Individual successes are measured by getting the job done, accomplishing assigned tasks, and executing. Long term organizational success though depends on being able to leverage those individual successes through the execution of scalable, repeatable, definable processes and systems. Through leveraging institutional learning, the organization is able to incrementally improve efficiency and performance.
Organizations that do not follow effective processes are typically marked by indecisiveness, poor continuity, ineffective forecasting, inadequate visioning, misunderstanding of core competency, and lack of effective focus on critical tasks (among other difficulties). While, there may be talented people in these inefficient organizations, the potential of those talents is not fully utilized. Individuals are constantly faced with “reinventing the wheel” and do not have effective mechanisms for tapping into the vast knowledge and experience of prior organizational learning (or even of others currently in the organization).
This is not about defining procedures. Improving processes through lessons learned (better ways of doing business) is essential. To sustain strengths and improve weaknesses an organization needs to actively seek better ways of doing business. For the organization to be able to extract those lessons from team members there needs to be 1) an environment that truly values team accomplishments as well as individual contributions, 2) a culture where team members believe their input matters and 3) trust and respect that the identification of lessons (that may reflect past failures) will be rewarded rather than punished. Note that learning and incorporating lessons into the process requires more than simply identifying the potential lessons.
June 29, 2010
June 24, 2010
“Best Fundamentals Ever” for Multifamily
Apartment REIT second quarter results and MPF Research data suggest that the corner has been turned in the rental market (1). REIT’s and analysts alike have given very positive outlooks and the REIT’s have even started to move forward on new development projects. The supply-demand fundamentals are strong in the coming years with positive demographics in the prime rental ages (the Y generation is 80 million strong), high college graduation rates, and virtually no new completions or construction(2). Equity Residential’s CEO even goes so far as to say the apartment industry is already entering the best years the apartment industry has ever seen(3).
If you are an Apartment REIT with access to capital, gearing up for new development (as it looks like they are doing) is probably a good strategy. After all, it usually takes 12 to 18 months to start delivering new apartments and the supply side will continue to be constrained. The rest of the industry is still faced with hurdles regarding access to capital and the negative feedback loop regarding job growth, the shadow market, and immobility.
In the past, job growth has been highly correlated with occupancy and rents and yet recent improvements in apartment fundamentals have not followed the trend in government reported job statistics. Why do Apartment REIT results conflict with the job reports? I haven’t seen a solid explanation yet.
There are a lot of factors in the current economy that were not present during previous cycles that may explain some of it and there is some skepticism regarding the government’s statistics. Also, there is a lot of “noise” in the job statistics from events like the census, the oil leak, seasonal adjustments and under-reporting of small businesses. National statistics may not translate well into neighborhoods where there could be pockets of improvement either. Anecdotally, young renters are likely highly motivated to find ways to get out of their parents house, reduce the doubling and tripling up that they have done over the past few years or form their own household.
In the past, home ownership rates were highly negatively correlated with the number of renters. As home ownership rates continue to decline today(4), there are differing opinions about what that means for the Multifamily Industry. The single family market continues to implode and concerns remain over what that means for the economy at large, future job growth and the shadow market. Strategic defaulters remaining in their homes rent free, vacant homes that have been foreclosed, renters wary of homes that could go into foreclosure, and a frozen market where homes are more illiquid than ever (and people are more immobile than ever) are all factors that are difficult to analyze. The most obvious impacts of continued troubles in the single family market are the continuing negative effect on capital availability and concern we will be dragged into a double dip recession.
So, what does it all mean for new multifamily development? It looks like the REIT’s may take advantage of their access to capital to get a head start on what looks to be promising years ahead. Much of the rest of the industry is likely to be mired in the mud on the side of the road until the rents improve significantly, capital becomes accessible, and they can move forward "opportunistically". There will be some though, who have followed distinct strategies and positioned themselves well to take advantage of the transformational change that is occurring - and will be able to "dip" their toes into new development along with the REIT's.
One last statistic to consider: Architectural Billings for multifamily have dropped from December 2009 through May 2010 as follows 51-50.1-47.3-47.3-45.8-46.9 with anything under 50 indicating a decrease in billings. Maybe, there isn't much to read into that as the only ones with access to capital are basically REIT's, and mutifamily billings for architects are generally pretty lumpy.
