COMPASS helps corporate American improve real estate efficiency

Since 1990, Compass Management and Leasing has proven time and time again that it knows how to manage any proeprty in Corporate America to its fullest potential, most recently earning the respect and business of AT&T, Digital Equipment Corp. and Mellon Bank.

It was battered by recession during the first two years of the decade. Now noticeably leaner (and no doubt meaner), it is faced with an increasingly global marketplace where cost-conscious customers require excellence for every dollar they spend, while stockholders demand a thorough accounting for every cent expended in the process.

"It," of course, is Corporate America. Faced with the mandate to accomplish more with fewer resources, companies that comprise this sector of the nation's business scene have gone to great lengths to minimize costs while achieving maximum quality in the goods and services they produce -- a goal that requires the optimal utilization of every component of their organizations.

Nowhere is this trend more apparent than in the way Corporate America treats its real estate. After years of regarding real estate as a largely uncontrollable cost of doing business, major corporations are now increasingly looking for ways to make their president portfolios operate efficiently, effectively and profitably -- in short, more like the commercial portfolios held by traditional real estate investors.

One real estate services company that is providing Corporate America with the ways and means to accomplish these objectives is Atlanta-based Compass Management and Leasing Inc. One of the nation's top five property managers, this subsidiary of Equitable Real Estate Investment Management Inc. is now celebrating its fifth anniversary, which comes on the heels of a three-month period that one company official describes as "the most exciting in the history of Compass."

During the last 90 days of 1994 alone, Compass announced its selection as exclusive adviser to AT&T with respect to corporate facilities management services across the telecommunications giant's entire real estate portfolio; an outsourcing contract with Digital Equipment Corp. that includes management of its Maynard, Mass., headquarters and 1.7 million sq. ft. of facilities in the United Kingdom; and an outsourcing contract to manage more than 4 million sq. ft. of corporate headquarters and regional office facilities for financial services giant Mellon Bank.

Corporations seeking cost savings

"Large corporations are asking how to handle their real estate to make it operate more efficiently and economically," says Compass president and CEO Gary Sligar. Their bottom-line question is "How do we save money on our real estate portfolios?" he notes. "And, from our standpoint, the answer is obvious -- the procedures and systems of commercial management can be adapted and expanded to meet the needs of corporate portfolios."

When Corporate America's concerns about the performance of its real estate first came into full bloom in the early 1990s, "We made a conscious decision to reorient our marketing approach a bit," says Sligar. "We always believed that our core business was traditional property management and leasing, and viewed the corporate facilities management, due to our extensive national client base, as a natural evolution. SO, we decided that we would approach large corporations and talk directly with them about what we can bring to the table with regard to their corporate portfolios."

What Compass brings to the table is an organization with an impressive pedigree, a sizable portfolio, an "ownership perspective" when it on, senior vice comes to handling properties, a broad array of building-related services, an emphasis on decentralized decision making and a focus on performance measurement.

Equitable Real Estate Investment Management, the nation's leading real estate manager for pension funds, created Compass in 1990, a time when property markets were in decline and the investment giant felt that it was time to form "a dedicated entity differentiated by an `ownership perspective' to serve clients' property management needs," according to Sligar.

"We started out with a clean sheet of paper and a 26 million sq. ft. real estate portfolio that Equitable entrusted to us," says Bruce Ficke, Compass senior vice president and head of national leasing and marketing. The charge from Equitable was "your team knows what they are doing," he recounts. "Here is a portfolio of properties that will assist you in establishing yourself in the industry -- now go create an innovative company."

"You know what you're doing -- now go do it," may, at first glance, seem an outlandish way to kick off an operation that now has in excess of 1,200 employees, more than 70 corporate, institutional and investment clients, a 900-building/100 million-plus sq. ft. management and leasing portfolio, and operations in more than 145 domestic cities and 27 cities in the United Kingdom. But it fits right in with the decentralized decision making and employee empowerment ethos that permeates the Compass organization.

"We embrace wholeheartedly the concept and practice of decentralized decision making," says Sligar. Compass has always been a very decentralized company, he notes, with the national headquarters playing a supporting role to the 10 major regional offices spread throughout the country. "The role of our national headquarters is that of a source of guidance and assistance, along with coordinating an overall policy that supports the philosophy, quality and consistency of our company on a national basis," he says. But, when it comes to actual market and property-level considerations, "those decisions are made in the field, where the rubber meets the road."

"We might get a recommendation from our New York office that all hourly on-site employees wear long-sleeved uniforms with their names on them, and we find that the other regions are in agreement," says Ficke. "What we do at national headquarters is develop a policy that says `all hourly on-site employees will be uniformed.' But, we don't dictate the kind of uniform, because what is appropriate for New York may well be inappropriate in Los Angeles," he explains. The various Compass regional offices determine the way they individually address and implement policies, adds Ficke, "because we believe in empowering the regions to run their business in response to local market conditions, with national headquarters providing national consistency."

Service providers must be empowered

"Empowerment" is more than a concept at Compass; it is viewed as one of the major means by which a services company remains competitive. "Quality is the price of admission to compete in today's market -- If you can't perform with a level of quality that matches clients' needs, you don't get to even play in the game," says Sligar. And, in his view, quality performance results from employees that are carefully selected, given the means to do the job, and then left alone to do it -- i.e., employees that are empowered.

"Performance comes from a shared sense of employee empowerment," says Sligar. "We focus on creating partnerships with our people on the front lines, because they are the ones that make things happen. This partnership-oriented attitude, which has full accountability for results as an integral component, will continue to be the main factor that fuels our company's success."

