Every business has to operate from somewhere and as an interim manager you may want to take a look at an organisation’s property strategy to improve efficiency and profitability. Our special guest blog post is written by Robin Worthington, an experienced Property Director who has worked for global brands such as Cadbury and is now a successful consultant and interim manager:

“You may have lost interest in this article already.  Eyes generally glaze over at the first suggestion of anything to do with property, and particularly if it’s associated with that awful word ‘strategy’. So I risk simultaneously boring you and damaging my reputation by combining the two.  But I will take that risk, as I have something very simple to say about property strategy that I know will save you time, money and angst.

What is a Property Strategy?

Contrary to popular myth, a strategy is not an objective or a goal, but the method you choose to deliver an objective or a goal.  As a property man, I have very little to say in shaping your commercial goals, but lots to say on how to deliver those goals.  I might therefore say a goal is not deliverable for a good property reason, or that it is deliverable but at a property-related risk.  Shell became famous for its mantra of ‘Decide the destination. Plot the route. Manage the journey.’ Property is part of the journey. It applies as equally to smaller companies as it does to large ones.

Clearly property is a necessary investment for the majority of businesses. (Even virtual organisations operate from somewhere.)  The path is well-trodden on basics such as size, shape, location and length of lease.  These two short anecdotes may help you go beyond that level of thinking -

  • In reviewing the performance of their sorting offices as well as pure property costs, a postal company recently measured how many mail rounds could be supported per 100 sq.ms of floorspace. The figure varied enormously, with the key physical factors turning out to be parking, unloading capacity and physical proximity to both bulk deliveries and the rounds themselves.
  • At Cadbury I introduced a property strategy of owning ‘core’ manufacturing sites (e.g. Bournville) and leasing everything else. The logic being that ownership gave maximum continuity and freedom for core operations and minimum cash tied up overall.  I dined out on that for several years until the Property Director of another large organisation told me his policy was the exact reverse.  His logic was (i) if it were indeed a core site, he would willing sign up to a very long lease, freeing up capital to invest in the business and (ii) ownership of non-core properties gave relative freedom to exit when deemed appropriate.  We were of course both right - me from the perspective of a cash-rich manufacturer, and him from the perspective of a cash-strapped service organisation.

I’m often asked if I support sale and leasebacks.  My response is now pretty much standard - a sale and leaseback is a process not an objective and how can one be for or against a process?  More constructively, the principle itself is not the issue - it’s about what you do with the money.  If the sale is to raise cash to invest in the business and shows a higher return (after rent) than does the property itself, then I’m in favour.  However, if it is to raise cash to e.g. prop up a failing business, then I’m not - quite the reverse, as it will only make matters worse by increasing debts and decreasing flexibility.

In short, and as ever, there is no one answer. As that wonderful writer Scott Peck said - ‘There is always a greater truth, and it normally comes from context’. Or as the equally wonderful Steven Covey said - ‘Start with the end in mind and begin at the beginning’.

Attempting to join up beginnings, endings and context, here’s one final anecdote.  In seeking to create a property strategy within Cadbury, I landed on what I termed ‘7Cs’ - Cash Generation, Cost Reduction, CapEx Avoidance, Continuity, Compliance, Corporate Responsibility and Customer Satisfaction. In seeking to apply them recently to a client in the health care industry, I found they were equally valid, but in a different order of priority - compliance (perhaps unsurprisingly for health care) being at the top of the list.  Try it with your own clients, see how many of the tests apply, and then see how the property strategy supports or doesn’t support their business priorities.”

Different styles of property strategy will work better for different businesses. What experience do you have with property strategy? Share your stories in the comments below.

Robin Worthington FRICS was Group Property Director of Cadbury until its acquisition by Kraft in 2010. He is now a Consultant and Interim Manager, having undertaken successful assignments at Capita Symonds, Morrisons Supermarkets, Jaguar Land Rover and the GAME Group.  He is a Member and past Chair of the CBI Property Group, a Member of the Mentoring Panel of IDDAS and holds a Certificate as a Pension Trustee issued by the Pension Regulator.

photo credit: wallyg via photopin cc