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IAMC INSIDER
From Site Selection magazine, September 2015
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Thanks to All the IAMC Freaks

Kevin Dollhopf
Kevin Dollhopf
IAMC Chair

The numbers are in, and IAMC leadership applauds the organization for achieving another milestone — Palm Desert was the first Forum to receive a 9/10 overall rating from the attendees. Combined with more than 100 active members for the first time, we truly can say that IAMC rocks. The next time we gather will be in Cleveland, the city that rocks!

Most of you are familiar with the book “Freakonomics.” On a whim I bought the latest in this series, “Think Like a Freak,” to read on a long day of travel. It provides a great framework for my last remarks as IAMC Chair and to let the membership know what their leaders have been thinking, doing and planning for the organization.

First, we have a freaky organization. We specialize in a difficult-to-recruit and small niche — industrial corporate real estate executives. Then we give every Associate member company, no matter how large or small, an equal chance to participate — our balance. Finally, we disdain salesmanship in this professional setting in favor of connecting. Sounds like a recipe for disaster, but those are the core principles we continue to reinforce with strict adherence. They have created a successful business model.

The exciting news is that IAMC, while maintaining these core principles, is now a different organization than it was several years ago. And that requires some freaky thinking. Here are my final thoughts on what IAMC must do.

We are financially successful; our reserves are growing. This new burden means we must now invest back in the organization to maintain the success. Two years ago, leadership incentivized (a freaky fundamental) the committees by awarding $50,000 for ideas to drive continued success. We are incentivizing participation in events with our honorariums, scholarships and subsidized rates.

We must focus on small issues to gain big wins. IAMC has specific goals for small wins: high Active member participation in Professional Forums, strong evaluation ratings for events, controlled growth, provocative and valuable white papers, sponsorship diversification. The big win is a quality organization with engaged members competing effectively in a sea of professional associations.

We must admit what we don’t know. This year, we admitted we didn’t know what the “world-class education” in our mission statement meant. So the board of directors challenged a task force to figure out how to measure, define and frame our education strategic plan. The conventional delivery wisdom of education was challenged — and we now have a redirected plan based on what our membership wants.

Quitting is okay. Some of our original ways of doing things may need a reboot. One example: We are driving organization and inter-committee communication through the new Council structure. With a fulltime executive director in place (great job Tate!), we can now challenge the norms.

We must innovate to drive member value. This is tough and is the ultimate panacea to our success. How do we look differently at a professional association and find new avenues to truly engage members as volunteers? We need your help on this one.

IAMC Chair Kevin Dollhopf reels in another industrial real estate executive.

We must develop the best talent for the organization. The position of the College of Fellows with the new Leadership Council has been solidified. IAMC is letting its “garden weed itself” by allowing the most engaged members to impact the organization in significant ways — strategic planning, leadership positions, mentorships and thought leadership.

At last, it is time to bid farewell as your chair, and one of the important characteristics of thinking like a freak is that freaks like to have fun. Having fun with people you know is the secret sauce of IAMC. With that in mind, I truly thank everyone for the FUN — both professionally and personally — that you have allowed me to share in over the last few years.

Let’s continue to be freaks.
See you in Cleveland!

Kevin Dollhopf
IAMC Chair

Single Source Real Estate Service Agreements:
A Knife that Cuts Both Ways

Moderators:
David Hocker, Global Director of Properties & Facilities, Cooper Standard Automotive Inc. Raymond Ocasio III, Manager of Real Estate, Gulfstream Aerospace Corporation

Sponsor: Duke Energy Corp.

Overview

Increasingly, many companies are expecting the corporate real estate function (CRE) to also have some degree of responsibility for facility management (FM). How this works varies by organization. In many organizations, the operating model involves a centralized CRE function that deals with capital allocation decisions, with facility management taking place locally. In general, if the real estate and facilities budget resides with the business, it is difficult for a centralized CRE function to exercise control. Ownership by the business, especially in businesses with hundreds of sites, may be more practical, but a risk is that local business owners will forego important routine maintenance.

In terms of single sourcing, a small percentage of companies attempt to single source their real estate activities, but few are able to single source facilities management, as each facility may have hundreds of different service providers, making single sourcing almost impossible. A common model is to create regional networks of service providers, with as few providers in the network as possible.

Active members at the Palm Desert Forum Manufacturing Industry Group session.

