Corporate real estate units need to get more proactive in crafting solutions to escalating work-force shortages, consultant Kate McEnroe told IAMC in St. Louis.

Thinking about location, location, location? Then you’d better spend a lot of that cogitation time concentrating on labor, labor, labor.

That was the message that consultant Kate McEnroe delivered to a large workshop of corporate real estate management (CREM) and economic development executives at the Industrial Asset Management Council’s (IAMC) Professional Forum in St. Louis.

McEnroe sounded a central and recurrent theme at the St. Louis Forum: The quality end of the labor pool is getting increasingly shallow, and business operations are suffering as a result. And that, she said at the Oct. 8th workshop, means that CREM units have to become much more proactive in creating solutions.

Many current CREM efforts, however, are centered instead on a single-minded focus on controlling bottom-line occupancy costs.

"A lot of corporate real estate departments have gotten really good at occupancy management," said McEnroe. That concentration, she continued, manifests itself in a preference for fewer sites, often in bigger cities in more expensive space.

Such strategies, though, "aren’t married to where human beings really are," McEnroe noted. "My advice is, don’t pour your energy into the center of operations," she said. "Bigger isn’t always better. Economies of scale don’t work with where the people, the workers, are."

In fact, optimizing the portfolio through setting up fewer sites often contributes to employee turnover, the president of Atlanta-based Kate McEnroe Consulting contended.

CREM units — and companies as a whole — have to broaden their efforts to strengthen employee recruitment and retention, she advised.

"Occupancy management has to be married to human resources and portfolio management," McEnroe said. "[CREM units] need to know how to answer business units’ needs while also meeting work-force needs."

For that to happen, though, top management needs to implement a more multi-pronged approach, she added: "Joint financial modeling is a rare thing."

Urban areas — abandoned by many companies in favor of the suburbs — provide one promising avenue for alleviating the work-force blues. McEnroe referred to Inc. magazine’s Inner City 100, which ranks America's fastest-growing urban-based businesses.

"Forty-one percent of Inner City 100 companies cited recruiting the work force as a primary reason for locating in urban centers," she noted.

Rural America, where unemployment and underemployment rates are often significantly higher, offers another ripe labor source, McEnroe said. One company that’s tapping that market is Putnam Investments, she explained. The Boston-based financial giant is hiring employees in rural areas to work from their homes, performing tasks that include customer service, corporate systems and even management. Putnam is also creating on-campus facilities at colleges and universities that are staffed by students working part-time.

Manufacturing companies have been slow to adopt new and more aggressive labor-attraction strategies.

"Manufacturers are not leading the way," McEnroe said. "If you haven’t started, you are already late to the party. Automation and off-shoring will not save you."

"India is not a silver bullet," she advised. While the world’s second most populous nation has been an inordinately popular destination for off-shored operations, the financial equation there is growing increasingly expensive, she explained: "Annual raises for workers in India are now running about 15 to 20 percent."

Manufacturers have also trailed other sectors in creating an image of themselves as attractive places to work.

"No one’s being told at home, it’s good to work [for manufacturing companies]," she noted.

McEnroe described how some companies are differentiating themselves as attractive options:

Internal branding: Slogans, she explained, may be simple, but they can successfully create a positive image among prospective employees. Some examples: Target — "See Yourself Here"; Southwest Airlines — "Feel Free to Actually Enjoy What You Do"; and Philips — "Simplicity Is Getting the Inside Story before You Join."

External branding:"Get a lot of competitive benchmarking," McEnroe advised. Among the examples she cited: Fortune’s 100 Best Companies to Work For; Great Place to Work Institute; Working Mother’s 100 Best Companies; and Black Enterprise Magazine’s Best Companies for Diversity.

Co-opting: "Get them young," McEnroe said. Existing employees’ referrals are a good way to tap into new labor talent, she advised. Another innovative strategy is Kidzania, a kids-only theme park in Japan and Mexico that allows children the opportunity to see how it would feel to work at various jobs. Corporations sponsor their own space inside the park to display the positives of their workplaces.

