Glenn Corney, International Product Manager for IPD Occupier services, explains why multinational corporate real estate (CRE) managers now say they need international benchmarking to do their job.
Real estate management is becoming international in its horizons. IPD recently asked 20 European real estate managers across some of the largest companies in the world about their involvement in the performance management process. The organisations selected for this scoping study were significant multinationals, with a single individual responsible for real estate across Europe. The results indicated that corporate real estate management can now effectively manage multinationally, but that the information required to manage performance effectively is yet to catch up with the needs of managers.
From initial research among these organisations, it is clearly not only desirable, but also practical to begin to develop multinational benchmarking in the same way as IPD has developed reliable national benchmarking. This initiative will require organisations to come together and give their support to collaborate with IPD to move the industry forward – so that multinational CRE managers can have the resources they need to manage effectively.
Five clear issues were identified in this investigation, which point to the need for multinational organisations to work together to ensure that benchmarking data is available to their decision-makers.
1. Multinational management is starting to take real estate seriously
In identifying organisations to participate in the initial research, it emerged that it is becoming the norm for multinationals to have global and regional CRE managers. Furthermore, as shown in Figure 1, these roles are focused on the areas where real estate issues most closely affect the organisation: setting real estate strategy and involvement in key projects and transactions.
Figure 1 - Roles and responsibilities of European/EMEA CRE managers
2. To be effective the CRE team needs benchmark data
IPD’s initial research found that the current issues faced by multinational CRE teams are reminiscent of those faced by large organisations during the 1990’s, when real estate management moved from regional or site management to a centralised national function. In performance management terms, this can be viewed on a maturity scale from information poverty to effective, value-focussed management (see Figure 2, below). The first challenge is to get a comprehensive picture of the portfolio: once reliable information is established, benchmark data is essential to begin to contextualise company results and understand “performance” – efficiency or value rather than cost and size.
Figure 2 - CRE Performance Management Maturity
3. CRE has an important role in strategic procurement
As Figure 1 shows, the European CRE managers covered by this research often have a direct role in real estate and facilities procurement. Where this is not the case, and procurement is done by a separate corporate function, there is an increasingly strong operational link between these two functions, often with embedded or allocated individuals within the procurement team. Currently, single supplier sourcing for both facilities and real estate services across Europe is still not the norm (see Figure 3) with only around 30% of companies in this model. Although many organisations have previously felt suppliers were not mature enough to deliver a consistent service across regions, many managers identified that they were currently reviewing single-supplier options. It is likely that there will be a growing move to rationalise supplier-bases to simplify management, promote consistency and reduce costs. To retain effective management control over their suppliers the CRE team will need benchmark data to test the value they are getting.
Figure 3 - Management capabilities of European CRE teams
4. Information systems are becoming more capable
Putting in place effective management information systems to support multinational CRE has been a real challenge. Information is often held in different systems and measured according to different standards. This is often a result of how the organisation itself is organised. For example around 60% of companies do not have a single finance system due to businesses operating in country or functional silos. This is changing however, with software packages such as Manhattan, Qube and Planon offering web-enabled enterprise-wide CRE platforms, and more companies moving to single finance systems. Space, cost and occupancy data are still core for the CRE team. Having a platform on which to store data is only the first step however. There is also a need for consistent standards against which to measure data. If you are using local rentable area measurements as the basis for comparison across European regions, your comparisons could be over 20% inaccurate (source: JLL) due to differences in the way space is measured. Although many organisations have invested huge resource into developing their own standard for space measurement, an increasing number are looking to adopt freely available industry standards such as IPD’s space, cost and environment codes as they reduce costs and facilitate like-for-like benchmarking. IPD are currently working with OSCRE to develop an electronic data exchange, which will allow organisations to share data with partners at the push of a button. CRE information capability is now such that multinational benchmarking is possible.
5. Benchmarking capability does not match the needs of CRE
The majority of organisations surveyed (see Figure 3) currently carry out some form of internal benchmarking. In most cases this will involve resource-intensive processes to periodically gather data from regional managers and produce statistics. However, most managers surveyed expressed dissatisfaction with the results this achieved. Under-developed definitions, differences in measurement standards and an inability to verify whether numbers were accurate were some of the issues they encountered. External benchmarking overcomes many of these issues by performing intra-market comparison across companies. It is only through external benchmarking that internal figures can be effectively validated and actual performance understood.
How to get involved
IPD aim to launch the European office benchmarking pilot in May 2011 and are currently finalising participants. The European pilot will be the first stage in the development of reliable benchmark data in all major centres around the world.
For more details on the project and participation contact Glenn Corney.