To make sure the right people are on the front lines, Compass utilizes what is known as the Birkman Method as part of its employee selection process. "We use this motivational assessment tool for all management-level employees," says Ken Manson, senior vice president in charge of national operations. "We have found it to be particularly helpful, because we can match up its results with what we think we know about the kind of person who succeeds in this business."

Finding successful on-site property managers can be a daunting task. "The generalist property manager is probably the hardest person to find out there," says Manson. "It is fairly easy to find highly skilled leasing or engineering people, because they fit fairly readily defined molds," he notes. But, "The optimal qualities of the generalist manager, the one who makes things happen at the property level, are tough to quantify. You're talking about a fairly broad position that people come into from all sorts of directions. It is a position that needs an individual with a sales side to work with tenants, a numbers side to work with accounting and a mechanical side to work with equipment and systems."

The kind of person it takes to be an effective generalist property manager has changed in the past five years or so, adds Manson.

"This change has occurred partly because of the advent and widespread use of the real estate asset manager," an additional organizational layer that is often placed between the on-site manager and the property owner. "In the case of the property manager, we find this places a premium on, of all things, sales skills," he notes. Managers who have high levels of sales and persuasive abilities "do a much better job of communicating and selling themselves and their programs to the asset manager," says Manson. Indeed, he notes, these individuals "can probably get by with fewer of the other skills, because they excel at marshalling resources and communicating."

Performance levels closely documented

Delegation and empowerment are two terms commonly associated with Total Quality Management (TQM), an organizational model which has had a major impact on American business. Accurate measurement of process and performance is another emphasis of TQM; it is also an integral part of the COMPASS approach.

"Our feeling is that if you can't measure it, you can't manage it," says Ficke. "And what is measured is what gets managed. One of our main distinguishing features in the eyes of Corporate America is our ability to quantify and measure performance, and from there do what we call `managing by fact.'"

"Managing by fact" is a process in which every conceivable type of property-level information for buildings managed by Compass -- including data on building characteristics, receivables, payables, work orders, occupancy levels, equipment inventories, tenant surveys and security incidents -- is generated at the property level, input into computers and "swept" nightly up to the Compass regional and national offices. This operating information is consolidated and massaged at the national headquarters, resulting in a data base from which performance benchmarks, based upon the collective experiences of the COMPASS management and leasing portfolio, can be generated.

"We measure all the different functions carried out at properties across our portfolio," says Ficke. "The information is easily accessed by everyone in our organization, so that they can use it to compare any particular aspect of property performance for a single property, or group of properties, against regional, national and property-type-specific performance benchmarks," he explains.

This data also helps answer "the one big question at the end of every day," adds Ficke: "What is the cost per square foot of operating a particular property, and how does that compare with a broad base of similar properties?"

A system like this requires very sophisticated technology, notes Sligar. "For example, we have bar-coding systems implemented in our buildings today," he says. "That means that we put a bar-code label on every major component of every piece of equipment. All this information feeds into a data base, helping us manage preventive maintenance and work order programs, create automated billing and evaluate employee performance based on how long it takes to perform various tasks. We then benchmark all that information on a companywide and nationwide basis. This system allows us to generate statistics -- facts -- and create measures that help us save our owners money."

Compass has just completed rolling out this performance management system, according to Manson, who is in charge of system implementation and maintenance. All information eventually makes its way to his office at Compass headquarters. "People originally asked me what I was going to do with all this data," he says. "What I do is send it right back to the property managers, because they are the people at the property who are in the position to make changes. They need to look at the data and see how their property stacks up against the national averages for each performance measure and then determine what adjustments in operations are necessary."

Compass' clients also make use of the data generated by the system, according to Ficke. "Clients prefer to manage by picture, which is a service we offer. We are able to use our performance measurement and benchmarking technology to show them meaningful charts and graphs, giving them a very clear perspective on how their properties are being operated and how this compares with the marketplace," he says.

"We can actually show clients, through the use of charts and graphs, whether or not their buildings are competitive in the marketplace," adds Sligar, "because we have all the necessary data gathered and put into a logical format. Clients, in turn, can quickly make rational decisions based on the information we provide."

Opportunities abound in the future

These are busy times at COMPASS. In addition to an influx of new corporate clients, COMPASS Development, a division of this company, is hard at work on Monarch Tower, a 24-story, 540,000 sq. ft. office building slated for a May 1995 groundbreaking in Atlanta.

In the corporate facilities management arena, "Opportunities abound," says Sligar. Making even further inroads into that market, he notes, is a matter of "convincing the corporate clientele that outsourcing this function is the thing to do, and proving to them how we can save them a lot of money by operating properties more efficiently."

"Until five years ago, very few corporations would consider allowing a firm like ours to operate their real estate -- that was traditionally done internally," says Ficke. Changes in that attitude have dramatically expanded opportunities for management and leasing companies. "Corporate America owns almost 75% of the real estate out there -- it is a tremendous source of business", he notes.

Judging by the comments of at least one newer Compass client, this company stands to capture its share of the corporate business. After selecting Compass, out of an original pool of 20 services providers, to take over the management and leasing of its corporate and regional headquarters, Mellon Bank facilities management vice president John Java was asked what drove the decision.

There were a variety of reasons. "We originally looked at Compass as an outsourcing alternative because of our company's need to standardize operation procedures nationwide, to provide for our future growth, and, most importantly, to help us enhance our cost management of property," said Java. "We chose Compass because of their broad experience, their proven cost controls and their very progressive application of data processing to the industry. And, last but not least, there was a feeling of trust that developed between us through the entire selection process."

Martin Sinderman is an Atlanta-based regular contributor to National Real Estate Investor and Southeast Real Estate News.

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