You’ve finally come to the conclusion that something needs to change. The way you are managing your portfolio today cannot continue if you’re going to support the goals of the business 5 years from now. But you have a whole lot of locations and no idea where to start in developing a plan. Before you jump in or bring in someone from the outside – you need to develop your gameplan.
The problem with real estate is that you end up with a long list of locations but you don’t know what is actually going on inside the four walls. What business units are there? Is this R&D focused? Customer service? Executive management? Is there a manufacturing or distribution function there? For large or critical facilities this is probably well known internally. But following a Pareto curve, you probably know 80% of the square footage and 50% of the facilities. A good portion, but not everything. And the ones that you do know are probably already setup correctly.
So, the process to begin analyzing your portfolio:
- Determine all of your facilities and the functions that occur in each.
- Work with the business units to group all locations into 1) Core/Strategic; 2) Necessary function but not Strategic location; or 3) Tactical location based on short term requirements.
- Push back and make sure the business unit isn’t simply putting all of their locations into #1 and #2.
- Develop 10 year plans for how to deal with locations in #1. Discussion of each should be around: Is this facility in the correct location? Should we combine or split any existing locations based on business needs? Is it better to lease or own these locations? The goal is to limit the number of times you need to impact changes on these facilities.
- Develop 5 to 7 year plans for locations in #2. These are the facilities that are most impacted to changes in customer demand levels, growth/retraction of the business and shifts in business strategy. It’s important to have stability but it’s not wise to lose flexibility for the sake of longer real estate terms.
- Finally, develop 3 year plans for tactical facilities. These are the ones that serve business functions but can be duplicated fairly easily or are not significantly impacted by personnel turnover. The goal is to have some level of stability but to retain as much flexibility as possible.
- Implement the above plans over a 2 year cycle and maintain for the following years.
- Repeat no more often than every 4 years or after business changing events.
As with any process, adjust it to meet your specific needs, but the bones will give you a framework to understand location. What you will typically find as you go through the process is that functions that should fall into #1 , 2 or 3 become intermingled in shared space and you have very tactical functions tying up operational space in core locations. Where possible, these should be separated as much as possibility. The goal of this process is to co-locate like flexibility requirements. A call center next to a research and development laboratory isn’t helping the portfolio.
Depending on your business’s complexity these may be something that that you can do on your own over a several month period. However, as complexity increases, so does the cost of failure.