by John Salustri — Originally published in the July/August 2019 issue of BOMA Magazine
The one constant in our lives and in our businesses is change. Mergers and acquisitions (M&As).
Technologies advancing beyond our comprehension. Lease-bending approaches to work, such as shared space. The Silver Tsunami and the millennial rise into positions of power. Any one of these “disruptors,” to use a buzzword that’s all the rage these days, would be enough for serious strategy meetings.
But, it’s the timing, the confluence of these factors, that can crank up the stress level and bring change management into the limelight as a corporate issue, especially for property management firms that face these issues times two. They not only need to embrace internal change to function in a new era of work, but they also need to help their tenants address their own attempts to cope. To do otherwise is to be seen as obsolete or irrelevant by the talent you hope to hire and by those tenants who will vote with their feet.
Shawn Rhodes puts the change management challenge into military terms. Little wonder, since the global business consultant in team performance and change management was a war correspondent in the U.S. Marines. As such, he brings some of the best practices of a highly tuned military organization to bear in his work with clients.
“We understood that the processes we were using to keep ourselves alive, and that a lot of companies are adopting now, came from a generations-old mindset,” he says. “Namely, we know that things are going to change around us, so our tactics have to change. If we don’t prepare ourselves to pivot actively, the competition, the enemy, is going to eat our lunch.”
It might seem extreme to compare lifeand-death military action with unrest at work. But, being on the losing end of a termination conversation can have a devastating, if somewhat subtler impact. “For the military, it means someone isn’t coming home,” Rhodes says. “For businesses today, it means your quarterly review isn’t going to go as well as you wished.” Whether the impact is personal or professional, turning away from change could have ripple effects that can shake businesses and organizations to their core.
The specifics of strategy might change, based on the challenge du jour, but certain universal rules can elevate the issue from vague concern and “what change will mean to me” to a clear, engaging action plan. We’ll get to that shortly.
According to a Deloitte survey, the number of respondents expecting to engage in an M&A this
year is up 79 percent over 2018. That’s a lot of potential hand wringing over redundancies and
terminations, not to mention absorbing new ways of working. And, despite assumptions, such agita is not the province of baby boomers alone.
Courtney Nelson (formerly Hanfland) ought to know. Her firm, Catholic Health Initiatives (CHI), closed on a record $29 billion merger with Dignity Health in January. Nelson, system director of Real Estate Transactions for the newly formed CommonSpirit Health, knows firsthand that adjusting to change isn’t a generational issue.
“Change creates uncertainty for everybody,” she says. “Leading up to our merger, there was a lot of unease, especially among people new in their careers and to the team. There’s anxiety that comes to any generation when you’re talking about big mergers and redundancies and concerns about who you’re going to report to and how you’ll go about your work.”
Becky Hanner, BOMA Fellow, CPM, LEED Green Associate, RPA, agrees. Now the principal of her own shop, Hanner Commercial Asset Services, she was formerly with a Colliers affiliate where “we ended up changing company names four different times in eight years. In terms of culture, concern isn’t a generational thing. I see millennials moving from a private office workplace to an open environment having just as much difficulty as boomers. If there’s any difference, it’s simply that they come with less baggage.”
They also come as digital natives, so they presumably can navigate more gracefully the changes in technology that all companies have to absorb, she adds. But, otherwise, they face the same challenges: “How do you implement and communicate change? How do you get buy-in and get help so everyone buys into the change more?” It’s a delicate issue, she notes, far transcending old-school approaches that begin and end with “deal with it.”
If all that weren’t enough, Nelson sees an added responsibility of managing change in a manner consistent with the mission of her organization. “With faithbased healthcare, it’s so much more important that changes be established and implemented in a sympathetic manner,” she explains. “We need to know from the perspective of the folks in the field such questions as how they manage the local real estate.
FROM REAL ESTATE’S HANDS
TO THE POPE’S EAR
The January merger of Catholic Health Initiatives (CHI) and Dignity Health to CommonSpirit Health wasn’t CHI’s only newsmaking deal. In 2017, the organization closed a $725 million
sale leaseback transaction with Physicians Realty Trust. In terms of change management and the need to listen to your people, the deal was significant not only for its size, but that it also started with one raised hand.
“As a department head, you can’t be afraid to push the envelope with organizational leadership,” says Courtney Nelson. “Some of our greatest success stories came out of
pushing the envelope, and decision-makers listening to their people. The sale leaseback started when I raised my hand and pointed to an opportunity.”
The brass listened—and, in the case of this faith-based organization, the brass included the occupants of Vatican City. “We always invite all stakeholders from all impacted business areas into the discussion,” she explains. Preparation for the
sale leaseback meant months of travel and a lot of time in phone and email exchanges.
“We had to persuade every single market leader to get on board. We had to go to the local bishops and communicate with Rome to explain the benefits.” It wasn’t an easy sell, Nelson admits, since “the Catholic Church is used to owning everything.”
Months of research went into defining the portfolio and listening to local leaders in charge of those assets. “We evaluated all our owned real estate, chose those that could be candidates for an investment sale and underwrote those against the strategies of market leaders responsible for that real estate.
