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Value management: raising CRE strategic relevance

Sally A. Fisher
Global Client Services, Cushman & Wakeeld, Los Angeles, California, USA
Abstract
Purpose The purpose of this paper is to describe the need to go beyond relationship management to embrace the techniques of value management with details on why and how CRE managers should pursue this as a professional goal. Design/methodology/approach This article discusses the experiences of the author working across multiple global corporate accounts. The article advances the discussion on how to strategically align and advance the performance of CRE departments to support business change for corporate competitive advantage. Findings As CRE managers strive to elevate their strategic relevance to the organization, they are challenged to go beyond relationship management. They are challenged to become value managers, capable of implementing corporate strategy anywhere and with anyone in the organization. Research limitations/implications Further research is warranted into the perspectives of senior management on the contribution of CRE to the business planning process. CRE managers are often viewed as functional experts and may be overlooked as candidates for involvement in corporate management development programs. Practical implications CRE managers, in charge of business alignment, must turn a professional corner by focusing more on driving corporate value. A career choice is required to invest in the business and nancial acumen needed to sit credibly at the planning table with senior management. The career path of the in-house CRE manager is one of a general business manager, referred to in this article as a value manager. Originality/value CRE managers are challenged to adopt the behavior, attitude and skill set of general business managers to arrive at solutions to business challenges. These challenges are cross-functional in nature and often do not start nor end with real estate or, by extension, facilities. Thus, the role of relationship manager needs to evolve into a value manager, who possesses the skills of business planning, business case development, and cross-functional project management. Keywords Value analysis, Change management, Strategic alignment, Strategic alliances, Career development, Real estate Paper type Conceptual paper

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The impact of value managers It is a rare Corporate Real Estate and Facilities (CRE) group today that does not feel pressure to elevate their strategic relevance to the organization. CRE managers risk being ignored or simply taken for granted unless they are perceived as adding value to evolving corporate strategies. For one CRE group, this became abundantly clear when a decision to move the headquarters was made without their involvement at the planning table. CRE learned of the decision at the same time as the rest of the organization. Why did senior management ignore CRE at the planning table for such an important decision? At the opposite extreme, a different CRE group foresaw a major nancial crunch coming their way as over half of their space was coming up for renewal in a single metropolitan market. The case that convinced the CFO to move a signicant portion of

Journal of Corporate Real Estate Vol. 11 No. 4, 2009 pp. 229-236 q Emerald Group Publishing Limited 1463-001X DOI 10.1108/14630010911006710

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the business operations was made not just based on rental rates and location risk, but more importantly on labor demographics and operational efciencies linking CRE to the full view of the business challenge. These examples illustrate how senior management is looking for functional managers who can create business change and lead cross-functional teams to implement against corporate strategies (Bruch and Ghoshal, 2002). This paper makes a case for the need to evolve the role of the in-house CRE manager away from the functional role of CRE service delivery and into the corporate role of value management. What does value management mean? Why is this role in demand? What does it mean for the career of a CRE manager? Most importantly, how does a CRE manager become a value manager? Service delivery or value management Two main objectives are common for any CRE group. The rst is to demonstrate prociency in managing service delivery. The second is to demonstrate the ability to implement corporate strategy. It is hard, if not impossible, for CRE to be viewed as a strategic player when senior management is dissatised by poor service delivery (CFO Research Services, 2003). Thus, excelling in service delivery is a prerequisite for elevating CREs strategic relevance to the organization. Prociency in service delivery by itself, however, is unlikely to win CRE much attention from senior management. How then does CRE elevate its strategic relevance? Perhaps the greatest opportunity lies in its ability to evolve beyond the traditional sphere of real estate and facilities. The opportunity is for CRE managers to step out of the subject matter role and take on instead the views and actions of a general business manager to drive corporate value, of which real estate is just one part. Let us call this being a value manager. Many organizations have outsourced real estate and facilities functions to an external service partner, with dramatic improvements in service delivery. Much of the service partners value, of course, lies in helping to manage costs and boost operational efciency, but perhaps the most important benet of outsourcing is that it enables the remaining in-house CRE managers to focus on business alignment and strategy. Figure 1 illustrates the span of activity from value management to service delivery. It is not the intent of this paper to make the case for outsourcing, but the trend of outsourcing in CRE has amplied the need for in-house CRE to become more strategic

