By Antonia Cardone, MCR.W, Managing Director, Workplace Strategy & Change Management, and Patrick Symes, Senior Workplace Strategy Consultant
How Is Our Competition Measuring Performance?
Given this is such a common question, it seems odd that the answers we find are often far from the truth. Perhaps the question itself, is misplaced (albeit well intentioned). Let’s consider this problem in a different context:
Knowledge is having the right answer. Intelligence is asking the right question.
What’s the metric?
Problem 1: Right vs. wrong metrics:
In real estate, we follow an era where we’ve become increasingly facile at driving down baseline metrics. The reality is that these baseline metrics are relatively easy to establish: cost and space. And now, as the industry recognizes that the change in these metrics is asymptotic: they can be reduced but can never reach zero (‘virtual organizations’ might argue with this), we ask ourselves “What else would be useful to describe real estate value and performance?” We should also be questioning whether business performance improvements are rationally linked to cost and space metrics? One argument is “by reducing establishment costs we are able to invest in talent” but the counterpoint is “by cramming more people in, our productivity has dropped.” So, what should we be measuring?
Ask more questions.
Problem 2: Competitors’ metrics or Our metrics?
From a word order perspective, putting ‘competitors’ first make them the focus. Secondary are measuring and performance. The problem is beginning with competitors – often as a first port of call, anxious corporate real estate leaders reach out for what they believe is the answer: industry benchmarks. But, the answers to these questions don’t come from web-searching the real estate benchmarks of competitors, which if they could be found, like hen’s teeth, might be considered the holy grail. Will the average density of a competitor’s portfolio (which may include industrial space, for example) truly help describe how an organization is supporting its clients or its staff?
First, we define, then we measure.
We need to define what performance really means for our own organization first. Forward-thinking corporate real estate leaders want to use the same measures that capture C-Suite attention (shareholder return, profitability, human capital performance) to evaluate real estate’s impact and to develop metrics that capture the value they deliver to the business. These metrics clearly link operational and individual performance to the corporate strategy and allow real estate leaders to accurately describe their contribution to business objectives. And, the most progressive real estate leaders also want to know what impact their real estate decisions have on the company’s highest cost and biggest asset: their people.
It is only once we have defined what drives performance, and how we can effectively measure it, that industry-wide comparisons may be valuable. Real estate leaders should perhaps be asking:
- Does our C-Suite rate its CRE department as a trusted advisor to the business more highly than is the case at our competition?
- Are we better than our peers at making our company more competitive and successful?
- Are we better than our peers at focusing on strategy rather than being distracted by tactical fire-fighting that should be handled by our service providers?
- Amongst our peers, how are we at diagnosing true business needs and translating these into a real estate strategy that helps our company meet its most important objectives?
- Are we better than our competition at helping the business understand the portfolio options that will ensure we meet our current and future employee, customer, and supply chain needs?
Who has the answers to these questions? Our profession needs to find new ways to share information and gather knowledge around real estate performance beyond the reliable old favorites that don’t describe how companies are managing diverse and conflicting pressures today.
How can we measure strategic metrics?
- Baseline metrics – start with what you know and identify what you don’t. What data is already available and being captured? Is it accurate? Is it thoroughly representative? Who cares about it and how is it used? But more importantly what data is missing. Think of the Abraham Wald Missing Bullet Holes story (myth or truth is still up for debate) and identify where the key gaps in measuring your performance objectives are. You’re likely to have part of the story, you need to fill the gaps.
- Defining what metrics are specifically appropriate to monitor: work-shopping (be sure to bring diverse perspectives into the discussion) to answer, “What is important to our C-Suite?” The range of possible metrics is broad and needs to be refined specifically for your organization, today. There is no point reporting on the last CEO’s priorities. And, no point creating metrics for which you cannot gather the relevant data. Hence, a very small number of metrics is ideal.
- Analyzing assumptions to test availability of data to compile the metrics. Where is the data? How might the new metrics be best represented? As a specific data point, or graphed over time, based on what is most useful to your organization? Will the data continue to be available over time? Can we gather and compile metrics cost effectively? What systems are in place to ensure that? Focus energies around test-driving recommendations before they go public.
So, real estate leaders it’s time to step back and look at the bigger picture – your real estate organization, your parent organization and real estate’s role in it, to determine whether you are helping deliver answers to the company’s big strategic questions.
The key to achieving meaningful results is to flip the question: by starting with performance that supports the business objectives, we can then identify how we measure this in real estate terms. Finally, then and only then, do we cast our eyes to competitors for comparison. If we don’t know what’s truly important to the business and just follow the industry leader, we might well follow them off the edge of a cliff. Or follow them into this revolutionary, scary world of ‘Activity Based Working’. But that’s a whole other debate!
Antonia Cardone, MCR.W, is the Managing Director of the Workplace Strategy & Change Management group for Cushman & Wakfield Strategic Consulting.
Patrick Symes is a Senior Worklace Strategy Consultant for Cushman & Wakfield, based in the U.K.