"From 2000 to 2004 the main focus at Motorola was entirely on right-sizing our portfolio through site reduction and on reducing overall operating costs," says Bob Bovee, director of Global Real Estate Strategy. "In 2004, all businesses within Motorola returned to growth following a 46 percent reduction in sites, a 44 percent reduction in facility costs, and the adoption of new management processes that have helped us achieve maximum bottom-line financial performance."

In the first half of 2005, Motorola's sales are up 17 percent to $8.8 billion and overall earnings are at just under a billion dollars, up 52 percent from a year ago. Although Motorola may be best known for mobile cell phones and the infrastructure to support those devices, it is just one of four core business segments within the company. The others include Motorola's Networks division; the Government and Enterprise Mobility business that provides voice and data wireless solutions to the military and public safety officials at federal, state, and local levels; and the Connected Home business, which provides technology for home security monitoring and digital television.

Managing a Global Portfolio

Despite Motorola's dramatic reductions, the company still has 68,000 employees and 333 sites globally. Of those sites, 39 are considered major sites, defined by Motorola as a facility with more than 150,000 sf. The global portfolio represents $425 million in operating costs and 24.5 million sf of space, which breaks down to 19 million sf of owned space and 5.5 million sf of leased space.

All facilities are managed by Motorola's real estate and development team, which is comprised of only 26 people. Within that team, nine people focus on project management, long-term strategy, and financial and legal counsel. Another nine people serve as regional transaction managers, with three in each of Motorola's regions: Asia-Pacific, the Americas, and Europe Middle-East, and Africa (EMEA). The remaining eight people form the Facility Leadership Team, which includes a director of facilities and a strategic planner for each of Motorola's four core business segments.

Bovee explains that the team of 26 is able to effectively manage such a large facility portfolio with so few people by working as an integrated real estate team within Motorola and by selecting highly qualified outsource partners.

"Our real estate and development experts allow us to represent the interests of our specific internal customers, but also helps us keep sight of corporate strategy and how it affects the overall portfolio," says Bovee.

"Once we make a facility decision, we rely on our outsource partners to help us execute the day-to-day detail work," he continues. "We also turn to our partners to handle real estate transactions such as leasing, and buying and selling of owned properties, and for project management of any new construction, renovations, or expansions."

Relationship Management

Leveraging and managing the performance of outsource partners is a key component to effective relationship management, which Motorola sees as the first of four strategic elements that define its real estate and development team. The other elements include decision-making, benchmarking, and setting measurable goals and objectives.

"In addition to building solid relationships with our outsource partners, we work very closely across all the functions of our integrated real estate team within Motorola so as to maintain solid relationships," says Bovee.

This includes regular reviews with individual businesses within Motorola and regular planning meetings among the members of the Facility Leadership Team, who serve Motorola's four core businesses.

Decision-making

"We want to keep decision-making simple, but we want to make sure that our decisions are well understood and that once the decision is made there will be no second-guessing," says Bovee. "First we ask ourselves, how will the decision impact the overall corporation? Then we can consider how the individual businesses will be affected."

A key decision-making tool at Motorola is the use of Net Present Value (NPV), a financial analysis that allows managers to review operating costs in relationship to space utilization. The NPV analysis summarizes the net present values of the decision in relation to its profit and loss impact. It also considers cash flow, the inflow and outflow of cash to the corporation, on a monthly and annual basis.

"A standardized analysis such as NPV is very helpful because it leads to decisions that are financially based and helps emotions to stay out of the picture," says Bovee. "Even though we strive for simplicity in decision-making, we need a financial analysis that is complex enough and comprehensive enough to be meaningful and representative."

Benchmarking

Bovee explains that Motorola's third strategic focus is benchmarking, done primarily by collaborating with similar companies to share standards and performance metrics in the area of real estate management.

"We clearly get better when we measure things," says Bovee. "Benchmarking our metrics against other leading-edge companies shows us how we stack up against our competitors and whether we need to make any adjustments to improve our performance."

Across Motorola, all divisions keep a scorecard to measure performance metrics such as site count, percentage of shared sites, cost as a percentage of sales, cost per square foot, sales per square foot, and how much square footage per employee is being used. The scorecard is refreshed and reviewed quarterly to insure that opportunities and issues are addressed in a timely fashion.

In 2000, Motorola had 618 sites. This year, the number of sites will end the year at about 315, a reduction of over 300 facilities. In 2002, the cost of sales per square foot was at just $804. Based on Motorola's 2005 sales forecast, the figure is expected to rise to more than $1,500 per square foot.

Currently three-quarters of Motorola sites are shared locations, where all or most of the company's core businesses share the site, a dramatic rise from 2000 when only eight percent were considered shared sites. This has been a key factor in reducing facilities operating costs from $753 million in 2000, to $425 million at the end of last year.

Goals and Objectives

"Now that we are operating in a profitable environment, we can shift our focus from reduction to one of controlled growth," says Bovee. "To support this healthy growth, our primary goals and objectives within the real estate and development team are to optimize all sites and space and to achieve best-in-class metrics."

If a new site is proposed, Bovee explains that Motorola applies what it calls an E-cubed decision-making approach—entry, efficiency, and exit.

"First we challenge the entry of every new site by making sure we can't accommodate that requirement in some other way within our existing portfolio," says Bovee. "If a new site is approved, we want it to be as efficient as possible from day one. And we make sure that we have a clean exit strategy from the very beginning."

For this reason, Motorola sites, including manufacturing operations and lab environments, strive not to be over-specialized to ensure that the space retains its marketability and value to outside investors if the space needs to be sold in the future.

Workplace Mobility

One way that Motorola is working to control operating costs and to optimize space is by studying workplace mobility.

"We are looking at how people actually work so that we can plan space accordingly to reflect this," says Bovee. "As people are becoming increasingly mobile to get their jobs done, we now realize we can move away from the one-person/one-seat philosophy."

To study this, Motorola's real estate team conducts "dark space studies," which involves surveys that assess which office spaces are dark, or not being used, on specific days and finding patterns that might lead to opportunities for shared space.

"Since workspace can stir up a lot of emotions, we also know that changing or reducing that space is often easier said than done," says Bovee. "These studies and Motorola's commitment to space optimization have lead to corporate-wide space standards that can be applied uniformly without exception to every facility, whether it is executive offices or workstation environments."

Moving Forward

Bovee points to continuous improvement as an overriding goal for the future, including ongoing efforts to strengthen communications with all businesses within Motorola and to encourage benchmarking against as many companies as possible.

"As we look towards the future, we are working to make sure that our real estate strategies are well aligned with all individual businesses and with the company at the highest levels," says Bovee. "This will also ensure that our goals continue to support the overriding goals of the corporation."

By Amy Cammell

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