Corporate real estate management features

Lopes, Jose Luis Rangel . Facilities ; Bradford  Vol. 14, Iss. 7/8,  (Jul/Aug 1996): 6.

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ABSTRACT
 
This article describes some features specifically designed, or adapted from other disciplines, to be used in
operational corporate real estate management as a part of a research project being developed at the University of
Reading.

FULL TEXT
 
Jose Luis Rangel Lopes: PhD candidate at the Department of Construction Management and Engineering, The
University of Reading, Reading, UK
ACKNOWLEDGMENT: The author would like to thank Professor Ranko Bon, Head of the Corporate Real Estate
Management Research Unit (CREMRU) in The University of Reading, and Dr Chris Gee, Head of Facilities
Management Development in NatWest Group Property (NWGP), for their collaboration and assistance which made
this project possible, and the Brasilian Research Council (CNPq) for sponsoring this research.
Overview
This paper reviews some management concepts and tools applied to corporate real estate management (CREM).
Two tactics were used to condense the information in a brief and clear format. The first was the use of figures to
synthesize concepts and show their relationships. The second tactic was to follow a chronological order in the
presentation of the main concepts. The chronological order was based on the date of publication of the concept in
an article of the Harvard Business Review[1].
The following section describes the main concepts and the next section describes some tools adopted in the
project: "A meta-model for corporate real estate management" (CREM-MM) being developed in the Department of
Construction Management and Engineering at The University of Reading. The purposes of these tools are
manifold, but their use is always directed to organizational operational real estate management. The conclusion
connects these features with a future article describing the application of these principles in a real-life situation in
one of the main property owners in the UK.
Concepts
The analysis starts in 1979[1] with an article by Rockart describing a method to elicit the critical success factors
(CSFs). These CSFs are the core of the goals followed by top management, and the hard and soft information
needed to measure and produce reports describing the levels of their achievement. A similar concept, usually
named key success factors (KSFs) define the main aspects considered important in the specific analysis being
made (e.g. KSFs for customers would be aspects such as price, quality, time, etc.).
The second concept is from Eccles, published in 1991[2], and describes the shift from treating financial figures as
the foundation for performance measurement to treating them as one among a broader set of measures, based on
organizational strategy. How these measures relate to each other and what measures truly predict long-term
financial successes in business are fundamental points in defining the measures. Identifying competitors and/or
companies in other industries that exemplify best practice in some activity, function or process, and then
comparing one's own performance to theirs, in the process of competitive benchmarking, is another important
factor pointed out by Eccles.

