A bare-bones budget and a huge portfolio complicate facility decisions at SBC. Vickie Berry and her team have found ways to ease the pain
Vickie Berry is being asked to perform a rather delicate balancing act: maintain the organization’s facilities at a level that supports the business’s mission while constantly searching for ways to drive costs out of the business.
For Berry, vice president of corporate real estate, property management, at SBC Communications, several factors have made reconciling the two particularly tricky. The factor that most complicates her responsibilities — which include facilities management, security and energy management, environmental management, and occupational health and safety — is the sheer size of SBC’s national real estate portfolio: 22,000 facilities encompassing 141 million square feet and housing 165,000 employees. SBC owns about 80 percent of that space.
The girth of the corporate real estate portfolio has meant that driving costs out of the business to meet leaner budgets has required more than just examining facility strategies, such as installing motion sensors to reduce energy use or limiting the frequency of interior painting projects. Though these are important elements of the overall strategy, as is consolidating or eliminating underused properties, the most important component has been identifying and standardizing operational best practices, especially as the portfolio has grown.
Three acquisitions — Pacific Telesis in 1997, Southern New England Telephone in 1998 and Ameritech in 1999 — made SBC the second-largest local phone company in the United States. During these acquisitions, Berry played a critical role in aligning the acquired companies with the operating procedures of SBC. It was a task that meant examining the operations of each acquired company, comparing them with those that existed at SBC and identifying the most efficient system that could be implemented companywide.
Complicating matters was that after each acquisition, senior management gave each SBC business unit, including corporate real estate, a non-negotiable financial target as a way to drive cost out of the business. The downturn of the economy in the early 2000s made further cost reductions imperative.
The size of the portfolio, the acquisitions and the budget cuts have required Berry to identify the best property management practices, then adapt and standardize them so that facilities across the country are operated and maintained similarly. And all this had to be done while keeping a careful eye on eliminating expenses and maintaining employee safety and network reliability.
“It was incumbent on us to take a look at operations and determine where the best practices were and what were the smartest ways to be operating,” she says.
For Berry, locating best practices is crucial because even with a total corporate real estate budget of close to a billion dollars, real opportunities for cost-cutting aren’t as apparent as they might seem.
“A billion dollars is certainly a large amount of money,” says Berry. “But when you start peeling away the pieces, you will see that there’s really only a small percentage where there is an opportunity to eliminate costs.”
What has made Berry successful is understanding that the challenges of locating, adapting and standardizing best practices, while cutting costs, are inextricably linked. Doing the first helps take care of the second. Standardized procedures bring standardized data, which facilitates a way to look across the entire portfolio and make cost-conscious decisions. Operating procedures are streamlined – from the frequency of preventive maintenance to how utility bills are paid. This means greater productivity from Berry and everyone else, all the way to the maintenance technicians performing work at SBC facilities across the country.
“If you don’t standardize, even if you’re doing well, you may not know you’re doing well,” says Tobey Nealy, SBC’s director of property management for the Texas region.
Berry places SBC’s facilities in three categories. Network and equipment-related facilities house telephone switches and serve as the home base for network field technicians. These facilities make up about 71 percent of SBC’s real estate portfolio. Data centers comprise about 3 percent and the remaining 26 percent is administrative and office space.
As SBC’s corporate real estate budget has shrunk, Berry and her five regional directors have been forced into some tough facility decisions. If a chiller replacement is needed at both a network facility in St. Louis and a data center in Dallas, and there’s only enough money for one or the other, how is a decision made on what to do? Berry realized the necessity of constructing a plan whereby a consistent ranking system could be applied to different types of projects for different types of facilities in different regions of the country.
The solution was a software package called RECAPP (real estate capital asset priority plan — an SBC rename of the original acronym: renewal capital asset planning process), which was tailored to SBC’s needs. Berry recognized the system as a best practice in the Midwest region, where the former Ameritech used it to prioritize capital expenditures. Berry expanded it to include deferred maintenance projects that have the potential of turning into significant repairs.
The first step to making RECAPP a national standard for corporate real estate was to do some corporationwide research. Through client portfolio planning meetings, Berry worked closely with senior leadership of SBC business units to make sure strategic goals and plans were consistent with those of corporate real estate regarding facilities. Working with the business units was essential to ranking the importance of facilities, which in turn is key to evaluating the priority of projects.
“We feel like we are in lock-step with them in supporting them to meet their corporate goals,” she says.
Based on the priority of the facility at stake and answers to customized questions about the project, RECAPP calculates a score that Berry and her staff use to rank different projects against each other. Unfortunately, doing so requires a “rob Peter to pay Paul” strategy, but at least Berry and her staff now have a systematic and standard approach, which has been an essential element to cutting costs. Every decision-maker across the country, including Berry and her regional directors, evaluates data the same way. Money isn’t wasted on projects that aren’t of pressing concern.
“Five years ago, when we felt like we had adequate funding, there probably wasn’t the level of prioritization there is today,” she says. “Today, the line of demarcation between priorities is very crisp and clear.”
“We’re assured of allocating scarce capital to the more critical projects,” says Mark Schleyer, vice president of corporate real estate, design and construction. “This enables us to score projects according to the type of facility and prioritize consistently.”
Schleyer and Berry work closely together on projects that overlap their organizations. “She is basically my client on replacement projects that require engineering,” says Schleyer. “Our teams coordinate closely with each other to prioritize.”
Knowing When to Do What
The confluence of standardization, prioritization and cost cutting is the modus operandi for Berry’s preventive maintenance operation as well. Prior to each acquisition, the acquired company had been using a different system to schedule work, pay bills and respond to occupant complaints, among other things. Berry recognized that to be a standardized organization, corporate real estate needed a single system to plan and execute these tasks across the portfolio.
Berry began by creating field teams with representatives from different regions of the company that met to discuss the optimal way things should be done.
“Through those discussions, the best practices surfaced,” says Berry. “All voted and agreed, and business requirements were written. As a result, an adopted process may not have even been one that one region was using. The teams may have created a new process.”
The solution was a system that Berry calls the “heart of our property management operation:” an off-the-shelf building management system software package that was dramatically customized to reflect the discussions by the field teams and the unique needs of SBC’s vast portfolio. The system includes four integrated modules: contract management, bill payment, call service center, or dispatch, and field operations – for Berry’s organization, the most important component.
From 2001 to 2004, Berry’s staff loaded every piece of facility equipment in the corporate real estate portfolio into the system and assigned each piece of infrastructure at those facilities a maintenance schedule. With that complete, the building management system is able to produce recommended technician-level maintenance tasks on a daily or weekly basis across the country. Because of insufficient funds and a technician staff spread exceedingly thin, not every task is able to be completed when the building management system says it should be.
So, to balance the difference between what should be done and what actually would be done, Berry developed a priority system similar to that used for capital projects and deferred maintenance. She, in conjunction with the business units, identified 100 buildings in the portfolio that are deemed most critical to the business. At these, the goal is to complete 98 percent of all required maintenance tasks. For the rest of the facilities, depending on their predetermined priority, between 55 and 75 percent of tasks are completed.
The standardized system allows Berry and her staff to carefully track where money is being spent on maintenance and to root out inefficiencies if necessary. The system compiles tasks, regardless of whether there is any intention to complete them, so Berry also knows how much money she should be spending. “We know we need a lot more than we have and for the first time, we are able to provide concrete support data for funding requests,” she says.
“This comprehensive building management system is by far the biggest step forward we’ve made,” says Nealy. “Data is now available and in a common format which drives better business decisions.”
Finding out that a task can’t be completed at the moment can be a hard pill for an occupant to swallow. But Berry says she thinks that most of them understand why everything can’t be done – including specific occupant requests.
“The occupants understand budget cuts for facilities because their budgets are being squeezed as well. Still, it can be a tough message to deliver because we believe we should be doing more and want to be doing more. So it’s come down to a conversation with an organization that wants their carpet shampooed or their walls painted where we have to say: ‘I’ve got a limited amount of money. What’s more important? Keeping the network reliable or painting your walls?’ ”
When work is completed, Berry keeps a careful watch on occupant satisfaction by surveying occupants on how professionally they were treated and whether work was completed in a timely manner. Any less-than-satisfactory comment requires a personal follow-up call. “Communication is the key to client satisfaction,” she says. “They may not like the message you are delivering, but they appreciate the prompt communications.”
Other benchmarks Berry uses to gauge her success are typical: service interruptions, or attributable incidents to corporate real estate, as SBC calls them, overtime, accidents, employee absences, cost per square foot and kilowatt-hours per square foot. To track the last one, Berry has instituted a standardized electricity model to forecast both electricity consumption and required funding.
The energy model is a critical tool for developing and tracking electricity budgets. Berry also uses this tool to help communicate energy funding needs to the CFO. “Our biggest challenge is taking a very technical world and turning it into a numbers world,” she says.
Utilities comprise about 42 percent of corporate real estate’s total budget and energy accounts for 93 percent of the overall utilities budget. Berry pays more than 32,000 electricity bills and more than 60,000 utility bills per month. Keeping close tabs on the company’s energy usage is crucial, especially because Berry is predicting a 7 percent increase, or $30 million, in energy costs for 2005.
The forecast is predicated on facility variables that are entered into the model. The program calculates a forecast for both electricity consumption and required dollars. This is completed with input from all in the real estate hierarchy.
Berry has hired an “energy czar,” as he’s affectionately known, to monitor rates and make sure SBC gets the best deals possible in deregulated markets. Approximately 40 percent of SBC’s energy budget is spent in deregulated markets, which has made forecasting a little easier because rates can be assured over fixed periods of time. Berry requires each of her five regional directors to complete a consumption forecast based on what they know about the facilities and factors influencing energy usage in their territories.
“When developing our budgets, we look at all known factors that will impact our consumption for the coming year,” says Nealy. “This includes energy reduction strategies, anticipated equipment growth, property acquisitions and dispositions, and people moves into or out of facilities.”
A final factor in the equation is a 30-year weather history.
With the forecast data in hand, Berry and her staff can identify facilities designated as “energy hogs” — at the moment, 500 facilities make up about 55 percent of the total energy consumed. Berry has put these sites, as well as some other “energy watch locations,” on third-party monitoring to make doubly sure good data is available on energy use in those locations.
Each first-level manager may have only a couple buildings on energy watch. “I feel that’s a very manageable number,” says Berry. “They can then work with their network counterparts to understand what they may be doing equipment-wise in that facility that will impact energy consumption.”
This system, as is the case with the whole operation, requires close and frequent interaction between Berry, who is stationed in Dallas, and her directors in their regional offices. Berry constantly encourages her directors to share ideas, because even though they may be hundreds of miles apart, they’re all dealing with similar issues and might have solutions to each others’ problems.
Berry has created a station she calls Vickie’s Toolbag on corporate real estate’s Web site. It’s a place where any corporate real estate employee can go to post ideas or upload documents or templates that might be useful for anyone else in the organization.
With a work force just shy of 1,000 employees, compared with more than 100,000 in SBC’s network organization, Berry sometimes feels like corporate real estate is the “orphaned” part of the corporation. But that certainly hasn’t stopped her from working to build corporate real estate into one of the best and most efficient of SBC’s business units. It’s certainly taken a lot of hard work, but for Berry, it’s been a labor of love.
Beyond the Call
“It’s a job I thoroughly enjoy,” she says. “No two hours are the same. Every day is a new set of opportunities and challenges.” And she’s certainly energetic in taking them on.
As she whisks from office to office to look in on her colleagues, Berry moves with speed and purpose. She speaks quickly, confidently and authoritatively, and listens intently as well.
Berry has held a variety of positions in her 27 years at SBC. She’s been in corporate real estate for all but seven of those years. Her continuous rise through the ranks is partly a result of ambition and partly a result of a commitment to continued professional development.
A slight grin, almost of incredulity, crosses her face as she lists her various professional qualifications — from licensed architect to logistics certification at Georgia Tech to a real estate broker’s license in California.
She has certainly earned the respect of her colleagues as well, many of whom have worked with her for the majority of her tenure at SBC. In fact, Schleyer, the vice president of the design and construction organization, says Berry was the first person he met on his first day of work in 1977. “Our career paths have criss-crossed ever since.”
Having risen nearly to the top of the corporate real estate hierarchy, Berry’s pride in her organization is evident.
“Within our organization, there is example after example of employees that truly go beyond the call,” she says. “I’m truly fortunate to be part of a great organization.”