Real Estate and Facilities Lifecycle Management

Transcription

1 Real Estate and Facilities Lifecycle Management

2 Page 2 Executive Summary A business environment that is unyielding in its pursuit of bottom-line savings and process efficiency has driven enterprises to seek greater alignment of real estate and facilities lifecycle management (REFLM) strategies with corporate goals. Enterprises now realize the strategic value of, REFLM as it proves to be a point of advantage in managing an area of significant corporate spend and high complexity. The results are spend and process visibility delivered through collaboration and ease of access and exchange of information. This provides further support to the positive impact that real estate and facilities lifecycle management has on the development and execution of corporate strategy. Research Benchmark Aberdeen s Research Benchmarks provide an indepth and comprehensive look into process, procedure, methodologies, and technologies with best practice identification and actionable recommendations Best-in-Class Performance Aberdeen evaluated the real estate management practices and performance of over 90 enterprises in May and June 2008, using two key performance criteria to distinguish Best-in-Class companies: 1) Rate of occupancy; 2) Rate of space utilization. Best-in-Class enterprises in this study are notable for their superior performance and credit real estate management tools and solutions with contributing to the following benefits: 1.5 to 2.9 times higher rates of savings across key REFLM expenditures than All Others Twice the level of incremental improvement in their capacity to fulfill maintenance requests Competitive Maturity Assessment Best-in-Class performers shared many common characteristics with respect to real estate management. Best-in-Class companies are: 58% more likely to leverage multiple stakeholders for REFLM data collection and aggregation, and strategy development 10% to 33% higher levels of visibility in to REFLM processes and spend, respectively. Required Actions Leverage REFLM technologies Measure performance across all REFLM phases Engage C-level executives in REFLM process Align REFLM and overall corporate strategies

3 Page 3 Table of Contents Executive Summary...2 Best-in-Class Performance...2 Competitive Maturity Assessment...2 Required Actions...2 Chapter One: Benchmarking the Best-in-Class...5 Business Context...5 The Maturity Class Framework...8 The Best-in-Class PACE Model...10 Chapter Two: Benchmarking Requirements for Success...12 Competitive Assessment...13 Capabilities and Enablers...15 Chapter Three: Required Actions...20 All Steps to Success...20 Laggard Steps to Success...20 Industry Average Steps to Success...20 Best-in-Class Steps to Success...21 Appendix A: Research Methodology...23 Appendix B: Related Aberdeen Research...25 Figures Figure 1: Strategic Value of REFLM...5 Figure 2: Top Pressures Driving Focus on REFLM...7 Figure 3: Top Actions to Manage REFLM...7 Figure 4: Rates of Savings for REFLM...9 Figure 5: Facilities Maintenance Request Fulfillment Capacity...9 Figure 6: Challenges to Effective REFLM...11 Figure 7: REFLM Process and Spend Visibility (1 - lowest to 5 - highest)...12 Figure 8: Cross Functional Coordination for REFLM (1 - lowest to 5 - highest)...16 Figure 9: Priority of REFLM Technology Investment (1 - lowest to 5 - highest)...19 Figure 10: Strategies for Improving Energy Management...22 Tables Table 1: Phases in Real Estate and Facilities Lifecycle Management...6 Table 2: REFLM Best-in-Class Status...8 Table 3: The Best-in-Class PACE Framework...10 Table 4: The Competitive Framework...14 Table 5: The PACE Framework Key...24 Table 6: The Competitive Framework Key...24

