Strategic partnerships, aligned interests, measurable goals and smooth employee transitions build top line and bottom line value Bryan Jacobs, International Director, Real Estate & Facility Management, JLLPrint This Page
For most companies, real estate and facilities constitute a top-three expense—but represent far more than just a budget line item. A high-performing corporate real estate team can boost workforce productivity, supply chain efficiency, business agility and mitigate risks to critical facilities. A new white paper by Jones Lang LaSalle (JLL) identifies four tips for creating real estate outsourcing relationships that create long-term value and quick savings.
Complex C-suite demands on in-house corporate real estate teams is driving rapid growth in outsourcing. Companies that thoughtfully invest in outsourced real estate services stand to gain competitive advantage over those that do not consider real estate to be a strategic function
1) Select the best strategic partner
Companies often turn to outsourcing as a way to reduce real estate and facilities costs. But cost is only the tip of the value iceberg. Even a small increase in employee productivity following a workplace transformation has the potential to produce significant value that can surpass even a major occupancy cost reduction. Minimizing facilities costs over the long term requires advanced strategies with providers who can offer the latest in portfolio management technology and ideas.
In short, experience and professional expertise matters. Many strategic partners offer some capabilities, such as janitorial or cafeteria services, or building engineering expertise. However, these areas of tactical expertise can be far more effective when executed in tandem with strategic portfolio optimization, workplace strategy, energy use advisory, transaction management, supplier management, integrated facilities management and smart building managed services.
2) Align the interests of the company and the outsourced service provider
A company that invests in a broad real estate service relationship is positioned to achieve a strong return on its investment when the outsourcing contract is properly structured. Cost savings from real estate strategies build up over many years, as quick-payoff strategies are joined by longer-term occupancy planning approaches that pay increasing dividends over time.
The relationship’s success is often based on a combination of financial and non-financial—but still measurable—criteria. Executives from the service provider routinely work at client sites rather than their own company’s office and, their engineers and facility managers work on-site. This creates a cultural bond with the client organization.
3) Develop measurable goals and implement strategies for maximum value creation
The strongest real estate outsourcing relationships are structured around mutual goals and performance-based incentives, and the service provider is compensated for achieving or exceeding goals. For example, if the goal is to complete a facilities rollout within a certain number of days, the vendor team might receive a bonus payment if it completes the project in fewer days—or a smaller fee if it does not complete the project within the desired timeframe.
Developing the right set of key performance indicators (KPIs) is critical to a successful relationship. KPIs focus everyone’s attention on reaching or exceeding the metrics that constitute success. KPIs can include financial goals, such as reducing direct occupancy costs by 15 percent through space consolidation or completing an analysis of ownership versus sale-leasebacks of major facilities. Non-financial goals can include achieving a 4.5 out 5 average score on employee satisfaction surveys after service calls or implementing a program to reduce greenhouse gas emissions by 15 percent.
4) Ensure a smooth and positive transition of facility staff
A smooth employee transition is the most critical part of the outsourcing process. In fact, one of the biggest obstacles to a successful outsourcing transition arises from concerns about job loss and diminished service quality. Contrary to these misperceptions, companies that outsource their real estate management can improve real estate productivity and successfully transition their facilities employees to the service provider with the help of a thoughtful communications plan for managing a smooth transition.
Bringing a real estate partner on board can not only help the company’s bottom line but also benefit the internal team. They will have access to advanced technology platforms and best practices in real estate strategy, which will help their personal career advancement.
Doing it right
Real estate and facilities strategy can be a major contributor to a company’s success—if it’s done right. Just as important as direct cost considerations, the quality of a company’s facilities operations can affect the productivity of its people, the efficiency of its supply chain and the level of risk in its critical operations.
Access the whitepaper and slideshow overview and additional resources: