Is “Operational Strategy” an Oxymoron?

By Jim Ware (with assistance from Paul Carder of Occupiers Journal Limited)

[Oxymoron (from the Greek ὀξύμωρον, “sharp dull”): a figure of speech that is self-contradictory. Common examples include “jumbo shrimp,” “living dead,” and “open secret.”]

(This is Part One of a two– three-part series on how facilities design and management affects business success.)

In my role as Global Research Director for Occupiers Journal Limited I am currently in the early stages of leading a research project focused on how large organizations structure and govern their facilities management activities.

We are exploring the current management practices, organizational structures, and performance metrics being used to ensure that workplaces and other facilities are meeting the needs of their occupants (for more detail about the project, see the overview of the GRID program on the Occupiers Journal Limited website, or send me a direct inquiry).

The study has given me an opportunity to explore the role that facilities management, or “FM,” plays in a broad range of organizations across several different industry sectors. To date the participants have all been U.S.-based companies, although most of them have global operations.

We will soon be including organizations based in the UK, the Netherlands, Spain, Portugal, Latin America, Australia, and Hong Kong. When the project is completed, in early June September, we anticipate drawing on data from at least two-dozen large organizations across several continents.

While it is way too early to draw any conclusions, it is already becoming clear (in the U.S., at least) that for many senior executives FM is a purely operational function; they see its role as keeping the lights on, the air clean and comfortable, and the buildings safe and secure—and of course to deliver other basic services that keep the organization running. Longer-term planning and strategy responsibilities for facilities commonly reside within the Corporate Real Estate and/or Finance functions.

Yet several people I have spoken with have also pointed out that, as those who pay the most attention to workplace design, maintenance, and utilization, FM professionals have important knowledge and insights that should be influencing strategic thinking all the way up to the very top of the business.

After all, business strategy is about developing unique capabilities to serve a chosen marketplace or set of customers; strategy means doing things not just better, but differently, than competitors. It means reducing costs, increasing quality, and providing goods and/or services that customers can’t get anywhere else.

So the question is, can the management of facilities contribute to strategic business success? or are facilities just a “cost of doing business,” to be kept as minimal and as “invisible” as possible? One of the research interviewees commented that the only time facilities management got any attention in his organization was “when we screw up somehow.”

These issues have been rolling around in my head for several weeks as I have listened to senior FM professionals in many different organizations tell me that in their experience all those strategic needs are currently being dealt with by business unit senior executives, by Finance, by workforce strategists, by real estate portfolio managers, and by corporate real estate executives—but not by FM.

Remember, I have been asking these executives about what their current reality is, not what they think it should be.

These conversations reminded me several times of a comment made years ago by John W. Gardner, who during his career was Secretary of Health, Education, and Welfare under President Lyndon Johnson, a founder of Common Cause, the President of the Carnegie Corporation, a founder of The Corporation for Public Broadcasting (PBS), and the author of Excellence: Can we be equal and excellent too? (1961; link is to description on Amazon.com).

In Gardner’s words, in Excellence:

The society which scorns excellence in plumbing as a humble activity and tolerates shoddiness in philosophy because it is an exalted activity will have neither good plumbing nor good philosophy: neither its pipes nor its theories will hold water.

For me, that perspective makes a good case for the central importance of facilities management in business strategy, especially when we think of how a well-managed facility can impact business success. An effective facility can:

• reduce the cost of business operations;
•  help attract and retain talent;
• enable creativity and productivity among employees;
• contribute to the company’s brand and image (“building as brand”);
• contribute to the health and well-being of the workforce;
• support efficient business processes;
• enable employee creativity, collaboration, and productivity
• contribute to sustainability and environmental responsibility;
• reduce the risk of business disruption.

All too often the first factor, reducing the cost of operations, is the only measure that seems to matter.

However, while all of these factors can contribute to operational effectiveness, even taken altogether they don’t in and of themselves make facilities truly strategic.

To have a strategic impact an activity or capability must differentiate the business from its competitors. It is worth noting that in some industries—retailing comes immediately to mind—the facilities are absolutely central to brand strategy and to generating business revenue (more on this in Part Two, next month).

In a now-classic 1996 Harvard Business Review article called “What is Strategy?” Harvard Professor Michael Porter identified three basic principles that define strategic positioning:

1. “Strategy is the creation of a unique and valuable position, involving a different set of activities [different from what competitors are doing]. . . .
2. Strategy requires you to make trade-offs in competing—to choose what not to do. . . .
3. Strategy involves creating “fit” among a company’s activities.”

(from “What is Strategy?” Harvard Business Review, Nov-Dec. 1996, reprint #96608, p.1; emphasis added)

As Porter further describes it:

Strategic positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company. It means performing different activities from rivals, or performing similar activities in different ways.” (also p. 1)

The best example of how operational strategy works is the way Southwest Airlines designed and implemented its entire business model to support its basic strategy of being a short-haul, low-cost, point-to-point airline connecting mid-size cities (drawn from the Porter article).

Although that strategy has evolved in many ways since 1996, Southwest remains singularly successful in 2012, largely because it has held on to the core components of its operational business system:

•  limited passenger service
•   frequent, reliable departures;
•   high aircraft utilization;
•   low ticket prices;
• use of many second-tier airports
• no seat assignments;
• no formal meals;
• 15-minute gate turnarounds;
• limited use of travel agents;
• no connections with other airlines;
• a standardized fleet of Boeing 737 aircraft (meaning simplified training for pilots and maintenance staff);
• a high level of employee stock ownership; and
• flexible union contracts.

Just think about it; those approaches are internally consistent and mutually reinforcing—and all are necessary to deliver on Southwest’s promise of low-cost, reliable service. Even though many full-cost global airlines have attempted to compete with, and to emulate, Southwest, no one has yet matched Southwest’s system—or its success.

So the answer to the question “Is operational strategy an oxymoron?” is clearly a resounding “No.” Operations—including facilities—can clearly help an organization be competitive in the marketplace. But the key idea is differentiation. It’s not enough just to have lower-cost facilities than your competition.

The questions that must be asked relate to how well your facilities/workplace strategy contributes to your business strategy. Is facilities management aligned with the requirements of your business units, in the locations where you need to be? Do your facilities support your talent recruiting and management strategies? Are the workplace designs consistent with the business’s technology needs and strategy? Does the facilities cost structure support the company’s financial strategy and cash flow requirements?

Perhaps even more importantly, facilities managers have to ask themselves this very basic question:

What is the facilities function doing to strengthen the company’s strategic positioning with customers, with employees (and prospective employees), and with the communities where we are located or want to do business?

When you can answer all of these questions, then—and only then—you’ll have a strategic story to tell, and you’ll be part of the conversation when business strategy is on the agenda.

What do you think? Please send your comments directly to me or post a comment here. I look forward to learning from you.