"Cracking the Code" of Corporate Real Estate Benchmarking

 

Benchmarking is one of the most powerful and enduring tools for improving organizational performance. Its full value to the corporate real estate industry is only now beginning to be realized. With the explosive growth in new and powerful database technologies and consultative analytical processes, benchmarking is delivering real results to corporations.

 

From its initial beginnings in the 1980s as a tool for measuring corporate performance in virtually every aspect of a company's operations, benchmarking allowed measurement against best-in-class practices in manufacturing, distribution, sales and marketing, and business administration. While learning how companies compare against their competition might be interesting to some, the real goal of benchmarking was to establish parameters by which companies could improve their competitive performance.

 

Until recently, corporate real estate services and facilities management executives often found themselves up against the proverbial wall when it came to obtaining the same kind of in-depth, actionable benchmarking results that were available to other critical functions of corporate performance, such as accounting, sales and marketing, manufacturing and distribution.

 

 

 

"Corporate real estate people were really at a disadvantage when it came to getting benchmarking results that were more than one-dimensional, such as showing how their company's gross occupancy costs measured up against the average for their particular industry and/or geographic area," says Mark Mundahl, director of operations, United Properties Corporate Real Estate Services Group.

 

Knowing a company's rank in the universe of corporate occupancy costs might have been useful, but what companies really needed was meaningful data to enact plans to improve the overall performance of their corporate real estate assets. Since corporate real estate costs are typically the second highest cost of doing business—exceeded only by employee costs for most companies—the C-level executives are pressuring real estate directors to put better management controls on overall corporate real estate property services and facilities management areas.

 

BRINGING BEST-IN-CLASS CAPABILITIES TO THE CORPORATE REAL ESTATE WORLD

Companies committed to the process of continually improving their corporate performance in all aspects of their business were particularly interested in gaining more control over the real estate area.

 

Recent advances, driven by the advent of new technology and the wider availability of corporate real estate information, are transforming companies' ability to more meaningfully benchmark their corporate real estate property and facilities management services. This new benchmarking approach helps companies utilize the full value of their corporate real estate assets. The new approach includes both quantitative and qualitative factors, enabling companies to more directly compare their corporate real estate management and facilities costs, service levels and process with those of other companies with similar real estate.

 

"We've really cracked the code on how to accurately benchmark corporate real estate performance on a peer-to-peer basis in recent years," says Kevin Farrell, executive managing director, United Properties Corporate Real Estate Services Group. At United Properties, for example, accurate benchmarking processes can be established in four critical real estate performance areas: Building Operations, Occupancy and Workplace Services, Business Administrative Support, and Employee Services.

 

QUALITATIVE APPROACH ADDS VALUE TO THE BUSINESS ENTERPRISE

Using the new benchmarking tools, companies can then identify and assess those aspects of their corporate real estate operations that merit more detailed investigation. In one such recent example, a multinational company with a large corporate campus wanted to know how it could improve the performance of its building maintenance operations. The first phase of the benchmarking study revealed a below-average ratio of "wrench time" to staff hours worked. By digging deeper for a more in-depth understanding of the company's maintenance process, the benchmarking experts determined that the most significant way to improve the process was by reengineering the way work was scheduled. Once this issue was solved, the company was able to upgrade the performance of its facilities management processes to best-in-class status. That correlated with the company's overall business objective to be best-in-class in all aspects of its corporate operations.

 

In another example, a company had established a business objective of attracting and retaining the best employees in the industry. In looking at all the ways to improve performance in this area, the company discovered through employee satisfaction surveys that the quality of the corporate cafeteria services was a key factor for the high performing employee population that it sought to recruit. By benchmarking the company's internal food service operations against the best-in-class standards in comparable industries, the company determined that the cafeteria services lacked the kind of trendy, upscale menu choices that appealed to this group. In this case, the outside benchmarking team contracted with a food service partner—one with best-in-class credentials of its own—to help the company spice up the cafeteria menu in such a way as to meet the culinary approval of the targeted group of employees.

 

"It makes it easy for companies to see where they rank in terms of best practices among companies not only in like industries, but also with like uses of their real estate facilities," says Mundahl. "Companies could learn a lot about what was taking place in the corporate real estate world," he says. "What they were often missing was the ability to translate that knowledge into meaningful data for developing action plans to improve the performance of their corporate real estate assets."

 

APPLES-TO-APPLES COMPARISON PREVIOUSLY UNAVAILABLE

Companies also struggled to obtain such detailed, peer-to-peer specific data in the past. Without such detail, the information derived from benchmarking was apt to result in a reactive, rather than proactive, report. For example, research and development driven companies can now obtain detailed analysis of how their real estate practices and processes match up against the world of research-driven companies. "In the past, we just couldn't get to this same level of detail for many companies," says Mundahl. "The new trend is to make benchmarking more of a proactive, problem-solving process for companies."

 

For companies that engage in the solutions-oriented benchmarking process, the return on investment can be substantial. Many of the companies that United Properties has worked with on benchmarking programs have seen returns of three to 10 times their initial investment, says Mundahl.

 

"Quantitatively speaking, it's not uncommon for companies to realize savings of $1 to $4 per square foot in gross occupancy costs," says Farrell.

 

Qualitatively, companies can see equally impressive gains, as measured by criteria such as higher productivity, greater efficiency in the workplace and more efficient use of corporate real estate assets, as well as improved employee satisfaction and retention rates.

 

Almost every company with corporate real estate assets to manage can benefit from a benchmarking study. Among the kinds of companies that have seen the greatest gains, however, are those with corporate portfolios, including:

 

• multiple campuses in different geographic areas;

• companies that have undergone a transformative event such as merger and acquisition activity;

• companies experiencing significant recent business changes involving expansion or contraction; and

• those companies experiencing a change in leadership or a change in corporate strategies.

 

Most importantly, any company without a clearly defined corporate real estate strategy that aligns with its core business strategies is a benchmarking candidate.

 

"Bottom line, companies are using the new benchmarking capabilities to improve their competitive performance in the marketplace," says Mundahl. "That's the best argument of all for implementing a new corporate real estate benchmarking strategy today."