Monthly Archives: April 2011

The Office

By Ken Ashley

ATLANTA (April 18th, 2011)

Comedian Steve Carell stars in the American version of the BBC TV show The Office. The show, a so-called “mocumentary,” has become very popular in the United

Master of Five Sigma

States, including our own household. Carell’s character is the distressingly idiosyncratic Michael Scott who is a mid-level manager at a mid-sized fictional paper supply company. Dunder Mifflin, as it is known, has a rather depressing looking office in Scranton, Pennsylvania.

The show depicts the lives of every day employees and their hapless leader, Scott. While he can’t ever seem to get it quite right as a manager, he does have some hilarious “pearls of wisdom” on the show.

A Whitman’s sampler:

  • You may look around, and see two groups here. White collar, blue collar. But I don’t see it that way. You know why not? Because I am collar-blind.
  • I am Michael, and I am part English, Irish, German, and Scottish, sort of a virtual United Nations.
  • A lot of the people here don’t get trophies very often, like Meridith or Kevin. I mean who’s gonna give Kevin an award, Dunkin’ Donuts?
  • The most sacred thing I do is care… Today I am in charge of picking a great new healthcare plan. Right? That’s what this is all about. Does that make me their doctor? Um, yes. Like a specialist

And my favorite

  • I miss the old Dunder Mifflin. Too much change is not a good thing. Ask the climate.

Who’s Michael Scott’s CFO?

We thought about Michael Scott when reading this article entitled Weaving a Corporate Culture in the April edition of CFO Magazine. David McCann,who is always a great read, creates another intriguing story about Beaulieu of America, which is the third largest carpet maker in Dalton, GA.

You can almost picture Scott-like managers as the article recounts that the company had a “horrific” employee turnover rate of 50%. With worker replacement cost of $5,000 per employee, this accounted for an expense of over $17.5 million a year for the company. What a mess.

After trying everything they could think of, the company hired HPWP, a human resources consulting firm that works to create “high performance workplace environments.” HPWP had some amazing results and righted the ship, according to the article.

“You Don’t Frisk Your Family Members For Silverware After Thanksgiving Dinner”

HPWP Founder Sue Bingham, who is a no-nonsense prognosticator of HR wisdom, instituted so-called “adult conversations”  and put in place hiring teams of fellow employees to give the nod to new additions. She helped establish an environment of trust with these teams.

“Hiring managers tend to select applicants who think like them, but that often fails to create the best group chemistry” says Lynn Chambers of Beaulieu. When a hiring team makes the choice, “you’ve got people surrounding that person who want him or her to succeed,” continues Chambers.

Bingham says “Approximately 95% of employees at all levels are responsible workers and good people, [but] management policies and leadership resources typically focus on protecting the company from the 5% marginal employee group. Applying and enforcing these policies equally often results in a negative impact on the responsible workers and on the company.”

A Penny For Your Thoughts

Major real estate decisions such as office moves and corporate headquarters relocations do sometimes require a “hiring manager,” aka real estate director or other executive, to make decisions in secrecy. Public companies must be careful not to run afoul of the law, for example. Mergers, acquisitions and downsizings are all events that typically require tight lips in order to execute properly.

But we sometimes see situations where companies make real estate plans under the veil of silence, when it seems they are managing for the 5% of marginal employees. Maybe there is no need for secrecy, but leaders simply assume this is required. Management may not have thought out the process and wrongly believe that no one will know until they are ready for the news to be announced.  Que Michael Scott.

With a well thought out change management process and clear indication on the real estate direction of the company, the equivalent of the hiring teams can be used in real estate decisions as well. Sometimes called cross-functional teams, these committees aggregate employees from multiple levels of the company or division. There is no perfect way to assemble the group, but the very act of asking others to participate in the process will win kudos.

As the economy turns, talent recruitment and retention will once again become a major issue for employers. The more the rumor mill kicks up in the midst of real estate changes, the more tensions will build. What a great environment for competitors to pick off some of your best employees.

There are many, many resources on change management. We will highlight some at the end of this post. However, a few best practices we have seen in working major real estate projects include:

Start early and often. According to change management experts, a major reason for employee resistance to change is lack of awareness. Engage key employees in a real estate advisory team and turn them into advocates for your process within the company. No, they don’t have to go on property tours, or even really be involved in every detail, and they certainly don’t have to be final decision makers. But if you treat this group with respect and keep them briefed, they will serve as your built in rumor control. Besides, when someone asks what’s going on, you can refer them to a committee member. Saves you time and makes the committee feel great.

Will The New Toothpaste Sell? Think of yourself as a product manager and “do the Proctor & Gamble.” In other words, test market changes to the workplace and see if changes work on a small group of employees, instead of trying to change the whole organization at once. You are not Superman, and if a tweak is needed in a furniture layout or use of some new piece of technology, staff will respect you for starting small before a big fall.

