Why? What? How? – A 3-Part Series.
Part 2: (Below): Address the What in the Real Estate Decisions
Part 3: (Upcoming): Discuss How you will execute
“We just got the contract,” Keith said joyfully. He took a sharp breath in and lowered his voice. “We need, er, need enough space for 85 staff in 90 days,” he said with stress suddenly present. “That’s wonderful news, Keith and congratulations on that new business, I know you've been pursuing this deal for along time” I said. “We will get you taken care of, but just a few questions first.”
Opening a new office is usually an exciting and energizing endeavor. People are in a good mood, and by its very nature, something good has happened to cause the phone call to the broker.
However, as I said in the blog on why we lease office space, lease terms are long-term commitments and must be entered into after planning, thought and with as much flexibility as the market will allow.
Making wise decisions in corporate real estate is sometimes tough because it’s many times hard to get
firm commitments from managers about growth (or lack thereof). The sales guys show a 20% growth hockey stick but product development says there is no way they can keep up.
My friend, the very talented Ben Pugh, who frequently advises boards of directors and c-level executives on their real estate strategies, has a deceptively simple and practical formula in addressing the what (or the need) for corporate offices.
Think and plan, then act.
You would be shocked how many people and even large companies get into the market, and perhaps even get into lease without having done some basic planning for the business case. If you will take the time to think and build consensus around the four below categories before you commission the survey you will be ahead of many in corporate America.
Below are four critical areas to cover in the “thinking” phase of planning for the new office.
As your company or division grows in revenue and success, what impact will this have on headcount and facilities requirements of current functions? What is the volatility or risk of future headcount projections of those functions?
There are articles, books and whole courses taught on so-called alternative work place strategies (think Yahoo and you’ll arrive in the center of the debate). Sometimes, however, we forget the basics. Densities in smaller spaces of less than about 10,000 square feet will average to about 250 square feet per person. Larger spaces can get more efficient because you only need so many break rooms and reception areas – so perhaps 180-225 square feet per person is applicable in larger spaces.
This all changes depending on what you are doing in the space. If you are creating a space for engineers, you might allow more space for gear. Asking them what they need is a good start. Then filter down to reality.
What organizational culture objectives does this facility need to meet to best support future success – in terms of look, feel, amenities, and image?
I’ve walked thousands of office spaces in my career. Just like when you walk into someone’s home, you get an instant dose of the culture when you walk in. Some take great pride in brand and values and proudly show them off in the space. Some look like a Dilbert cartoon and don’t know it. The bottom line is this: color, lighting and layout can and will have an impact on employees in the space whether you realize it or not.
Work with a design professional to communicate with your desires for sheetrock, carpet and office furniture. If you are intentional about it, then you are half way to success.
Should any current functions remain in place or be moved? Does this enable operational synergies critical to future success? Do the different functions have different functional / physical / location needs that are better met if separated?
If you are opening “the” office for your company, then of course you all have to be together. But what happens when you get that big contract in Kansas City? Life gets 100% more complicated when you go from one to two offices. Rolling out multiple cities can be a NASA level problem. Determining which function goes where is part MBA class material and part gut. Work with your board and the executive team to solicit input. This challenge is more a management issue than sticks and bricks, but once you enter into that 5 year lease, it will be painful to undo early.
LOCATION & COST STRUCTURE
What is the best location for retention of current key employees and recruitment of future key employees?
What target “run rate” best supports business model objectives – in terms of cash flow and P&L? What capital is available to invest in the real estate decision?
Another fact of life in the location decision is so-called “decision maker housing.” While I would like to think that all those entrusted with leadership responsibility have a noble intent and will make location decisions in the best interest of the company, I am sadly reminded that this is not always the case. One thing I know for sure: it IS important to know where the CEO or most senior person at the site lives if one can obtain the information. There are likely to be outer boundaries based on this important dot on the map.
As I hung up the phone with Keith, I thanked my lucky stars that he had a good idea of what he needed. They had been planning for a win for sometime and had their act together. They also currently have the market in their favor in the area they want to search.
With a recovering economy, we need more time and crisper decision making as a general rule. The days of waiting months for your chairman to make the final decision are passing us by. Spaces are beginning to lease and the options are fewer and fewer.
The real wisdom you can bring to your organization is to advise them to start early and, as Mr. Pugh would say, “think early and think often.”