By Rob Harris
Edition 9 – December 2017 Pages 34-39
Tags: real estate • fm • building
In his analysis of the Enlightenment, the great American naturalist Edward O Wilson observed that the main branches of learning emerged in their present form – natural sciences, social sciences and the humanities – out of a unified vision that searched for an ordered, intelligible universe. However, as scientific knowledge expanded exponentially, its key method – reductionism – pushed thinking in the opposite direction. Consequently, scientists became professionally focused, resulting in “physicists who do not know what a gene is, and biologists who guess that string theory has something to do with violins.”
Similarly, within the real estate supply industry. For many decades, major European real estate markets have been riven by fragmentation in supply structures. At least four generic groups can be identified, under the professional titles of design, construction, real estate and facilities. And within each of these there are numerous silos of activity, each with their own practices and arcane lexicon.
To misquote Wilson, there are real estate professionals who have never visited a construction site and designers who think a yield has something to do with harvest time. This is not to argue against specialism; but it highlights the key issue for this paper: the nature of the customer-supplier interface.
For a customer of the real estate supply industry, which here means an occupier, the array of skills required over the life cycle of occupation is labyrinthine, not to mention inefficient and costly. Some of the symptoms and implications are listed below.
• Separate design, construction, property and facilities management silos defeat presentation of a coherent discipline to customers.
• Duplication in activities and a lack of joined-up planning creates inefficiencies (and costs), and inconsistency in methods, approaches and standards.
• There is a dominant transactional/procurement culture rather than one based on genuine business relationships.
• Property is seen as an end in itself, rather than as an aspect of the customer’s corporate resource planning.
Apart from these specific problems, there are two broader implications arising from supply chain fragmentation. First, there is a cultural issue arising from the fact that the customer does not sit at the centre of the supply process. Secondly, there is a structural issue in that the supply process comprises a complex web of technical skill bases rather than an integrated management function.
The customer position. The first point is that the customer does not sit at the centre of our complex industry, but on the fringe. Moreover, the occupier has to share the ‘customer’ role with investors. Most new buildings are designed and delivered to appeal to investors first, and occupiers second. The real estate industry is dominated by interests that are focused on property as a tradable asset, namely landlords, developers and the large real estate practices. This is not a criticism: property investment is a hugely important function that allows, among other things, the constant rejuvenation of the built environment.
But it does, ipso facto, lead to an industry culture that is more resistant to change than might otherwise be the case. This issue is more important today than at any time in the past, as the occupier customer base undergoes fundamental change. The real estate industry’s traditional, core customer base comprised large, steady state, lumbering corporates who were themselves, a part of the property process. But this market is on the brink of extinction.
Technical versus management function. The second point is that the real estate supply process is focused on the highly fragmented delivery of technical skills rather than offering a management function. Other workplace resource functions have evolved into broadly-based management functions. Personnel became HR; purchasing became Procurement and technical support became Technology.
By contrast, real estate services are provided by functions variously known as Property, Facilities, Corporate Real Estate and Accommodation. Various models have been tried: outsourcing/insourcing; intelligent client units and shared service centres among them. The common thread is technical service provision driven by a fragmented supply process. And it is in danger of being marginalised as the technical services are commoditised.
Overcoming fragmentation
Whether looking internally at the client organisation, or externally across the supply chain the only part of the fragmented supply chain which has a customer (occupier) focus as its core activity is the nascent Workplace Management function. That is because it is just another management function. Its roots are in general management, and it is an emerging sub-discipline of Workplace Resource Management.
Workplace Management brings together all the fragmented parts of the design, construction, real estate and facilities sectors into an integrated management function, allied to its colleagues in HR, Procurement and Technology, among others, to provide an integrated Workplace Resource Management function.
Whether in healthcare, leisure, logistics, offices or retail, large swathes of the occupational market have been, and continue to undergo, enormous change in their operating models. They are evolving into lean, agile, fleet of foot businesses for whom space is a commodity not a lifelong marriage. This calls for a new customer-supplier relationship, which Workplace Management can provide….