4 Page 4 Table 7: The Relationship Between PACE and the Competitive Framework...24

5 Page 5 Chapter One: Benchmarking the Best-in-Class Business Context The success of a company is often the result of a well-developed and tightly executed business plan. A critical underlying factor that also contributes to success is the space(s) selected and managed on a day-to-day basis to support all business operations. Spend for real estate and facilities lifecycle management (REFLM) is significant within an enterprise, comprising 15% of the total enterprise spend for companies participating in this research effort. Reflecting the role it plays in affecting a company's monetary outlays and bottom line performance, executives continue to appreciate the role real estate and facilities play in supporting corporate strategies (Figure 1). Fast Facts 82% enterprises ascribe strategic value to REFLM Over half (57%) of enterprises have conducted an internal assessment of real estate and facilities to establish visibility into their REFLM operations Figure 1: Strategic Value of REFLM 49% 33% 11% 6% High Moderate Low No strategic value / contribution Over 80% of enterprises ascribe strategic value to the role of real estate and facilities lifecycle management. The long-term value of looking beyond real estate and facilities spend as sunk costs or simply the cost of being in business is measurable and pays dividends to those organizations willing to believe that their competitive position can be effected by where they do business and how they manage these spaces. REFLM: Closing the Loop In addition to the magnitude of corporate dollars required, real estate and facilities lifecycle management is also highly complex, involving many interrelated processes for effective management (Table 1). "In our business, the facilities and the spaces we're in drive customer interaction so, strategically, it is very important for us to have the right space and manage it properly. ~ Executive Vice President, Facilities Management, Large European Financial Services enterprise

6 Page 6 Table 1: Phases in Real Estate and Facilities Lifecycle Management Phase Name Strategic Master Planning Real Estate Management and Administration Facilities Management Facilities Maintenance and Operations Project Management Asset Management Description Alignment of real estate and facilities management goals with corporate strategies; also includes capital planning and budgeting for real estate and capital maintenance investments. Lease negotiation, administration, and transaction management, including due diligence and site selection; oversight and optimization of portfolio performance. Oversight of space occupancy and utilization, planning / design, moves, hoteling, reservations, etc. Can also be termed as space management Planning of preventive maintenance and fulfillment of requested maintenance (break / fix) activities; includes work order management and execution / fulfillment, janitorial / housekeeping / cleaning, grounds / roads / landscaping, security, maintenance, repair, and operations (MRO) supply management, etc. Oversight and execution of modifications, renovations, and other construction and building activities; includes tracking of transactions, changes, milestones, and work orders. Capital and non-capital projects for real estate and facilitiesbased activities. Inventory, tracking, and management of capital and operational assets Source: Aberdeen Group, May 2008 As the moniker implies, REFLM is a lifecycle of management functions that should be integrated to optimize performance and strategic contribution real estate and facilities under management. Cost and Competition Drives Action No matter the industry, profitability is the expected outcome of any business venture. Yet there are many different factors that can affect the bottom line performance of company. In the case of REFLM, it is rising costs and the need to better manage spend on real estate and facilities (Figure 2).

7 Page 7 Figure 2: Top Pressures Driving Focus on REFLM Rising REFLM costs Improve or maintain competitive position in market Better manage and prioritize capital spending 29% 31% 38% "In an environment of lower budgets, there is a need to manage growing costs. The real estate budget is one of the three largest for us so we need to balance priorities, But this is difficult without a strategic master plan, which we don't have. Rising costs of facilities maintenance costs Improve workplace productivity 23% 28% ~ Finance Manager, Large Financial Services Enterprise While costs are necessarily the key focus for enterprises, especially in consideration of the complexity and magnitude of this area of corporate spend, the influence and strategic significance of effective real estate and facilities management on the competitive positioning of companies is also recognized. Yet companies have not let themselves become paralyzed by the onerous task of managing the different phases of the real estate and facilities management lifecycle; they have approached REFLM with actions as diverse as the cycle itself (Figure 3). Figure 3: Top Actions to Manage REFLM Conduct an inventory and assessment of current real estate and facilities 57% Establish a formal strategic planning process 49% Increase stakeholder collaboration for REFLM data and strategies Merge real estate and facilities management groups Leverage technology for REFLM Provide educational / professional development opportunities 40% 38% 36% 31% The strategies employed include ensuring that they have the proper information from which to start, addressing key organizational processes,