Related Articles:
(1) Wall Street Journal article: http://tiny.cc/77xg3
(2) CEL Associates has demographics at http://tinyurl.com/252v9ro
Harvard State of the Nations Housing 2010 http://tiny.cc/6eemy
(3) Equity Residential CEO interview at http://tiny.cc/x1x3i
(4) The Housing Collapse Intensifies: http://tiny.cc/12b0z
(5) Apartments Stage a Comeback Reis research supported http://tinyurl.com/295xk26
If you are an Apartment REIT with access to capital, gearing up for new development (as it looks like they are doing) is probably a good strategy. After all, it usually takes 12 to 18 months to start delivering new apartments and the supply side will continue to be constrained. The rest of the industry is still faced with hurdles regarding access to capital and the negative feedback loop regarding job growth, the shadow market, and immobility.
In the past, job growth has been highly correlated with occupancy and rents and yet recent improvements in apartment fundamentals have not followed the trend in government reported job statistics. Why do Apartment REIT results conflict with the job reports? I haven’t seen a solid explanation yet.
There are a lot of factors in the current economy that were not present during previous cycles that may explain some of it and there is some skepticism regarding the government’s statistics. Also, there is a lot of “noise” in the job statistics from events like the census, the oil leak, seasonal adjustments and under-reporting of small businesses. National statistics may not translate well into neighborhoods where there could be pockets of improvement either. Anecdotally, young renters are likely highly motivated to find ways to get out of their parents house, reduce the doubling and tripling up that they have done over the past few years or form their own household.
In the past, home ownership rates were highly negatively correlated with the number of renters. As home ownership rates continue to decline today(4), there are differing opinions about what that means for the Multifamily Industry. The single family market continues to implode and concerns remain over what that means for the economy at large, future job growth and the shadow market. Strategic defaulters remaining in their homes rent free, vacant homes that have been foreclosed, renters wary of homes that could go into foreclosure, and a frozen market where homes are more illiquid than ever (and people are more immobile than ever) are all factors that are difficult to analyze. The most obvious impacts of continued troubles in the single family market are the continuing negative effect on capital availability and concern we will be dragged into a double dip recession.
So, what does it all mean for new multifamily development? It looks like the REIT’s may take advantage of their access to capital to get a head start on what looks to be promising years ahead. Much of the rest of the industry is likely to be mired in the mud on the side of the road until the rents improve significantly, capital becomes accessible, and they can move forward "opportunistically". There will be some though, who have followed distinct strategies and positioned themselves well to take advantage of the transformational change that is occurring - and will be able to "dip" their toes into new development along with the REIT's.
One last statistic to consider: Architectural Billings for multifamily have dropped from December 2009 through May 2010 as follows 51-50.1-47.3-47.3-45.8-46.9 with anything under 50 indicating a decrease in billings. Maybe, there isn't much to read into that as the only ones with access to capital are basically REIT's, and mutifamily billings for architects are generally pretty lumpy.
Related Articles:
(1) Wall Street Journal article: http://tiny.cc/77xg3
(2) CEL Associates has demographics at http://tinyurl.com/252v9ro
Harvard State of the Nations Housing 2010 http://tiny.cc/6eemy
(3) Equity Residential CEO interview at http://tiny.cc/x1x3i
(4) The Housing Collapse Intensifies: http://tiny.cc/12b0z
(5) Apartments Stage a Comeback Reis research supported http://tinyurl.com/295xk26
June 17, 2010
What's the Most Popular Countertop for Kitchens?
quoting Consumer Reports.org (Kimberly Janeway)
“We plan to replace our kitchen counters and are interested in using stone. Is granite still a hot choice?"
"Granite remains the biggest seller, having accounted for 56 percent of kitchen-countertop sales in the past year, according to the NPD Group, a market-research company. Quartz (Caesarstone and Silestone) and laminate (Formica), each with 13 percent of the countertop market, trail granite in popularity, followed closely by solid surfacing (DuPont Corian)."
..."Granite earned its spot as the most popular counter courtesy of its good looks and durability. Indeed, in our countertop tests, granite was the only stone that could resist heat, scratches, and, when properly sealed, stains.”
