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COLLIERS INTERNATIONAL | WHITE PAPER BOUNDARY SPANNING: CRE CHALLENGES | WHITE PAPER | MAY 2012

MAY 2012

Boundary Spanning:

CRE Organization Challenges


SURVEY RESULTS OF CORPORATE REAL ESTATE EXECUTIVES

BOUNDARY SPANNING: A NEW CRE PARADIGM Eighty-six percent of senior executives interviewed for a Center for Creative Leadership (CCL) study believe it is extremely important for them to work effectively across boundaries, yet only seven percent believe they are currently successful at doing so. This study focused on five types of boundary-spanning areas that prevent effective management and leadership through change:

vertical
Across levels and hierarchy

horizontal
Across functions and expertise

stakeholder
Beyond the boundaries of the rm, with external partners

demographic
Across diverse groups (eg. gender, ethnicity, nationality)

geographic
Across regions and locality

Source: Center for Creative Leadership (CCL)

Real estate is a key operational business area, instrumental in improving global and regional business performance. In the fall of 2011, Colliers International surveyed its global Corporate Solutions clients about the challenges CRE executives face in managing their real estate organizations, processes and portfolios, across the five types of boundary described by the CCL.

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BOUNDARY SPANNING: CRE CHALLENGES | WHITE PAPER | MAY 2012

Hybrid 18%

Other 0%

GEOGRAPHIC BOUNDARIES

Ideas to improve GEOGRAPHIC organizational effectiveness in CRE include:


Across levels and hierarchy Across functions and expertise

vertical

horizontal

stakeholder

Beyond the boundaries of the rm, with external partners

demographic geographic Decentralized 0% Across diverse Across


groups (eg. gender, ethnicity, nationality) regions and locality

> Cross-cultural/cross-regional teams to support project development > Regional and global subject matter experts (SMEs) for all disciplines > Taking on assignments or living in another region > Best practices sharing in periodic meetings
Hybrid North America manages all strategy, nancial & management all regions manage portfolio management and transactions, 27%

9 When CRE executives were asked, How effective are you at managing all the resources and real 8 7 6.18 Hybrid estate portfolio in your national18% global regions?, the answers supported the findings in the or Other 0% 6 5 Centralized CCL analysis. The average score recorded was 6.18 out of 10. Eighteen 82% 10 4 Decentralized 9 3 percent of respondents rated0% themselves a 9with no perfect scores 8 2 Other Hybrid 7 0% 6.18 1 18% recorded. Surprisingly, forty-two percent of respondents scored 6 0 10 5 Centralized themselves at a 5 or lower. These results illustrate the challenges CRE 82% Decentralized 9 4 0% 8 3 executives are facing in todays increasingly complex regional and global 7 2 6.18 64% 70% Other, please 6 1 specify, 9% business alignment. Centralized led 5 0 Centralized
from North America, 64% 82%

10

60% 50%

40%
Other, please specify, 9%

36%

Decentralized each region manages their own portfolio and structure, 0%

When asked, Where isHybrid manages collaboration occurring within your real the North Centralized led America from 20% North America, all strategy, nancial 64% & management all respondents noted that only thirty-six percent of their organizations collaborate across all 50% regions manage 10% portfolio 0% 36% management and 40% regions, with the remainder 27% please 0% targeted focused on 64% 70% transactions, Other, specify, 9% Hybrid North Centralized None led Across Across 30% America varied regions. This 60% interactions amongallthe managesDecentralized from North America, demonstrates strategy, nancial All Certain 64% & management all each region 20% 50% Regions Regions regions manage that, even with centralizedmanages their own organizations, regional portfolio and portfolio 10% 36% management and structure, 0% 40% 0% transactions, 27% sensitivities and subject matter needs persist that cant be 0% 30% 10 None Across Across Decentralized translated to a global platform.own each region 20% 9 All Certain manages their

30%

4 3 2 1 70% 0 estate organization?, 60%

64%

portfolio and Regions Regions 10% 8 structure, 0% 7.27 0% 0% 7 6.09 None Across Across 6 10 All Certain 4.64 When asked, Which is your greatest challenge in managing 5 9 Regions Regions 3.82 4 8 7.27 a team in multiple national or global regions?, CRE 3 7 6.09 10 executives responded with a series of evenly-weighted answers. Scores ranged from 3.55 to 2 6 0.91 9 4.64 5.64, with none of the five identified categories standing out as a challenge of greater or lesser 1 5 8 3.82 7.27 0 4 importance. RegionalProject sensitivities 7 structure and real estate transaction process, and in Strategic Planning Facility Transaction Lease 6.09 3 Management Management Management Administration 6 communication and time variances scored slightly higher than other areas. 2 4.64 0.91 5 1 3.82 4 10 0 3 9 Strategic Planning Facility Project Transaction Lease 2 Management Management Management Administration 8 0.91 1 7 5.64 0 10 5.45 6