8 Page 8 and promoting a culture of learning. All these actions are linked together by acceptance and leveraging of technology to as part of their REFLM process strategy. The Maturity Class Framework Top performing enterprises effectively manage the phases of the real estate and facilities management lifecycle by employing key technologies and processes to optimize the strategic contribution of REFLM. Aberdeen used two key performance criteria to distinguish the Best-in-Class from Industry Average and Laggard organizations: Rate of occupancy Rate of space utilization Table 2: REFLM Best-in-Class Status Definition of Maturity Class Best-in-Class: Top 20% of aggregate performance scorers Mean Class Performance 96% rate of occupancy 96% rate of space utilization Industry Average: Middle 50% of aggregate performance scorers Laggard: Bottom 30% of aggregate performance scorers 85% rate of occupancy 88% rate of space utilization 42% rate of occupancy 35% rate of space utilization Best-in-Class enterprises demonstrate that a strategic advantage that positively impacts business can be established through real estate and facilities management. Effectively matching key technologies with welldefined and efficient processes has led to superior levels of occupancy and space utilization, which reflect the organization's ability to properly plan for and use their real estate and facilities. In addition to more effective use of space, Best-in-Class enterprises further distinguish themselves at addressing the key issue of rising costs by establishing higher savings rates across a series of REFLM performance metrics (Figure 4).

9 Page 9 Figure 4: Rates of Savings for REFLM 7.0% 5.2% 5.6% 5.8% 2.7% 3.0% 4.0% 2.4% Best-in-Class All Others Total cost of occupancy Cost per square foot leased Maintenance cost per square foot Cost per employee to move By delivering higher savings as a result of their REFLM strategies and use of technology, the Best-in-Class are able to free up funds for other strategic initiatives within the enterprise or to reinvest into REFLM programs. Operationally, Best-in-Class enterprises maintained their superior performance in the ability to fulfill maintenance requests; their incremental improvement of 50% also doubled that of the 25% that their competitors realized (Figure 5). Figure 5: Facilities Maintenance Request Fulfillment Capacity Best-in-Class All Others Fulfilled before technology Fulfilled after technology The overall time to complete these maintenance requests was also positively impacted as, on average, a 50% reduction in the number of days to fulfill maintenance work orders was experienced across all competitive sets.

10 Page 10 The Best-in-Class PACE Model Following through with a lifecycle approach managing real estate and facilities to achieve corporate goals requires a combination of strategic actions, organizational capabilities, and enabling technologies that can be summarized as follows: Table 3: The Best-in-Class PACE Framework Pressures Actions Capabilities Enablers Rising REFLM costs Improve or maintain competitive position in market Conduct inventory & assessment of real estate and facilities Establish formal strategic planning process Merge real estate and facilities management groups Leverage REFLM technology Internal management of REFLM processes Real estate and information accessible and exchanged between corporate real estate and facility management groups Collaborative relationship structure between real estate and facility management groups Ability to measure REFLM performance Central system of record for real estate portfolio and facilities / space under management, including transactions Central repository for all real estate and facilities management-related documents Budget forecasting and scenario analysis tools Online tracking of project completion / milestones and budget status Automated alerts for key dates

11 Page 11 Aberdeen Insights REFLM Hurdles As with any business function that impacts both the strategic positioning and fiscal well-being of an enterprise, specific challenges emerge that forestall effective management (Figure 6). Figure 6: Challenges to Effective REFLM Coordinating REFLM strategies with corporate goals Balancing budgets Communicating value of REFLM 29% 37% 47% "There are a number of challenges we face: cost escalation, people, globalization. We know that with an automated real estate management solution, our company will be able to reduce costs and centralize operations, as well as reduce repetitive tasks and standardize processes unique to the real estate and facilities management lifecycle. ~ Shashank Agarwall, Manager, Large Technology Manufacturing company Change management 27% Aging buildings 21% While enterprises have clearly recognized the strategic value of REFLM (see Figure 1), there remain significant challenges to aligning REFLM strategies with corporate goals to optimize the contribution of REFLM as a competitive differentiator. The flames of this struggle are further fanned by the difficulty noted in communicating the value of real estate and facilities management to enterprise leadership. As with any other corporate program, executive support is critical for driving performance.

