Increasing ROI on capital investments
Switching to a programme management approach on capital property projects requires significant organisational transformation, but can deliver more on investment.
Property teams in Australia are under pressure to deliver more on investments. Jon Poore explores how leading players are achieving that goal with a new approach to managing capital property projects.
While much of the rest of the world was sent reeling by the global financial crisis which struck in 2008, in Australia we felt the impacts more gradually. It has been a long, slow, squeeze with that squeeze still keenly felt by many executive boards.
Boards want to know why and how money is being spent, they want assurance that budgets and deadlines will be met, and they want cost savings. In retailing and banking, where property remains at the heart of the business, there are opportunities to improve efficiencies and deliver more value through the way capital investments in property are managed.
Traditionally, capital programmes have been delivered reactively, responding to demands from business units. Often property teams will have little or no say in the order or priority of projects; sometimes it’s those who shout loudest who take precedence.
Capital constraints, imposed to deal with market conditions, can disrupt plans for delivery. The result is that short-term approvals of capital expenditure reduce the opportunity for efficiencies from the supply chain and effective planning.
We now see some Australian retailers and financial institutions challenging established ways of managing capital property projects. New approaches will typically achieve 20 percent reduction in capital expenditure while delivering better value to the business and reducing exposure to risk.
From project to programme
A programme management office (PMO) provides the means to organise delivery, set a baseline, inform decisions and engage the supply chain. It should be the first step for any organisation committed to delivering capital efficiencies, reducing costs and increasing return on investment for customers and shareholders alike.
Rather than looking at works on a project-by-project basis, the property team take a holistic view of all capital works planned and in delivery. A PMO provides the tools and systems to provide a ‘snapshot’ of where individual projects and the whole programme are at any time. Having robust controls and this single source of truth reduces risk and increases stakeholder confidence, allowing them to take informed decisions. They set direction with confidence and then monitor the benefits on a regular basis. The impact of decisions on capital reductions or delays in capital approvals become more apparent and hence can be better managed. Running a programme rather than individual projects will lead to efficiencies in the supply chain. Bulk procurement deals for elements such as services, fit-out or technology become more viable, and with a good pipeline of work in front of them, suppliers are more willing to innovate and add value.
The transition from project-by-project delivery to a programme management approach requires significant organisational transformation. Our experience has taught us that the successful implementation of a PMO is less about systems and processes and more about cultural change.
Creating the culture for a successful PMO
Lead - Leaders must commit to providing a clear vision, scope and purpose alongside a comprehensive change management plan.
Communicate - Open and honest communication is required to engage property team members and other stakeholders in the change process.
Inspire - Providing the technology and tools to provide robust information inspires confidence in stakeholders to take decisions.
Evolve - Once decision-making becomes strategic rather than project-by-project, the opportunity to keep improving and adding value increases exponentially.
Celebrate - Successes will include increased capital efficiencies, reduced risk, and the ability to align capital property investments with strategic goals of the business.