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“Break down the cubicles” October 31, 2013

Posted by Bob Cook in Alternative Workplace Strategies, Profession of Corporate Real Estate.
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I rarely repost stuff you can find elsewhere on the web, but this performance from the opening ceremony of Corenet Global’s Summit in Las Vegas last week is sure to become a classic in the corporate real estate community and deserves reposting … and reposting … and reposting.  Enjoy.

2011: Year of the Rabbit …. and Decade of the Corporate Real Estate Exec February 13, 2011

Posted by Bob Cook in Alternative Workplace Strategies, Corporate HQ, Financial Planning & Analysis, Green Initiatives, Lease Accounting, M & A Integration, Profession of Corporate Real Estate.
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This Thursday ends the 15-day Chinese New Year Celebration.  According to the Chinese Zodiac, we’re entering the “Year of the Rabbit”.   We may also, though, be entering the “Decade of the Corporate Real Estate Exec”, the decade in which corporate real estate execs rise to truly strategic roles in their organizations.

The year 2011 will usher in an era of increased responsibility for corporate real estate professionals.  Events playing out this year will put corporate real estate executives, their staffs, and their advisors front and center.  The spotlight will be hot, but rewarding … for those ready to perform.

Leaving the oughts behind

With a name like that … “the oughts” … we should have known the decade from 2001 through 2010 was going to be tough.  Slashing budgets, laying-off people, constantly explaining why the company still has too much space:  it was not the best of times for corporate real estate folks. 

To be fair, the oughts did have their fun moments:  implementing alternative workplaces, expanding into China and India, building solar-power arrays, planning next-generation data centers.  But while these activities were sometimes high-profile (in the sense of “gee-whiz”, isn’t this cool), for the most part they tended to be tactical activities in service to specific divisions or functions … away from the central concerns of headquarters.  They did, however, help raise the self-image of corporate real estate professionals who no longer are satisfied with a backstage, custodial role.  Most are ready to perform on stage.

The good and the bad

So, if you’re in corporate real estate, how will 2011 differ from the past?

Good News:  You won’t be tasked to slash your budgets; corporate profits are doing just fine and executive management is now focused on growth rather than contraction.   You won’t be consolidating (unless your company buys another company to integrate); you’ve already done your consolidations.  And you won’t have to lay off any more of your staff; thank God, that’s over … or at least it is if you avoid being on the “losing end” of a Merger.

Bad News:  Some of you may lament, though, that some of the things that were fun in the past won’t be on the agenda in 2011:  You won’t be constructing many new buildings; we have enough of those for a while.  You also won’t be building out much space inside your buildings because you probably have built space you’re still not using.  You won’t be flying across oceans looking for new space; globalization is taking a breather while companies wait for worldwide demand to catch up with worldwide capacity.  And you probably won’t be doing a big outsourcing; where outsourcing makes sense, you probably already have.

The shape of 2011 and the decade to come

The Year of the Rabbit, CY2011, and the coming decade will bring a new world shaped by these forces: 

  • cash hoards at leading companies in a “winner-takes-all” economy
  • attractive real estate markets  from an occupier’s perspective, for at least a few more years in most locales and indefinitely in some
  • new advances in “green technologies” and lowering prices due to competition
  • the establishment of a new lease accounting standard
  • strained budgets at all levels of government

The New Agenda

This world will bring those corporate real estate professionals who are ready for the stage closer to the core of their companies’ businesses.  The new corporate real estate agenda for the “Year of the Rabbit” and beyond:

  • Acquisition Integration
  • Balance sheet Management
  • Corporate Citizenship
  • Design & Management of Processes
  • Employee Retention and Recruitment

 

Acquisition Integration.  Most leading companies are sitting on cash hoards and have large borrowing capacity, setting the stage to make the year 2011 record-breaking in terms of M&A activity.  Corporate real estate execs will play key roles in integrating acquired companies, as they have been, but those, savvy enough to grab the opportunity, will engage beyond managing cost-saving consolidations.  They will take a leadership role in managing the “soft art” of cultural integration. Corporate real estate execs have an opportunity to address a vexing problem: most M&A’s are unsuccessful.  Most experts think the obstacle to success is cultural incompatibilities.  By simply extending corporate real estate’s responsibilities from the physical environment to the social environment and thinking of themselves, not as “facility engineers” but, as “social engineers”, corporate real estate execs can … and should … take on the challenge of successfully merging cultures to achieve M&A success.