12 Page 12 Chapter Two: Benchmarking Requirements for Success Real estate and facilities lifecycle management touches every part of an organization and can affect each person in the company. To address their deficiencies, companies must have a complete understanding of their REFLM operations. To this point, visibility remains an objective that many enterprises are not able to obtain (Figure 7). Figure 7: REFLM Process and Spend Visibility (1 - lowest to 5 - highest) Strategic Master Planning Real Estate Management & Administration Fast Facts Best-in-Class enterprises are 1.4 to 2.0 times more likely to engage multiple stakeholders to collect and aggregate REFLM data, and develop REFLM strategies Best-in-Class organizations enjoy visibility into REFLM processes and spend that is rated 10% to 33% higher than Average and Laggards Facilities Management Facilities Maintenance and Operations Project Management Asset Management Spend Process On average, only 11% and 15% of enterprises indicated that they had a high level of visibility (designated as a rating of 5) into processes or spend, respectively, across the phases of the real estate and facilities management lifecycle. Such shockingly low levels further reveal the barriers to success faced by companies in managing the real estate and facilities lifecycle. They have little insight into which processes need to be attended to and / or have the most strategic impact; and they remain unaware of the costs and spend into area of high dollar volume. "Even though we're rather decentralized, we have pretty high level of visibility, especially at the executive level. Collaboration is pretty strong though, which helps with the challenge of getting good data." ~Sara Oseasohn, Finance Manager, Harvard Real Estate Services

13 Page 13 Case Study Big Spaces, Big Opportunities A large, multi-national manufacturing company with over $14 billion in annual revenue and more than 94,000 employees, leverages a combination of technology, collaborative strategies, and process improvements to effectively manage the company's 30 million square fee of real estate and facilities worldwide. Strategically, REFLM is viewed in the context of where they re located now, where they need to be in the future, and how these decisions affect the economics of the organization. A true lifecycle approach is being developed to eventually address all real estate and facilities challenges. Using their solution, they are able to drive visibility into REFLM operations to the highest levels; "We are 'right there' for communication with senior management," stated the Director of Corporate Real Estate. The CFO and SVP of Operations regularly receive reports, quarterly meetings are held with the Controller, and strategy meetings are routinely held. Additionally, the Director of Corporate Real Estate is part of the Mergers, Acquisitions, and Divestitures team, where he has input into space-related strategies and how to align them with corporate growth initiatives. The solution in use also allows for analysis of different scenarios to use in capital planning decisions, enables mapping of all corporate spaces, including the condition of their infrastructure, and houses all real estate-related documents. A stronger push to bolster facility maintenance capabilities has also been initiated, highlighted by the initiation of a "Facilities Council" that will look into and develop strategies around facilities maintenance. A key focus is on cost avoidance; early assessments indicate that by addressing facility maintenance issues in two different facilities at this time, they will be able to save $3 million in future expenses. An additional focus is on energy consumption and conservation, where targeted programs to reduce lighting use in one corporate space resulted in $1 million of energy savings and water conservation in another led to $250,000 in utility cost savings and reduction in water consumption in the millions of gallons over the year. Competitive Assessment Aberdeen Group analyzed the aggregated metrics of surveyed companies to determine whether their performance ranked as Best-in-Class, Industry Average, or Laggard. In addition to having common performance levels, each class also shared characteristics in five key categories: (1) process (the approaches they take to execute their daily operations); (2) organization - the structure, skills, and capabilities of the organization, as well as the alignment of processes and actions with the strategic direction of the enterprise; (3) knowledge management - the accessibility and visibility of data and information, including the ability to leverage it across the enterprise; (4) technology - the level of automation and functionalities of tools leveraged to enhance process execution and delivery of information;

