MEASURING SUCCESS BENCHMARKING

Transcription

1 Enterprise Alignment MEASURING SUCCESS BENCHMARKING MARCH 13, 2013

2 AGENDA DEFINITIONS HOW DO YOU USE BENCHMARKING? HOW CAN BENCHMARKING AFFECT C SUITE DECISION MAKING WHAT METRICS DO YOU TRACK? HOW DO YOU TRACK DATA? KEY PERFORMANCE INDICATORS NEW TRENDS

3 METRICS KEY PERFORMANCE INDICATOR (KPI) Financial and non-financial quantifiable measurements that reflect the critical success factors to help an organization define and measure progress toward organizational goals. BENCHMARKING An assessment used in the strategic management process that compares an organization s results to historical performance, that of similar organizations, or acceptable industry standards. SERVICE LEVEL AGREEMENT (SLA) Firm commitments negotiated in a contract that outlines a specific level of service required from a service provider.

4 BENCHMARKS Definitions? WHAT DESCRIPTION PURPOSE Portfolio Metrics Enterprise wide Alignment at corporate level Service Line Metrics FM/PjM/LA/TM Drive efficiencies and granular tactics Service Provider Metric Outsourced delivery Ensure provider meets objectives established

5 BENCHMARK DISCUSSION Do you benchmark internally and/or externally? What are the challenges with each?

6 CORENET SURVEY RESULTS Q: Which of the following does your organization compare your data against? 98% of survey participants seeing value in corporate real estate benchmarking

7 BENCHMARKING Does your firm believe that CRE has an impact on productivity and/or revenue? Do you use benchmarking to drive decisions internally, if so, with C-Suite and/or business units and what results have you been able to obtain? Can benchmarking assist in executive level decision making?

8 CORENET SURVEY RESULTS Productivity 80% 70% 60% 50% 40% 30% 20% 10% 0% Impact of Workplace on Worker Productivity Impact on Revenue 80% 70% 60% 50% 40% 30% 20% 10% 0% No Impact Promote Sales Increase Innovation Speed to Market Customer Service Other

9 Portfolio Management SUMMARY OF REAL ESTATE DRIVERS THAT IMPACT SHAREHOLDER VALUE Example of How to Drive C-Suite Impact? Additional Benefits Levers Possible Initiatives Impact on TCO Manage Balance Sheet Generate Cash Increase Earnings 1. Optimize Utilization Optimize facility planning and space standards Consolidate/relocate facilities Dispose non-essential facilities Reduce holding cost Reduce holding cost Impact disposal cost 2. Optimize Financial Structure (Re-)negotiate lease Sell and lease back space Evaluate buy vs. lease options Reduce ownership cost Reduce ownership cost Reduce ownership cost 3. Reduce Occupancy Cost Strategically source/outsource facilities management services Manage energy costs Review/audit lease charges Manage real estate taxes Reduce holding cost Reduce holding cost Reduce holding cost Reduce holding cost 4. Improve Real Estate Management Streamline organizational structure Optimize processes Rationalize technology Reduce holding cost Reduce holding cost Reduce holding cost

