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Making Buildings Count
When Pittsburgh-based PNC Financial Services bought United Trust Bank of New Jersey last March, Gary Saulson, director of corporate real estate for PNC Realty Services, hired just one property administrator to see to the day-to-day management of the 47 new branches PNC acquired.
A single property manager for that large a portfolio, according to at least one industry assessment, illustrates why PNC Realty Services is considered a top-notch corporate real estate group. The 40 to 50 branches that each PNC property administrator manages is a significantly greater number of properties than other property managers oversee for a dozen other top facility organizations surveyed by a nationally recognized real estate advisory firm. And that firm isn’t the only one that’s recognized PNC’s efficiency. Facility executives inside and outside PNC agree that this is a significant accomplishment.
How is it done? Hire good staff, train them well, have good management infrastructure and support, and provide them the authority to take charge. “I give them what they need and let them do their jobs,” Saulson says.
These kinds of metrics are proof that Saulson has made a difference at PNC, the 14th-largest financial services company in the United States. Saulson has a smaller staff than he had in 1996 to manage roughly the same amount of square footage; he has expanded the staff’s responsibilities; and he has improved services for internal
and external customers. He has imbued his staff members with a sense of accountability and honed them into a class of experts that today’s industry demands.
The result is Saulson and his team have gained seats at the corporate table. Once almost ignored by corporate executives, PNC’s facilities group has been raised to the peer level of senior managers, placing the interest of buildings on par with the interests of the business units. Calling the facility group’s relationship with senior managers “symbiotic,” Saulson says Realty Services has become a critical component in the corporate mission of PNC.
Saulson is in charge of 12 million square feet, including Firstside Center in Pittsburgh, the largest corporate office building certified under the U.S. Green Building Council’s LEED (Leadership in Energy and Environmental Design) green building rating system. In 2000, it received a silver rating.
That wouldn’t have happened without Saulson and his team championing the green cause, but it also wouldn’t have happened unless senior managers at PNC believed occupancy costs were important to the bottom line.
“In most companies, facilities are taken for granted,” Saulson says. “This is not meant as a criticism as there are many excellent facilities groups throughout the country. But, if facilities groups are not getting the respect they should, then maybe it’s because they are reactive rather than proactive. All facilities groups want to be or should be involved in the innermost workings of their companies. We’ve made a concerted effort to be involved. And now we have developed this symbiotic relationship with the business units, but it took work.”
The work has primarily involved earning the trust of senior managers. One way that Saulson did this was by making sure facilities staff gave more than a simple yes or no answer to business unit requests. Instead, he made sure they provided the business unit managers with a range of options, laid out the cost and benefits of those options, and then let the business units decide.
“That doesn’t mean we always respond immediately; sometimes that doesn’t make sense,” he says. “‘I don’t know’ is an acceptable answer and maybe even the preferred answer. But you have to follow it up with, ‘But I will get back to you as soon as I can with answers.’ And follow up.”
To build on the trust his department had gained and to respond more quickly to senior management requests, Saulson created a customer relationship manager program. Each business unit is paired with a member of Realty Services. That customer relationship manager, or CRM, is effectively “embedded” in the unit and may be included in that business unit’s staff meetings.
“The CRM is the business unit’s first point of contact with Realty Services,” he says. “That person is on the ground floor of the business unit’s discussions and can provide early input from Realty Services. We can then respond more quickly to any requests that they may have. It’s important that these senior managers always have a person to call. And when they call, it’s important that that person is accountable and responsible for his or her decisions.”
Accountability is important, especially when it comes to all the groups that make up Realty Services, such as operations, project management, disposition or leasing.
“The beauty of the way Gary (Saulson) has set up the organization is that each facility group has its own functions and responsibilities, and to some extent its own agenda,” says Eve Shavatt, vice president and manager of the acquisitions and disposition group. “He has trained everybody to step back and look at their groups as if they’re running their own companies. The bottom line for all of us is the question, ‘What’s the best overall thing for the company? For the shareholders?’ It’s what motivates us all.”