Balance Sheet Management.  All that cash and borrowing capacity at leading companies are going to make real estate central to discussions about financial structure.  Companies need to decide whether they should continue to retain all that cash (something that stockholders don’t like), pay down debt (something that has probably already been done if the company has a lot of cash), give cash to shareholders via stock buybacks or dividends (something that company managers don’t like because they want to keep money for a “rainy day”) or spend it (something that certainly cannot be done foolishly.)    It turns out that spending cash to buy company facilities bridges these concerns: it keeps wealth in the company in a way that can be turned into cash if needed, earns more than cash-equivalent investments, and can often support business operations better than can leasing property.  Real estate is, thus, destined to become important in discussions about a company’s financial structure, particularly over the next few years while an “occupier’s market” reigns and purchases can be made cheaply.  Also entering the discussion will be the new lease accounting standard that will transform the balance sheets of many companies and bring real estate strategy (own vs lease, lease duration, utilization) even further into discussions about company financial structure.

Corporate Citizenship.  Our governments are broke (to use an imprecise but, I think, meaningful term.)  Corporates will be called upon to pick up the slack … either forcefullly by regulation or voluntarily… and they will have to get serious about social and environmental responsibilities.   Federal and state governments can’t afford tax breaks for energy-savings and environmental-protection so companies will be expected to beef up their sustainability programs.  While technological advances may improve the ROI on energy-saving and environmental-protection investments, companies will be expected to make these investments even where there’s no payback.  As for local governments, they can’t afford redevelopment programs so companies will be expected to participate in urban revitalization projects, even when no subsidies are available.  There may even be a return to the civic-mindedness of the 1960’s when corporations built their headquarters with plazas to serve as centers of their communities.  Corporate real estate professionals will be managing much of this good corporate citizenship.

Design & Management of Processes.  As the role of corporate real estate execs migrates towards the center of the company, execs will find themselves spending less time on implementation and more time designing and managing processes to lead, coordinate and govern the implementers, who will increasingly be outsourced providers.  Acquisition integration, for example, requires processes to plan consolidations, account for them, and track implementation status.  Another example: the new lease accounting will require SOX-compliant processes to record leases in a timely fashion, abstract them accurately, and (if the present proposal holds) make quarterly assumptions about their likely lengths, contingent rents, and service components.  All these processes will have to be integrated with processes of other functions … HR, IT, Finance … intertwining corporate real estate with other key functions and making it integral to how the company works.

Employee Retention and Recruitment.  Despite the fact that unemployment is still stubbornly high, competition for top talent is severe.  As product design, marketing, supply chains, financing, and the art of management, itself, becomes more sophisticated, the winning of the competition for sophisticated talent is becoming more and more important to company success.  If you have the best talent, you can create the best products, the best marketing, the best cost structure, etc. … the things that allow you to easily win the competition for customers.  And what attracts talent?  Money helps, but ultimately, it’s about the work environment.  Here again, corporate real estate execs can play an important role by using their command over the physical work environment to help mold the social work environment that will determine how successful their company is in retaining and recruiting talent.

It is a new year:  “Year of the Rabbit”. 

Will it be a new decade:  “Decade of the Corporate Real Estate Exec”?

Eleven things I learned at the CorenetGlobal Summit in Phoenix September 23, 2010

Posted by Bob Cook in Alternative Workplace Strategies, Financial Planning & Analysis, Green Initiatives, Lease Accounting, Profession of Corporate Real Estate.
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 1. 110 degrees doesn’t feel that bad in the shade.

2.  Face-to-face meetings are a nice complement to living “la vida webosphera”.

3.  Corenet Summits ain’t what they used to be, many long years ago… but…

4.  Even without Duck Soup, Summits are still pretty good.

5.  Topics presented in breakout sessions draw varying sizes of crowds.  My take:

6. “Alternative Workplace” is still in first place as a topic of interest to the most people.

7. “Career Planning” is close behind (perhaps because of all the members “in transition”)

8. “Green” is gaining ground fast and could overtake “Alternative Workplace” shortly, and …

9. “The New Lease Accounting”, while far behind (it wasn’t even given a prime time slot), is coming up fast (judging by the standing-room-only crowd at a 7:45 AM session on subject).