“Along the way, there was a lot of voiced concern about losing control and ensuring patients would still have fivestar experiences, even with a third-party owner. We worked hard to get it right as much as possible with the people most impacted,” she explains.
The deal was completed in two phases over a nearly two-year period. In all, some 60 buildings were involved in the transition. When the smoke cleared, “The teams that were most impacted reported positive outcomes in their local market,” Nelson reports.
And, it all started because corporate leaders responded to one raised hand by a change agent.
Who does it? What challenges do they already face? What keeps them up at night?
“We could come in and say, ‘Thou shalt do this because it’s best practice,’” she continues. “Instead, we focus on solving the issues they’re experiencing and collaboratively drawing on solutions that work in other markets that might transition well. That’s the approach that makes change successful, whether it’s technological or cultural. It cannot sound to the people who are doing the work that we’re making change ‘just because.’ That’s how to create a lot of reluctant folks.”
SPILLING THE BEANS
As Nelson indicates, communication is key to change management. But, dialogue isn’t enough. Impactful communication involves knowing how to structure that dialogue, and what to leave out. Department managers are tasked with the often contradictory needs to ease staff concerns while staying in their lane and not revealing too much too soon. “You can overdisclose,” she says. “Oftentimes, you might know information that can be very sensitive.”
That said (or unsaid, as the case might be), both Nelson and Hanner believe in sharing as much
information as possible. “I’ve always ascribed to an open-door philosophy and telling people what you know,” Nelson reveals.
Leading up to the merger, “we had town hall meetings so everyone could hear all the concerns
that were being voiced, knowing that someone might ask what someone else is hesitant to ask.”
Those meetings, some smaller and some videoconferenced for nationwide staff, often were held even if there was no news to report. It’s the silence that can be most unsettling, Nelson explains.
Hanner will go a little further out on a corporate limb. The responsibility to the employer is clear, she says, but there’s still room for honesty with your staff. In the face of change, she notes, “I’m upfront and honest with my people, and I’ll tell them I’ll do everything I can to protect their jobs, even if it entails a relocation. And, if something should happen, I’ll give a good reference and a good lead.
“You don’t want to jeopardize your organization,” she continues, “But, we’re also talking about your own reputation in the market, and no one should ever do anything that might taint their own personal reputation.”
Yes, that frank approach does spook some recipients and can send them scurrying for the door, she adds. But, in the name of honesty and that reputation, “I can live with myself.”
THE PYRAMID, INVERTED
There’s a counter-intuitive tone to such an approach to change management that hallenges old notions of top-down decision-making. “It’s very difficult to implement any change management program top-down,” says Rhodes, “because you’re asking people who potentially have more experience than you to do things differently.”
An outsider might be surprised at this, but he says it’s a concept the military embraces. While
orders still filter down through the ranks, much of that decision-making is informed by intel from subordinates. “Although we may not be able to put all the strategic pieces together, we’re still gathering the required information, so as policy changes come down, it’s actually made up of what we’re seeing in the field,” he explains.
It’s an apt business model, according to Rhodes. “Engage your people, ask them how they’re seeing things change out there. That will allow you, first, to keep up with what’s going on in the industry and with your tenants, because they’re constantly changing structures as well,” he says. “Second, it gets their input and advice. You’ll make the ultimate call, but it actually came from the mouths of your people.”
He also suggests another military approach, explaining that the Marines actually maintain a database of lessons learned that dates back to the 1970s. Such a resource can go far to help property managers avoid landmines others encountered. And, yes, it’s a concept applicable to the private sector. “I’ve seen it done in multibillion-dollar, Fortune 100 companies and in small startups,” Rhodes says.
Both Nelson and Hanner agree with the need for shared information. “Just communicate like
heck and make sure you have a good relationship with your employees,” advises the latter. “People tolerate change a lot better when they understand what’s driving it. They’ll be happy to help, as long as you keep talking honestly with them.”
“Frustration is a poison in the minds of the people on your team,” Nelson adds. “Trust is easily lost. The key to any organization managing change is communication and giving folks the opportunity to be heard. Not everyone will be satisfied with your answers, but their questions can be provocative and informative.” (See “From Real Estate’s Hands to the Pope’s Ear,”.)
WHAT’S GOOD FOR THE GOOSE…
What works for the internal operations of any real estate firm pays dividends in tenant relationships. Change management executed properly “allows you to keep on the cutting edge of the market and what your tenants need,” explains Rhodes. “If you can listen to your tenants—something not everyone does well—and provide services first in your market, they’ll see you as a great and innovative adviser. If not, someone else will provide the right answers and take that business.”
Having such systems already in place, however you realize them in your organization, is key to encountering change head on. Otherwise, you’ll get a crash course in change management, whether you like it or not.
And, as Rhodes says: “Crisis is not the time when logical thought prevails.”
ABOUT THE AUTHOR: John Salustri is editor-in-chief of Salustri Content Solutions, a national editorial advisory firm based in East Northport, New York. He is best known as the founding editor of GlobeSt.com. Prior to launching GlobeSt.com, Salustri was editor of Real Estate Forum.