Tom Severino, deputy director of Realty Services and manager of operations, agrees: “We find out what an employee does best, place that person in a position that capitalizes on that expertise, and make that person accountable for the results of the job. For instance, when we needed to appoint a manager of the project management group, we found the best project manager we had and gave him the position. That’s generally how it works. We want to capitalize on our employees’ strengths, assign them to a job that they feel comfortable in, and then give them the responsibility to act.”
This philosophy extends to property administrators who are responsible for specific properties. “We want property administrators to have a sense of ownership,” Severino says. “We tell them, ‘We want you to take care of your properties like you own them.’”
That level of expertise is apparent to outsiders. Andrew Wisniewski, executive vice president of CB Richard Ellis in Pittsburgh, says Realty Services is like no other facility group with whom he has worked. He says Saulson and his team approach PNC real estate requirements as would a top-tier institutional investor or brokerage firm. He knows this personally after having worked across the table from the PNC staff on a complicated leasing deal.
“His team knew the market well, negotiated a strong lease for PNC and led the lease negotiations from beginning to end,” Wisniewski says.
Shavatt says Realty Services’ structure is designed to engender professionalism by ensuring that all the groups within Realty Services not only act independently but also are aware of each other’s responsibilities.
“You’re much more effective when you can work with all the groups involved in real estate,” she says. “You pick up things, sometimes it seems almost by osmosis, from different groups that you think might not be important but come into play later during some deal.”
PNC leases about 50 percent of its space and owns 50 percent. Managing the 12 million square feet and handling most of the real estate transactions with a 130-person staff is possible because of the expertise of the staff, the use of available technology, such as a sophisticated work-order management system, and detailed metrics.
“We benchmark everything,” Saulson says. “We compare costs for every expense category for a building.” He compares that building’s performance against itself and similar buildings. “We look at energy. We look at carpeting costs. We look at how much we spend to clear snow. Everything.”
The once and future PNC
For Realty Services, that door wasn’t always open to senior management. PNC evolved from a decentralized model to its present highly integrated structure. But finding the right setup involved some trial and error.
PNC Financial Corp. was formed in 1982 when Pittsburgh National Bank and the Provident National Bank merged. Back then, facility management for the corporation was considered anything but an integral part of PNC’s strategic mission. Rather than working with senior managers from across the company, facilities operated separately on a market-by-market basis.
That period was characterized, Severino says, by a lack of communication and coordination among the various groups. There were eight regional facility groups, eight regional security groups, and eight regional purchasing groups, and “no one really talked with each other.”
That all changed, however, in two major reorganizations.
The first mirrored a change in corporate strategy in the early 1990s. After a flurry of acquisitions, senior corporate executives were anxious to unify PNC’s image and policies. Facilities staff were brought together to coordinate common signage. It was the first time the various groups worked together to accomplish a corporate task.
“Out of this task came the idea that this is the way we should be running things on a broad level,” Severino says.
Then in 1993, purchasing, security and facilities were combined to form a new department, PNC Administrative Services.
While that reorganization significantly improved things, the department was restructured three years later in 1996 when it became obvious that there wasn’t as much integration between purchasing and facilities as first thought. So purchasing and security were separated from facilities management to combine those groups with other PNC functions that were similar in nature.
About the same time, the real estate holding company that PNC formed in 1990 to manage all the real estate it acquired during the real estate crash of the late 1980s and early 1990s was just completing its work. Saulson says that he recognized that PNC could save money and be more effective if it handled all of its real estate decisions through one group. With full corporate support, Saulson became director of a new group, PNC Realty Services in 1996. That group included the facilities management portion of Administrative Services and the real estate holding company.
Since 1996, Saulson, Severino, and their team of managers have continued to refine Realty Services. They combined the management of office buildings with the management of branches. They established a consistent philosophy on outsourcing, refined operating procedures, and created the customer relationship management program.
A continuous process
The fuel that drives Realty Services is its focus on the business units as internal customers as well as PNC’s outside customers and, ultimately and most importantly, the shareholders. And what shareholders want is to see that PNC’s assets, including buildings, are managed efficiently and showing value, Saulson says.
Value to Saulson means managing PNC real estate to benefit the business units, meeting their short-term needs for space and long-term real estate interests.
