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Presented by:CoreNet Mid-Atlantic Chapter

13 September 2012

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Introductions

Moderator: Janise Nichols, Tenant Logistics Manager, GSA

Panelists: Sheryl Etelson, Strategic Facility Planner,

Lockheed Martin Eric Thorpe, Managing Partner,

Terra Novo Partners

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Corporate Real Estate 2020

CRE 2020 was a year-long project that has brought together hundreds of CRE global thought leaders to analyze the current and future state of our industry. Reports include interviews with and direct hands-on input from more than 280 CRE executives, service providers and economic developers around the world. Research has examined a wide range of external and macro-economic, social, political and other influences, triangulating these drivers against trends affecting the globally networked enterprise and CRE itself.

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Overview

Enterprise Leadership findings Partnering with Key Support Functions findings GSA update Group discussion Preparing now for 2020

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Enterprise Leadership: Becoming more effective leaders in our organizations

CRE as Customer Manager and Sustainability Advocate

CRE + IT + HR = The Leader of 2020

Workplace Productivity or, the Holy Grail of CRE

CRE Leaders as External and Internal Agents of Change

Continued Evolution of the Corporate Real Estate Executive

CRE Leaders as Brand Managers

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Where is CRE?

Source: “Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management,” Guadalupe, Li, Wulf, Working Paper 12-059, Harvard Business School, 2012

The average number of CEO direct reports doubled over this 20-year period. About 70% of that increase was in functional rather than general managers.

1986-1990 20060123456789

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Functional ManagersGeneral Managers

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By 2020, Senior CRE Leaders Will:

Be competent in the core business and possess a skill set that is diversified and cross-functional. Advocate sustainability.

Champion the integration of leading-edge technology into real estate and workplace operations and into the workplace itself.

Evolve from subject matter specialists focused on execution to integrators, change agents and strategists.

Lead the development of improved corporate solutions that elevate the brand, promote the culture and assure employee engagement.

Champion change in the supply side of the service industry.

Be able to measure the impact of workplace infrastructure on business units and the enterprise.

85%

82%

79%

68%

52%

79%

Average = 74%

Enterprise Leadership – 2020 Survey Results

Senior leaders will champion change in the supply side of the service industry, including more innovative partnerships and the seamless integration of internal and external resources globally.

Strongly Disagree Neutral Strongly Agree

1%

8%

23%

50%

18%

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Microsoft – One example of championing change in the service provider industry

“Our model is purposeful in saying that we wanted to have a simplified, integrated, one-company-to-partner-with strategic relationship at the same time we acknowledged that there seems to be a devaluing of global reach. After pushing for a greater span of execution with firms in brokerage and in project delivery we came to the conclusion that we were getting less than optimal execution, intellect and knowledge and pricing by going toward geographic span.” Chris Owens, Microsoft

Enterprise Leadership – 2020 Survey Results

Strongly Disagree Neutral Strongly Agree

4%

12%

33%37%

15%

Senior leaders will be able to measure the impact of workplace infrastructure on business units and the enterprise.

Do you believe that Real Estate and Facilities have an impact on organizational productivity?

Source: “Productivity Metrics,” CoreNet Global Research, 2011 11

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The Productivity and Innovation Equation

Source: “Innovation and the Workplace: Learnings from the SLCR Forum,” Howder, Myer and Thorpe, The Leader, November/December 2012

“Answering the question of how much impact workplace has on workforce engagement will require a different level of research and analysis than has been completed to date. In the meantime, leading companies continue pushing workplace design as one direct method of increasing productivity and reaching that essential innovation frontier.”

Driving Global Service Provider Integration Microsoft

Inspiring Partnering Practices in 2020 Report

An Early Adopter of theGlobal Integration ModelProcter & Gamble

Integrated Team Launches Agile Workplace Unilever

A Collaborative BusinessPartner in a Shared ServicesEnvironment Pacific Gas & Electric

CRE at the Frontline ofWorkplace Change eBay

Case Studies

Project-Based Integration,An Industry Proven ModeRed Hat

Leveraging ProgramManagers to DriveFunctional Integration Shell Oil

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(nū'klē-əs, nyū'-) n., pl., -cle·i (-klē-ī'), or -cle·us·es.