(See entire article at http://tiny.cc/jpdpu)
For a typical apartment community, granite offers great return on investment for as little as $5 per month in additional rent for each unit. See www.TheBaypathGroup.com for details.
“We plan to replace our kitchen counters and are interested in using stone. Is granite still a hot choice?"
"Granite remains the biggest seller, having accounted for 56 percent of kitchen-countertop sales in the past year, according to the NPD Group, a market-research company. Quartz (Caesarstone and Silestone) and laminate (Formica), each with 13 percent of the countertop market, trail granite in popularity, followed closely by solid surfacing (DuPont Corian)."
..."Granite earned its spot as the most popular counter courtesy of its good looks and durability. Indeed, in our countertop tests, granite was the only stone that could resist heat, scratches, and, when properly sealed, stains.”
(See entire article at http://tiny.cc/jpdpu)
For a typical apartment community, granite offers great return on investment for as little as $5 per month in additional rent for each unit. See www.TheBaypathGroup.com for details.
June 15, 2010
critical thinking leads to sound decisions
As information and change increase exponentially in today’s digital age, critical thinking is more important than ever. Critical thinking is more than just questioning and reasoning. Taking into account the context and sources of information, the limitation of your understanding and knowledge, and recognizing and questioning assumptions are the first steps in critical thinking.
Interpreting and evaluating arguments and evidence with a healthy dose of analytical skepticism; the questioning of accepted norms; an honest and open evaluation filtered for bias, predisposition, and relevance; the balancing of uncertainty and weighing of data and alternatives; effective communication; and the prioritization of effort also play essential roles in critical thinking.
Of course, coming to logical conclusions must be followed by carrying out solutions and continuous refinement (or reevaluation) as additional relevant information becomes available.
The distillation by this blog has broken a tenet of critical thinking (avoiding oversimplification). Seize the opportunity to expand your knowledge. There are some 142 million Google hits for “critical thinking”, hundreds of books, and numerous courses available – give it some critical thought.
Here are three related documents you may want to ponder:
1) 4 indicators your firm isn’t critically thinking: http://bit.ly/bQG4gf
2) Creating a sound decision-maker: http://prosfromdover.wordpress.com/
3) Critical thinking is the most important skill employees need in the next five years http://alturl.com/pkot
Interpreting and evaluating arguments and evidence with a healthy dose of analytical skepticism; the questioning of accepted norms; an honest and open evaluation filtered for bias, predisposition, and relevance; the balancing of uncertainty and weighing of data and alternatives; effective communication; and the prioritization of effort also play essential roles in critical thinking.
Of course, coming to logical conclusions must be followed by carrying out solutions and continuous refinement (or reevaluation) as additional relevant information becomes available.
The distillation by this blog has broken a tenet of critical thinking (avoiding oversimplification). Seize the opportunity to expand your knowledge. There are some 142 million Google hits for “critical thinking”, hundreds of books, and numerous courses available – give it some critical thought.
Here are three related documents you may want to ponder:
1) 4 indicators your firm isn’t critically thinking: http://bit.ly/bQG4gf
2) Creating a sound decision-maker: http://prosfromdover.wordpress.com/
3) Critical thinking is the most important skill employees need in the next five years http://alturl.com/pkot
June 8, 2010
Charlie Brindell's 'Dumb Tax'
Are you paying high 'Dumb Taxes'? Charlie Brindell, the CEO of TCR, was quoted recently by MFE as saying “If you try to build an organization as opportunities are emerging, you will inevitably stumble, you are going to spend a lot of money and pay a big ‘dumb tax’ if you don’t have people who know and understand these markets.”
Charlie Brindell obviously wants to tout TCR’s expertise in core markets,potential efficiencies, breadth, and organizational structure. However, his general notion of a “dumb tax” in reference to efforts that do not take advantage of the leverage of institutional knowledge, experience and learning curves is something everyone should think about in broader terms. Dumb taxes are prevalent in the industry – some can be abated and others are difficult to avoid. While, circumstances sometimes dictate organizations venture 'outside the box', some have gone so far outside they have lost sight of the box and forgotten what their competitive advantage is/was. While determing your strategic direction, don't forget about the 'Dumb Tax' (or where your box is).