5 4 3 2 1 0

4.64

4.36

Cultural Dierences

Business Structure Dierences

10 9 8 7 6 5 4 3 2 1 0

9 Management Management Management Administration 3.55 8 7 10 5.64 5.45 6 9 4.64 4.36 5 8 4 7 Regional Communication Other 3 5.64 sensitivities in & Time 5.45 6 structure 2 real4.64 Variances & 4.36 estate 5 1 transaction process 4 0 3 Cultural Business Regional Communication Dierences Structure sensitivities in & Time 28.80 Dierences structure & real Variances 7.90 1 7.30estate transaction process 0
Cultural Business Regional Communication

Facility

Project

Transaction

Lease

Strategic Planning

3.55

3.55 Other

4.80 3.90

Facility

Project

10 Dierences Structure sensitivities in & Time 8.80 Dierences structure & real Variances 9 estate transaction 7.90 8 process 7 10 6 8.80 9 4.80 WWW.COLLIERS.COM/CORPORATESOLUTIONS 5 7.90 8 3.90 4 7 Strategic Planning Transaction Lease

Other

7.30

7.30

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BOUNDARY SPANNING: CRE CHALLENGES | WHITE PAPER | MAY 2012

Hybrid 18%

Other 0%

Ideas to improve HORIZONTAL organizational effectiveness in CRE organizations include: > Promoting a customer relationship model (CRM) for doing business > Developing cross-functional teams no one discipline > Encouraging rotational assignments in other regions > Tracking internal performance through customer feedback scores

vertical0%
Across levels and hierarchy

Decentralized

Hybrid North America manages all strategy, nancial & management all regions manage portfolio management and transactions, 27%

within the CRE organization such as Transaction Management, Strategic Planning, Lease Administration, etc., as well as the relationship to the business and operational units will pro64% Other, please mote a stronger CRE and business 70% organizational structure. specify, 9%
Centralized led from North America, 64%

10 9 8 7 It isandcritical that CRE(eg. regions and organizations align the best talent within all functional areas to support Across Beyond the Across diverse Across 6.18 functions boundaries groups 6 expertise of the rm, gender, locality 5 service delivery to internal clients. Horizontal boundary-spanning focuses on business interwith external ethnicity, Centralized partners nationality) 82% 4 action and collaboration across interrelated parts of the business. Today, many of these areas 3 2 may be somewhat siloed. The communication and collaboration across functional areas 1 0

HORIZONTAL BOUNDARIES
stakeholder demographic geographic

horizontal

When CRE executives were asked, 50% Across which function does collaboration occur most 36% readily?, Transaction Management40% services were identified as the highest scoring area. No30% Decentralized tably, Strategic Planning scored the20% lowest. This answer is somewhat surprising, given that each region manages their own portfolio and successful strategic planning relies upon the collective expertise of all functional areas identi10% structure, 0% 0% 0% fied. In order to develop a cohesive strategic plan, it is important to elicit critical feedback on None Across Across the local markets, transaction processes and status ofCertain implementation efforts, as well as All Regions Regions maintain up-to-date data management practices.
10 9 8 7 6 5 4 3 2 1 0

60%

7.27 6.09 3.82 4.64

0.91 Facility Management Project Management Transaction Management Strategic Planning Lease Administration

10 9 8 7 6 5 4 3 2 1 0

5.64 4.64 4.36

5.45 3.55

Cultural Dierences

Business Structure Dierences

Regional Communication sensitivities in & Time structure & real Variances estate transaction process 8.80 7.90

Other

10 9 8 7 6 5 4 3 2 1 0

7.30

4.80 3.90

Facility Management

Project Management

Transaction Management

Strategic Planning Lease Administration

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BOUNDARY SPANNING: CRE CHALLENGES | WHITE PAPER | MAY 2012

VERTICAL BOUNDARIES Ideas to improve VERTICAL organizational effectiveness include: > Global cross-matrixed or flat organizational structures > Develop more intentional opportunities to interact with CRE leaders > Increased collaborative technology tools to facilitate communication > Forum to share bestpractices for delivery of services
Across levels and hierarchy

Vertical boundaries comprise organizational challenges related to structural alignment within a CRE organization, and the relationships between internal management levels. When asked, Which structure you would prefer to manage your organization, a resounding eighty-two percent stated that a centralized model is the most appropriate. No respondents supported a decentralized global model.
Across functions and expertise Beyond the boundaries of the rm, with external partners Across diverse groups (eg. gender, ethnicity, nationality) Across regions and locality

vertical

horizontal

stakeholder

demographic

geographic

This illustrates the shift in global business models where growth is anticipated to continue to emerge in regions outside of North America. It is important for leaders to have a closer relationship with all regions, to stay in sync with needs of those global business partners.
Hybrid 18% Hybrid 18% Decentralized 0% Decentralized 0% Centralized 82% Centralized 82% Other 0% Other 0%

When asked, Which structure would best describe you current management structure, sixty-four percent currently operate under a centralized model, demonstrating that eighteen percent of the respondents from the prior answer would prefer a shift to a centralized operating model.

