The Leader - March/April 2009 - (Page 18) THE EVOLVING STATE OF PORTFOLIO PLANNING: A CRITICAL DISCIPLINE FOR UNCERTAIN TIMES Demand Forecasting – Demand forecasting is difficult for everyone. Many firms feel they started by assigning the “wrong person for the job,” and have now recognized the importance of investing in people with appropriate client relationship management (CRM) skills. IT Systems/Data Integration – Complete, accurate data is important, whether to support demand forecasting, create confidence in metrics, or speed up decision making. Creating a perfectly integrated system of all occupancy and real estate information for the whole portfolio is expensive, so expect to see most organizations work toward this slowly, in pieces, or as part of a larger technology initiative. 1 2 organizations are turning away from the exercise of trying to benchmark their real estate ”performance” against that of their competitors or a pre-defined industry standard. These teams are instead implementing metrics that have cultural “buy-in” specific to their company, which helps them communicate performance more effectively. Charter & Control – The CRE organization’s best shot at gaining influence over international real estate controlled by autonomous business units is to clearly show its value in the areas it does control. This requires demonstrated success against metrics that the organization values. It also requires a robust infrastructure that can be expanded to absorb new portfolio management responsibilities. Green/Sustainability Issues – Discussions indicate the first step for most organizations is creating an inventory and tracking system that addresses all areas 4 of sustainability related to the company’s footprint – including carbon emissions, waste stream, transportation impacts, and energy use. We anticipate that portfolio decision making will increasingly take into account the sustainability impacts of legacy and new locations, with wide variation among organizations as to how highly they prioritize sustainability factors. Detailed Interview Findings Portfolio consortium participants granted our researchers detailed interviews covering various aspects of Portfolio Management. They ranked the abilities of their teams on a scale of 1 to 5 (“poor” to “excellent”) across three major Portfolio Management processes (demand forecasting, supply management, and cluster planning). They also ranked the state of their portfolio metrics and policies/initiatives under their control. The data indicates that CRE teams are rigorously engaged with evolving portfolio planning to a higher level – they have strong practices today but recognize significant opportunity to achieve more. 3 Metrics – The quest to uncover the perfect set of metrics continues. Some 5 ORGANIZATIONS THAT DO THIS “VERY WELL” IN SUBPORTFOLIO PLANNING ANALYZE THE FOLLOWING: ° 56 percent - Compare alternatives by cash flow, NPV, GAAP profit/loss, and balance sheet implications FI G U R E 3 PORTFOLIO MANAGEMENT CHALLENGES LISTED BY CRE EXECUTIVES Demand Forecasting Although every organization surveyed does an annual demand projection process with its business units, and many do forecasting on a “continual” basis, only a few claim to be doing better than a “good” job. The reasons cited include: ° 28 percent - Decide whether to implement planned capital improvements ° 28 percent - Determine which facilities are core to the portfolio ° 28 percent - Analyze trade-offs between capital investment, write-offs and long term savings 22% OTHER IT ADOPTION SYSTEMS INTEGRATION/ GOOD DATA 22% ° 11 percent - Determine where business groups should be located within facilities COST CUTTING/ CONTAINMENT 11% ° 11 percent - Illustrate likely employee impact [moves, hires, layoffs, etc] by market FORECASTING/ UPFRONT EVELOPI ENGAGEMENT w BUs 22% 35% MANAGING RE UNDER CONTROL OF AUTONOMOUS BUs 22% The experience that business units are not great at forecasting their own demand. The belief that they themselves do not have the resources and/or relationships needed to do an excellent job. We did note that our survey participants have developed robust demand forecasting 1 2 3 The fact that their industries are complex. 2 0 0 9 T HE LE ADE R 18 MARCH / APRIL
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