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There is not a single business that is not affected by the economic crisis to some extent – falling sales and profitability, reduced asset values, lack of available capital, liquidity problems and exchange rate volatility. In this unprecedented environment every organisation is challenged to reduce operating costs quickly. As the cost of providing the workspace is a significant proportion of the total operating cost of any business, this is an area which must be subject to special scrutiny.

For Real Estate, Workplace and Facilities professionals, the challenge is to take cost out quickly, whilst ensuring critical business functions continue to run smoothly and avoiding any poor decisions that may have high cost implications when the upturn eventually comes. Make sure you sweat your assets - look at them from every angle – are your outsourcing and infrastructure strategies impacting every dollar spent?

1. Immediately cut back on your discretionary expenditure – carefully.

Service Levels will have been set after careful consideration of the implications on business continuity and compliance - impulse reductions may have serious and unforeseen long term repercussions.

2. Understand your portfolio. (1)

It is surprising how many businesses still do not have full visibility of how many properties they have, how they are being used and what lease liabilities and opportunities exist.

Update your register of properties and leases. Do you have lease breaks pending that may enable you to renegotiate or exit the lease? If you need the space, don’t forget to consider moving to monthly rental payment to ease your company’s cash flow.

3. Understand your portfolio. (2)

Some companies may have a current register of properties and leases but do not really understand how the buildings are utilised. Headcount reductions will present opportunities to optimise the utilisation of workspace. Undertake a quick space utilisation study – fast track with real-time workplace technologies. One of the most under-utilised areas of any portfolio is the executive suite – dare to challenge this one!! Reduce portfolio footprint fast - dropping properties and working smarter actually has more impact on reducing costs than simply cutting variable costs alone. Less real estate means lower rents, utilities, labour and service costs.

4. Challenge your work-style culture.

A workstation will typically cost around $14,000 per year. Alternative working styles – desk-sharing, hot-desking and home working – could shed thousands of workstations and save millions of dollars. Fundamentally review your allocation of space – the demand of the current working environment is increasingly for more collaboration space and less personal space.

5. Challenge service levels.

These will have been set in better economic times, based on assumptions of what was important then in each building– brand identity, customer experience, employee experience, business continuity or compliance. This will have changed. Customer experience will probably have grown in importance as retention of customers becomes critical – maybe employee experience is now less important as headcount falls.

6. Eliminate duplication in service delivery.

It is a useful exercise to map all the resources - both in-house and with suppliers - involved in service delivery. The more suppliers you have, the more interfaces there are and the more resource that goes into managing the interfaces. Different suppliers have different processes and different cultures which need to be aligned. Each interface creates duplication and cost.

7. Outsource what is non-core.

This is another area where past decisions - on what is core and non-core – may no longer be valid.

8. Challenge the outsourcing process.

The outsourcing process can typically extend over twelve to eighteen months and use up large quantities of internal or costly consulting resources. Choose a reputable supplier with a good track record and negotiate a contract which can deliver benefits in a few weeks. 

9. Be the best at sourcing. 

Be the best at sourcing – consolidate your supplier base, leverage procurement across borders, and with lower commodity prices start with contracts which have a high volume of materials and a regular turn-over of parts. Make sure that you are not putting your business at risk by depending on suppliers that do not have a sound balance sheet.

10. Don’t forget your carbon footprint.

The current consensus is that the planet has about twenty years to significantly cut back on greenhouse gas emissions before global warming will cause new natural mechanisms to kick in and accelerate climate change. Legislation and regulation in this area will inevitable increase over the next decade. Retrofitting large installations will bring significant reductions in emissions whilst saving cost. Be creative – look at things from a fresh perspective – think what if…like arranging off balance sheet financing to replace building technologies and find energy savings to pay for it.

And don’t forget to prepare for the upturn – it will come. By taking these steps you will be able to reap the benefits.
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