Charlie Brindell obviously wants to tout TCR’s expertise in core markets,potential efficiencies, breadth, and organizational structure. However, his general notion of a “dumb tax” in reference to efforts that do not take advantage of the leverage of institutional knowledge, experience and learning curves is something everyone should think about in broader terms. Dumb taxes are prevalent in the industry – some can be abated and others are difficult to avoid. While, circumstances sometimes dictate organizations venture 'outside the box', some have gone so far outside they have lost sight of the box and forgotten what their competitive advantage is/was. While determing your strategic direction, don't forget about the 'Dumb Tax' (or where your box is).
Real Estate Outlook
Chris Lee’s June 2010 two part analysis of the key issues transforming real estate today, and his predictions about the future, provokes strategic soul searching. The facts speak for themselves, and Chris presents a lot of facts. There unquestionably is a lot of uncertainty today, not the least of which is timing, but the next 10 years present opportunities as well as challenges.
Cut and past into a new tab:
See Part I at http://tinyurl.com/252v9ro
See Part II at http://tinyurl.com/235vblr
Cut and past into a new tab:
See Part I at http://tinyurl.com/252v9ro
See Part II at http://tinyurl.com/235vblr
Risk Management – Embrace It
Do you know where the deep sea drilling rigs in your industry, firm, and career are even located or do you “feel like” you manage risk well? Risk is a part of life and in the tedium of daily routines and the work at hand; risks often go unidentified, unrecognized, and unmanaged. Everything can’t be planned for, and risk management can be paralyzing and detrimental when taken to extremes; but many routinely pass by (or start) ticking time bombs without an inkling or second thought of the lurking danger.
Thoughtful and deliberate identification, consideration, assessment and understanding of undertaking risks are essential. While, checklists and controls are a necessary part of the risk management process, they also tend to provide a false sense of security and relate to specific points in time. Honest open communication within your organization about how significant risks are identified, monitored, controlled and minimized has to be made a core principal.
There is inherently less uncertainty in an organization staying close to its core competency and pushing efficiencies with as many repeatable scalable activities as possible. Management of a project by an experienced team provided with clear and unwavering vision, continuity and unimpeded momentum becomes less difficult and requires less resources. Control over a process replete with opportunities to leverage institutional knowledge and take advantage of learning curves is infinitely easier than starting from scratch (often with teams that also have little history together). The pace of transformational change today requires adaptation, but it is costly not to leverage institutional knowledge and reckless to dismiss the risk that cumulative reinvention brings with it.
Don’t negotiate with, or lie to, yourself. Significant risks can spiral out of control quickly and be devastating. No matter how well run it is, you intuitively know significant risks exist in your organization that could be managed better. The explosion of BP’s Deepwater Horizon in the Gulf of Mexico on April 20, 2010 is tragic and over time we will learn the specifics of what happened. In the mean time, let it be the catalyst for reassessing risk in your organization and planning for your successful future. Take proactive control.
Thoughtful and deliberate identification, consideration, assessment and understanding of undertaking risks are essential. While, checklists and controls are a necessary part of the risk management process, they also tend to provide a false sense of security and relate to specific points in time. Honest open communication within your organization about how significant risks are identified, monitored, controlled and minimized has to be made a core principal.
There is inherently less uncertainty in an organization staying close to its core competency and pushing efficiencies with as many repeatable scalable activities as possible. Management of a project by an experienced team provided with clear and unwavering vision, continuity and unimpeded momentum becomes less difficult and requires less resources. Control over a process replete with opportunities to leverage institutional knowledge and take advantage of learning curves is infinitely easier than starting from scratch (often with teams that also have little history together). The pace of transformational change today requires adaptation, but it is costly not to leverage institutional knowledge and reckless to dismiss the risk that cumulative reinvention brings with it.
Don’t negotiate with, or lie to, yourself. Significant risks can spiral out of control quickly and be devastating. No matter how well run it is, you intuitively know significant risks exist in your organization that could be managed better. The explosion of BP’s Deepwater Horizon in the Gulf of Mexico on April 20, 2010 is tragic and over time we will learn the specifics of what happened. In the mean time, let it be the catalyst for reassessing risk in your organization and planning for your successful future. Take proactive control.
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