Corporate Real Estate Management

Lecture 3 Understanding CREM characteristics

Abdul Jalil Omar

Review
CRE(M) - an organisational function How it is integrated into the organisation is a decision about the design of the organisation Business mantra for design of organisations
Core business keep close Support service push away (buy-in)
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CRE(M)s responsibilities
Provide shelter (physical space or envelope) Optimising workplace (production platform) Rewarding shareholders (financial return) Managing CRE function (form, environment, growth and advancement)
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After: Valenziano & Kious (2005)

The CRE(M) functions structure

Options
Business units run their own CRE function Organisational internal property unit Cost centre - Property costs charged to a CRE unit Profit centre A CRE unit charges business units for their property costs. Aims to maximise property profits External property unit Subsidiary property company Publicly traded subsidiary company Property trust (LPT/REIT)
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CRE and firm infrastructure The IRIS or CIR platform

CRE HR IT Finance
Integrated Resource Infrastructure Solutions (IRIS)

Corporate Infrastructure Resources (CIR)

Integration of strategic organisational resources

Source: Materna, R. & Parker, J. (1998) Corporate infrastructure resource management: an emerging source of competitive advantage, IDRC, Atlanta

IRIS or CIR
IRIS or CIR is orientated towards executing the organisations business plan through

A set of corporate functions and processes recognised as strategically important New way to create & sustaining corporate capabilities for executing those plans Increasing use to increase firms competitiveness

Alignment of organisational and CRE strategies

Make self-serving space decisions
Organisation

Business unit 1

Business Horizontal strategy Unit 2

IRIS/CIR

Horizontal strategy
Management Management HR

Operations

Horizontal strategy
Operations

CRE IT Business infrastructure Finance

Business Unit 1 as silo

Business Unit 1 as silo

Balanced scorecard alignment

Internal processes Financial Learning and knowledge Customers perspective

Source: Kaplan & Norton (2006)

CRE(M)s balancing act

Corporate management

Business units
Customised

CRE(M) unit

Corporate outcomes
Standardised

Service providers
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CRE(M) functions organisational style

Centralised
Organisation

Decentralised
Organisation

Business unit 1

Business unit 2

CRE unit

Region 1 Nth America CRE unit

Region 2 Europe

Region 3 Asia/ Pacific CRE unit

Direct or centre-led model

CRE unit

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Some other variants

Organisation CRE unit CRE unit Organisation

Region 1 Nth America CRE unit

Region 2 Europe

Region 3 Asia/ Pacific CRE unit

Region 1 Nth America CRE

Region 2 Europe

Region 3 Asia/ Pacific CRE

CRE unit

CRE

In-direct, or Advisory model

(CRE resources controlled)
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Influence model

(CRE resources not controlled)

CREM units

(Australian companies)

Separate CRE company 20%

Other 7%

Separate business unit 33%

Part of shared service unit 27%

Part of finance unit 13%

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Source: PCA/KPMG (2005), Graph 2

CRE(M) Sub-functions
Varcoe (2000)
Facility management Design and occupancy planning Project management Property management Transactions Strategic management Portfolio management Asset management
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Valenziano & Kious (2005)

Planning Transactions Facility management Design and construction

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Varcoe (2000)

CRE(M): designing the organisation

In-house management unit (internal service provider) Out-tasked management activities (external service provider) Outsourced management activities (external service provider) Strategic alliances management activities (internal/external service provider) Joint venture management activities (internal/external service provider)
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Structuring drivers
What is CREs fit in the organisation? What services are to be provided to the organisation? How best to deliver those services? Who are CRE(M)s customers (for relating too)?

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CRE(M): designing the organisation

What do I make? in-house
What do I buy? outsource

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Designing the CRE functions organisation

4 organisational structures Functional Geographic Market/customer Process

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Source: Valenziano & Kious (2005)

Functional CRE organisational structure

CRE Lead
IT CRE Infrastructure HR

Finance, Legal, etc

Planning
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Transactions

Facility Management

Design & Construction

After: Valenziano & Kious (2005) Fig. 9

Geographic CRE organisational structure

CRE Lead
IT CRE Infrastructure HR

Finance, Legal, etc

Region A

Region B

Planning

Transactions

FM

D&C
After: Valenziano & Kious (2005) Fig. 10

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Customer relationship CRE organisational structure

CRE Lead
IT CRE Infrastructure HR

Finance, Legal, etc

Content Expertise
Workplace Process Program

Relationship Business Unit A

Planning Transactions

Relationship Business Unit B

FM D&C

Portfolio Expertise

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After: Valenziano & Kious (2005) Fig. 11

Process CRE organisational structure

CRE Lead
IT CRE Infrastructure HR

Finance, Legal, etc

Entitlement & Development Process New Development teams
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Workplace Delivery Process Workplace Delivery Teams

Customer Relationship & Planning Customer Teams

After: Valenziano & Kious (2005) Fig. 12

Case example Sun Microsystems - 1987

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Source: OMara (1999) Figure 4.3

Case example Sun Microsystems 1988-91

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Source: OMara (1999) Figure 4.3

Case example Sun Microsystems 1991-5

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Source: OMara (1999) Figure 7.2

Case example Sun Microsystems 1996-9

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Source: OMara (1999) Figure 7.3

Case example BBC

Original CRE(M) organisation design

CRE Lead

Environment

Design

Development

Finance

Strategy

Operations

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After: Valenziano & Kious (2005) Fig. 13

Case example BBC

Redesigned CRE(M) organisation
CRE Lead

Workplace Partnering Customer Intimacy & Relationship Management

Planning & Advice

Direction

Infrastructure

Delivery Management Projects

Workplace, Environmental, & Portfolio Strategy

Innovation

Enabling Systems & Financial Reporting

Compliance & Reporting

(workplace solutions) (workplace services)

& Facilities

KPIs. Vendor & Performance Management

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After: Valenziano & Kious (2005) Fig. 13

Required skill sets

Insource skills

Financial & planning Strategic

Business Managerial Technical

Outsource skills

Relationships
Contract management/ administration Operating the artefact

Operational

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Strategic skillsets
More strategic
Strategy Communication Relationship skills Customer focus

Teamwork Business acumen Financial acumen Intellectual curiosity

Technical Process Real estate acumen Project management Negotiation Trust
After:McCarty, et al. (2006) Fig 8

Traditional

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CRE(M) skills
Communication Strategic thinking Consulting skills (consultation? Or being a Consultant?) Financial & analytic skills

Underlying orientation to external environment Customers Customers business, financial & competitive environments Outward trends and forces
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Source: McCarty, et al. (2006)

Summary
CREM organisation varies among organizations. Higher involvement requires multiple skill sets