14 Page 14 and (5) performance management - the ability of the organization to measure their results to improve their business across key performance indicators such as rate of occupancy and utilization, cost savings, and operational efficiencies. Table 4 shows some of the processes, capabilities, technologies, and strategies employed by Best-in-Class, Average, and Laggard companies within the competitive framework. Table 4: The Competitive Framework Process Best-in-Class Average Laggards Engage multiple organizational stakeholders to access real estate and facilities management data and to develop strategies 57% 40% 29% Internal group manages REFLM sub-processes Organization Knowledge Technology 80% 74% 61% C-level (CEO, COO, CFO) reporting directly from REFLM groups 64% 50% 43% Self-rated visibility into processes across all REFLM phases (1 lowest to 5 highest) Self-rated visibility into spend across REFLM phases (1 lowest to 5 highest) Key functionalities of REFLM solutions

15 Page 15 Best-in-Class Average Laggards 69% central system of record for REFLM transactions 54% central repository for REFLM documents 54% automated notification and alerts of key dates 51% budget forecasting and scenario analysis tools 46% online tracking of project completion and budget status 59% central system of record for REFLM transactions 47% central repository for REFLM documents 46% automated notification and alerts of key dates 46% budget forecasting and scenario analysis tools 27% online tracking of project completion and budget status 43% central system of record for REFLM transactions 36% central repository for REFLM documents 29% automated notification and alerts of key dates 18% budget forecasting and scenario analysis tools 25% online tracking of project completion and budget status Measure KPIs across all stages of real estate and facilities management lifecycle Performance 70% 60% 42% Ability to benchmark REFLM sources internally 36% 34% 24% Capabilities and Enablers Competitive pressures force companies to seek out strategic advantages across all business functions and processes. Real estate and facilities lifecycle management provides yet another avenue through which enterprises can make their mark. Best-in-Class enterprises have most readily capitalized on the benefits of effective REFLM programs. Some of those advantages across Aberdeen's competitive framework include: Process Best-in-Class enterprises are 60% more likely than All Others to engage key stakeholders across the organization to aggregate and collect data, and also develop REFLM strategies. Such processes are a necessity considering that, traditionally, oversight of data and tactical management of different REFLM activities has been dispersed across corporate real estate, facilities management, project management, and engineering groups. The ultimate effect is improved collaboration and accessibility to data (Figure 8). By improving the technology and strategies around our real estate management, overall it s going to help us provide a better service to our customers. As usage of a REFLM solution increases and processes become standardized, it will enable organizational growth. ~ Human Resources Manager, Canadian Public Sector

16 Page 16 Figure 8: Cross Functional Coordination for REFLM (1 - lowest to 5 - highest) Level of collaboration Accessibility / exchange of key data & information Best-in-Class All Others The Best-in-Class engage multiple stakeholders more frequently, and also demonstrate a stronger ability to coordinate and exchange data across different REFLM functional management groups to drive better performance. Organization The Best-in-Class are 8% to 36% more likely to rely on an internal group to manage different REFLM sub-processes. By centralizing management internally instead of relying on third-party providers, a common point of contact and leadership is provided to the rest of the company. This also serves to provide a unifying voice from which any policy changes or process modifications would be delivered. Additionally, leveraging internal management sources reduces the inherent need to establish additional relationship management structures and processes to facilitate an effective outsourcing relationship. Knowledge Management Visibility into processes and spend across all REFLM phases are 7% to 29% higher in Best-in-Class organizations than in All Others. Visibility dictates the ability of an enterprise to actively monitor performance and assess areas of the real estate and facilities management lifecycle that require attention. As visibility wanes, companies have less control and lose management capabilities, potentially jeopardizing the competitive advantage that is supported by Best-in-Class REFLM performance. Technology To enhance capabilities for REFLM, organizations are increasingly looking to technology tools and services to generate process efficiencies, savings, and

