The Relevance of Corporate Real Estate to Enterprise Success

#12: The Relevance of Corporate Real Estate to Enterprise Success

Moderator: Dr Barry Varcoe, Zurich Financial Services

Facilitator: Dr Martha O’ Mara, Corp. Portfolio Analytics

Speakers: Michael Leone, Regus

Tanya Penny, Verizon

Running Order

•  Session Introduction

•  The Research

•  CRE Practice Findings

•  Key Findings:

  Panel & Audience discussion

•  Conclusions

Is there a relationship between the capability of CRE and Enterprise economic performance?

The Research

CRE Practices Maturity

Enterprise Economic Performance

Identified Relationships

Correlation Tests

The Sample

•  Fortune 500 focus

•  On-line survey live during October 2010

•  40 valid data sets on perceived CRE performance:

  3.6 m people supported

  221 m (gross) m2

  US$72.6bn budget

20 CRE Practices

Tactical •  Supplier management •  Operational and management

information •  Space and interior standards •  Governance and compliance •  Customer satisfaction

measurement •  Performance measurement •  Budget management •  Extent of outsourcing •  Telework policy

20 CRE Practices

Strategic •  BU relationship management •  Sustainability •  Portfolio strategy planning •  CRE team diversity •  CRE/HR/IT collaboration •  Use of serviced offices •  Effective staff development •  Continuous improvement and

innovation •  Business strategy collaboration •  Capital release strategies •  Alternative workplace strategies

The Sample

5 Economic performance measures •  Revenue growth (last 3 years)

•  Net sales per employee

•  Return on Assets (RoA)

•  Return on Equity (RoE)

•  Tobins Q

Industry Sectors

Market Sectors

Sample Variance Tests

•  Portfolio size •  CRE team size •  CRE&FM operating budget size •  Professional membership •  CRE organization structure •  Industry sector •  Enterprise size (annual revenue) •  Enterprise size (No. of employees)

= No significant differences

Organization Structure

CRE Organization Structure

Budgets

Budgetary Control / Recharging

Reporting Line

CRE Reporting Line

Suppliers

Use of Suppliers

Telework

Telework / Telecommunications Applicability

AWS1

Alternative Workspace Strategies (Current)

AWS2

Alternative Workspace Strategies (Future)

Sustainability

Sustainability Practice (Future)

Self View of Executive Opinion

CRE View of Executive Opinion

Key Findings… Maturity and Correlations

CRE Practice Maturity

Industry Maturity

Comparative Industry Maturity

Key Findings

•  Correlation vs Causality

CRE Practices Maturity

Enterprise Economic

Performance

?

6 CRE Practices correlated to Enterprise Success Measures

Discussion Topic 1

Supplier Management… Correlates positively to both RoA and RoE

Discussion points:

•  What do you think the key aspects of good supplier management are?

•  Is it the CRE’s or Suppliers that are making a difference (note: the extent of outsourcing did not show a correlation)?

•  Only ¼ of respondents have international/integrated solution supplier relationships – does this mean there is a lot more potential to add value?

Discussion Topic 2

Operational and Management Information… Correlates positively to both RoA and RoE

Discussion points:

•  What is it about the MI that makes the difference?

•  What are the key challenges in getting good MI?

Discussion Topic 3

Close CRE/HR/IT Relationship… Correlates positively to both RoA and RoE

Discussion points:

•  As an industry we have been talking about this for quite a long time, but have we really done much?

•  Who can take the credit for this – CRE, HR or IT?

•  What are the main relationship areas that are key?

•  What are the big potential gains in the future by doing more of this?

Discussion Topic 4

Use of Serviced Offices… Correlates positively to both 3 year growth, RoA and Tobins Q

Discussion points:

•  Use of serviced offices was the least ‘mature’ CRE practice…

•  Why would this correlate? Is it more a case that growing enterprises are more likely to use Serviced Offices?

•  Do Serviced Offices offer potential value in situations other than growth strategies?

Discussion Topic 5

Continuous Improvement & Innovation… Correlates positively to RoA

Discussion points:

•  Which direction is the ‘causality’ likely to be?

•  What continuous improvement practices are really effective?

•  What are the main sources of innovation?

•  Do we invest enough as an industry in research and innovation?

Discussion Topic 6

Use of Capital Release Strategies… Correlates negatively to both 3 year growth and Tobins Q

Discussion points:

•  What are the likely causes of this?

•  Is this likely to be a passing phenomena of recessionary times or more sustained?

•  Should we stop this sort of activity until we better understand what it is really doing?

Correlations vs Maturity

CRE Correlation Practices vs Maturity

Discussion Topic 7

Tactical •  Space and interior standards

•  Governance and compliance

•  Customer satisfaction measurement

•  Performance measurement

•  Budget management

•  Extent of outsourcing

•  Telework policy

Strategic •  BU relationship management •  Sustainability •  Portfolio strategy planning •  CRE team diversity •  Effective staff development •  Business strategy collaboration •  Alternative workplace strategies

Discussion points:

•  Any surprises amongst those that did not show any relationship?

•  Which practices may make a difference as they advance further?

Correlations

Correlation Summary CRE Practice 3 Year

Growth Net Sales / Employee RoA RoE Tobins Q

Supplier Management

Management Information

CRE/HR/IT/Collaboration

Serviced Offices

Continuous Improvement & Innovation

Capital release strategy

Conclusions…

Is there a relationship between the capability of CRE and Enterprise economic performance?

Yes… in parts!

Does CRE make a difference? Probably

What are the consequences? Good; Bad; Good

#12: The Relevance of Corporate Real Estate to Enterprise Success

Moderator: Dr Barry Varcoe, Zurich Financial Services

Facilitator: Dr Martha O’ Mara, Corp. Portfolio Analytics

Speakers: Michael Leone, Regus

Tanya Penny, Verizon