That, in a nutshell, is what is behind Saulson’s stance that conducting most real estate decisions in house — not the current trend — is best for the corporation. As the head of the Realty Services’ real estate acquisition/disposition group, Shavatt has clearer insights on what deals are best for PNC and can keep the long-term, strategic interest of PNC in mind while assessing real estate deals, Saulson says. This might not be true if real estate was outsourced.
“We can have a business unit perspective and a long-term, real estate perspective,” Shavatt says. “And because we have long-term interests in some real estate, we keep the community in mind and have a better sense of how community developments might affect us as well as the community. We might consider selling a parcel of land or building to a prospective buyer, for example, because that person or company could better the community.”
“We want to stay close to the transactions we conduct,” Saulson says. “When you let go of that process, you don’t know what is motivating the deal. Is it the commission a third party will get? Their next deal? You just don’t know.”
Realty Services does outsource some functions, such as engineering and cleaning, but makes certain that those firms are closely managed and continually evaluated from a performance perspective. Severino says that employees of the outsource firm are thought of as employees of PNC, and are expected to perform as well as its in-house staff.
Taking a green direction
Many things have changed in Realty Services since 1996, but one change borders on revolutionary: PNC’s movement toward green buildings. Still a contentious issue in the corporate world, the move toward green buildings has been a strategic move for PNC. “When the buildings don’t cost more, and people like them better and are more productive, why wouldn’t you do it?” Saulson says.
It didn’t take long for Saulson to understand the benefits, and following the great success of Firstside Center, PNC has embarked on a greening plan. New branches and office buildings, as well as any building undergoing a major renovation, will be built green. Saulson is working with Gensler, an architecture firm, and the Paladino Company, a green building consultant, to build green bank branches — the first financial institution in the United States to do so. PNC ranks second nationally among corporations as an owner of green buildings. “These buildings are good for the employees, good for the customers and good for the community so, of course, they are good for PNC,” he says.
“None of this stuff is gold plated,” Saulson says. “Just nice comfortable buildings where there is plenty of daylight and healthy materials. We think this has an impact on productivity. The company recognizes this. It’s also part of our mission to embrace the communities in which we do business. Green buildings do this.”
With its commitment to green buildings, and efficient management of facilities, Realty Services has proved far more successful than any PNC facility group before it. That, Saulson says, is because the staff has the ability to adapt and evolve. “Staff members understand why they do what they do.” To cling to ways of doing business just because that is the way things have always been done is death for a facility’s group.
“You have to be an agent of change in this business,” Saulson says. “You can’t resist change if you’re going to be successful. Facilities groups at some organizations still act like order takers rather than participants. You have to be a partner.”
Building reflects bank’s mission to be employer of choice
It didn’t take long for Gary Saulson, director of corporate real estate for PNC Financial Services, to decide to build the bank’s newest office building green. In fact, within two hours of meeting with Rebecca Flora, director of Pittsburgh’s Green Building Alliance, he decided the 647,000-square-foot facility would be certified by the U.S. Green Building Council. After Saulson heard about the potential for the building to decrease operating costs and improve productivity, it was a practical decision — and one that Saulson has never doubted.
“About the only reason I had for not building a green building back then was that there were so few large green buildings built,” he says. “But adapting to change is one of the most important abilities in this business. You have to be flexible and be willing to accept new ideas.”
The largest corporate silver-rated green building at the time it was completed in 2000, PNC Firstside Center is a healthy and comfortable facility for employees and is cost effective to operate.
Daylight dominates the interior with 90 percent of the 1,200 employees having access to outdoor views and daylight. Considering the 125,000-square-foot floorplates, that was challenging. But an interior atrium space, energy-efficient windows and light wells provide ample light while the glazing systems, interior shade systems and sunshades reduce the solar heat gain and control glare as they limit the need for electric lighting.
A hybrid underfloor and overhead air distribution system helps control temperature and improve comfort while keeping energy costs down. Natural and recycled materials make up the bulk of the interior furnishings. The site, a reclaimed railroad yard, puts the headquarters in the middle of an urban setting. Firstside Center was built for about $167 per square foot.
“When the biggest reason someone has now to not build green is because it’s not the way they do things, I see problems with that organization,” Saulson says. “We want to be the employer of choice so we built PNC Firstside to be the most comfortable, healthy and productive building we could.”