10. PHX is near the downtown convention center, allowing for a fast exit.

11.  Saguaro live to be 200 years old (according to art exhibit at PHX) and take ten years to grow one foot tall.

Lease expenses up 5 to 15% … how to manage the budget effect of the new lease accounting July 21, 2010

Posted by Bob Cook in Alternative Workplace Strategies, Financial Planning & Analysis, Lease Accounting.
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If you have budget responsibility for a leased real estate portfolio, it’s time for you to start feeling a little nervous about the new lease accounting. That’s not bad. Nervousness can be good …. as long as it prompts you into action.

The desire for better disclosure of lease liabilities on financial statements is driving the accounting change, but that change is going to have many “downstream effects”. The most painful one may be the impact on corporate real estate budgets.

I’m not talking about the budget that will be required to put in place the processes and systems to comply with the new standard … although that, granted, will also be painful … but rather, I refer to the fact that, in the first year of adoption of the new standard, corporate real estate departments are going to find their previous budgets to be woefully short of what’s needed to cover their lease expenses.

 

How you may feel if you don't manage the challenge

Description of the new accounting

Why is this going to happen? While the main goal of the new accounting is to provide better disclosure of leases by putting them on the balance sheet … as both a right-to-use asset and as a lease liability … this balance sheet accounting sets in motion a whole new way of accounting for lease expenses on the P&L.

The simple concept of a “rent expense” will be a thing of the past. Instead, leases will have a “depreciation expense” and an “interest expense”. The result will be that P&L expenses resulting from a lease early in the obligation will be much higher than those later … and important to know regarding budgeting, they will be higher in the early years than they would be in those same years under present accounting.

For a more complete description of the accounting and its implications, check out my webinars held on behalf of Tririga. They are available on-demand on Trirga’s website.

The Budget Challenge

An illustration: Take a ten year lease with a $1 million annual rent obligation. Under present accounting, you would simply have a $1 million “rent expense”. Under the new accounting, assuming a company incremental cost of debt of 6% used to discount obligations to determine balance sheet amounts, you will have a “depreciation expense” of $736K and an “interest expense” of $442K, for a total of nearly $1.2 million … an increase of almost 20%! 

And because your company probably structures internal budgets to parallel P&L expenses, your budget to cover leases in the first year of that lease will have to be higher than what it would have been under the present accounting by that-nearly 20%.

Now … you may be thinking, “That’s ok, I’ll just make sure I put that higher budget in place and make sure my internal client understands it before I sign the lease.”   Well … if that hasn’t gotten your nervous system jittery yet … consider this: Most likely, the new accounting standard will not allow grandfathering of existing leases.  At the time your company adopts the new standard, you will have to account for all your operating leases as if they were new on that date.

The result: The P&L expense of each and every lease in the portfolio will instantly increase. Your overall portfolio expense won’t go up by 20% unless all your remaining lease terms are ten years or longer, but the increase is still likely to be significant. Depending upon the length of the remaining lease terms at the time of adoption of the new standard, your budget for your lease portfolio will probably have to go up somewhere between 5% and 15%.

What can be done?

So.. can anything be done to ameliorate the budget impact? Yes and no. The phenomenon of P&L expenses being very high at the beginning of a lease and higher than they would have been under the existing accounting is inevitable. There are, however, at least three things that can be done to ameliorate the budget impact.

The first is to not let yourself and your stakeholders be surprised by this budget problem. Begin planning for it now. Most companies plan budgets 12 to 18 months in advance. With the adoption of the new standards likely, in my opinion, in 2013, this means you are less than a year away from having to include the new accounting in your budgeting. Begin now to understand the impact on your company and communicate it to stakeholders.

The second thing that can be done is to re-structure your lease portfolio over the next few years so that you will not have a large number of leases with long remaining terms when the new accounting is adopted. Clearly, this is easier said (or written) than done. Your first priority is to base portfolio planning on company needs to adequately control space and have flexibility where needed, and the second is to base leasing decisions on market conditions. After considering these, though, plan on incorporating this portfolio planning goal of minimizing remaining lease terms in your lease negotiations and re-negotiations.

The third thing to do is to prepare consolidation plans asap so that you’ll be able to assume that you will not be exercising some of your options to renew leases. This will avoid having to account for long lease terms because option periods need to be included if options are likely to be exercised. This will significantly decrease the budget challenge in the year of adoption of the new accounting. I’ve written previously of how adopting alternative workplace strategies might let you justify consolidation plans and reduce the financial statement impact of the new accounting. So, too, would other actions that would allow consolidations, such as outsourcing business processes, moving sales to the internet to reduce sales or retail space, or just rationalizing a portfolio to excise excess space.

