Hermann Miskelly is a senior consultant at Global Productivity Solutions and is responsible for guiding our clients' efforts to achieve Operation Excellent® through Strategy Deployment, Lean, Six Sigma, and Design for Six Sigma (DFSS) implementation, training, and project support. He has also led our development of a comprehensive DFSS program that includes curriculum, implementation, training, and execution support. With Global Productivity Solutions, Hermann has provided training and project support for a wide span of industries and services, including aerospace, automotive, consumer electronics, and medical devices manufacturing and retail, consumer, government, and health care services. His latest initiative has been aligning Global Productivity Solutions with the CRESTAR Alliance to bring Six Sigma to corporate real estate management.  

Hermann has twenty-eight years of experience in product design and development, mechanical engineering, project engineering, program management, new business development and Six Sigma/DFSS process improvement leadership in the aerospace/defense industry. In various roles, he has led or participated in driving development projects from initial concept into production and guided successful Operational Excellence® implementations.

A certified Six Sigma Master Blackbelt and DFSS Blackbelt, Hermann has led Operational Excellence® initiatives at corporate and local business unit levels, applying methods and tools to product development, manufacturing, business system, and service improvement projects. He has trained Six Sigma Blackbelts, Greenbelts, and Champions and has been instrumental in leading many companies in implementing Six Sigma, DFSS, and other process improvement initiatives. He developed internal training materials and led training for Six Sigma Champions, Blackbelts and Greenbelts and DFSS Champions and Blackbelts. Hermann also developed methodologies for aligning Operational Excellence® projects with annual operating plan objectives and strategic goals through the application of Strategy Deployment methods and tools.  

Hermann's education includes a BS in Mechanical Engineering from the University of Alabama in Huntsville and graduate studies in missile design, engineering management, and advanced statistics. He also has been awarded nine patents.

 

Lean Six Sigma and Corporate Real Estate Management?
by Herman Miskelly

A 2003 survey conducted by the CFO Publishing Corporation of 264 Chief Finance Officers, Senior Vice Presidents and Vice Presidents of Finance, and Controllers found that nearly 50% of the respondents thought that corporate real estate (CRE) was one of their top three operating costs and that 86% of the respondents thought that corporate real estate was of strategic importance to their organization.  If corporate real estate represents such a major expense and is of strategic importance, why then have the CRE organizations and processes in many companies largely been untouched by Lean Six Sigma (LSS) initiatives?  Even in those companies that have been aggressively applying LSS corporate-wide to reduce operating costs and improve customer service, such as General Electric and Motorola, many were well into their LSS deployments before turning attention to CRE management. 

Given the importance of CRE management, one is tempted to ask two questions:  why is LSS not applied CRE management right at the start of an initiative and is LSS even applicable to corporate real estate?  Let me answer the first question this month and next month we will address the second question.

Addressing the first question I believe is relatively easy.  While of strategic importance, CRE management in many organizations is devolved to the individual business units.  Establishing facility needs, documenting requirements, requesting and vetting proposals, negotiating purchases or leases (with the exception of possibly legal review), and rents are made at the business unit level or even lower at the facility level.  CRE management and oversight at the corporate level is almost an afterthought, delegated to the Chief Operating Officer, the Vice President of Finance, or even the Vice President of Human Resources, where it is simply reported and rolled-up into operating cost spread sheets.   

So I ask you to consider where your company puts responsibility for CRE at the corporate level. Is CRE given the visibility that should be accorded it due to its operating cost impact and strategic importance?

While devolving CRE management and decision making to the lower levels of the organization puts control closer to those typically having the most pertinent information and those having to live with the consequences of the decisions, several problems arise with this approach.  Although CRE processes are highly repetitive at the corporate level, at the local level they occur so infrequently as to be “one time events”.  Thus, expertise of and familiarity with CRE management processes is underdeveloped.  This results in frequent errors, schedule delays, and cost overruns.  As LSS is primarily focused on reducing variation in repetitive processes, it is not viewed as being applicable to local CRE processes since, at the local level, buying a new facility or extending/changing a lease may occur once every five years or so.  But in a large corporation these could be annual or even monthly events.   

The second problem with devolved CRE management and decision making is that a narrow local focus does not allow a more global view of CRE needs or costs.  This lack of global view frequently results in space and cost inefficiencies.  Once it pulled CRE management responsibility into the corporate organization, one Fortune 500 corporation found a situation where that one business unit was attempting to expand its office space while another business unit was attempting to sublet excess office space and neither was aware of the other’s situation.  While this is not unusual, the fact that the two facilities were located across the street from each other was unusual!  Many corporations find that there are no established standards for office sizes or locations or, it there are standards, that the standards are being followed.

So again I ask you to consider the impact to your overall operating costs of not managing CRE at the corporate level?  Are you finding inefficiencies, schedule delays, or cost overruns that are the result of poorly executed CRE management practices?  If you have in place a corporate-level monitoring or auditing system to ensure that CRE standards are being followed at the local levels?

The final drawback is the difficulty or lack of corporate governance for CRE practices.   Maintaining CRE management, control, and database systems at the corporate level can be initially difficult and costly to establish and maintain.  Furthermore, without recognition of the importance of CRE to operating costs and strategic goals, these systems frequently do not rank high on priority lists.  However, with the enactment of the Sarbanes-Oaxley Act of 2002 the need for these CRE systems has become critical.  Sarbanes-Oaxley requires a structure of administration and reporting of corporate finances and decision making processes.  This requirement for administration and reporting flows down to CRE management and decisions.  There are now criminal penalties for not maintaining administration and reporting processes within CRE management. 

So, can your corporate organization vouch for the transparency of the CRE management practices and decisions made at local or corporate levels?  Do you have standardize, auditable processes for CRE management and decision making?

I believe that the discussion above shows why LSS methods and tools have not been applied to CRE management, processes, and organizations.  Additionally, I believe that the discussion also shows why, more than ever before, LSS must be applied to CRE if a company is going to control operating costs and comply with corporate governance regulations.   If you find that your company or organization is currently struggling to manage or monitor your CRE processes and decisions, allow the CRESTAR Alliance to show you how we can apply our LSS methods, tools, and experience to your CRE processes and improve your bottom line, strategic decision making, and regulatory compliance.

Next month I will share with you how LSS can be directly applied to CRE management, presenting both specific LSS method and tools and LSS case studies.