Scheduling: Offering employees flexibility and support services is a major plus in recruiting, McEnroe said. Health and wellness firm Rodale, for example, offers its employees day-care compensation when the workers are traveling. Other companies, she noted, are offering concierge services that busy employees can use.

Catering: Some companies have carved out a unique niche in attracting labor, McEnroe explained. Timberland, for example, provides employees with a $3,000 subsidy to buy a hybrid automobile — an attractive option for ecologically minded individuals. Ferguson and PNC, on the other hand, involve parents in the recruitment of their children. At the other end of the chronological spectrum, Guide One Insurance offers benefits that are specifically designed for an older work force.

Moderated by Doyle Shea of 3M Corp., this Oct. 8 panel discussion at the IAMC Fall 2007 Professional Forum in St. Louis featured corporate real estate executives Jeff Adelson of Boeing, Matt Fanoe of Coca Cola Enterprises (CCE) and Terry Rees of General Electric.

Panelists L-R: Terry Rees, General Electric; Matt Fanoe, Coca Cola Enterprises; Jeff Adelson, Boeing. Moderator Doyle Shea, 3M, is standing just behind Fanoe.

Adelson, Boeing’s northwest regional disposition manager, in describing his company’s management of some 87 million sq. ft. (8 million sq. m.) of owned and leased space, said his department’s responsibilities are about evenly split between service providers and Boeing employees. "We operate under a shared services group, which includes HR, accounts payable, security and logistics, and then that goes to the CFO," he told a room packed with attendees.

"Governance requirements and transaction volume are going up, while internal staffing is going down and our service providers are changing from multiple to a single provider," he said.

Fanoe, head of corporate real estate for bottler Coca Cola Enterprises, said his company handles about 85 percent of Coca Cola Co.’s volume in North America, as well as running operations in Great Britain, France and the Benelux countries. The company’s 47 million sq. ft. (4.4 million sq. m.) of real estate (three quarters in the U.S.) comprises 15 office locations, 79 manufacturing centers and over 500 distribution centers, half of which are leased. "The average lease term right now is about three years," he said, amid a business climate replete with change and, therefore, demanding flexibility.

While Fanoe’s organization is involved in services ranging from workplace solutions to surplus property disposition, he said his team has been very active in the arena of business incentives, which he said are becoming "increasingly complex" as all parties try to figure out win-win solutions.

Since 1992, CCE corporate real estate has disposed of over 270 surplus properties for $150 million and completed over 100 property acquisitions with a value of over $180 million. "We’ve tried every type of auction you can try," Fanoe said of the past 15 years. "We’ve completed over 1,300 lease negotiations and conducted over $50 million in business incentive negotiations with governmental agencies."

Rees of General Electric works for the $163-billion company’s infrastructure business unit, which consists of aviation, energy, oil and gas, transportation, and water and process technology. The company’s overall portfolio comprises more than 7,000 locations in 184 countries, 80 percent leased and 20 percent owned, said Rees, adding that the company spends approximately $3 billion annually on leases.

Rees said his organization works with three preferred vendors who handle the lion’s share of transaction management: CB Richard Ellis, Colliers and Cushman & Wakefield. Rees and nine other portfolio managers report to the director of real estate for GE, who reports to corporate properties and services in turn.

When asked how their direct reporting chain is evolving, Fanoe said real estate’s intrinsic ties with supply chain personnel mean he reports through the supply chain side, though some shared responsibilities would at times indicate it would be better to report through finance. Rees said his team reports through GE’s powerful HR function. "Is it where we’d like to report? No," he said, but "there could be a lot worse places to report." Adelson said Boeing Realty just made a change from being a subsidiary reporting to site services to now reporting to the company. "We’ve only been in it about two months now," he said, "and the synergy is working out well."

As for departmental structure, Rees said his team decided a business unit structure was best, in part because of the sheer size and breadth of the company. "We’re regional," said Adelson, "but it ends up being according to business units: commercial planes in the northwest, space in the southwest."