Start now

As is the case with everything having to do with the new lease accounting … from reformulating real estate strategies to preparing new processes for compliance … you need to start now. Don’t get lulled into thinking this is something that does not have to be addressed until the standard is in place. Actions you are taking today will probably not be grandfathered. For all practical purposes, the new standard is already in play.

Alternative Workplace Strategy’s New Best Friend: The New Lease Accounting July 12, 2010

Posted by Bob Cook in Alternative Workplace Strategies, Financial Planning & Analysis, Lease Accounting, Profession of Corporate Real Estate.
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How is that? How could lease accounting impact workplace strategy?

If you’ve been reading this blog … or if you’ve tuned into my lease-accounting webinars (which are available on-demand on Tririga’s website), you’re already aware about how the new lease accounting is going to have implications far beyond accounting… about how it’s going to shine a huge spotlight on corporate real estate, force a re-thinking of real estate strategies, and require creation of new processes, systems and careers. Alternative Workplace Strategy is an area where all three of these effects will come to play at once.

Many companies have nascent programs to implement Alternative Workplace Strategies … such as office hoteling and work-from-home … but many of these programs just haven’t gotten very far. While these programs have as their goals worker productivity and satisfaction gains, the bugaboo is usually around a companion goal to save money, to show a positive ROI from cost savings. There seems to be a Catch-22: it’s difficult to show a positive ROI on a single implementation because you usually need the mass of many implementations before net cost savings can be shown … but without an ROI-positive demonstration pilot, most companies are leery to commit to the many implementations needed to show a positive ROI.

The new lease accounting, though, provides a way around this conundrum.  To see how, I need to explain a bit of the new accounting….

Basically, the present value of all likely lease obligations will be going onto company balance sheets to better inform the public about the financial obligations of companies. The operative word for this discussion is “likely”. If you have a lease with a right to renew, you will have to decide whether it is likely that you will be renewing the lease or unlikely. If you decide “likely”, the lease payments due during the renewal period(s) need to be included in the present value calculation. This will increase the amount that goes on the balance sheet … something that company managements won’t like because it will make their companies look more risky to investors and will, at least in the early years of the new accounting, hurt their P&L. Company managements will want to assume renewals are unlikely, but auditors will be closely scrutinizing the renewal vs non-renewal assumptions. Managements will have to substantiate their assumptions.

And because of the spotlight the new lease accounting is going to shine on lease obligations, assumption-making about leases is going to get upper management attention … as will the real estate strategies that affect the amount of those obligations. Among these, Alternative Workplace Strategy is one that can make a big difference.

Think about it. If a company were to commit to the “likely” implementation of an Alternative Workplace Strategy and if that strategy allowed it to reduce its space and plan to forgo renewing some of its leases, it should be able to assume those leases will not be renewed. Voila….the company would avoid including the renewal period obligations on the balance sheet.

Now, the commitment would have to be sincere. Auditors would want to see evidence that, in fact, the company has set the course to implement the Alternative Workplace Strategy. They’d want to see demonstration projects, budgets, detailed plans, implementation processes, ROI calculations, executive sponsorship, etc. But if a company can show these things … my oh my … just a commitment to implementing an Alternative Workplace Strategy will create an immediate financial-statement benefit!

That’s why I’m saying, “Alternative Workplace Strategy, meet your new best friend …. The New Lease Accounting.”

Do you have your SOX-compliant portfolio plan yet? April 5, 2010

Posted by Bob Cook in Alternative Workplace Strategies, Financial Planning & Analysis, Lease Accounting.
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I’ve been writing about the impact of the new lease accounting standards to be set by FASB and IASB.  By June of this year the Exposure Draft outlining the standards will be in place with compliance likely to be required in late 2011 or early 2012. Corporate real estate – both strategy and process – is going to be mightily affected.

One aspect of the standard, in particular, is going to have far-reaching consequences – namely the accounting for leases with options to renew. This accounting is going to force corporate real estate departments to have documented portfolio plans. And these are going to have to be diligently created plans, created with SOX-compliant processes, that pass muster with auditors.