Context

Panelists and Manufacturing Industry Group participants discussed how their organizations are structured, how their companies think about centralization versus decentralization, and the merits of single sourcing real estate and facility services.

Key Takeaways

Even organizations with large real estate footprints have a small corporate real estate function.

Panelists and participants who described their companies’ real estate portfolios came from organizations with between 90 and 900 sites, ranging from 7.5 million sq. ft. up to 55 million sq. ft. Even with hundreds of sites and millions of square feet, the corporate real estate functions were just two to four people.

Where corporate real estate reports within the organization varies. In one company, corporate real estate reports to sourcing. In another, real estate reports to the treasury group, after previously reporting to corporate development and before that being part of the M&A group.

In general, the corporate real estate function has a global perspective, although in one company corporate real estate fully supported all real estate activities in North America but served as an internal consultant for real estate activities in Europe and Asia.

In many organizations, corporate real estate also has responsibility for facilities.

Among many manufacturing companies the scope of the corporate real estate function has expanded over time to now encompass facility management. Business owners seem to often think of the real estate function as responsible for necessary real estate activities to select a site and get it up and running, as well as ongoing service and maintenance of a facility.

Most organizations centralize some real estate and facilities management activities and decentralize others.

Several panelists and participants commented that the capital allocation function is centralized in their organization, but maintaining individual facilities tends to be decentralized. Companies often have personnel onsite at a facility charged with maintaining the facility. However, in some instances there is minimal centralization, with most real estate activities and facilities management decentralized and owned at the business level; each business is responsible for its own real estate and its own facilities. One panelist explained that at his company, each geography has its own president, and each president wants a person on their staff who is responsible for the business’s real estate. Another panelist commented that at his company, the corporate real estate group deals with real estate matters, with the business being responsible for the facilities.


“A benefit of centralization is visibility of capital spending requirements.”
— Session participant

Decisions about centralization versus decentralization fit with ownership of budget. As one participant explained, if CRE owns and controls the budget, then real estate tasks can be centralized. When things are centralized, there is great company-wide visibility about capital needs.

But if CRE doesn’t own the budget then the function can’t really control things centrally. In instances where CRE doesn’t have control over the budget, CRE may serve as a consultant and a domain expert, educating sites on risks and pain points. Several participants concurred that a risk of decentralizing real estate and facilities management — and giving all budget and responsibility to the business — is that the business will typically delay and avoid deferred maintenance, which will have long-term consequences.

Keys to Controlling Facility Spending

One participant commented that there are five key areas of facility-related spending that must be controlled:

  • Roofs
  • HVAC
  • Heavy electrical
  • Fire protection
  • Structural

The idea of single sourcing sounds good, but in reality it is rarely practical.

Participants distinguished between single sourcing for real estate services and for facility maintenance.

  • Single-sourcing for real estate services. In an informal poll of Manufacturing Industry Group attendees, roughly 10 percent to 20 percent say their company single-sources for real estate services. One participant indicated a preference for having “one throat to choke,” yet his company has a model with three options to choose from. Another participant said that his company has a preferred real estate vendor, but if that vendor can’t serve the company in some particular geography, the company will use another service provider. Another participant noted that most companies need different service providers for each geography.
  • Several participants explained that over time they have developed trusted relationships with a service provider in a particular geography. In some instances companies have evolved from compensating service providers on a purely transactional basis to putting service providers on retainer to support the company in a broad variety of ways.

  • Single-sourcing of facility services. In general, it is not viewed as realistic to single-source for all necessary facility services. In most instances, manufacturers have hundreds or even thousands of service contracts. They prefer to use as few service providers as possible, and often create regional or local networks. In some instances, in a remote location, a company may have a trusted service provider or individual nearby that the company will have become a jack-of-all-trades, providing service in as many ways as possible.

  • “Nobody single sources for property or facility management.”
    — Session participant

    One participant observed that having a single-source provider for all sites might work for a business where all sites were identical, but even then, it would be difficult. Experienced attendees advised less experienced IAMC professionals to be cautious. A representative comment was, “Most vendors will say, ‘We can serve you everywhere.’ But they can’t; they subcontract the work.”

    A model preferred by many is a regional model. Companies can try to consolidate their service providers within a region, and a regional focus — which requires some management of providers — typically ensures a high level of competition.



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