CFO Studio magazine with Todd McElhatton

14 cfostudio.com FEATURED CFO In many companies it’s work-your-own- hours, he adds. Huddle spaces or lunch areas that encourage getting together can be retention and collaboration facilitators, particularly with Generation Z and Millennials, whose focus is more on well- being than on putting in long hours to demonstrate their career commitment. Areas of Savings At York, Mukherjee absorbed JLL- generated market data for portfolio optimization. “What we wanted to do was leverage this opportunity to identify markets within our current footprint with best talent pools, better cost structures, higher safety or lower crime, and ease of access to airports,” says Mukherjee. “There were multiple aspects to those requirements. We had to do the analysis based on families of jobs.” Where current employees lived—and where customers were—factored into the decisions too. “As part of the study we did with JLL,” says Mukherjee, “we looked at tapping into locations with proximity to good schools, producing students with the skill set we needed for our future workforce, or migration patterns of workers to certain parts of the country. We looked at the availability of government tax dollars, although they didn’t play a very big role in the end.” The course York eventually took was to create a hub and satellite model, where hubs would have at least 200 employees. Satellites were markets York had presence in that didn’t have the critical mass of employees but were strategically important. Substantially fewer York locations meant savings in lease, maintenance, and utilities expenses. In addition, •Leveraging existing available space to support growth avoided the cost of leasing additional space. •Long-term commitment to occupancy costs and capital expenditures was reduced by using coworking spaces (WeWork and Regus) to fill needs for offices in some cities where York needed a presence with few employees. •Corporate policies to enable work-from-home arrangements, where appropriate, also reduced space requirements. And then there are the soft benefits. To name just one, York adopted more cloud- based technologies and “collaborative working tools for sharing documents and video meetings between employees across geographies,” says Mukherjee. Sold on the Value “Real estate was a lever to support a broader transformational journey that we were undertaking.” So real estate rationalization enabled other decisions, such as reorganizing the Finance team and anointing some of York’s existing locations as shared services hubs and promoting local leadership, says Mukherjee. Were there tough choices? Yes, but Mukherjee emphasizes that the entire process was collaborative. “We engaged the business and operations executives to jointly agree on, ‘Here’s what’s in it for you.’ ” Business leaders who became more efficient in their use of space and in helping consolidate real estate would get a benefit on their P&L that in turn could be re-invested in employees and improving customer service. From this point, York’s journey becomes a little harder, he says. The plan is to stay engaged with the global leadership team and, using criteria Mukherjee’s team has developed, continue to review “if the hubs and satellites we agreed on make sense and quarterly action plans. In that way we’ll keep executing on the long-term plan.” Mukherjee is passionate that “CFOs who aspire to be more strategic should be looking at this lever and getting involved, because of the independent and unbiased view they can bring to the analytics around real estate and the bottom-line and cultural impact.” For him, rethinking real estate usage helped support “a broader transformational journey that we were undertaking—real estate wasn’t leading that, but was enabling and supporting our shared services strategy and our brand rationalization.” The ROI of Portfolio Optimization The cost of rent looms large when CFOs are looking for new office space, but other considerations should get more attention, says Scott Lesh, Managing Partner for JLL, commercial real estate brokers. Lesh helps CFOs see the biggest potential cost, and where real savings lie, by sharing a JLL tool called 3-30-300. The 3 represents the average cost for utilities, the 30 is the average rent per square foot, and the 300 represents the average cost per square foot for employees, Lesh explains. “If we can improve your workplace environment, and you then have a direct reduction in sick days, then we can show the return on investment,” he says. The average person takes seven sick days per year, and if the new office design reduces that by an average of a half a sick day, the program can calculate the savings for that client, says Lesh. “We have factual data to back up the claims that more light and better air quality, for instance, cut sick days.” A dashboard allows clients to plug in their average wages, number of employees, square footage, and some other costs, says Lesh, and then do some sensitivity models of their own: If we do this, the result would be X. Another conversation Lesh has with CFOs regards labor arbitrage. Relocating to an area with lower labor costs would cut salary costs, but the right type of talent has to be sufficient for the company’s present and future needs.