17 Page 17 strengthen the strategic alignment between REFLM and company-wide goals. Deployment of process automation tools has been shown time and again to drive efficiencies and deliver savings. Bolstering Best-in-Class performance is the decision to leverage technology as part of the strategic plan to improve REFLM. Such a strategy occurs 26% more frequently among the Best-in- Class than in Average and Laggard organizations, with specific functionalities being utilized to distinguish performance: A central system of record is 17% to 60% more likely to be utilized by Best-in-Class enterprises. This enables all data and transaction information across the entire real estate and facilities management lifecycle to be centrally stored within a source that is readily accessible. Centralizing data also improves the ability to audit transactions and provides a solution that can be referred to for benchmark information, impacting future costs through improved visibility. Best-in-Class organizations use a centralized, online repository for REFLM documents 26% more frequently than their peers. Such capability within a system facilitates auditing, provides a specific location of reference for such items as lease or mortgage agreements, archived work order records, maintenance records for assets, capital project plans, and strategic planning documents. Leveraging budget forecasting and scenario analysis functionality is 46% more likely to occur in Best-in-Class companies. This allows for greater visibility and decision-making capabilities across the multiple phases in the real estate and facilities management lifecycle, ensuring that the significant corporate spend for REFLM is justified, will benefit the overall operations, and not drain financial resources of the business. The Best-in-Class are 70% to 100% more likely to leverage online functionality for project completion and budget status. This more distinct visibility into an aspect of REFLM that is highly variable (due to the wide variety of capital construction projects that an organization may engage in) involves many moving parts. Different participants and tasks must be coordinated (i.e. contractors, electricians, plumbers, IT, HVAC, etc.) as part of the construction process, which is critical for ensuring completeness and accuracy of projects. Additionally, Best-in-Class companies are over 50% more likely to use automated workflow functionality for development, design, and approval of capital projects. Performance Management Measurement is the key to evaluating performance. Although companies measure a wide range of key performance indicators (KPIs), Best-in-Class enterprises are 30% more likely to measure REFLM performance across the entire lifecycle. This drives their advantage in visibility and allows accurate information about program management to be collected, analyzed, and

18 Page 18 distributed throughout the organization, laying the foundation for pro-active improvement of REFLM programs. The concept of "you can't see what you don't measure" is aptly applied to REFLM. Driving the Best-in-Class advantage in occupancy and utilization is that fact that they are 5% to 20% more likely to include such measure their performance for either of these. Additionally, Best-in-Class companies are up to 68% more likely to measure more complex REFLM performance in such areas as total cost of occupancy, costs per employee move, utility / energy consumption, and hours of operation / down time of space managed, among others. The result has also led to the Best-in-Class being able to leverage data collected across all REFLM phases to deliver savings that are 1.5 to 2.9 times higher than All Others.

19 Page 19 REFLM Technology: Is There a Focus? The Best-in-Class demonstrate a higher acceptance of and propensity to leverage REFLM technologies than the Average and Laggard competitive sets across all phases of the real estate and facilities management lifecycle (Figure 9). Figure 9: Priority of REFLM Technology Investment (1 - lowest to 5 - highest) Real Estate Management & Administration Project Management Asset Management Facilities Management Facilities Maintenance and Operations Strategic master planning Best-in-Class All Others A real estate and facilities lifecycle management solution will help us to achieve faster construction cycle times and reduce project estimation error. We are hopeful that it will allow us to better deal with the challenges of remote area construction management. ~ Business Process Management Director, Government Agency The gap between priorities for investment in specific REFLM technologies is modest from top to bottom, highlighting the holistic view that companies take when selecting a REFLM solutions. The importance of an integrated lifecycle approach to real estate and facilities management is readily apparent; value is being delivered across each stage of the REFLM process through automation and tools currently invested in reflect this goal. Yet there remain subtle and distinct differences. Real estate management and administration can be viewed as the tactical starting point of the REFLM activity, but project management activities are present throughout. Construction projects, whether they are large-scale capital developments or smaller contracting projects, affect the view and outlook of all REFLM phases and their position in the technology investment pecking order reflects the importance placed on it by enterprises.

