Where does Facility Management fit into Corporate Real Estate Responsibilities- and how does this impact a career path?
In the property user market there is a lot of confusion about the concepts of corporate real estate (CRE) and facility management (FM). This is particularly true if the latter term is prefaced with the word ‘strategic’. But how do these to concepts fit together in the commercial property market; do they operate mutually exclusively and what skills are required?
The first principle to accept is that both terms should be focused on the users and occupiers. This represents the primary corporate infrastructure resource in which to conduct business – whatever that may be. Some may take exception to this perspective; after all many facility managers are employed by the supply side, the owners of the assets. True, but, as all facility managers know, to be successful in their jobs, they need to maintain a very strong customer (that means user) focus. Facility managers are usually the key interface between the users and owners of the assets – in which role they should probably more appropriately be called building services managers.
Generally, it is assumed that CRE is more focused on strategic issues while facility managers are focused on the day-to-day running of the buildings. Although this may be true, there are many facility managers, often in government employment, who have primary responsibility for much of the significant strategic decision-making related to their properties and facilities.
Conversely there are many CRE executives who are so focused on transactions that real estate strategic alignment with business objectives is forgotten. So who are the strategists and who are the doers?
It is best to think of property related services supporting the corporate infrastructure requirements as a continuum with no clear distinction between FM and CRE. Despite the lack of recognition in the corporate landscape, facility managers and CRE executives usually have the biggest corporate infrastructure challenge to manage. In corporate financial statements property and facilities still generally represent the longest liabilities in terms of lease commitments and/or the lumpiest assets in terms of owned assets. How these are managed in the face of today’s uncertain business environments is the challenge for both facility managers and CRE executives.
So where is the divide between CRE and FM? And does that matter? Let’s rather focus on providing our customer base, the government agencies and boardrooms of corporate Australia with the operational services and strategic support they need to maintain their competitive advantage.
EVOLUTION OF RESPONSIBILITIES
Understanding the spectrum of expected services and the evolution of the responsibilities of facility managers or CRE executives provides an indication of the changing nature of the required skills. Business and organisational needs have changed. To survive and thrive in this market, the key focus is to remain agile as an organisation. The role of corporate infrastructure support has evolved over the past decade in keeping with these changing challenges.
Gone are the days of a focus on janitorial and engineering services with a strong technical focus as the primary operating model for most facility managers. These services are expected as a given, to be delivered effectively and efficiently without compromise and this has not changed.
Likewise the re-engineering phase on minimising building and other property costs is no longer enough. This is often based on detailed analysis of utilisation rates undertaken with a controller mentality. All business and operating units are required to adhere to strict standardisation of usage benchmarks, no matter what the function or business process being undertaken. This is all about efficiency with very little thought for the effectiveness. During this phase of the service evolution, asset registers are rigorously updated or created, often for the first time. Suddenly corporations discover what they really own and/or lease and how significant the recurrent costs are. It is expected (and hoped.) that most corporations (and governmental agencies) are past this stage.
The next focus is on tactical transactions, usually based on a ‘problem solving’ approach. This focus is still favoured by many CRE executives, particularly those ‘deal-junkies’ who have came through the ranks of real estate agency firms. More and more facility managers are also starting to drive real estate functions. This focus on transactions, however, does little to provide sustained strategic advantage to a company or organisation. A strategy is not a bunch of great real estate deals shackled together.
Business planning and understanding the real estate markets is now the key focus of CRE and FM strategic service delivery. A real understanding of the longer-term implications of real estate and facilities commitments, be they leased or owned, against the backdrop of real estate cycles and business needs, starts to provide sustainable corporate and organisation advantage. But is this approach enough to meet the challenges of the future, particularly considering the ongoing nature of change?
Because of the nature of the corporate assets under their control, CRE executives and facility managers operating at the strategic level are being forced to evolve into business strategists – leaving behind their old industry operating models of the past, be these caretaker, controller, order-taker or deal-maker roles. The industry leaders at this level, if they are employed by an organisation or an outsourced service provider, need to assimilate the property implications of various business scenarios as strategies evolve.
UNDERSTANDING THE ‘BUSINESS OF THE BUSINESS’
An intimate understanding of the ‘business of the business’ and the co-creation of business strategies with the business and operating unit leaders, is now mandatory to stay relevant. The challenge is in understanding how to convene the workforce to do whatever they do, most productively – however, wherever and whenever. This needs to be done by structuring agile corporate infrastructure platforms at optimal cost levels.
Obviously, with the evolution and growth of this corporate support function, the required skills also need to evolve. For some individuals, this may be not possible! A transaction junkie should not be talking strategy and a traditional facility manager may be frustrated thinking scenarios and possibilities rather than absolutes.
A much more proactive ongoing multi-pronged approach is essential. First, the FM or CRE executive has to be totally in tune with the business itself, understanding the industry, all the business drivers, opportunities, issues, challenges and threats. In some organisations there is now a requirement for these executives to ‘do time’in the operational sharp-end of the organisation. Be it sales or marketing, product innovation, finance or whatever, extended periods within these groups are a requirement before being entrusted with the responsibility of the corporate real estate portfolio or facilities strategy.
The FM or CRE executive also needs to ensure that real estate and facilities is intimately linked into the other parts of the corporate infrastructure support groups. These are likely to include not only HR and IT, but may also include the finance department. These groups together control and manage the resource and infrastructure base of the organisation – resources that in this new corporate world are mostly interchangeable. Virtual offices can replace real estate bound workplaces, contractors working off-site can replace permanent employees in the office and IT is now the key mode of business linkage competing with physical linkages.
COMMUNICATE IN CORPORATE TERMS
In order to be heard, the CRE or FM executive needs to be able communicate in corporate terms. Understanding the corporation’s financial statements and the impact that transactions will have in the performance reporting of the company is an essential new skill. Similarly concepts such as the weighted average cost of capital and capital structures should not be mysteries.
The CRE or FM executive should communicate on an ongoing basis, both formally and informally, with the senior leadership of the business units in order not to be caught out by sudden changes in business requirements. No longer can these executives expect real estate and facility requirements to arrive on their desks – in requisition form – on a timely and orderly basis.
Change is the key imperative in business today. No longer are concise clearly articulated medium and long-term business strategies provided by business units; they seldom exist, so cannot be used as a basis for the real estate strategy. But the fact that they do not exist is not a reason to be ‘caught out’ in not providing the best portfolio strategy.
RANGE OF SKILLS
The key message is that a new range of skills are required across the FM and CRE spectrum. Every level of service across the spectrum is vital and as important as the next for the effective delivery of corporate infrastructure requirements. But how do facility managers or CRE professionals up-skill themselves to meet these challenges? Experience shows that the best education is generally always picked up ‘on the job’.
For the professional, the most important new skill required as facility manager or CRE executive, is being able to understand the user corporation’s key business strategies. This is the starting point and should be internalised into every management decision and process considered. Equally important is undertaking a range of education initiatives to be up-skilled in the understanding of the business of corporations and the tools that they use to retain their competitive advantage
