The food of survival for the commercial real estate industry in a starving economy is strong return on investment on your staffing decisions, your purchasing decisions and your resource investments.
Return on investment can be measured in the near term and over a longer period of time – which is an important distinction when making decisions that drive ROI. The key to maximizing return on investment is to apply three simple principles of value realization:
- Understand the sources of return on investment by investigating and monitoring all facets of your building operations
- Actively measure return on investment by applying a thorough understanding of the cost-to-return ratio
- Respect the life cycle of return on investment by having the courage to see it through
In an economic famine, when accounts receivable are slowing and revenues shrinking, employing these principles will be critical to organizational success, and perhaps, survival
Understanding Your ROI
Understanding return on investment requires that an organization actively investigate its business operations by applying tools that enable personnel to see the business more clearly. Without visibility, decision-making is always blind and that blindness can be dangerous. Dissect your business by segregating your building operations into key performance units ? people, resources, activities, and obligations ? then watch those individual business units carefully.
Measuring Your ROI
Measuring return on investment requires that an organization apply those same visibility tools. In business, visibility comes from efficient data gathering, effective communications and usable reporting. Take those same key business units and set a cost and revenue baseline for each. Build your management tools around those units so that the business can monitor and measure them accurately and often.
Life Cycle of Your ROI
Respecting the life cycle of return on investment is perhaps the most important principal of operations and the hardest to employ. Like fruit, return must ripen before it can be harvested. Embed your data gathering and communications tools into each unit then actively and regularly compare their performance. Doing so will allow you to see your return ripen over time and help you to know which units are performing well and which units are draining resources.
When times are tough, a manager’s first reaction is to make the decision to cut. Generally, managers do so indiscriminately and without gathering all of the facts – this because they believe that time is of the essence and that unpleasant tasks are best administered quickly. Uninformed decision-making usually results in cutting one or more resources that generate the highest return. So take a deep breath and make sure that you gather all of the facts before taking action. Apply the good carpenter’s maxim “measure twice, cut once” to all of your management decisions. Be courageous enough to let the fruits of your labor ripen and your business will survive, even thrive.
For a more detailed White Paper on extending and improving your ROI please visit the Research Library.