20 Page 20 Chapter Three: Required Actions Whether a company is trying to move its performance in real estate and facilities lifecycle management from Laggard to Industry Average, or Industry Average to Best-in-Class, the following actions will help spur the necessary performance improvements: All Steps to Success Measure performance across the entire real estate and facilities management lifecycle. Deploying automated tools to facilitate management of the real estate and facilities lifecycle enables a company to improve REFLM performance. However, in order to optimize program performance, companies must develop the ability to measure performance across the phases of REFLM and establish benchmark targets for improvement. The Best-in-Class are 67% more likely to measure enterprise wide performance across all REFLM activities and stages. Laggard Steps to Success Conduct an assessment of real estate and facilities across the enterprise. Measurement of REFLM performance is futile if it is not known what spaces are being managed. Best-in-Class enterprises are 28% more likely to conduct an inventory of their real estate and facilities under management, including evaluations of condition. This establishes a baseline of knowledge so that performance measurement can be fully leveraged to benchmark cost savings and process efficiencies. Leverage an internal group to manage REFLM subprocesses. The Best-in-Class are 8% to 36% more likely to rely on an internal group to manage different. By centralizing management internally instead of relying on third-party providers, a common point of contact and leadership is provided to the rest of the company. This also serves to provide a unifying voice from which any policy changes or process modifications would be delivered. Additionally, leveraging internal management sources reduces the inherent need to establish additional relationship management structures and processes to facilitate an effective outsourcing relationship. Fast Facts Measure performance across the entire real estate and facilities management lifecycle, which occurs 67% more frequently in Best-in- Class companies Conduct an assessment of real estate and facilities across the enterprise to establish a baseline of knowledge against which REFLM performance can be measured Involve C-level executives in the REFLM process to add weight to the value of REFLM and improve support for REFLM initiatives Coordinate REFLM strategy with overall corporate strategy to ensure alignment and ensure strategic value is leveraged Industry Average Steps to Success Involve C-level executives (CEO, COO, CFO) in REFLM. The Best-in-Class are 28% more likely to involve the C-level suite of executives as direct reports for REFLM. Such an organizational capability ensures visibility by the highest levels of corporate

21 Page 21 leadership who are ultimately held responsible for company performance. Access and involvement of these enterprise leaders engenders a desire to drive value from REFLM and facilitates support for program transformation. Leverage REFLM to support strategic position of the enterprise. Average organizations are 13% less likely than the Best-in-Class to ascribe high or even moderate value to the importance of REFLM in the development and execution of corporate strategy. Despite representing, on average, 15% of enterprise spend, Average organizations have not modified their view of REFLM as a strategic differentiator to match that of the Best-in-Class. This hinders Average companies from improving REFLM performance, particularly because they are unable to communicate the true value of doing so. Best-in-Class Steps to Success Align the strategies of real estate and facilities management with overall corporate goals. It is onerous task trying to integrate the wide-ranging strategies for effective REFLM with the expansive and aggressive goals of the overall company. Best-in-Class enterprises are 40% less likely to be challenged by this coordination of strategies, contributing to their competitive advantage and bolstering performance. Provide educational and professional development opportunities for REFLM staff. Well defined processes, executive involvement, and technology all contribute to Best-in- Class performance; but it is the people who are charged with managing the real estate and facilities lifecycle on a daily basis who make the difference. By investing in REFLM staff and encouraging professional growth, companies allow these groups to perform their jobs better and drive performance improvements. Best-in-Class enterprises are 27% more likely to focus on staff education and professional development as a key strategy. Growing the Green Building

22 Page 22 Growing the Green Building As corporate social responsibility initiatives continue to be developed, they also impact REFLM. Sustainability and green buildings, rated 3.7 out of 5 in terms of importance to the real estate and facilities management lifecycle as a prevalent concern. While no companies surveyed have yet constructed or retrofitted buildings and spaces to achieve "green certification," there are numerous strategies being employed to address energy efficiency (Figure 10). Figure 10: Strategies for Improving Energy Management Adjustment of HVAC controls Utilized energy efficient lighting 68% 67% Informal education and / or seminars for staff Utilized light sensors 51% 58% Utilized consultants to identify energy efficiency opportunities Installed or adjusted automated timer to turn lights on / off Negotiated energy contracts with suppliers Upgraded an automated building management and control system 37% 34% 33% 33% The current tact being used by companies is to incorporate green elements into their existing spaces, which is the avenue taken by 53% of respondents. The full impact remains to be seen, but companies are cautiously optimistic, noting a 1% expected decrease in energy consumption over the next year as a result of their green REFLM strategies.