Other, please specify, 9% Hybrid North Centralized led America manages Other, please from North America, all Hybrid North strategy, nancial specify, 9% 64% Centralized led & management all America manages from North America, regions manage all strategy, nancial 64% portfolio & management all management and regions manage transactions, 27% portfolio management and transactions, 27% Decentralized each region manages their own Decentralized portfolio and each region structure, 0% manages their own portfolio and structure, 0%

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None Across Across 6 All Certain 4.64 5 Regions Regions 3.82 4 3 10 2 0.91 9 BOUNDARY SPANNING: CRE CHALLENGES | WHITE 1 PAPER | MAY 2012 8 7.27 0 7 Strategic Planning Facility Project Transaction Lease 6.09 Management Management Management Administration 6 4.64 5 3.82 10 4 9 3 8 2 0.91 7 1 5.64 5.45 6 0 Strategic Planning Facility Project Transaction Lease 4.64 4.36 5 STAKEHOLDER BOUNDARIES Management Management Administration vertical horizontal stakeholder demographic Management geographic 3.55 4 Across levels Across Beyond the Across diverse Across Stakeholder boundaries focus on the relationships with external service providers. In the 3 and hierarchy functions and boundaries groups (eg. regions and Ideas to improve CRE expertise of the rm, gender, locality 10 with external ethnicity, 2 question, How would you rate the effectiveness of the delivery of services that apply, partners nationality) 9 STAKEHOLDER boundaries 1 respondents stated that they were very satisfied by the delivery of Transaction Management 8 0 include: 7 Cultural Business Regional Communication Other services, with a score of 8.8 out of 10. Facilities Management scored the lowest at 3.9. Low 5.64 Dierences Structure sensitivities in &5.45 Time 6 > Aligning the internal service Dierences structure & real Variances to improve performance. Project Management 4.36 scoresestate transaction a need also indicated 4.64 5 delivery model with external process 3.55 4 service provider model in 3 10 8.80 2 9 order to meet the future 7.90 1 8 7.30 needs of the regional or 0 7

global businesses

> Determining commensurate key performance indicators to measure and ensure service levels from your provider(s) > Stressing the importance of an ROI-based compensation model where the service provider illustrates cost savings through service area delivery

6 Dierences Structure sensitivities in & Time 4.80 5 Dierences structure & real Variances 3.90 estate transaction 4 process 3 10 2 8.80 9 1 7.90 8 7.30 0 7 Strategic Planning Facility Project Transaction Lease Management Management Management Administration 6 4.80 5 3.90 4 10 3 8.80 9 8.00 7.90 2 When respondents were asked, How effective can a global blanket model be to manage your 8 1 7 6.20 service lines, many felt Transaction Management , Lease Administration and Strategic Plan0 5.50 6 Strategic Planning Facility Project Transaction Lease ning were best suited to a sole-sourced service provider model. 5 Management Management Management Administration 4 3 10 2 8.80 9 1 8.00 7.90 8 0 7 Strategic Planning Facility Project Transaction Lease 6.20 Management Management Management Administration 5.50 6 5 4 3 2 1 0
Facility Management Project Management Transaction Management Strategic Planning Lease Administration

Cultural

Business

Regional

Communication

Other

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BOUNDARY SPANNING: CRE CHALLENGES | WHITE PAPER | MAY 2012

boundary

Also called frontier. The location of the most advanced or newest activity in an area.

522 offices in 62 countries on 6 continents


United States: 147 Canada: 37 Latin America: 19 Asia Pacific: 201 EMEA: 118

$1.8 billion in annual revenue 1.25 billion square feet under management Over 12,300 professionals

PREPARED BY: Chris Zlocki Managing Director, Strategy & Innovation Integrated Client Services | Corporate Solutions chris.zlocki@colliers.com +1 720 479 7736

SUMMARY FINDINGS > Corporate real estate leaders face steep challenges in managing global business organizations in todays environment. There are opportunities to improve delivery and business effectiveness across all parts of the organization. > The majority of collaboration is regional, not global. > Regional sensitivities in structure and real estate transaction process, and communication and time variances are the most challenging areas for geographic boundary spanning. > Collaboration occurs most in the Transaction Management process, and least across Strategic Planning functions. > Centralized CRE organizational structure is overwhelmingly preferred over any other model. > Respondents were very satisfied with the delivery of Transaction Management services by their service provider. > There is significant room for improvement in the delivery of global Facilities and Project Management services provided by third-party vendors. > CRE leaders and their organization(s) report equally (eighteen percent) to the CEO, CFO and COO. Nearly half stated that they report to a myriad of other leaders including HR, IT, Manufacturing, Planning and Procurement. > Thirty-six percent of real estate services sourcing is led by procurement; followed by the real estate department at twentyseven percent, and finance at eighteen percent.

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Copyright 2012 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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