A central or essential part around which other parts are gathered or grouped; a control center.

Introducing the “Super Nucleus”

Summary Points Over 60% of survey

respondents support the concept of a super nucleus

Companies are at varying stages in their SN development

CRE’s are comfortable with concept because the collaborative nature of their roles

Existing partnerships provide CRE leadership with a unique opportunity

Greatest challenges include internal politics, integration of different functional areas and overcoming traditional silos

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“…Today’s model of integration requires companies to address the needs of their work force and workplace in a way that provides the best employee experience and the greatest operational value.” – Sodexo, Workplace Study 2011

Formation of a “Super Nucleus”

Summary Points Collaborating on major

projects builds partnerships and lays the groundwork for more formal integration in the future.

For many, the path to a super nucleus will be a gradual — and challenging — process.

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“This natural progression makes sense.” - Jim Ware, former Harvard Business School Professor

“I think the idea is absolutely right…What I find surprising is how slow change has happened.” - Michael Joroff, Senior Lecturer at MIT

“We do see a general movement toward this sort of centralized super nucleus…But I think different industries are moving at different speeds and levels of maturity toward that model.”

- Francesca Jack, Director of Strategy at DEGW

Graphic Source: Cassidy Turley

Formation of a “Super Nucleus”

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Emergence of New Integrated Workplace Leadership

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Summary Points• Managing and leading an

integrated workplace– Bridge functionals – Leverage collaboration

• Leadership needed to inspire collaboration

– No “one size fits all”• CRE as leader of the Super

Nucleus– Precedent?– Tactical to Strategic– CRE across the enterprise

Fact: Almost 75% of survey respondents believe new integrated workplace leadership will emerge by 2020.

Will new integrated leadership be required?

Strongly Disagree

Neutral Strong Agree

3% 6%

21%

40%30%

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Summary Points Delivery of support function

services will be enhanced by the greater collaboration and integration of support group functions

Primary role of the legacy support functions will remain delivery of services.

Service Providers will continue to be leveraged to deliver services more efficiently.

Survey respondents believe that service delivery will continue to be of critical importance.

Continued Importance of Service Delivery

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Summary Points Measuring the effectiveness

of the Super Nucleus presents challenges

Today’s functional targets are the norm

Migration to wider and unified performance targets is expected

Balanced score card approach is an option

Biggest Challenge? Still a work in progress!

Sample Metrics: Total (Support) Cost per FTE, as a % of Revenues, as a

% of Total COGS or OPEX Organizational Productivity/Efficiency Ratios Business Readiness (i.e., for M&A) Employee Attraction/Retention Ratios Workplace Flexibility Headcount per seat ratio

Graphic Source: Cassidy Turley

Emergence of Joint Objectives and Unified Metrics

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Case Study: The Procter & Gamble Co.

An Early Adopter of the Global Integration ModelHow We Got There

1999-2002Creation of Shared Services

• Service consolidation& basic infrastructure• Re-site services to central locations

2003-2005Building a Progressive Business Model

• Strategic sourcing with external partners• Run our services as businesses• Business Service and IT integration

2006-2009Agility, Flexibility & Change Anticipation

• Dramatic IT-driven innovation• Even greater reduction in costs• 3-fold increase in organization capacity and flow-to-work

2010 and BeyondGBSe – Running Simpler, Flatter, Faster

• Focus on key audiences: Employees, functions and BUs• More dynamic identification of priorities• Scaled capabilities to build, operate and deliver GBS

services

Source: The Procter & Gamble Co.