10 CRE Organizationlevel metrics Enterpriselevel metrics ASSEMBLING PERFORMANCE DATA FOR EXECUTIVE DECISION MAKING Example of How to Drive C-Suite Impact? What would you be concerned about as a CFO? FY 2010 Geographic Breakdown Total Company Revenue FY 2007 FY 2008 FY 2009 FY 2010 Americas Asia Pacific EMEA $10,000,000,0 $11,000,000,0 $11,500,000,0 $8,500,000,00 $5,000,000,00 $1,000,000,00 $2,500,000, Total Locations Total Square Feet 8,000,000 8,500,000 8,500,000 8,300,000 5,000,000 1,000,000 2,300,000 Total Rent $140,000,000 $135,000,000 $140,000,000 $130,000,000 $75,000,000 $15,000,000 $40,000,000 Total Operating $160,000,000 $95,966,507 $101,652,881 $98,000,000 $55,000,000 $15,000,000 $28,000,000 Total Depreciation $98,000,000 $88,367,523 $79,000,000 $75,000,000 $50,000,000 $5,000,000 $20,000,000 Total Cost $398,000,000 $319,334,030 $320,652,881 $303,000,000 $180,000,000 $35,000,000 $88,000,000 Total Headcount 33,000 35,000 38,000 38,000 20,000 8,000 10,000 Total Capacity 36,000 38,000 38,000 40,000 20,000 8,000 12,000 Average Revenue/Location $20,000,000 $21,359,223 $21,904,762 $15,454,545 $16,666,667 $10,000,000 $16,666,667 % Rent of Annual Revenue 1.40% 1.23% 1.22% 1.53% 1.50% 1.50% 1.60% % Operating Cost of Annual Revenue 1.60% 0.87% 0.88% 1.15% 1.10% 1.50% 1.12% % Depreciation of Annual Revenue 0.98% 0.80% 0.69% 0.88% 1.00% 0.50% 0.80% % Total Cost of Annual Revenue 3.98% 2.90% 2.79% 3.56% 3.60% 3.50% 3.52% Annual Revenue Per Headcount $303,030 $314,286 $302,632 $223,684 $250,000 $125,000 $250,000 Annual Expense Per Headcount $12,061 $9,124 $8,438 $7,974 $9,000 $4,375 $8,800 Annual Revenue Per Square Foot $1,250 $1,294 $1,353 $1,024 $1,000 $1,000 $1,087 Annual Cost Per Square Foot $50 $38 $38 $37 $36 $35 $38 Annual Revenue Per Seat $277,778 $289,474 $302,632 $212,500 $250,000 $125,000 $208,333 Annual Expense Per Seat $11,056 $8,404 $8,438 $7,575 $9,000 $4,375 $7,333

11 CALCULATING IMPACT ON SHARE PRICE Example of Savings Required to Improve EPS by One Cent

12 CALCULATING IMPACT ON SHARE PRICE How Much Does BB&T CRE Have to Save to Improve EPS by One Cent Revenue Shares Outstanding Revenue per Share Profit EPS Trailing PE Ratio Forward PE Ratio Share Price $8.62 B M $12.34 $1.92 B $ $31.50 Savings required to improve EPS by 1 = $6,998,300 Savings of $10,000,000 Would shift EPS by (Cents) Would increase stock price by (Cents) Would increase enterprise value by (Dollars) $99.5M

13 BENCHMARKING What metrics do you track? How often do you gather them?

14 CORENET SURVEY Total Occupancy Costs - Per SF - Per Person - % of Revenue Square Feet - Per Person - Per Workspace - Revenue per SF FM Metrics - Costs - Timeliness - Customer Satisfaction Sustainability - Energy Consumption per Person/SF - CO2 per Person/SF - Water Consumption per Person/SF

15 Benchmarking How do you gather data? What do you compare it against? What are the challenges with external benchmarking?

16 EXTERNAL BENCHMARKING CHALLENGES

17 EXTERNAL BENCHMARKING CHALLENGES Caution: there are many variables PORTFOLIO Size Coverage (national/global/regional) Type, variety and complexity of facilities Owned vs. leased SERVICES Services managed in current organization structural model Scope of each service What is in-sourced and what is outsourced scope of outsourcing (task or strategic) Scope of services complexities, controls, approval processes Due diligence process engaging sustainability, environmental, feasibilities, etc. Annual volume of transactions/projects STRATEGY Performed in house or outsourced Content and details of data gathering and frequency Use of technology vs. manual Relationship and scope of planning with business units Budget management who controls CRE or BU? RESOURCES Total number of staff internally Cost of staff and shadow staff (accounting, finance, other) Skills of internal resources are they skilled to perform as envisioned? Fully loaded cost of house staff (benefits, management, accommodation, training, etc.)

18 CORENET SURVEY % 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Industry Data Sources IFMA BOMA Brokers CoreNet REEB Others Technology Platform Data collection is piecemeal and informal: No industry standard dominates REEB seems to have most robust data No technology platform or specialty software dominates: Disparate approaches

19 CORENET SURVEY FM Costs Q: Which of the following costs does your organization include when calculating occupancy costs?

