Michael Jordan's Weblog

Sound performance management first requires not a 'dashboard' but an understanding of the value an organization is trying to create for its customers. Here is the list of performance indicators that I think all CRE groups should consider. But first, a note on dashboards:

Too often, the department dashboard is only loosely related to the activities performed for customers. This is because a dashboard is often pulled together as a response to upper management and the data on the dashboard are chosen for ease of collectability instead of for their value as true performance indicators. This is the "look for the keys under the streetlamp" phenomenon -- that might not be where your keys are but the searching is certainly easier. The dashboard should not come first; the requirements for customer value-add should come first.

By definition, a CRE organization is a support function for a business (unless your business is corporate real estate). Managers of support functions should make themselves familiar with the Kano Model of customer requirements categorization. This is because the majority of what business management wants from support functions falls into the category of "threshold" requirements (aka "dissatisfiers."). These are customer requirements that are minimum performance standards. In other words, if you work in a corporate support function (IT, HR, Finance, CRE...) you are most likely to have a job that usually only gets attention from business management when something goes wrong. This is an important concept to keep in mind when deciding what to measure. I'll explain why in a moment. The value-add of CRE organizations should be expressed in two primary categories:

1. Quality of financial performance
2. Quality of the employee work environment

These two areas are important. And, although they are interdependent, they should be monitored separately.

Quality of financial performance in the CRE world is long and short term operating expense and capital investment. It is largely a function of the size of the portfolio (# square feet) accounting for both active and inactive (reserved) square footage. The cost of carrying unused capacity ($) is also a useful metric to watch.

Density/Utilization is an important performance indicator of any asset and can be expressed in # People per seat and/or # square feet per person. At Sun (and at other large companies) this is not as straightforward as it seems -- some "people" are listed in the HR database but do not require a seat under any circumstances (e.g., third party contractors). It's probably not a good idea to include them in the calculation. Sun's CRE department actively manages to a People/Seat ratio in designing space because we assume that, thanks to our flexible work program, it will be greater than 1:1 -- in fact, our Sales VP just committed to a 3:1 ratio in our field offices, recognizing that sales staff are normally out of the office and can share workspace in the office. Sun has a working hypothesis that when density gets low enough, employee morale suffers.

For work environment quality I think the best metrics are defect and failure related. In other words, what is the rate at which something goes wrong (this is related to my statement above about threshold requirements)? For CRE groups this is normally some kind of tracking of fix-it requests through a call center. As long as that number is normalized per employee or per some other factor, it's probably good enough. I would suggest that to reach the next level of sophistication, however, that the first thing a CRE group should do is categorize their space: manufacturing, administrative, engineering (labs), and sales space each has different uses and, therefore, requirements. CRE groups recognize this in design and construction when determining how to marry form with function. The same concept applies to performance. For example, a carpet in customer-facing sales space has a lower threshold for what is "worn out" than the same carpet in administrative space.

There is a lot of flexibility in measuring defects in work environment quality, e.g., a DPMO metric (defects per million opportunities) or a MTBF metric (mean time between failure). Both require first understanding what your customers value and what comprises real failure to provide that value. (By the way, assigning dollars to these defects to create a cost of defect metric is a good way to combine the financial performance and employee work environment categories of value-add.)

In summary, if you define customer requirements in both the financial and work environment categories and simple metrics to match, your dashboard will be a true picture of CRE performance, not just a box-checking exercise for upper management. Maybe now we should talk about data collection...(next time).