GSA Update

Continue to demonstrate value Continue to align w/ real estate partners

– Service Providers– O + M– Brokers

Unified business functions

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GroupDiscussion

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Future Research

1 Source: “Upskilling the Corporate Real Estate Organization,” CoreNet Global Research, 2012

Preparing NOW for 2020

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Our preparations begin and end with leadership:

1. Think broadly -- know the business of your company’s business and speak its language

2. Recruit and develop tomorrow’s CRE leaders

3. Be a strong and effective partner with the business units and other infrastructure groups

4. Identify opportunities by thinking beyond the functional boundaries of CRE

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APPENDIX

Access the entire CRE 2020 library at: http://www2.corenetglobal.org/knowledge_center/

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Enterprise Leadership:Professional Leaders InterviewedAllstate InsuranceMichael (Mike) Thomas, Vice President,Administration and Real Estate

Bank of New ZealandGarry Pellett, Head of Properties

ChevronNigel Harris, MCR, SLCR, Senior Real Estate Advisor

Ciena Corp.Mark Gorman, MCR, SLCR, Vice President of Corporate Real Estate and Facilities

CiscoDavid Wagner, Vice President, Finance,Workplace Resources

Coca-Cola RefreshmentsMatthew J. (Matt) Fanoe, Vice President of Real Estate

Deutsche Bank AGRick Bertasi, Managing Director, Global Head of Corporate Real Estate and Services

Honeywell InternationalRichard (Rick) Kriva, Vice President of Global Real Estate

InVentiv Health, Inc.Erica Chapman, Esq., MCR, Vice President of Real Estate & Facilities

Iron MountainSarah K. Abrams, Senior Vice President, Head of Global Real Estate

Johnson & JohnsonMerton (Mert) Livingstone, Vice President of Workplace Solutions

McKessonFrank Robinson, Vice President of Real Estate Services

MicrosoftChris Owens, MCR, General Manager ofWorldwide Real Estate

Procter & GambleBrian Banke, BCCR, SLCR, Global Real Estate Portfolio Manager

Royal Dutch Shell plcMike Napier, Executive Vice President for Real Estate

Sage Software, Inc.Rachel Blankenship, MCR, Vice President of Corporate Real Estate Management

Sony ElectronicsMark Nicholls, Chief Administrative Officer

T-Mobile (U.S.)Sean Prasad, MCR, Vice President of Real Estate

TelstraVito Chiodo, Director of Property – Australia and International

U.S. General Services AdministrationDavid Foley, Deputy Commissioner, Public Buildings Service

Vodafone Group Services Ltd.Billy Davidson, Group Property Director

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Enterprise Leadership:Team Participants

William (Bill) Alexander, Senior Director, GlobalReal Estate, Tyco International

Girish Awachat, AVP – Infrastructure Services &Business Continuity, Principal Financial Group

Irv Baker, Director of Facilities and Real Estate,Vendor Resource Management

Peter Baugh, Vice President Corporate Real Estate, Canadian Tire

Donald (Don) Becka, MCRRick Bertasi, Managing Director, Global Head ofReal Estate, Deutsche Bank AG

Ronald (Ron) Blanken, VP Philips Real Estate,Philips

Jonathan Cameron, Director, Brattle Cameron Ltd.Trish Clarry, MCR, V.P. Real Estate, Scotiabank

Michael Creamer, Head of EMEA - CIS, Cushman& Wakefield

Billy Davidson, Global Property Director, VodafoneGroup Services Ltd.

Pankaj Dhume, Vice President Global CorporateServices, BMC Software Inc.

John Ferrari, Vice President AdministrativeServices, OneBeacon Insurance Group

Rudolph (Rudy) Flores, Director, Corporate RealEstate, TD Ameritrade

Mark Gorman, MCR, SLCR, Vice President, GlobalReal Estate and Facilities, Ciena Corp.

Robert (Bobby) Goudge, Senior Vice President,The Frost National Bank

Kittie Hook, Senior Vice President, Cassidy TurleyFuller Real Estate

Scott Jennings, Senior Director of Client Services,Holder Construction

Restor Johnson, Vice President Real EstateServices, UnitedHealth Group Inc.