Here’s the background: The present value of future lease obligations will be going onto balance sheets. Most companies won’t like this because it will spotlight their financial obligations to landlords and negatively impact some measures of profitability such as Return on Assets. But here’s the interesting wrinkle on the present value calculation: the amount of lease obligations has to be based – not just on the present term of the lease but – on the likely lease duration, taking into account optional renewal periods.

Impact on strategy and process: That means that each quarter, corporate real estate departments are going to have to state what they think will be the likely lease durations for those leases with options to renew. Upper management is going to be pushing to make non-renewal assumptions, where legitimate, particularly for large leases. Auditors, though, will be scrutinizing any assumptions that renewal options will not be exercised and are probably going to require that formal portfolio plans, supported by the affected business units, be in place to substantiate renewal assumptions. And they’re going to want to review the processes used to create those plans.

How Corporate Real Estate Execs lives will change: Real estate planning is going to have to look ahead more than it typically has. This is going to be a challenge for corporate real estate departments in terms of staffing, but even more so in terms of getting business units to work with them on developing longer term plans.

For corporate real estate departments, this is “good news / bad news”. The “good news” is that they will gain CFO support in their efforts to get business units to do longer-range real-estate planning with them – something which many corporate real estate execs would like to do, but which business units are usually loathe to do.  The “bad news” is that corporate real estate departments are going to be in the “hot seat.” They’ll have responsibility to prepare a plan, but they’ll be dependent upon the cooperation of others across the enterprise to prepare them. Not an enviable situation.

So what can corporate real estate execs do? As always, starting early will help. Corporate real estate execs have to start tackling this issue now. They can lay out their process for developing portfolio plans, identify the major leases or collection of leases that deserve scrutiny, understand what options to renew exist, educate themselves about the new accounting standard, begin to educate their internal clients about it, and in general, get on with the business of portfolio planning.

 Other posts on lease accounting:

Beware new lease accounting guidelines coming

IASB confirms June 2010 date for lease standard exposure draft

Cisco’s Real Estate Valuation Dilemna: How much is enabling face-to-face collaboration worth? April 5, 2010

Posted by Bob Cook in Alternative Workplace Strategies, Financial Planning & Analysis, Real Estate Markets, Silicon Valley.
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Last week the San Jose Mercury News reported that the State of California is moving along on its efforts to sell the last large parcel of the Agnews Development Center property – 86 acres in north San Jose. See “Last of Agnews property up for grabs”.

While other state agencies, county government, local government, and school districts have first dibs on the property, if none of them bite, it’ll be offered to tech company Cisco which has an option, dating back to 1996, to purchase the land for $90 million. If Cisco doesn’t bite, the property will be made available to the public.

Cisco might very well bite. The property is adjacent to its giant, sprawling headquarters campus and would fit Cisco’s modus operandi which has been to consolidate virtually all of its 11,000+ Bay Area employees on this campus. If it thinks it might want to expand its employee population in San Jose at some point in the future, the Agnews site might offer the last chance to expand its campus with contiguous land.

That’s a big “if”, though, because in recent years, Cisco has been expanding its R&D efforts considerably oversees — most notably in Bangalore where it has 6,000 employees and aims to have a total of 10,000 employees in a few years. This overseas expansion has, arguably, been at the expense of growing R&D and other jobs in San Jose, and might be an harbinger of where job growth would be for the company in the future.

Assuming, though, that Cisco wants the land, the issue it needs to deal with is price and bidding strategy. While it has an option to purchase the site at $90 million, the California General Services Administration estimates the value of the land to be only $60 million. If Cisco were to exercise its option, it seems, on the surface, that it would overpay.

But if Cisco doesn’t exercise its option and chooses, instead, to try to be the successful bidder in an open bidding process so it can get the property for something closer to $60 million, it risks not being the successful bidder at all. This is particularly true because price won’t necessarily be the State’s only criteria for selecting the winning bidder. It might, for example, give preference to bids from developers who would convert the site to housing, the promoting of affordable housing being one of the State’s goals.

So that’s going to make Cisco think long and hard about passing on its option to buy. Some might say that the 50% premium it would have to pay above the site’s estimated value is too high, but that estimate of value does not take into account that this property is probably a lot more valuable to Cisco, if it thinks it needs the expansion space, than to anyone else.