Several questions from Shea and the audience inquired as to the evolving nature of the service provider network, beginning with how involved those providers are in strategy.

Rees responded, "Ideally, I’d like to have the service providers do everything, with my involvement in large, high value-add projects. The problem is I would have to give up six or seven things I would struggle to give up or maybe don’t want to give up. Long term, I’d like to be strategic, and not touch the 1,000- or 2,000-sq.-ft. (93- to 186-sq.-m.) renewals. If there are huge build-to-suits or huge facilities, then I’d like to be involved."

"We try to keep our focus on strategy," said Fanoe. "It’s largely up to the service providers to do the transactional work. I do think there’s a trend towards more teaming on the service provider side, but we’re still farming out to them." Fanoe added that a decentralized company like CCE naturally uses a lot of boutique brokerage firms because it’s difficult to get coverage from the larger providers in small third- and fourth-tier markets.

"Right now I’m really a team leader," said Adelson, mentioning the involvement of internal personnel in site services and governance. But eventually, he said, he’d like to have service providers handle some of those functions, including items like security and IT for lease build-outs. Boeing has gone from three service providers to one (CBRE), and Adelson said it’s made things like site comps across the U.S. much easier to obtain.

Asked about drivers for asset disposition, and whether capital markets affect disposition decisions on quick movement versus maximizing value, Adelson said, "It’s not an overnight activity. There has to be a community value. With Boeing, they are probably manufacturing sites, retitled and rezoned, so looking at interest rates is not part of the equation. It’s a long-term event, and we have a lot of government affairs, environmental and finance people involved."

Asked if they were setting strategy or being handed strategy, Fanoe offered, "It’s a combination. We’re on the team. It’s harder to get involved in those meetings, but you really have to interject yourself into that process."

"One interesting thing about GE is that things are pretty fluid," said Rees. "We reinvent ourselves every couple years. This year we had the head of corporate real estate retire, and had somebody come in who’s not from real estate. But if anybody will get us into the CFO, she will. The person who was my boss until October 1 just got transferred to Shanghai. I have 30-plus years of experience, but I am constantly learning."

Get to them early and often.

In a session titled "How Industry and Academia Can Solve the Looming Skilled Worker Shortage" on Oct. 9 at the IAMC Fall Professional Forum in St. Louis, Mo., that was a key theme among the panelists for cultivating the skilled work force of tomorrow. Among the interested listeners was moderator and IAMC member Mert Livingstone, vice president of global operations for Johnson & Johnson R&D.

Dr. Rick Norris, director of plant and life sciences at St. Louis Community College (SLCC), said his city’s "BioBelt" brand and his institution’s biotech curriculum have both flourished since 2000, but were both built on heritage as much as trends.

"The metro area employs 15,220 people across 400 plant or life science establishments," he said. That employment sector grew by 56.6 percent between 2001 and 2002 in the St. Louis area, he said, not only exceeding the growth rate of the state and the nation, but also paying average wages that are $25,500 higher than the average private-sector wage.

The St. Louis metro area now ranks 17th among 360 metro areas in the U.S. for its plant and life science employment, which encompasses agricultural feedstock and chemicals, pharmaceuticals and medical devices. Norris added that while R&D capital investment is on the decline in many areas, St. Louis has welcomed half a billion dollars in venture capital in the sector over the past few years.

SLCC is no stranger to developing curricula and talent to match industry needs, having just celebrated the 35th anniversary of its chemical technology program, which graduates close to 400 students a year into jobs with an average starting salary of $38,000.

The institution’s biotech program launched as a sister program to that chemical technology curriculum in 2000. Though conceived as a two-year associate degree with a one-year biotech proficiency certificate program, half the program’s students over a seven-year span have already had bachelor of science degrees.

"The University of Missouri said we are considered grad school when it comes to biotech," said Norris. "The program offers hands-on practical experience in the lab setting, with eight to ten hours in the lab a week."

A story Norris told may serve as a caution to those corporate visionaries who think academia’s vision is myopic:

"We tried to start this program in 1997," said Norris. "We called companies in, did a technology scan for techniques. Our final question was, ‘Would you hire a student with a two-year degree?’ They all said, ‘No.’ So we didn’t do it.