Terri Johnson, Senior Director, Global Real Estate& Facilities, Avery Dennison

Ronen Journo, M.Sc. , MCR, Director WorkplaceResources, Europe, Middle East, Africa and Russia,Cisco Systems

Jennifer Marler, Partner, SNR Denton

Michael McMahon, Vice President, Sodexo

Seng Chor Ng, MCR, CPA, Vice President GlobalStrategy and Portfolio Management, ThomsonReuters

Janise Nichols, MCR, SLCR, Manager, IndustryRelations Division, U.S. General ServicesAdministration

Tatsuo Oi, MCR, Associate Professor, WakayamaUniversity

Sean Prasad, MCR, Vice President Real Estate &Facilities, T-Mobile

Ed Rondeau, Real Estate General Manager,Georgia Institute of Technology

Mark Schleyer, Senior Vice President, AT&TServices Inc.

Greig Scott, Regional Director, Corporate RealEstate EMEA/APAC/Japan, Teradata Corp.

Charlotte Teklitz, Managing DirectorProperties, American Airlines

Michael (Mike) Thomas, Vice PresidentAdministration and Real Estate, Allstate

Eric Thorpe, BCCR, SLCR, Managing PartnerTerra Novo Partners

Lee R. Utke, MCR, Senior Director, GlobalCorporate Real Estate, Whirlpool Corp.

Helmut Weih, MCR, Director Global CorporateServices China, CBRE

Tony Shou Fat Wong, MCR, Director WorkplaceResources APJ, Cisco Systems

Martin Woods, Managing Director, CBRE ProjectManagement Asia

Tom Yuen, Vice President Real Estate, ACE Group

Partnering with Key Support Functions: Research Contributors

Corporations: Altisource American Express AT&T Australia & New Zealand Bank (ANZ) Bank of New Zealand (BNZ) eBay Hilton Lockheed Martin Microsoft NetApp Pacific Gas & Electric Procter & Gamble Nokia Corp. Nokia Siemens Networks Red Hat Shell

Consultants: Accenture CASP-R Limited DEGW Future of Work iOpener Institute McCarthy Consulting Pan Europe HR Network TIGNUM CP Analytics The Occupiers Journal

Corporations (cont’d): Siemens AG Unilever Verint Vodafone NZ Yahoo Zurich Financial Services

Service Providers: Cassidy Turley CBRE JLL

Academics: Georgia Tech MIT

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Partnering with Key Support Functions: Project Team Members

Contributing Editors:

Michael Arikat, Mace North America Limited

Dennis Blue, Jackson National Life Insurance

Robert (Bob) Bull, FRICS, Air New Zealand

Sheryl Etelson, Lockheed Martin Corp.

Robert Fitzgerald, RPA, MCR, Nokia Corp.

Iain Franklin, MRICS, B.Sc., MSc, Real Estate Consultant

Judy Laube, CFM, MCR, AT&T

Eckhard von Muenchow, Nokia Siemens Networks

Keith Probyn, CCIM, Shell Oil Company

Craig Robinson, MBA, Cassidy Turley

Jim Scannell, The Travelers Companies, Inc.

CoreNet Global LiaisonDavid Heaton, CoreNet Global

Enterprise Leadership – 2020 Survey Results

Strongly Disagree Neutral Strongly Agree

1%5%

9%

57%

28%

Senior leaders will be competent in the core business and possess a skill set that is diversified, cross-functional and focused on customer relationship and process management. They will advocate sustainability and corporate social responsibility goals.

Enterprise Leadership – 2020 Survey Results

Strongly Disagree Neutral Strongly Agree

2% 2%

14%

43%39%

Senior leaders will cham-pion the integration of lead-ing-edge technology into real estate/workplace op-erations and into the work-place itself to support in-creased employee produc-tivity and an enhanced employee experience.

Enterprise Leadership – 2020 Survey Results

Strongly Disagree Neutral Strongly Agree

3%5%

13%

51%

28%

By 2020, senior leaders will evolve from subject matter specialists focused on execution to integra-tors, change agents and strategists who are viewed internally as an essential, equal partner to and for the business.

Enterprise Leadership – 2020 Survey Results

Strongly Disagree Neutral Strongly Agree

2%5%

15%

46%

33% In support of a global, mobile work force, senior leaders will lead the development of improved corporate solu-tions that elevate the brand, promote the culture and as-sure employee engagement, particularly for client-facing space.

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Survey Results

Source: “Upskilling the Corporate Real Estate Organization,” CoreNet Global Research, 2012