The way businesses occupy real estate portfolios in the “new normal” could change dramatically. Questions such as offshore footprint, remote work, and balance of owned, leased, and flexible space are just some of the areas where a re-engineering could be required. Many CRE leaders will have the opportunity to support core business transformation and innovate the CRE strategy, as well.
Developing restructured plans can, of course, illustrate what CRE brings to the business. This will require a holistic approach that spans multiple disciplines to provide a comprehensive road map for change. We recommend following these three steps:
- Understand scenarios for the future of the business
- Develop CRE strategy and plan for each business scenario
- Implement immediate opportunities and prepare for future clarity
Understand Scenarios for the Future of the Business
Ensure a clear understanding of the potential direction of the business. We like to remind people of the golden rule of CRE: “don’t let a real estate decision drive business strategy.” Of course, business transformation, or even less transformational shifts, is not easy to predict even for the C-suite. So, instead of the burden of choosing one, map out several more likely scenarios that the C-suite is envisioning. Ideally these scenarios are developed with CRE having a seat at the table, but regardless, the understanding of the core business scenarios under constant consideration by the C-suite is most important. These commonly include digital transformation, supply chain re-engineering, changes to target markets, customers and/or geographies, shifts in the makeup of the workforce, less transformational but incremental changes to the status quo, etc.
Develop CRE Strategy and Plan for Each Business Scenario
Once the potential directions (the scenarios as described above) of the core business are understood, CRE strategic planning can take shape. Key questions to help frame the scale of change include:
- What are the important core business key performance indicators and measures you are solving for? Examples: sales performance, talent attraction, employee engagement, productivity, operating and capital expense reduction.
- What CRE gaps do you see between what exists and what is needed to meet future business objectives? Consider company culture, management structure, metrics from above, the definition of success, decision making, priorities, etc.
- What are the emerging strategies, opportunities and disruptors that will change or challenge how work is performed in the new normal (in HR, IT, Brand, RE/Facilities, Other)? Examples: talent hub locations, distributed work requirements, new technologies, significant shifts in customer or political expectations, etc.
How and where will the business continue to expand/contract in regional and global centers.
1. Analyze “how work gets done” for each business scenario
The developed core business strategy scenarios will provide the basis for analyzing CRE alternatives and questions such as “what is work in the future” and “how should the work get done”? There will be multiple CRE alternatives, given there are multiple business strategy scenarios. Additional questions include: Where will the work be occurring? Does the work require more individual contribution or collaboration? Does the work require partnering with external stakeholders (universities, partners, alliances, government, etc.)? How will artificial intelligence (AI), machine learning and advancing technology define how and where people fit within the lines of business?
2. Focus in on one of four primary CRE strategies for each
As you answer these questions on the potential CRE models (workplace, footprint, CRE organizational design, etc.) that apply to each business strategy scenario, you will see a primary CRE vision and strategy that emerges for each. We have previously shared in some webinars and other materials that we see that most business will have one of four CRE strategies as their primary focus:savings, optimization, experience or growth. This will then lead to important tactics unique to each of the four.
3. Develop tactics/action plan for each
Once you select the priority CRE strategy for each business strategy scenario, you can then develop plans to support the intended outcomes of each. The plans can be laid out through actionable steps.
To develop action plans and tactics, we recommend incorporating these five key areas:
a) Optimization of Financial Structuring – Assess the financial position relative to your company’s balance sheet and operating expense requirements. Performa a post-COVID-19 stress-test cashflow and review the balance sheet requirements with your finance organization. Analyze opportunities to reduce cost and raise capital by unlocking underutilized equity sitting in your real estate portfolios. If your balance sheet needs shoring up, consider a sale-leaseback or other potential capital markets opportunities.
b) Workforce Re-alignment – COVID-19 has dramatically changed the way we will work in the future. Given recent changes in remote and distributed work, this provides the opportunity to realign access to key talent with the business units they serve either by examining realignment of functions to take advantage of key labor markets or more distributed labor pools to align with increased use of remote work policies.
c) Portfolio Rationalization – Re-examine your current portfolio plan, prioritizing locations for immediate impact relative to business disruption and critical lease/project dates. Any analysis should be tempered by the impact of remote work and potential change recommendations to the business units noted above relative to in-house versus remote work. Scenario options should be developed to right-size assets through consolidations, decommissioning, etc.
d) Workplace, Flex and Remote Work – How has remote work changed the way your employees will work in the future? You will need to develop plans that translate the new cultural and operational priorities into workplace strategies as well as measure the utilization emerging from the workplace and remote work changes made.
Incorporate ideas around flexible workspace. What role did flex workspace play during the pandemic? How effective was it as a solution to help your businesses? How does this change your portfolio strategy to be more inclusive in incorporating future location strategies?
e) Change Management – Develop a plan for managing organizational and workplace change. Questions focused on the right people in the right places will be top of mind. Where will the work be occurring? Does the work require more individual contribution or collaboration? How will AI, machine learning and advancing technology define how and where people need to fit within the lines of business moving forward? All these considerations will need to be planned and managed from a real estate footprint emphasis.
4. Identify commonalities / differences in each plan
Once the various action plans and tactics are developed for each CRE strategy tied to the applicable business strategy scenario, an analysis can be done to bring the next steps into focus. This starts by answering the key question of, “what are commonalities and differences between action plans and tactics?” In addition, this can also include the evaluation of today’s CRE model, and whether the CRE solutions in place today are still applicable to some of the new action plans?
Implement Immediate Opportunities, and Prepare for Future Clarity
The commonalities will lead to a clear understanding of immediate tactics that fit all or most CRE strategies, and ultimately all or most business strategy scenarios. Implement these short-term, after demonstrating to other stakeholders and the C-suite how these tactics carry a plan forward without incurring unnecessary risk of unaccommodated changes to the business.
Further, identify the differences between each action plan. These differences can frame the basis for an ongoing process of ensuring that longer-term alternatives and decisions are ready to act on once the business is ready.
To learn more, please contact our Enterprise Consulting team, including experts in management, workplace, portfolio and financial disciplines to co-create your revised CRE strategy, portfolio and operating plan.
About the Author:
Chris leads Consulting for Colliers’ Occupier Services platform. He oversees service lines including portfolio strategy, workplace advisory, flexible workspace, supply chain solutions and workforce analytics. As the Head of Client Experience, Chris also leads efforts to grow client relationships and expand service offerings for our global enterprise clients.