employee engagement, increased productivity and engagement.   The book Work on the Move2[i]   showcases over twenty companies and demonstrates how a well-designed workplace can positively impact business results and the triple bottom line: people, planet and profit.

Abdicating strategic leadership responsibilities

Many organizations assign a workplace project leader who lacks experience, a deep understanding of the business strategy or the influence needed to create strategic consensus.  Their perspective is too narrow; driving the project by a single function rather than by an alliance of cross-functional leaders.   There is a critical difference between the roles among a leader, an executive alliance, and the person managing the move.  Leadership sees the possibilities of how the space can impact the business, articulates the vision and inspires and motivates others.   Leaders are those who establish their organization’s vision and are therefore qualified to understand how the space can support that vision. As in everything, though, leadership is a role, not a function or a title.

A strong executive alliance builds upon the leader’s vision by providing insights and data from multiple strategic perspectives and by devising the strategy to achieve their joint objectives.   The project manager’s job is to plan, organize, coordinate and execute the vision. It is critical not to confuse a project leader’s role in a workplace change with that of an enterprise leader. The challenge is that many managers who are asked to “lead” the initiative are likely to look at the project from their limited, and understandably siloed, view. They may have little or no experience, or they are unduly influenced by external vendors who do not fully understand the business.

Inappropriate use of external vendors

Often, businesses do not include vendors at the right points in the process and rely on them to perform work that is not their core competency.  This incents an inappropriate, and potentially damaging, reliance on brokers and architects to make strategic decisions and provide input beyond their core competencies. Architects are experts at designing the right space with the right look and feel, and they try their best to support vague concepts such as “innovation” and “collaboration.” It is the businesses’ responsibility to give specifics of the business results intended by these terms.

As David Schmidt, former CEO of SCAN Health Plan said, “The broker and architect’s role is to provide professional advice about what has worked for other people. But the most important thing is to know what you’re going to do, where you want to get to and why. And the ‘why’ is really, really, critical. Once you know these things, brokers and architects can help you make that happen. They can’t tell you what you want. They don’t know your business; they can’t.”

Ironically, companies often do not heed valuable insights and beneficial advice given by their brokers and architects. As one architect said anonymously, “I explain three times to my clients how to leverage their design to meet business strategic objectives. After the third time, I give up and design to whatever they ask, even though I know it is wrong and will be changed shortly after they move. It’s sad but I have a business to run.” Unfortunately, we’ve heard this many times. It’s not only frustrating for architects, but also for others following in the move process, e.g., furniture suppliers, construction contractors, movers.

Inadequate leveraging of key functions

Some companies do not engage the necessary breadth of leadership, across functions, (e.g., human resources, information technology, finance, real estate, facilities, marketing) early enough in the process.  A manufacturing company in California neglected to include their information technology and human resources departments in the planning of their new office. This proved to be a costly error. It was only after construction started that the information technology department requested a generator for systems backup and human resources asked for a fitness center and a cafeteria with a full kitchen.  These last-minute changes cost the company about a million dollars in design, engineering and construction delays – all of which could have been avoided had information technology and human resources been involved earlier in the process.

Lack of data and metrics

Would you buy a new house without taking into consideration the value of comparable homes, the need to address your family’s strong attachment to their current town, the school district and how well the house can meet your future needs (e.g., another child, a mother-in-law who is moving in, your spouse’s need for a home office)?  Of course not! You would identify your needs, and those of your family, and the short and long-term implications of your real estate investment. You would involve a variety of stakeholders in discussions and decision making and develop a strategy and execution plan that meets your goals and those of your family. It’s amazing that many businesses fail to have this long-term, data-driven, inclusive approach to relocating or redesigning their space.

Lack of data and metrics leaves brokers and architects in a quandary as they are unable to do their best work. Real estate brokers are in the business of finding the best location at the best price and negotiating deals. However, without accurate workforce projections, financial realities, and a well-defined location strategy, real estate brokers are unable to appropriately size and select the right long-term location.

There is a surprising lack of data used to drive workplace decision making. Critical data is often missing, or, if it does exist, it is not aggregated with other data to show a complete picture of the work environment. Interestingly, in the early strategic-planning stages, many companies don’t baseline their current state. Without a baseline, it is impossible to measure post-move success: Was turnover reduced? Did employee engagement and productivity increase? Were costs saved? Was sustainability enhanced? Did sales improve as a result of the workplace transformation? Those companies that do measure post-occupancy results typically only measure employee satisfaction with the space

Additionally, there is a lack of available data to illustrate how people are using office space. Measuring space utilization is important to right-size the workplace and inform future design. While organizations are interested in knowing if workspaces are being used as they were intended, extremely few collect data on this. And, those that do are typically using traditional methods, such as observational studies to count the number of times an office, conference room or seat is used; security badge data to understand how many people are in a given area (building or floor); and focus group and management feedback to understand what’s working or not

Lack of understanding of change management

The built environment industry is confused and confusing about the meaning and impact of “change management.” Even the best of strategies will be derailed if change management is defined as change communications rather than organizational change. Organizational change includes evaluating the ability of an organization to support new ways of thinking and behaviors that are required to realize the benefits of a new design, (e.g., collaborating in new ways). Change of behavior could require changes to training and development, communications, organizational design, processes and compensation structure that rewards new behaviors. Notice that communications is only one factor in change management. Unfortunately, companies rely on architects, brokers and/or workplace strategists who often confine themselves to change communications and do not have the competency, power or authority to truly execute organizational change.

While this article seems bleak, we are finding that more and more companies are realizing the impact of place on business success, and we expect this trend to continue.  The enlightened C-Suite is leveraging the connection between people, place, process and technology for competitive advantage.

[i] Coles-Levine, Diane and Sanquist, Nancy. Work on the Move 2: How Social, Leadership and Technology Innovations are Transforming the Workplace in the Digital Economy. IFMA Foundation, 2016.

WORKPLACE MANAGEMENT SOLUTIONS (WMS) is a global strategic management consulting firm that leverages a company’s move or redesign to transform the workplace into an environment that is engaging, productive, sustainable and economical.  WMS helps companies think in new and creative ways by eliciting the best from all players involved in a move or redesign (e.g., HR, IT, Real Estate, Facilities. Sustainability, Architects, Real Estate Brokers, Furniture Suppliers).  WMS uses analytics to drive decision-making at all phases of the move and also helps employees rally behind change.