Life after G&A Reductions
The past few years were marked by significant belt tightening. Companies across the real estate landscape were faced with declining revenues and were forced to make very hard decisions (mostly relating to human resources) to reduce operating costs in order to maintain bottom-line performance. While the business cycle has not completely reversed itself, many companies have found new opportunities for revenue growth, but are wary about making the staffing moves necessary to realize those opportunities.
These resource limitations can be characterized as bandwidth constraints, and can be addressed in a number of ways, including:
- Focus resources on core functions – Recent staff reductions likely spread tactical responsibilities across remaining resources. Free-up these resources to do more strategic activities by leveraging outsource partners for tactical functions.
- Manage by exception – Develop information dashboards that provide access to property-level data and highlight significant risks and opportunities. Recast monthly reporting packages and performance metrics to focus on the exceptions.
- Eliminate unnecessary meetings – A culture that promotes endless meetings often evolves from insecurity and a lack of authority. Management silos often typify a “meeting-oriented” culture. It will take time to build confidence and assure people that there are many “right” decisions, and that it is better to choose one of them than to be paralyzed by indecision.
These approaches to increasing bandwidth are most successful when mandated by senior management and pushed down through an organization.
Cultural changes can be supported by certain technology that promotes collaboration and improves workflow. Business Process Management (“BPM”) tools are “game changers” when it comes to collaboration, improving cycle times, and streamlining operations. Sharepoint and other similar tools can help improve the availability of information and change the way that resources interact.
No matter what avenues are adopted, the first step is to recognize that increasing bandwidth is a key factor to growth in 2010 and 2011.
Building an Effective Real Estate Organization
Real estate companies traditionally think (and organize) in terms of the “front office” and the “back office”. The Front Office has long been viewed as the leasing, acquisitions, and other business functions that generate revenue, while “support” functions are relegated to the Back Office. The silos are starting to dissolve, and the “us” versus “them” mentality is giving way to a much more collaborative management style.
Interestingly, technology has played a significant role in the evolution of the “middle office”. Analytical capabilities, helping interpret performance and anticipate future direction, distinguish the transactional companies of yesterday from the operating businesses of tomorrow.
The middle office relies on some of the same tools that already support most real estate companies, including core property management and accounting systems. However, fully understanding analytical requirements of the middle office may warrant an optimization of those systems to maximize their utility. More often than not, additional tools must be integrated with these core systems to get a holistic perspective of company performance and facilitate decision making (e.g., budgeting and forecasting tools).
Leveraging Technology Beyond Accounting
Accounting departments of real estate companies have been using technology for years. Accounting and IT have been so closely aligned that many companies have organized IT to report to the CFO. However, enhancements in technology, coupled with more tech-savvy executives, have aligned the stars for deploying technology to processes that have historically been limited to email and Excel.
The ability to leverage technology for high-profile functions like Leasing and Revenue Management has brought significant attention to the top-line opportunities that technology can help realize. Leasing Pipeline Management tools (aka CRM) are one of the hottest topics in the industry. When properly implemented, these tools can bring considerable transparency to the leasing process and reduce the cycle times associated with document preparation and negotiation. Even more importantly, though, these tools can bring attention to inventory issues (such as existing vacancies and near-term expirations) that warrant management focus.
Other tools that are commanding the attention of real estate executives are Business Process Management tools (“BPM”). These generic “workflow” tools can be easily configured to address the needs of virtually any process of a real estate company, accessing data from disparate systems to facilitate complex decision trees and parallel and sequential approvals. Like CRM, BPM tools have been proven to reduce cycle times, automate manual processes, and create valuable transparency. Some of the processes that have benefitted from BPM at leading real estate companies include (1) tenant forms processing, (2) variance analysis, and (3) JV partner collaboration.