David Lawson – Facilities Management 2003
Cost cutting is the universal mantra nowadays. Trim a few contracts here, shake out a couple more pounds there, figure out how to squeeze that gallon-sized department into a pint of space. Rarely is a manager allowed to drive a coach and horses through the heart of a business. Christine Garvey was handed just such a set of reins and the ride is proving an exciting challenge.
Deutsche Bank, one of the world’s top financial groups, issued familiar orders a couple of years ago to cut costs in the wake of a global downturn. Concentration on core activities and rationalisation made the headlines but there seemed plenty of scope to fiddle around with a sprawling estate scattered across 50 countries comprising almost 40m sq ft. Garvey had other ideas.
Before joining the bank she had already made a name shaking up property at Cisco, a similar world leader with 17m sq ft of accommodation, and told Deutsche that fiddling was not the right option. It had to be a coach and horses. And in two short years she, along with former Cisco colleague Simon Ward and head of FM Andy Furlong, have whipped the horses into a frenzy. A whole layer of management has taken over, new FM and real estate suppliers appointed and a complete rethink is under way about how space is used.
Perhaps the most remarkable thing is that Deutsche’s Vorstand [executive committee] agreed to such massive changes. Job cuts and property sales normally grab the attention of managers under pressure to make cuts, with FM relegated to the shadows. But Garvey’s corporate real estate service [CRES] team pointed out a few simple truths.
While staff makes up 60% of costs, redundancies are costly and can leave gaps when the economy swings up again. Buildings are also hard to eliminate, particularly when most cities have acres of empty space available. FM changes, on the other hand, can have an overnight impact. Not by ‘slash and burn’ policies, however. Garvey points out there that hacking services can risk any company’s efficiency and long-term strategic goals. The secret is to move to a lower cost base by re-engineering and reorganisation.
Some idea of the potential emerged just by looking at the bank’s home territory. It had 2500 contracts for dealing with M&E services in Germany alone. Today they are only 10. Rapid transformation into a global empire also brought baggage. In London, for instance, Deutsche’s merger with Bankers Trust left the group with an estate of 30 buildings, which has now been halved.
A similar picture was repeated across the world. CRES costs ran to more than Euro1.5bn a year, but there was no strong central control. Each country had a different way of doing things and every business unit handled its own leasing and servicing. Tracking and comparing those costs would be an immense task but it had to be done. ‘You can’t control costs unless you know what you are spending,’ says Garvey. ‘You have to take ownership of the budget.’
The first priority was to draw everything under a single umbrella. Garvey created a global management structure in three tiers. The top level of the pyramid handles strategic planning, matching CRES goals to those of the core business rather than vice-versa. Below that the business is divided into world zones which are treated as ‘customers’. Furlong is head of all FM and technical services and, in turn, runs a three-tier operation, overseeing four heads of geographic zones and nine operational managers below them.
The key was to remove responsibility for decision-making on real estate and FM from individual business units. The existing structure had some controls but after drilling down into the web of leases and contracts, the team found a sub-culture of ‘shadow’ services, where departments had sorted out their own perceived needs in a completely ad-hoc way. ‘The secret is to give business units what they need – not what they want,’ says Garvey.
But the team couldn’t do anything until it knew what was being spent. That took a year of ‘program harvesting’ - literally feeding information on costs and constraints into spreadsheets. To make sense of all this, Bricsnet Building Centre, an information management tool, was bought off the shelf and tweaked to Deutsche’s needs. ‘We found a huge proliferation of programs being used by different sections which just could not talk to each other,’ she says.
Bricsnet integrates real estate management information into a global structure across the building life cycle, using tools such as calculating occupancy costs from on-screen plans, managing leases and handling online serviced requests..
Once it had this information and control, the CRES team could sketch out strategies and potential savings. These included:
Underlying all this was a philosophy that Deutsche Bank had become a global business so it needed to operate with global standards and policies. For instance, guidelines have been set for office space: a group executive is allowed 24 sq metres, an ordinary office 13.5 sq metres, a front office workstation desk 12 sq metres and a trading desk 7.5 sq metres.
Garvey admits this kind of imposition can raise hackles, particularly in organisations where managers have previously been allowed more freedom. ‘It needed a lot of negotiation with the chief operating officers of the eight business units,’ she says. It helped that the figures were not picked from the air but from detailed analysis of Deutsche’s existing work practices, its proposed changes and comparable industry standards.
They form part of a program called Smart Office. This is a fundamentally new way of helping people work more effectively in space that is designed around their key work activities rather than a hierarchy of title, says Garvey.
It combines real estate, technology, management and human resources to reduce space, cut churn and support the development of new kinds of working such as teaming and knowledge exchange. An experiment in Germany has already shown the potential by cutting overall occupancy costs by 18% . As the system spreads through the bank, rents are expected to fall from 58% to 44% of overall costs, and services like cleaning and energy from 35% to 26%.
The CRES team is practicing what it preaches. Adopting Smart Office reduced the amount of space required for its 35 staff by 40%. But benefits will have to be sold to operating officers around the world. ‘It is more a culture than a program,’ says Garvey. The initial figures produced in Germany will please the Vorstand but individual managers will need to see how the approach works for them through regional discussion forums and education. Changes are also likely to be geared to times when offices are being moved or consolidated.
In the meantime, FM changes are already picking the ‘low-hanging fruit’. Contracts have been renegotiated to make quick savings on simple things such as the amount paid per page for copying. Service re-engineering is also well under way as the central CRES team sets global standards for the kind – and level – of services each business unit should receive.
Some of these savings are remarkably simple. Take window cleaning: ‘You have to ask why this takes place every week in London when it is perfectly acceptable every quarter in the US,’ says Garvey. Again she stresses it is a matter if giving business units what they need, not what they want. ‘You have to convince them you do this for a living and know what you are doing,’ she says.
In Germany alone, outsourcing is expected to save almost 32% this year, with the biggest rewards coming from M&E/cleaning/landscaping, followed by catering and mailroom services. Jones Lang LaSalle has been appointed to provide an integrated overview of European real estate while CB Hillier Parker [now merged into CB Richard Ellis] will oversee FM in the UK and Germany. Single suppliers are being investigated for each other country.
Barely two years after the Vorstand’s approval, the team was able to outline these significant results to their CRES peers at Corenet’s global summit in Amsterdam in September. But they pointed out that much work has still to be done. Further consolidation of FM suppliers is on the cards, as are greater use of performance-based fees and pruning of suppliers that cannot meet tough price targets. Furlong is also looking closely at improving the way the web site, GTN, is used to share information and service the business. A great deal of work will also need to be done on benchmarking, performance measurement and – most importantly – measuring customer satisfaction.
Change can be hard to sell, says Garvey. But she points out that it can’t be ignored when working practices are being fundamentally altered. Property services have to respond and the key to success is taking control rather than reacting when it may be too late.
$813.6bn fiscal assets
[5th largest financial company in world]
3.2m sq metres space
Eur1.6bn total annual managed costs
Christine Garvey – global head of CRES
Simon Ward – Strategic Planning & Real Estate
Andy Furlong – Facilities Management