It’s a Sales Pitch. We have observed executives spending months arriving at a conclusion and expect rank and file employees to understand the decision in a

I guess your wondering why I called this meeting...

hastily arranged “all hands” meeting. Nothing wrong with method, just make sure you are prepared. We like well thought out visual support (including a brochure) and carefully crafted logic for the company’s actions that explain adult-to-adult why this is good for the company AND the team.

Properly explained, a real estate move can generate great excitement. It sounds simple, but if people believe they know what is going on and have trust in management’s motives, they really will whistle while they work.

Keep Michael Scott’s office a sitcom and not YOUR reality. Respect them and they will love and trust you in return.

Select Change Management Resources:

Harvard Business Review Change Management Articles

Wharton Center for Leadership and Change Management

Change-management.com

Dunder Mifflin (yes it’s a joke; don’t you go changing here)

Nobody Loves Me But My Mother (And She Could Be Jiving Too)

By Ken Ashley

ATLANTA (April 4th, 2011)

This great BB King song must be emblematic of how some down on their luck developers feel at this point in the market. Tenants are demanding rent reduction

That Man has the Blues!

and more services; the tax man wants to be paid; the lender is holding on the other line and oh, by the way, you need to cash a check to feed the kids. Developers take big risks and sometimes those risks don’t pay off.

We empathize with some landlord friends who are currently losing at the real estate game. The economy is recovering, but life in ownership is still hard in very real and personal ways, and we know this economy can be humbling to even the biggest ego. Most landlords in 2011 would tell you that debt is like a chocolate cake: delicious in small slices, but really bad for you if you have too much.

We are becoming a whole generation of “recession babies” who view debt as anathema and important to eliminate as quickly as possible. Certainly millions of Americans are cutting up credit cards and paying with Ben Franklins instead.

Want at Toaster With That CMBS Loan?

But wait, the Wall Street Journal and other publications are suggesting that the debt markets are coming back. In this blog article in the Wall Street Journal

Want Some Bread?

 

 

(CMBS Industry Ready to Exhale) Eliot Brown suggests that softening  of requirements on banks will allow them to more quickly issue Commercial Mortgage Backed Securities again. I feel a collective eye roll as you say, “Here we go again.”

Of course, debt is a tool like any other, and it is really the oxygen that allows commercial real estate to move ahead. In this brilliant post from March 30th by Dr. Sam Chandan –  The Return of the Rise of CMBS –  which ran in the New York Post, Sam explains that “This marked (positive) shift in borrowers’ access to credit has facilitated a critical mass of trades, supporting a degree of price discovery that was absent just a year ago; it has also allowed mortgage rates to remain near their cyclical lows even as long-dated treasury prices have fallen and yields have risen.”

The lesson as I see it is simply “in all things, moderation.” Thanks again, Ben Franklin.

Don’t You Be A Loser at Leasing

While it has become a national sport to shake our heads and wag our fingers at those developers that foolishly took all that risk, there most certainly is a parallel in the tenant universe. Our friends in the technology community used to call it “leasing ahead of the curve.” Some would call it leasing on a credit card. We call it not smart.

Leasing significant space in a vague anticipation of future growth can be expensive, but oh so tempting. Other tenants in the building are expanding and you might get boxed out! We need a solid path for growth, the managers proclaim. And if we sell that order of the BR549’s to the Chinese, we will need to hire gaggles of people quickly!

The “get them while they are hot” philosophy should be treated with great care in an environment in which lease obligations are firm commitments for years to come. The sad fact is that real estate is likely your second largest cost. Your largest cost – payroll – can be reduced relatively quickly through terminations, although this is not pleasant. Real estate is a commitment with no easy exit as we discussed in this post from late last year.

Let’s Keep Mom Happy

So, no matter the promises of future sales, business is booming and you need to hire more folks. This nonsense of working 90 hour weeks can’t last. How do you not “overspend” or overcommit in real

Smiles All Around!

estate? Through a beautiful thing called an option. Our advice to many clients now is to “go long and option up.” Translation: lock in low rates that are prevalent in the market and preserve both your growth and contraction ability through options in the lease. Ask your real estate broker about this, and talk to the lawyers, but exploring a soft instead of a firm commitment for space can many times be a career saving approach.

Another way to handle this issue is to partner with an architecture firm and develop a firm understanding of your space usage. The document the architect produces is called a program, and it will be the basis for calculating how much space you really need in the future. When the sales guys show up with the signed order and a big smile, you can then feel good about expanding based on a detailed and empirical look at your space needs as opposed to guessing on butts in chairs. No jiving with a program.

Expansion, like debt, is certainly not in and of itself a bad thing. Just don’t eat too much chocolate cake or you will be singing the blues. Moderation makes Mom happy, you know.