20 CORENET SURVEY Employees & Workstations Q: What measure does your organization use to record the workforce present in each building? Q: What measure does your organization use to record workstations/seats?

21 CORENET SURVEY Conclusions Portfolio benchmarking is clearly of interest to CRE professionals Cost and space metrics are currently most collected data and considered to be most important. Environmental information is less important Q: How do you think the property benchmarking process could be improved outside of your organization? 60% of respondents said they undertook competitor benchmarking, less than half were able to identify the method of data collection The two main areas for improvement are: The development of an industry standard approach to data collection and analysis Greater sharing of data and collaboration

22 BENCHMARKING Conclusions The two main areas for improvement are: The development of an industry standard approach to data collection and analysis Greater sharing of data and collaboration HISTORY IDRC Foundation Benchmarking Program IMA Statement 4O, The Accounting Classification of Real Estate Occupancy Costs, 1991 IMA Statement 4BB, The Accounting Classification of Workpoint Costs, 1997 Mid-1990 s OSCRE formed Open Standards Consortium for Real Estate OSCRE Occupancy Cost Exchange Standard, v. 3.0, November 2012 CoreNet Global Benchmarking Program (BenchCoRE) Launch, 2013 Q: How do you think the property benchmarking process could be improved outside of your organization?

23 Key Performance Indicators

24 KEY PERFORMANCE INDICATORS Alignment GUIDING PRINCIPLES Alignment with corporate goals and objectives Choose metrics that drive desired transformation Develop a realistic program that can be easily measured KISS Consistently applied across portfolio for national/global roll-up Real-time, web hosted tracking / reporting KEY STAKEHOLDERS Stakeholder CEO CFO HR Business Unit Emplyees Measurement Competitive advantage, EPS Real estate cost savings Employee attraction and retention On-time, on-budget delivery Productive workplace

25 KEY PERFORMANCE INDICATORS Selecting Metrics Select metrics that align with company goals and objectives and drive desired change Corporate Objective Growth Cost Reduction Branding Human Resources Customer Focus Operational Efficiencies Productivity Culture Track Flexible lease options SF/Person, Cost/Person Success rate in prominent signage Workplace satisfaction % customer area vs. revenue Process improvement Absenteeism % increased improvement

26 KEY PERFORMANCE INDICATORS Examples of KPIs Transaction Management Timeliness compliance with milestones Cost avoidance per transaction Cost savings per transaction Option clause tracking for flexibility Report timeliness and accuracy # of facilities in holdover BU satisfaction survey Project Management Projects on time Projects on budget Budget accuracy Cost savings from value engineering / procurement MWBE spend LEED certification BU satisfaction survey Punch list completion Project close-out timeliness Facility Management Work order completion timeliness Facilities operational cost savings Energy cost savings Safety incidents Facility outages/downtime Number of calls processed BU satisfaction survey

27 New Trends in Gathering Data

28 FUSION VIEWPOINT

29 FUSION VIEWPOINT Internal Portfolio Benchmarking

30 FUSION VIEWPOINT Internal Portfolio Benchmarking

31 MARK TO MARKET ANALYSIS Portfolio Cost Benchmarking Data Request Template Mark to Market Results

32 Wrap Up

33 AREAS FOR IMPROVEMENT Greatest Areas for Improvement Industry Standard Format Data Tracked Standard Chart of Accounts Industry Sharing of Data/Collaboration Industry Association (OSCRE, CoreNet, REEB) Web Based

34 Section 4: Approaches and Methodologies PITFALLS TO BENCHMARKING Failure to measure and communicate in a language the core business understands Failure to develop measures that provide information to implement desired change either in processes or behaviors Failure to institutionalize businesses make decisions frequently can t benchmark every two or three years Developing a benchmarking process that requires resources one cannot fund Failure to use consistent benchmarking measures, including challenges in collecting consistent data for evaluation

35 Thank You