23 Page 23 Appendix A: Research Methodology In May and June 2008, Aberdeen examined the use, experience, and intentions of utilizing solutions for real estate and facilities lifecycle management of more than 90 enterprises in a diverse set of industries. Aberdeen supplemented this online survey effort with telephone interviews with select survey respondents, gathering additional information on procurement outsourcing strategies, experiences, and results. Responding enterprises included the following: Job title: The majority of the research sample included respondents with the following job titles: C-level executive (17%), vice presidents (12%), director (17%), manager (29%), consultants and other (25%). Job function: Corporate real estate and facilities (41%), business development (15%), procurement (15%), business process management (7%), information technology (3%), finance (2%), other (17%). Industry: Financial services (14%), construction / architecture (7%), insurance/legal/real Estate (6%), high technology (6%), and a distribution across 37 other industries. Geography: 66% of the research respondents were from North America, 21% were from Europe, Middle East and Africa, 8% were from Asia-Pacific, and 5% from South / Central American and the Caribbean. Company size: 41% of respondents were from large enterprises (annual revenues above US $1 billion); 22% were from midsize enterprises (annual revenues between $50 million and $1 billion); and 37% of respondents were from small businesses (annual revenues of $50 million or less). Solution providers recognized as sponsors of this report were solicited after the fact and had no substantive influence on the direction of this benchmark report. Their sponsorship has made it possible for Aberdeen Group to make these findings available to readers at no charge.

24 Page 24 Table 5: The PACE Framework Key Overview Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows: Pressures external forces that impact an organization s market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, competitive) Actions the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product / service strategy, target markets, financial strategy, go-to-market, and sales strategy) Capabilities the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products / services, ecosystem partners, financing) Enablers the key functionality of technology solutions required to support the organization s enabling business practices (e.g., development platform, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management) Table 6: The Competitive Framework Key Overview The Aberdeen Competitive Framework defines enterprises as falling into one of the following three levels of practices and performance: Best-in-Class (20%) Practices that are the best currently being employed and are significantly superior to the Industry Average, and result in the top industry performance. Industry Average (50%) Practices that represent the average or norm, and result in average industry performance. Laggards (30%) Practices that are significantly behind the average of the industry, and result in below average performance. In the following categories: Process What is the scope of process standardization? What is the efficiency and effectiveness of this process? Organization How is your company currently organized to manage and optimize this particular process? Knowledge What visibility do you have into key data and intelligence required to manage this process? Technology What level of automation have you used to support this process? How is this automation integrated and aligned? Performance What do you measure? How frequently? What s your actual performance? Table 7: The Relationship Between PACE and the Competitive Framework PACE and the Competitive Framework How They Interact Aberdeen research indicates that companies that identify the most influential pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of competitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute those decisions.

25 Page 25 Appendix B: Related Aberdeen Research Related Aberdeen research that forms a companion or reference to this report includes: Visibility: The Crux of Real Estate Management, January 2008 Real Estate and Facilities Lifecycle Management, June 2007 Accruent Gets FAMIS, March 2008 REFLM: How Did I Get Here? A Look at Process Visibility; July 2007 REFLM: Whose Perception is Reality?; August 2007 Information on these and any other Aberdeen publications can be found at Author: William Browning III, Research Analyst, Global Supply Management, william.browning@aberdeen.com Since 1988, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.2 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500. As a Harte-Hanks Company, Aberdeen plays a key role of putting content in context for the global direct and targeted marketing company. Aberdeen's analytical and independent view of the "customer optimization" process of Harte- Hanks (Information Opportunity Insight Engagement Interaction) extends the client value and accentuates the strategic role Harte-Hanks brings to the market. For additional information, visit Aberdeen or call (617) , or to learn more about Harte-Hanks, call (800) or go to This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc a