UK: WHAT MAKES A SMART MOVE - RELOCATION. - Relocation 1 - The first of three articles on the subject examines the idea that the office move of the future will cease to be treated as an isolated incident. It will become part of a coherent strategy to sat

by Erik Brown.
Last Updated: 31 Aug 2010

Relocation 1 - The first of three articles on the subject examines the idea that the office move of the future will cease to be treated as an isolated incident. It will become part of a coherent strategy to satisfy organisational needs and to improve productivity.

This feature used to start with a cute introduction based on the old property joke that most companies relocate to within a short drive of the chairman's golf club. But Bruce Lloyd put a stop to all that. Lloyd is head of strategic and international management at South Bank University in London. And he has a whole toolshed of blunt axes to grind about relocation, property and management.

Consider this, for instance: 'Relocation involves a very high degree of property opportunism and it has not had much to do with management in the past. It has worked out well for some companies and badly for others. But the argument against is being undermined by the fact that you can get your property now for next to nothing. The more expensive property is, the stronger the case for getting out of the property business. The cheaper it is, the stronger the case for staying in. In the past, you could afford to be in it because of the expectation that it was going to go up. But very often all the relocating company was doing was taking some of its property profit.' It was a telephone call that took 25 minutes. Lloyd spoke for 23 of them. There was no hesitation, deviation or repetition. He knew what he wanted to say.

'People who work in offices in general have not been properly managed. We are still managing time, not output. In the vast majority of offices time is wasted, relative to what the manufacturing industry would put up with. Many of the studies appear to show that the level of productivity of office workers has not increased significantly in the last 20 years. There are lots of figures that show the level of productivity in manufacturing, but we don't have the same figures for office work. You can't measure it and it is not discussed in the same way that it is in manufacturing. Until that approach is taken, my prejudice is that most office work is extremely inefficient and a hell of a lot of it is unnecessary - but that's because it is not managed properly.'

What has all this got to do with relocation? Plenty. In an ideal world, relocation would only ever emerge as the result of a coherent property strategy. Part of that strategy would be to reflect organisational needs and to improve productivity. But the world is not ideal, and companies move for all sorts of reasons.

Lloyd argues - along with an increasing number of other people - that: 'For an awful lot of companies, an effective property strategy is absolutely critical to their future operation.' It was difficult to tell over the telephone, but he seems to think that 'an awful lot of companies' are missing the point. 'Most service organisations have not taken their utilisation of property very seriously. Property was a bonus,' he says. If they had it, it was going up in value - so much so that it was considered a good investment and they weren't that worried about how efficiently their buildings were being used. It was an asset.

'What has gradually been dawning on a lot of companies is that in difficult times they are forced to ask themselves what business they are in - and, in practice, a lot of them are in the property business but they don't manage it as such. Some have found this out too late. Some have had it found out for them - when they have been asset stripped by others.'

Worse still, chairmen and chief executives - who should have had better things to do - took strategic decisions to relocate (or to capitalise their property profits) and then left it to junior staff to come up with the reasons for doing it, rather than the other way round.

Okay. Most features on relocation concentrate on the balance between the savings in overheads that can be achieved in a move, and the cost of making that move. This article will probably get there in the end. But Lloyd's splendidly radical outpouring is important because it falls slap bang in the middle ground between two of the most important themes in relocation 1993 style.

The first is the way in which companies in a recession choose to look at their occupational property; the second is the way in which the property industry in a recession chooses to supply it. The fact is that recession has forced corporate occupiers to recognise that their property - once, as Lloyd rightly says, regarded as a cash cow - represents up to 50% of fixed assets and anything between six and 25% of overheads. Getting value out of it has suddenly become very important.

At the same time, the property industry has moved up a gear, shifting away from a deals-led business and towards a strategic property consultancy service. The reasons for this move are open to interpretation. Pioneering companies like DEGW, Stanhope and Rosehaugh began to concentrate on occupier, rather than investor, needs and building efficiency a decade ago. Get it right for the occupier, they said, and you'll get it more right for the investor. It made sense at the time and still does, but the rest of the industry has been slow to follow. That is now changing.

Perhaps all that has happened is that the property crash has added a commercial imperative to the logic of a customer-led approach. In any event, it is increasingly rare to find an agent flogging a building on the basis of its wall climber lifts and white Carrara marble entrance hall. These days agents are more likely to talk about productivity, cost-in-use and 'churn' - the relative ease with which staff and their computers can be moved around a building without the operation costing the fortune that it once did.

The property industry has always been long on dealers and short on gurus. It's the nature of the business. But the gurus are now out in force: and where the property industry can't generate its own, it will borrow - very often wisely. Frank Duffy of architects DEGW achieved guru status some years ago. But that doesn't stop him borrowing. In a recent - and very well received - article entitled A Vision of the New Workplace (co-authored by Jack Tanis of the American company, Steelcase Inc) he quoted W Edwards Deming, Peter F Drucker, Tom Peters, Michael Hammer, George Stalk Jr, Charles Handy and several more.

It was, in more ways than one, a meeting of minds. 'The key to the design of the new working environment,' the article ran, 'is productivity - of both workers and, just as significantly, of space.' It went on: 'Everyone involved in the process (of supply) - architects, designer and suppliers - has lost sight of the true customer. For one reason or another each is cut off from the office worker. The causes of this are numerous and include the inability to respond appropriately to changing user needs, as well as the inability of the client to measure the value of design and the physical space impact on the organisation's effectiveness.'

If we don't watch out, Duffy and Tanis said, we will carry on building offices that are more suitable for the first decades of this century than for the next. 'We are in danger of fitting out the wrong buildings with the wrong office environments, which are more capable of suffocating initiative than of stimulating invention.'

So, to return to the subject of relocation: there is a growing appreciation among both occupiers and suppliers of commercial property that the company that is relocating because it has no alternative is the unfortunate victim of a nasty corporate accident. Property and management strategy are knitting together nicely, and the results are - to say the least - interesting.

Companies that have huge operational property portfolios, like British Gas, have begun to charge 'internal rents' to divisional and departmental occupiers: a delightfully simple device that quickly reveals how property is being used and misused, and where the true value lies. At the same time, most of the major surveying practices have formed corporate property teams whose work - finally - sets relocation in its proper perspective.

Frank Eul, director in charge of consultancy at DTZ Debenham Thorpe - a large UK firm of commercial property advisers, explains: 'Relocation is only the implementation of a decision: it's a consequence ... and it's right at the end of the line.' That line starts with a recognition that property can optimise business efficiency, and can even be used to improve profits. Property strategy may include relocation, but only after detailed analysis and careful thought because it is expensive and the pay back can take years - up to seven years, on the latest estimates.

Eul was once the youngest industrial development officer in the country - at Sheffield - and has a reputation for speaking his mind. In a recent memo to some of his co-directors at DTZ (which, you will recall, makes a living from property) he described property as 'merely an umbrella' for business activities; a simple statement that kicks him up there with the Duffys and Lloyds of this world.

The memo went on: 'Of all the problems involved in the corporate move, the human issues are the most important. Corporate relocation involves career change, for better or worse. Corporate relocation involves family upheaval, which in itself has an effect on business efficiency. The emotional cost, in human resource terms, of social upheaval, including loss of friends, changes of school and, most importantly, loss of 'safe havens', such as church, societies and golf clubs, has to be costed and taken into account in the upheaval process.'

This gets straight to the nub of a problem that bothers everybody. For the new age property strategist, relocation has been a consequence of strategic thinking, which was rare; bad management (the urgent property problem ignored until it became critical); crisis management (the resolution of union problems - as in Fleet Street - or the urgent need to dump staff or out-moded working practices); property opportunism (as described by Lloyd); massive, unco-ordinated expansion (another management problem); and the chairman's love of golf (or similar arbitrary measure).

But there is a growing feeling that in the medium-term future relocation will be driven by human resources issues, by changes in organisational structures and technology.

Of these, the human resources issue is - as Eul says - the most important. It is also the easiest to pin down. Chartered surveyors Strutt and Parker make the valid point that service industries contribute more than 60% of GDP to most European and Northern American economies, and that the key to service business is the recruitment and retention of staff. The impact of the 'demographic time bomb' means that the total population within employable bands is set to fall by four per cent by the year 2000. The message is simple: if you want to retain the people advantage, you had better start looking after your people. This is the flip side of something Lloyd had said about productivity in service industries. 'The need to cut back has forced many companies to look for the first time in 15 years at the real results of what they are getting from the workforce,' he said. 'That pressure is likely to continue over the next 10 years - because that's where the growth is supposed to come from, that's where people work now.'

Changes in organisational structures - new patterns of work - should, according to Duffy and Tanis, have the potential to change the landscape of work.

That implies new forms of office that 'used correctly can accelerate organisations in their pursuit of wealth-generating knowledge'. And if you want to know what 'the landscape of work' means, Duffy and Tanis offer as an analogy the way in which containerisation changed the shape of port operations.

Technology, on the other hand, is directly related to both human resources and organisational change. For example, the Henley Centre for Forecasting says that most people, given the choice, would live in a country village or a small town and are increasingly open to suggestions that they should work from home. Technology, in those cases, is the enabler.

Teleworking and telecommuting may still be future speak, but office and desk sharing are effective realities for companies such as IBM. And commercial property developers are just waking up to the fact that although the collapse in demand for offices is just part of the cycle, there may be a longer term reduction in the need for offices as a result of management and technological change.

None of this makes the relocation industry irrelevant: companies will still move, land and buildings will still be provided for them and specialist relocation consultants like Black Horse and Hambro Countrywide will still do what they can to ease the pain and the expense. But if the property strategists have their way relocation will cease to be treated as an isolated incident, and will instead be absorbed into a seamless assessment and reassessment of needs, value and efficiency, which recognise finally that property is a long-term management issue.

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