Strategic facility planning is an ongoing collaborative process that recognizes the importance of place to business success.
Quarterly performance worries, mergers and acquisitions, Sarbanes-Oxley, economic downturns. What business leader has time for facility strategy? Yet businesses, their organizational cultures, and their places of business are inextricably intertwined—so much so that organizational success depends in large part on the alignment of place assets with business direction and the agility of those assets in responding to business growth and change.
However, many companies inadvertently overlook the value of place. From startup tech ventures to the world of multinational mergers and acquisitions, the outcomes of seemingly smart business decisions are often strategic errors of place. Why is this?
| Wisconsin Place, a mixed-use project in Chevy Chase, Maryland. Organizational success depends in large part on the alignment of place assets with business direction. |
Pace is one reason. Every day the stock market assesses business worth. Performance details are scrutinized every quarter, and business decision making sets its pace accordingly, responding swiftly to market conditions and opportunities. Yet places of business respond only gradually to business impetus. Site selection, acquisition, municipal approvals, construction, lease terms, demolition, and reconfiguration are all lengthy processes that can leave business plans flat-footed.
Business uncertainty also contributes to business/place misalignment. Concerns about the future—business viability, product success, and competitive position—can hinder an organization’s ability to anticipate, or even consider, long-term place needs. Indeed, the space between business failure and explosive growth is one that many companies occupy, however uneasily. Relegated to reactive mode, they repeatedly make the most expedient, incremental place decisions.
So companies often consider decisions about place only as an afterthought to business moves, despite the formidable presence of these assets on the balance sheet, and place becomes an accident of business instead of the workhorse the level of investment in it rightly demands.
Companies are routinely involved in facility planning processes of one sort or another. Daily tactical processes address minor stresses and strains that business dynamics call on facilities to ease. And occasionally larger but straightforward changes like headcount growth lead to planning a facility expansion.
But strategic facility planning is an ongoing collaborative process, not a tactical plan that lays out a linear sequence of events and responses. It addresses more complex business place dynamics by outlining multiple possible business scenarios and planning a physical envelope and financial model to accommodate the more likely ones. The aim of strategic work is to have an effective ongoing planning team and process, not one plan that rigidly sequences business events and place development.
The collaborators in successful strategic planning processes often include visionary corporate leaders, financial planners, business unit leaders, and real estate and facility planners. The dialogue among them at the core of this process can yield fruitful common understandings. These shared visions of how the business and its places work together offer a platform for:
- understanding current and future interplay among organizational units, operational functions, facility types, and locations;
- establishing physical envelopes and financial models to accommodate likely business futures and place needs—expansion or contraction, site and facility differentiation, multisite coordination, and consolidation or exit; and
- enhancing business planning processes by providing place clarity and input.
Places change more slowly than businesses these days. Consensus on facility strategy anticipates this and helps deliver facilities in step with business needs.
Many attempts at facility strategy fail to account for the dynamic nature of business/facility alignment, but that does not mean facility planning does not work. Effective planning frames the likely boundaries of the dynamics and circumscribes a facility envelope that can accommodate the more likely business directions.
Bookends, ranges, and probabilities are much more important to developing such an accommodation envelope than an argument over detailed headcount projections five years out. Anticipating multiple business scenarios is more important than focusing on one of several potential outcomes.
To be effective, planning must be more about the dynamics and less about specific conditions and fixed solutions. It must involve intuitive business leaders with the vision to articulate and assess multiple business futures. And it must employ facility and financial planners who understand the broad sweep of site and facility conditions and implications.
Arbitrary two- or five-year outlooks are not responsive to business dynamics. More useful is modeling of business trends or events that likely would trigger business place changes. It does not matter whether the triggers come in two, five, or ten years as long as the accommodation envelope anticipates them.
A capital expenditure envelope is an equally important component of a strategic accommodation plan. The current trend toward multiyear budgeting supports the longer-range capital planning that goes hand in hand with strategic approaches to facilities.
Business and facility situations vary widely, but several core processes are essential to successful strategic facility planning. By projecting multiple future business scenarios against facility opportunities and constraints, the planning team can see the implications of business dynamics on place configuration—and the place envelope needed to accommodate the business needs becomes clear. The following are the essential steps in the process.
- Build future business scenarios. Set up parameters for generating the scenarios first. Establish bookends to the scenarios by deciding whether to include nearly certain, likely, or even remote possibilities. But do not be distracted by timing questions as you develop future business scenarios. Focus on the sources of business change and build scenarios from them. Determine which new business situations might signal change in facilities—a new business direction, growth or contraction of existing businesses, discarded businesses, technology in-licensing or out-licensing, mergers and acquisitions. Perhaps changes will come from shifts in market geography, production cost structures, or talent and labor markets.
- Identify place opportunities and constraints. Start by evaluating current business places. Work your way from overall portfolio to various sites to individual buildings, evaluating their suitability for accommodating current business needs. Identify gaps. Consider how their performance or fit with the business might be optimized, including repurposing. Thinking forward, determine which place situations suggest a future opportunity or constraint for the business—such as location of talent, local cost structures, geographic access to markets, site and building capacities, zoning and development rights, site infrastructure, or facility condition and functional suitability.
- Identify triggering situations and their place impact. Next overlay multiple future business scenarios against facility opportunities and constraints. Determine the impact on facility needs and configuration and identify the specific place changes needed to accommodate each business scenario. Determine which combination of business and facility events has the most severe impact on place. Identify events or situations—from business and facility sources—that would trigger place changes. What are the most likely sequences of events? Examine the scenarios for overlap. Do the overlaps compound the place impact or create opportunities for efficiency?
- Plan the accommodation envelope and develop financial models. Depict the most impact-intensive combination of scenarios and place changes in physical and financial terms. This accommodation envelope should show how the more likely place changes could be fulfilled. Identify the kinds of sites and facilities that might be needed and those that are no longer needed. Are there opportunities for repurposing? Quantify and qualify the needs—the amount of space needed, the type, and where it is needed. Develop financial models to support the envelope and incorporate them in long-range financial plans. What are the order-of-magnitude capital and expense needs for construction or leases? Try to keep the plans flexible on timing and sequencing. Unlike most master plans, the best accommodation envelope is the one that allows each scenario to be realized without depending on others.
- Document, communicate, refresh. Document the process and work products of the team. Establish regular and transparent communication with the team on business direction. Routinely refresh the process and update the conclusions.
Attention to the ongoing process of reaching consensus on facility strategy requires a commitment of organizational time and energy. Yet addressing facility strategy proactively and collaboratively brings a shared understanding of business opportunities and place constraints. It also bolsters business planning, grounding it in the bricks-and-mortar realities of place.
Neither rigid nor reactive facility planning processes serve the dynamic interface between business and facility needs. A strategic approach to place requires an ongoing dialogue that flexibly and proactively addresses future business scenarios. The key is to make place considerations an instinctive part of your business strategy and decision-making processes.
Thinking proactively about place is challenging for growing companies. Reactive facility management is the default. Yet in view of the importance of place to business and organizational success, can your company afford not to think differently about place?