As one of the world’s most profitable companies (with net income of $6 billion per year, equal to 17% of revenue), Cisco could, and probably should, look at the value of that land differently than would others. If, in fact, the aggregation of so many employees near one another so as to maximize face-to-face interactions is an important feature of what makes Cisco tick (and it seems that the company’s decision to aggregate so many employees in one place indicates that it does see this as an important feature — and if it wants to provide for future growth — then its valuation of the land should be based on an evaluation of the incremental profit that the company would derive from expanding jobs in San Jose. It should not be based on any of the traditional land appraisal techniques. In fact, this methodology of basing value on what incremental benefit the property would bring to the company would be in line with how companies typically evaluate whether their owner-occupied properties are impaired and should be written down on their balance sheets. Companies typically do a test to see if the cash flows likely to be generated from the enterprise substantiate the property values on their books. If it does, then there’s no write-down — even if the aggregate of all the “market values” (using traditional appraisal techniques) of the properties is less.

Cisco’s high level of profitability would, I guess, easily allow it to justify “overpaying” for the Agnews site. By how much is difficult to judge, but for a company with net income of $6 billion per year, a $30 million premium would not seem too much to me. What Cisco would have to do is think through the value of being able to expand its campus onto contiguous land. Ultimately, that’s a judgement-call on the value of face-to-face communication – a big picture question if there ever was one. Be sure it’s not just a calculation of how much time would be saved in getting people together because they don’t have to drive very far. Instead, the true value would be based on the benefits of the face-to-face meetings – some serendipitous – that just wouldn’t happen at all if folks were not so proximate to one another. These may be just the type of interactions that may be at the core of Cisco’s success.

The irony of all this, of course, is that Cisco makes networking gear that facilitates virtual meetings, remote work, electronic communications, etc. It advertises how it supports “The Human Network” through other-than face-to-face communication (although it’s telepresence product, I suppose, sort of supports face-to-face encounters for those who can afford it.) These analogies aren’t quite on target, but: Cisco’s placing a high value on “face-to-face” would be like McDonalds serving only health food in its company cafeteria, like Nike not allowing employees to exercise at lunchtime, and like the State of Kentucky outlawing smoking.

Virtual Meetings vs Travel: How big advertising bucks are influencing alternative workplace practices April 1, 2010

Posted by Bob Cook in Alternative Workplace Strategies, Company Case Studies.
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The battle’s raging. On one side: the Tech Industry – Cisco, AT&T, Polycom, and the like – touting the benefits of virtual meetings. On the other side: the Travel Industry – Hyatt, American Airlines, British Airways, and their brethren – touting the benefits of live, personal encounters.

The battle is being waged with advertising. At stake is how company dollars are apportioned between tech budgets and travel budgets – and in the balance: the future of virtual meetings.

The tech companies started the battle a few years ago as they began advertising things like Cisco Telepresence and Webex on-line collaboration tools. The travel industry didn’t at first appreciate the attack on their business. Then, though, the Big Recession set in, and company execs around the world issued edicts to limit travel spending. Managers found they could hold meetings virtually, achieve cost savings, save time – and, as an added bonus, not miss their son’s little league games. Travel spending plummeted…. as did travel-industry revenue.

Hotel chains and airlines learned that virtual meetings posed more than an idle threat, and they are now counter-attacking, spending heavily on advertising the business benefits of business travel. They’re citing research about how important face-to-face contact is. Hyatt ads proclaim, “Great happens when people get together.” American Airlines ads say, “Eye Contact. Your most underrated skill set.” and British Airways says: “Be there face to face.”

We’ll have to wait and see how this all plays out. Arguments from both sides are being made by well-funded voices, by some of the largest advertising budgets on the planet. Certainly, both positions – travel is bad, travel is good – have merits, and both virtual meetings and business travel are likely to be here to stay. The question is: to what extent will virtual meetings curtail business travel?

The Future of Work / The Future of the Workplace May 27, 2009

Posted by Bob Cook in Alternative Workplace Strategies.
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office_cubicles_01 latest issue talks about “The Future of Work”.  Time points to ten trends that will change the way we work.   Here they are – along with questions  prompted in my mind about how “the future of work” will affect “the future of the workplace“.Time’s

1. “High Tech, High Touch, High Growth” means that high tech industries are likely to continue to be where the growth is and where corporate real estate investments will be made.  But what and where will be the high tech areas of tomorrow?

2. “Training Managers to Behave” is gaining ground a legitimate corporate sensibility and forcing a “rethinking of the balance between doing well and doing good”.  As “doing good” becomes an accepted corporate goal,  how will this affect corporate real estate decisions that  impact things like the environment or workers’ (physical and mental) health?