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Methods for taking new performance measures should evolve as the company's expertise increases. Although this
might impair historical comparison, it is more important how a company is doing compared with its competitors,
not with its own past. In this arena, industry and trade associations can play a very helpful role in identifying key
performance measures, researching methodologies for taking these measures, and supplying comparative
statistics to their members. The same can also be done by third-party data vendors.
Figure 1 shows the concepts described up to this point integrated by a strengths, weaknesses, opportunities,
threats (SWOT) matrix, where the internal strengths and weaknesses, and the external advantages and threats are
included in the framework.
The next concept is the balanced scorecard (BS), defined by Kaplan and Norton in a 1992 publication[3]. The
advantage of the BS is to complement the financial measures, which tell the results of actions already taken, with
operational measures on customer satisfaction, internal processes, and the organization's innovation and
improvement activities - operational measures that are the drivers of future financial performance. Using
indicators that summarize the current and predicted environment allows managers to be able to view performance
in several areas simultaneously.
The customer quadrant of the BS lists customer satisfaction indexes. The financial and internal quadrants list the
relevant rentability, productivity, costs and performance aspects. The organization development quadrant lists the
staff-related issues such as skills, attitude, and culture, directed to learning and innovation.
Focusing on the handful of measures that are most critical, helps to clarify, simplify and then operationalize the
vision at the top of the organization. Using a list of critical indicators of current and future performance keeps
organizations looking and moving forward, instead of backward. In 1993, another article by Kaplan and Norton[4],
described how the BS was being used in many organizations. The emphasis was in grounding the BS in the
organization's strategic objectives and competitive demands, and linking the measures to strategies. In times of
re-engineering, downsizing, restructuring, outsourcing and focusing on core activities, the authors reveal that the
BS is most successful when it is used to drive the process of change, according to many organizations'
experiences.
In a period of rapid change when strategy is a basic guide, Mintzberg[5] makes an important distinction between
strategy and planning in 1994. According to this author, strategic thinking and planning are very different
activities. The strategy-making process should capture what the manager learns from all sources and then
synthesize this learning into a vision of the direction that the business should pursue. While planning is about
analysis, strategic thinking is about synthesis; it involves intuition and creativity. The outcome of strategic thinking
is an integrated perspective of the enterprise, and a not too precisely articulated vision of direction. Such
strategies often cannot be developed on schedule and immaculately conceived. They must be free to appear at
any time and at any place in the organization, typically through messy processes of informal learning, which must
necessarily be carried out by people at various levels who are deeply involved with the specific issues at hand.
The development of novel strategies takes the form of fits and starts, discoveries based on serendipitous events,
the recognition of unexpected patterns, and learning inevitably plays a crucial role. Things are tried, and those
experiments that work converge gradually into viable patterns that become strategies. This is the very essence of
strategy making as a learning process. Strategic programming (not planning), on the other side, involves three
steps: codification, elaboration and conversion of strategies. But some of the best models that planners can offer
managers are simply alternative conceptual interpretations of their world.
This view of strategy making matches very well with the use of the BS proposed by Kaplan and Norton in 1996[6].
The BS in this way provides a link between the company's long-term strategy with its short-term actions.
Processes such as departmental and individual goal setting, business planning, capital allocations, strategic
initiatives, and feedback and learning, are usually unco-ordinated and often directed at short-term operational
goals. The BS signals to everyone what the organization is trying to achieve for shareholders and customers. To
align employees' individual performances with the overall strategy, the BS users have to engage in three activities:
communicating and educating, setting goals and linking rewards to performance measures. Linking compensation

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to the scorecard helps to align the company with its strategy. The measures also provide the basis for feedback
and accountability.
The authors reckon the definition of a personal scorecard to communicate corporate and business objectives to
the people and teams performing the work, enabling them to translate the objectives into meaningful tasks and
targets for themselves. In an ideal situation this would represent an individual executive information system
(EIS)[7] for each employee, based on a comprehensive corporate data model[8], an ideal world where data are
available to be transformed into information, and information is wisely transformed into intelligence. But the world
is not an ideal place, therefore some risks have to be considered.
The risks involved with the use of the BS can be accessed with the following questions: "Does the company have
the right measures on the scorecard?"; "Does it have valid and reliable data for the selected measures?"; and
"Could unintended or unexpected consequences arise from the way the targets for the measures are achieved?"
Having sound strategic goals and linking them to financial budgets, so that the budget supports the strategies, is
the best way to avoid becoming lost within organizational bureaucracy, vested interests of external lobbyists, and
internal struggles for control over resources between groups or business units. This is what Robbins[9] would
politely call the strategic-constituencies approach to organizational effectiveness.
According to Kaplan and Norton, building a BS enables a company to link its financial budgets with its strategic
goals, and also increases organizational learning at the executive level - strategic learning - through the feedback
from milestones within the business planning process, reflected and summarized in the BS. In Figure 2 the
concepts described above, with the addition of the concept of service level agreements (SLA), detail in greater
depth the box "measures of activities and processes" of Figure 1, integrating all the concepts and the two figures
into an holistic framework. The SLAs define the service and quality levels provided to the customers and
consequently the level of expenditure to provide these services.
It is important to note the importance of the CSFs, since they will define what will be measured in each BS
quadrant and also will influence the definition of the SLAs. The CSFs therefore should agree and be the main
indicators of the organizational mission, vision, goals and main strategies through measures within the BS. The
operationalization of the CSFs is made through the SLAs.
Tools for corporate real estatemanagement
This section describes four tools specifically designed or adapted to be used in CREM. The first one is the real
estate scorecard (RES) designed by Apgar[10]; the second and third ones are popular management tools adapted
by the author for real estate analysis - the Dupont Tree and the Boston Matrix; the fourth is a tool designed by the
author in a research project being developed in the corporate real estate management research unit (CREMRU) at
The University of Reading[11].
Apgar's purpose in designing the RES was to use it as an instrument to link decisions about facilities to business
strategy. According to Noha[12], superior performance in real estate include: first, satisfying operational needs
(which might include flexibility and productivity); second, reducing occupancy costs; and third, using less capital in
real estate, allowing investment of the savings more profitably in other areas of the business, probably in core
activities where the higher rentability allows the company to survive and prosper.
Basic factors to reduce costs are the "three Ls"[11]: consolidating locations, simplifying layouts, and renegotiating
leases. To grab the company's real estate situation, Apgar proposes a score based in the weighted average of five
factors: amount (area) of space used; price of the space being used; grade (quality) of the existing space; area
(location) of the properties; and risk involved in the use of the properties. These factors can be used for
competitive benchmarking, therefore giving an idea of where the company stands within the industry. Noha[12]
gives six factors that proved to have the greatest impact on company occupancy costs. According to his research,
they are: location, quality of space, facility size, length of lease term, decision-making and approval process, and
use of external resources.
The next step in Apgar's analysis is to assess long-term needs effectively, examining how decisions about facilities
can help or hinder the way customers are served and employees do their work, and how organizational strategy

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will affect long-term real estate decisions. In this step Apgar suggests the analysis of functions (what is done in
the building), time (when it is used), and space (how much is needed) - F/T/S. The next step is the definition of a
corporate real estate data model (CREDM) that can organize and provide the necessary data, such as the
corporate data meta-model proposed by the CCTA[8].
The next CRE tool is the Dupont Tree, which main advantage is to link bottom-line financial information with
portfolio information. This tree, shown in Figure 3, could be considered for buildings (e.g. best and worst in class
for each class of building - CPD, offices, branch by size) or for clusters of buildings. This tool can be used as a
competitive benchmarking instrument once the basic data are available for comparison.
The third tool for CREM to be discussed is the Boston Matrix adapted to real estate portfolio analysis. This tool
can give an integrated view of customer satisfaction, return on investment (ROI), and total income results for a
particular site or a cluster of similar properties. The ROI can be obtained in the Dupont Tree. The model consists of
a matrix with two axes (Figure 4). The vertical axis represents the customer satisfaction level with the
building/cluster (e.g. post-occupancy evaluations (POE), customer satisfaction surveys, etc.). The horizontal axis
represents the building/cluster financial efficiency index (e.g. ROI, etc.). A third dimension is introduced by giving
each building/cluster a circle whose size relates to the actual income it provides. The matrix is subdivided in four
quadrants at points that are half-way between "low" and "high" on each axis. The building or cluster is classified in
each quadrant as:
- Question marks - building/cluster with high customer satisfaction levels and low financial efficiency. Do you
invest to increase the efficiency with new equipment/materials or divest?
- Stars - building/cluster with high customer satisfaction levels and high financial efficiency. Use it as a model
building.
- Cash cows - building/cluster with low customer satisfaction levels and high financial efficiency. How is the
workforce productivity in this building/cluster? Do you invest to increase comfort with alteration/refurbishment or
divest?
- Dogs - building/cluster with low customer satisfaction levels and low financial efficiency. Consider high
investment on alteration/refurbishment or divest? Use it as the "black sheep" model.
The decision will consider the size of the circle that indicate the building/cluster. High income locations will
deserve a greater investment.
The last tool analysed is the CREM-MM proposed by the author[11], shown in Figure 5. The purpose of the meta-
model is to organize the features used in the CREM process in a coherent framework, which can be used as a
reference of available resources. The definition of the main dimensions of the CREM-MM followed patterns found
in the literature review[13]. Some of these patterns are: the primary factors of production in economics (capital,
labour and natural resources); various authors writing about CREM using three or four dimensions - Bon et al.[14]
classifies the CREM activities in financial, organizational and physical; the BS, described, which focuses on four
main perspectives, financial, customers, internal business, and learning and growth.
The financial dimension of the CREM-MM requires some comments, while the physical and human dimensions are
quite clear. The traditional meaning of finance is related to rentability and monetary values (two divisions of this
dimension) but one subdivision of this dimension is business information. This class is where information is
closest to intelligence. It includes marketing research and competitive benchmarking. Information is the new form
that finance is taking in the modern world. Not to be confused with intelligence, information is the media,
entrepreneurial skill is the behavioural pattern. Intelligence is the result of the application of a behavioural pattern
(entrepreneurial skill) in a media (information). In a world where learning and information are nourished,
intelligence is the desired outcome.
The CREM-MM is an instrument to diagnose real estate units of organizations in terms of the concepts and tools
being used in the management process. As the model is a synthesis of features used in CREM, its application in
real-life situations can elicit features that could be applied with benefits in a particular organization, based on
theoretical concepts and practical tools available in the field. As the emphasis in facilities management and