Figure 1. Illustration of value management compared to service delivery

and better understand the business of the business. This need can best be addressed by at least some of in-house CRE managers seeing their role (or a part of their role) as driving value management. Beyond relationship management To drive business alignment, many CRE groups have developed the role of the relationship manager (McCarty et al., 2006). At a minimum, relationship management can be viewed as an approach to align CRE activity with the business of the business, thus elevating the strategic relevance of CRE. Relationship management has had its focus on learning the language of the business and establishing a communication cadence with business leaders to stay in close to changing business needs (Roper, 2001). Forward-thinking CRE groups are going beyond relationship management and are instead adopting the behavior, attitude and skill set of general business managers. This paradigm shift lies at the core of achieving value management. The role of relationship manager is evolving into that of a value manager, who possesses the skills of business planning, forecasting, business case development, nancial acumen, and cross-functional project management. Value managers are capable of seeking out strategic opportunities anywhere and with anyone in the organization. Value managers hunt for connection points to and from CRE throughout the organization, and when they nd them, they contribute information to help cross-functional business planning, then they step up to lead or signicantly contribute to teams driving the business result. To illustrate this, let us continue the discussion of the CRE group above who created company-wide impact by making the business case to relocate a portion of the organizations operations. It is a big leap from executing real estate transactions (and managing facilities operations) to building business cases and forecasting, but it is a natural progression to remain relevant. The CRE managers who are evolving along this path are gaining real credibility in their organizations. In our example, the CRE manager engaged senior management to make a decision that would affect over 600 employees in a move of their back-ofce functions to a lower-cost location outside of the downtown metropolitan area. At rst, the CRE manager started out the hard way, trying to make a case based solely on real estate, which landed on deaf ears for nearly six months. Finally, the CRE manger expanded his sphere of analysis and team to lay out a cross-functional, interdepartmental business case, focused rst on the much broader, impending challenges for human capital and operational efciencies, and second on the real estate cost savings and capital preservation. This CRE manager evolved beyond relationship management to become a value manager. A lesson from outsourcing of other corporate functions If CRE groups want to achieve transformational results that arise from outsourcing (Jacobs, 2007), they need to transform the in-house CRE managers into value managers. This is actually a lesson learned from other corporate services functions, such as IT, HR benets, call center operations and accounting, that began using outsourcing well before CRE (IAOP Knowledge Center, 2007).

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In the early stages of developing outsourcing strategies, in-house managers were needed to enforce contractual agreements and problem-solve the interface between the organizations operating model and the service providers evolving capabilities. As service providers became stronger, they took on more and more of the responsibility for integrated service delivery and the interface with the organizations operating model. This, in turn, created smaller, more strategic in-house teams to focus on the need for managing corporate initiatives and creating business change. CRE groups are following the same evolutionary pattern and are catching up fast. Having entrusted service delivery execution to a competent external service provider, in-house CRE teams are feeling the pressure from senior management to become more strategically relevant to the organization. Meeting senior management expectations The pace of global competition and technological advances has placed most organizations in a state of constant evolution to remain competitive (Johnson et al., 2008). To contribute to solving these business challenges, CRE managers must also evolve by focusing less on service delivery and more on driving corporate value; less on subject matter expertise and more on change management; less on CRE performance and more on business performance. Service delivery managers do their job when they report from their own functional perspective. For senior management this is a given and not worthy of much consideration except in those instances when the size or complexity warrant their attention. Value managers, on the other hand, understand that smart organizations base decisions on a balance of company-wide perspectives, so they research and map CRE to the broader business challenges. Senior management recognizes and rewards managers who contribute to creating business value. The list below illustrates some of the qualities and actions that senior management expects. Business leaders rarely articulate this expectation, but they are quick to appreciate and reward the new, different business results that come when managers meet it. In essence, when business leaders place pressure on CRE to become more strategically relevant to the organization, this is what they are looking for. The expectation is that CRE managers step out of their subject matter role and take on instead the view and actions of a general business manager. The strategic relevance of CRE is demonstrated by how CRE managers work across other corporate services functions in solving business challenges and then engage the lines of business to make decisions. What does senior management expect the value manager to do? . Demonstrate leadership qualities. Rather than wait for opportunities to arise, anticipate them and lead others to them. . Act as a change agent. Embrace the maxim that There is nothing so constant as change and describe unanticipated developments in terms of their upside to the organization. . Master the discipline of business planning. Study the organizations business cases to recognize patterns and currents in the organization.

Lead and contribute to cross-functional planning efforts. Enhance the CRE prole through representation on company-wide initiatives. Advise on solutions to business challenges. Offer a business managers perspective on changes in the corporate landscape. Articulate CREs impact and risks in the organizations own terms. Translate CRE vernacular into universally understood goals and milestones. Advance leading-edge practices. Identify opportunities. CRE or not where the organization can advance its corporate services functions to gain and maintain its corporate competitive advantage. Develop a broad network across the organization. Actively cultivate contacts in other departments to develop cross-functional solutions. Apply negotiation and inuence skills. Work towards solutions in which all parties come away further ahead than where they started. Execute to a dened plan. Develop and stick to tactical strategies and communicate progress.

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Next steps cultivating the value manager How do CRE managers become value managers? How do they develop the skills needed to contribute to business planning? How do they put themselves on the career path of a general business manager? When value managers focus on what their organization does best (the business of the business) and on getting the real estate portfolio to support it, value managers understand that they need to spend less time being an expert in service delivery. Instead, they need to spend more time creating common goals across the organization, promoting strategic ideas that can have signicant impact enabled by CRE, and leading cross-functional teams to execute on detailed plans. The list below suggests ways that CRE managers can develop and build the skills needed to be a value manager. Starting small with strong ideas backed by analysis that nance, human resources and other corporate services can support, the CRE manager can engage business leaders that stand to gain from not only the real estate opportunity but more importantly from the business solutions it may create. Not all ideas will work out, but business leaders will start to take notice and appreciate the effort. Opportunities for greater involvement will arise, typically beyond the realm of just CRE, but in the implementation of company-wide strategic initiatives. How do CRE managers become value managers? . Professional development. Seek out internal management development programs available within your company to build the skills of general management. . Continuing education. Take external classes on business planning, management accounting, corporate strategy and change management that can arm the CRE manager with needed skills. . Industry associations for the management of outsourcing. Network with managers from other outsourced corporate functions (IT, HR, Accounting,

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Finance, etc.) by joining organizations such as SIG (Sourcing Interests Group) or IAOP (International Association of Outsourcing Professionals) to advance general management skills. Trade shows and conferences. Learn about industry trends from events focused on the business of the organizations business, and then translate those trends into new real estate initiatives. Raised prole. Volunteer for internal corporate change projects that need employees willing to work as team members and leaders. Internal network. Keep in active touch with other business managers who know where the opportunities lie for increasing the strategic relevance of CRE activities. Team-building. Use special CRE sessions to identify exceptional real estate and facilities opportunities, exchange ideas, and build a brief business case to connect the opportunities to broader business challenges. Incremental success and persistence. Target small, conspicuous victories in any campaign to increase the relevance of CRE.

CRE manager career path As the organization moves non-core functions like portfolio management, transactions, construction, project management, and facilities operations to specialized service providers, in-house CRE teams reach a crossroads. Some managers consider the transition in the personal terms of what it means for their career: Do they prefer the action of service delivery or do they want to inuence corporate strategy? Managers who opt for corporate strategy benet from choosing the career path of the general business manager to remain viable as an in-house manager. These managers rst earn their stripes as a value manager in the area of CRE and later open up the opportunity for a career in general management across the organization. There are three main reasons for choosing the career path that leads from CRE manager to value manager: (1) Company growth. Ultimately, the organization stands to gain the most from the results that value managers deliver. When real estate strategy evolves according to corporate strategy, the organization is more agile and able to respond protably to changing market conditions. Furthermore, when real estate strategy solves business problems, the CRE department earns the reputation as a contributor to effective business planning. (2) Growth opportunities for the CRE manager. The challenge of and reward from developing general business skills transforms the CRE manager into a much more valuable asset, with the potential to make business cases and build consensus in other departments besides CRE. Corporations understand and value general management skills and thus invest in internal mentoring, training, and development programs. Managers in the organizations that show potential beyond their functional expertise are chosen for lateral assignments to build their careers as general business managers.

(3) Job security. Those who dene themselves by their real estate skills may nd fewer opportunities to exercise them inside the organization, as partnerships with specialized service providers make in-house teams smaller. Instead, they may need to shift gears to that of a service provider to remain a specialist in CRE. Those who learn to drive corporate value will nd ample opportunity to build a career as a general business manager on the path to senior management. A call to lead By setting out on the career path of the value manager, CRE managers integrate real estate strategy to broader corporate strategy, see business challenges through the eyes of internal business partners and earn a seat at the table of business decision-making. They benet their organizations and their own careers, whether in CRE, human resources, nance, operations or any other department that prizes cross-functional solutions to business challenges. Few CRE managers have developed the required perspective outside of real estate and facilities to identify truly strategic business opportunities and thus elevate their role to value manager. A career choice is required to invest in the business and nancial acumen needed to sit credibly at the table with senior management. This career choice is not for everyone and there are plenty of opportunities (and critical need) for those who wish to remain a service delivery specialist. For those, who are looking for opportunities to grow within the organization, great opportunity lies in evolving ones role to that of a general business manager the value manager.
References Bruch, H. and Ghoshal, S. (2002), Beware the busy manager, in Harvard Business Review (Ed.), Becoming a High Performance Manager, Boston, MA, pp. 17-38. CFO Research Services (2003), The CFO perspective on corporate real estate, working paper, CFO Publishing Corporation. IAOP Knowledge Center (2007), 10 Years of outsourcing practice: tactical, strategic and transformational, working paper, International Association for Outsourcing Professionals. Jacobs, B. (2007), Beyond boundaries: leveraging partners to maximize the value chain, working paper, Jones Lang LaSalle IP Inc., New York, NY. Johnson, M., Christensen, C.M. and Kagermann, H. (2008), Reinventing your business model, Harvard Business Review, December, pp. 51-9. McCarty, T., Hunt, R. and Truhan, J.E. (2006), Transforming CRE value through relationship management, Journal of Corporate Real Estate, Vol. 8 No. 1, pp. 4-18. Roper, K. (2001), Aligning corporate real estate with the business of your company, Journal of Corporate Real Estate, Vol. 3 No. 3, pp. 222-31. Further reading Arthur, M.B. and Rousseau, D.M. (1996), The Boundaryless Career: A New Employment Principle for a New Organizational Era, Oxford University Press Inc., New York, NY. Bower, J.L., Capelli, P., Hamori, M. and Ciampa, D. (2007), So you want to be CEO (HBR Article Collection), Harvard Business Review.

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Ciampa, D. (2005), Managing yourself, Harvard Business Review. Hamel, G. and Prahalad, C.K. (1994), Competing for the Future, Harvard Business School Press, Boston, MA. About the author Sally A. Fisher is responsible for the integration and performance of services across real estate and facilities provided by Cushman & Wakeeld to one of its major corporate accounts. Ms Fisher earned an MBA at the University of Michigan and an MRED at the University of Southern California. She has spent her professional career advising on the design and advancement of corporate organizations to enhance performance, alignment across functional groups, and execution of occupancy, location and nancial strategies. Sally A. Fisher can be contacted at: sasher@rstam.com

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