3. “The Search for the Next Perk” talks about diminishing benefits, e.g. employer contribution to health insurance.  How does one reconcile this decline of one type of benefit in at least some places with the increase in some types of benefits elsewhere, e.g. free lunch at Google?   (Interestingly, both health benefits and free food emerged as a way to recruit during worker shortages — Kaiser Shipyard giving health benefits during WWII and Google giving free food during dot.com boom.  Is there a  lesson to be learned there?)

4. “We’re Getting Off the Ladder” and onto the “lattice”, Deloitte’s metaphor for how one’s career and life should be planned in conjuction with each other.  The concept: you can go sideways sometimes, like when you have small kids, then go up the corporate hierarchy later.  Implications? More teleworking?  More satellite offices?

5. “Why Boomers Can’t Quit” is that they don’t have enough retirement savings, but what kind of workplaces are going to be needed for seniors and where do they need to be?

6. ” Women Will Rule Business” and that means a lot more for our workplaces than just pink walls.  Women are consensus builders; what sort of collaborative teaming spaces might they demand?

7. “It Will Pay to Save the Planet” and the jobs thus created could alter the geography of corporations.  Will sun power make Nevada boom?

8. “When GenX Runs the Show”, owing to the baby bust of 1965 to 1978,  there’re not going to be a lot of them to go around.  Companies are going to compete fiercely for capable GenX’ers once the Boomers start retiring.  How can workplace geography and character help attract and retain them.?

9. “Yes, We’ll Still Make Stuff” and America will still need places to make it, but what kind of stuff will it be, where will it be made, and what kind of buildings will we need?

10. “The Last Days of Cubicle Life” It could have been entitled “The Last Days of Going to the Office” — or at least the office as we’ve known it.  Will the cube really die?  How about any type of “office”?  Or is that just wishful thinking?

Pictured above is one of 3,000 submittals to The Office.

Chief Real Estate Officer ??? May 27, 2009

Posted by Bob Cook in Alternative Workplace Strategies, Profession of Corporate Real Estate.
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I think one of the best ways to kick off this new blog is to repost something from my previous Sun Microsystems blog. The post lays out the conceptual framework from which I start:  that real estate strategy really matters.

The CRO??

Date: March 7, 2005

I don’t know if the top corporate real estate executive of any company has taken on the title of “CRO” — Chief Real Estate Officer — but I wouldn’t be surprised if this job title isn’t eventually adopted by many. An article in the February 24th issue of the Economist entitled “A Rise in the C-level” talks about the trend towards establishing new C-level positions in corporations. It used to be that corporations had only CEO’s and CFO’s and the occasional COO. Now there are posts for all manner of CXO’s: Chief Information Officers, Chief Technology Officers, Chief Talent Officers, Chief Purchasing Officers, Chief Privacy Officers, Chief Growth Officers.  Why not CRO?

According to the Economist, “the rising number of C-level appointments indicates a significant change in corporate structure” reflecting the fact that “heads of specialist functional ‘silos’ (finance, human resources, IT, etc) are becoming more and more involved in talking corporate strategy with the chief executive and the board”.

This certainly rings true to me, particularly for the tech world. In a fast-changing world where product lines often do not last more than a few years, the functions that define the corporation’s character – its culture, organization, business practices, geography, and financial structure — seem to me to be the ones that are really strategic. Products will come and go, becoming almost tactical responses to how best to use the corporation’s resources at any particular time; the corporate character is what endures and determines long-term success.

No function defines a corporation’s character more than corporate real estate. Over the last decade, real estate groups in many companies have come to be respected strategic functions. I would like to think the Workplace Resources function at Sun is one of these. We’ve been involved in many strategic issues that go far beyond our traditional “facilities management” role. We’ve played active, sometimes lead, roles in addressing issues such as the company’s geographic configuration, recruitment and retention of employees, and cost structure.

Probably no CEO has gone so far to think that long-term strategy isn’t about products – my admittedly unconventional assertion, above – but many, if not most, now realize that the functions are no longer just services for the business units; they now play important strategic roles. The rise of the CXO’s evidences this. I’ll be watching to see if anyone is annointed “CRO”.

If you are a subscriber to the Economist, you can check out “A Rise in the C-level” at http://www.economist.com. Search “C-level” in the February 24, 2005 issue.