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strategic real estate management is relatively recent, the author expects that this model can bring some practical
benefits to organizations interested in improving its operational real estate management.
Conclusion
The integrated use of these concepts and tools can only be beneficial to operational CREM. The features described
in this article are commonly described in general management literature, but their practical application in CREM is
not usually found in the literature, as well as their specific format when adapted to CREM. In a forthcoming article
the results from the application of these concepts and tools in a real-life situation will be described.
References
1. Rockart, J.F., "Chief executives define their own data needs", Harvard Business Review, March-April 1979, pp. 81-
93.
2. Eccles, R.G., "The performance measurement manifesto", Harvard Business Review, January-February 1991, pp.
131-7.
3. Kaplan, R.S. and Norton, D.P., "The balanced scorecard: measures that drive performance", Harvard Business
Review, January-February 1992, pp. 71-9.
4. Kaplan, R.S. and Norton, D.P., "Putting the balanced scorecard to work", Harvard Business Review, September-
October 1993, pp. 134-43.
5. Mintzberg, H., "The fall and rise of strategic planning", Harvard Business Review, January-February 1994, pp.
107-14.
6. Kaplan, R.S. and Norton, D.P., "Using the balanced scorecard as a strategic management system", Harvard
Business Review, January-February 1996, pp. 75-85.
7. Central Computer and Telecommunications Agency (CCTA), Executive Information Systems, HMSO, London,
1994.
8. Central Computer and Telecommunications Agency (CCTA), Corporate Data Modelling, HMSO, London, 1993.
9. Robbins, S.P., Organization Theory: Structure, Design, and Applications, Prentice Hall, Englewood Cliffs, NJ,
1990, p. 63.
10. Apgar, M. IV, "Managing real estate to build value", Harvard Business Review, November-December 1995,
pp.162-79..
11. Lopes, J.L.R., "A meta-model for corporate real estate management", Property Management, , Vol. 13 No. 4,
1995, pp. 9-35.
12. Noha, E.A., "Benchmarking: the search for best practices in corporate real estate", The Journal of Real Estate
Research, Vol. 8 No. 4, Fall 1993, pp. 511-23.
13. Lopes, J.L.R., "Looking for a common information framework for corporate real estate management", Internal
Report, Department of Construction Management and Engineering, University of Reading, 1994.
14. Bon, R., McMahan J.F. and Carder, P., "Property performance measurement: from theory to management
practice", Facilities, Vol.12 No.12, November 1994, pp. 18-24.
Illustration
Caption: Figure 1; Main aspects to be considered in the information processed within an organizational structure;
Figure 2; The balanced scorecard (BS) and its connections with CSF and other organizational perspectives; Figure
3; The Dupont Tree adapted to real estate investment analysis; Figure 4; The Boston Matrix adapted to real estate
portfolio analysis; Figure 5; Structure of the corporate real estate management meta-model (CREM-MM)

DETAILS

Subject: Facilities management; Real estate; Corporate planning; Research

Location: United Kingdom UK

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 Company / organization: Name: University of Reading-England; NAICS: 611310

Classification: 2310: Planning; 5100: Facilities management; 8360: Real estate; 9175: Western
Europe; 5400: Research &development

Publication title: Facilities; Bradford

Volume: 14

Issue: 7/8

Pages: 6

Number of pages: 0

Publication year: 1996

Publication date: Jul/Aug 1996

Publisher: Emerald Group Publishing Limited

Place of publication: Bradford

Country of publication: United Kingdom, Bradford

Publication subject: Building And Construction

ISSN: 02632772

Source type: Scholarly Journals

Language of publication: English

Document type: Feature

ProQuest document ID: 219624968

Document URL: https://search.proquest.com/docview/21962 4968?accountid=190474

Copyright: Copyright MCB UP Limited (MCB) Jul/Aug 1996

Last updated: 2014-05-20

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