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What’s wrong with this picture?

The people are gone, but the building remains.

If you lay off people then you still have to deal with the Real Estate.  Deal with the RE first.  If you need to make cuts, what do you look for?  Lack of productivity.  Everyone has heard the story of the Railroad employees who kept jobs because of some agreement, even though the jobs no longer existed.  They played cards all day.  Think of your empty buildings like they were just sitting around playing cards.  But you can get rid of them. 

As an economic malaise lingers, there is a predictable series of reactions.  Hiring freezes, spending freezes, cost cutting, and then a gut reaction to reduce headcount.  After the reduction, the RE portfolio, which was out of balance prior to the reduction, becomes even more out of balance.  RE persists on the balance sheet due to the nature of the asset.  Instead of dealing with this potential time bomb, CRE organizations continue down the path of cost cutting on a small scale: squeeze out another ½ cent per copy, reduce janitorial to third world levels, etc.  No one seriously considers getting rid of the elephant in the room.  If RE was an input into the manufacturing process, it would be dealt with swiftly (and first) due to the enormous dollars involved.  

So why do corporations persist in supporting an out of date model by supplying the assets in an inefficient manner?  If supply chain management has progressed to the point of being able to provide inputs right when they are needed in the manufacturing process, why do corporations continue to carry enough RE stock to supply their needs for a decade or more?  Why not take the lessons learned in manufacturing and apply them to CRE?  Why not supply RE assets (or, more appropriately, employee access to RE assets) on a “just in time” basis?  The value proposition to the corporation is staggering. 

The Value Proposition to the Corporation

Depending on what point an enterprise is on the crisis curve, any of the following could be the primary driver. 

Morale: Layoffs have a staggering impact on morale, both before and after the fact.  What better way to show your employees that they ARE the most important asset everyone tells them they are than by keeping them and getting rid of buildings.  Reluctance to participate in a Mobility program evaporates when everyone realizes it’s them or the building.

Money: Sure, there are upfront costs, but the payback period is short, and it goes on forever.  Huge dollars taken out of the cost structure up front will pave the way back to profitability rapidly as those expenses disappear from the balance sheet, allowing more dollars to flow to the profit line.  Who doesn’t love that?

Agility:  \When the economy picks up (and it will)  the portfolio will be configured to absorb employees without adding more space, and there will be ample time to thoughtfully plan out a changing portfolio that is an enlightened response to the new economy, rather than the same old knee jerk response to growth that always seems to occur (more about that in another post).

The Value Proposition to the Employee

Unity: What employee wouldn’t take notice of a corporation that takes actions that show they value their employees more than the building they work in?  In a work environment where layoffs are looming, everyone hunkers down hoping not to get hit and gossiping in the trenches about who they think will get hit.  Transitioning to a Mobility-enabled workplace will show your employees that you are invested in giving them what they need to be successful in the current economy, and that you value them enough to take uncomfortable steps forward if it means not having to lay off employees. 

Empowerment: Giving your employees the tools and workplaces they need shows them that you trust them, and that you are putting your money where your mouth is when it comes to supporting them.  This gives them a boost that will be all the more apparent when they talk to their outside friends and competitors who are still hunkered down in the trenches hoping to avoid the layoffs.  This will give you a huge pool of talented people to draw from as the economy rebounds.

The First Step

Getting from here to there is not easy, but then again, neither is having that conversation with the employee you have known for years who really doesn’t deserve to get laid off.  Start down the path to developing a mobility practice.  You can save your firm money, reinforce your culture, prepare for the future, and save your employees' jobs at the same time.  So have that layoff discussion with your buildings.  It’s the better thing to do.