"Then we started getting calls from them wanting those students, and we said, ‘You mean those students we didn’t train because you said you wouldn’t hire them?’"

Now the biotech program is blossoming into a complete multi-campus life science center, including a 12-week curriculum developed for entry-level positions at science-based companies, a career pathways initiative and a mobile technology center that takes traveling exhibits into elementary and secondary schools.

St. Louis-area employers in the life sciences sector include Monsanto, Sigma-Aldrich, Pfizer and J&J’s own Centocor Biologics, which uses bioreactors to make products for the treatment of ailments such as arthritis, psoriasis and Crohn’s disease. The company, founded in 1979 in Pennsylvania, was acquired by J&J in 1999. Mark Bell, senior director of manufacturing for Centocor, told the IAMC audience that for its 300 employees, "we will spend 23,000 hours in training this year."

While most of that time is spent on procedures, the training also includes Six Sigma, public speaking and automation. According to 2007 training data, Bell said, the company’s employees are receiving 82 minutes a week, whereas the industry average is 50 minutes a week. Why the intense studies? Two words: Intense innovation.

"Our facility is a stage-three clinical producer of new products, bringing in new technologies and procedures," said Bell. "So there’s a higher degree of training to support that."

In addition to a customized training program from the State of Missouri, Centocor’s work with SLCC has resulted in 11 program graduates now working for the company, with eight of them already qualified as job trainers and six of them having been promoted at least once, amid a work force that sees seven-percent turnover.

"Four-year graduates are often transitional," said Bell. "Two-year graduates with technical degrees are stable. Centocor needs to provide input in programs, and we’ve done that. Our skilled labor goals are being met through the partnership."

One of those 11 program graduates spoke just after Bell. Amer Meer, an associate validation engineer at Centocor who hails from New York, came on board in 2001 immediately after graduating from SLCC’s chemical technology program. He said his new job entailed working with cell cultures and protein purifications in manufacturing, some of which was old hat: "I’d experienced some of the things they were doing in school."

Today Centocor is helping Meer experience more school, by dint of assisting him financially with the completion of his Bachelor of Science degree through the University of Missouri-St. Louis and Washington University.

Meer said establishing relationships and bridges to employment with high schools is something companies need to do more of, in addition to offering tuition reimbursement. he also recommended that companies better educate schools on industry standards and needs, so they can provide training on specific skill requirements such as those connected to cGMP manufacturing.

J&J’s Bridge to Employment (B2E) program, first launched in 1992, and managed since 2003 by the Academy for Educational Development’s National Institute for Work and Learning, aims to reach at-risk youth and connect them to career paths in healthcare, and has completed 26 programs to date at J&J sites around the globe. Sites in Scotland, South America and St. Louis are in the planning stages.

Gwendolyn Miley, a Centocor employee in Pennsylvania, first became involved with the program two years ago.

"Disadvantaged youth don’t think college is a possibility and don’t have role models," Miley told the IAMC audience. "Bridge to Employment shows them possibilities. As students become involved, they soon want to know what the big picture is."

That big picture, of course, includes lots of new jobs in J&J’s sector.

"Of the top 10 occupations expected to post the strongest growth in employment through 2012, eight are healthcare-related," said Miley. "The need for RNs in nursing homes is expected to increase 6 percent by 2020."

Key to making the program work, Miley said, are partnerships with a local high school (preferably close to the corporate campus involved), a local university or college and, in some cases, a community-based non-profit organization.

It’s not cheap, said Miley. The grant from J&J’s corporate contributions budget for Centocor in Pennsylvania this year was $90,000. In June, 17 students graduated.

"The short-term outcome is to keep students in high school," Miley explained. The mid-term goal is graduation. And the long-term goal, she said, is that "they become productive citizens, potentially work for our company and reach out to other students in the community where they grew up."

Once they do so, they may learn — as SLCC and J&J have demonstrated at the institutional level — that outreach is its own reward.