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Freedom through Structure: Optimizing Chain Store Real Estate Processes

Monday, December 10th 2012
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Summary:

Does process get in the way of doing business? Do the head honchos in the boardroom rely too much on the analysts, to the point that real estate deals never materialize? Why are the people with the maps getting so much attention with their “pretty pictures”? Author Jim Stone of Chain Store Advisors explains that there can be a happy medium if …

You hear the complaints all the time.

“The field people only react to the deals that the brokers present to them.  They don’t take the market planners seriously when we target certain trade areas.”

“The analysts (aka “geeks” or “deal killers”) think they know everything because they have mapping and statistics programs.  They have no idea how the real world works.”

“I can’t open enough stores because the paperwork takes forever.  It’s easier to get a Ph.D. than get a deal through our approval process.”

Is this just the way it has to be?  Dealmakers versus analysts? People who drive sales and people who prevent sales?  Entrepreneurs versus bureaucrats?

NO, it doesn’t have to be this way.  But it sure isn’t easy to avoid these problems.  It all comes down to finding the right blend of structure and freedom that allows companies to manage their business while getting the most out of their talented and creative people.

The complaints above, and many more like them, are symptoms of an imbalance between structure and freedom in an organization.  Each represents a different way for a real estate group to fail:  either by opening underperforming stores that could have been avoided (too much freedom for dealmakers) or NOT opening enough stores to grow the business (too much freedom for analysts and bureaucrats).

I have gotten to know dozens of chain store organizations over the past 20 years and I’m sorry to say that there are few that seem to have gotten it right (especially over a long period of time).  Most companies tend to follow a pattern that is based on the general economy:  when times are good, the dealmakers get more freedom and when times are bad, the bureaucrats get more freedom.

There are a few industry leading companies that seem to strike a good balance during good times AND bad times.  In good times, they boldly pay top dollar for only the best locations that will perform well even in bad times.  In bad times, they use their strong cash position to grab “B” locations at prices that generate great profits in bad times and do even better when the economy recovers. How do they do it?

There are at least three common elements that I have observed in these companies:

  1. Defined business processes for market selection, market planning and site selection
  2. Ongoing training programs with active learner participation that create alignment from the boardroom to the field
  3. Information systems that provide fast, accurate decision support to all participants in the process, tailored to their roles and skill sets

Let’s take a closer look at these three traits.

  1. Defined business processes simply means taking the time to think through the way decisions will be made and writing it down.  The first draft may be rough, incomplete and in need of a lot of revisions in the early going.  If the authors are empowered by senior management to solicit input from all participants, and they actually get that input, it is much more likely to be useful and used.  I have seen cases where the authors of such documents become “process bullies” and aggravate everyone, creating a painful, cumbersome waste of time that is sometimes worse than no defined process at all!
  2. Training programs are the grease that makes the processes work.  Real estate markets are complex and there is a lot of terminology that people use to describe similar, but not identical, phenomena.  Every organization is a melting pot of people from different backgrounds and companies and the training programs provide a common platform for building and sharing a company’s standardized ways of thinking and talking about important factors and analytical methods.  This is one area where the balance between structure and freedom is particularly important:  standard terms and methods should always be viewed as a common denominator and all participants should be encouraged to correct and improve them as better ideas find their way into the mix.  The key to effective training programs is that they must be well-designed, have significant learner participation, and be ongoing, using a combination of delivery methods including classroom, online, on demand (Web-based), and on-the-job.
  3. Information systems that support chain store real estate decisions have come a long way in the last 10 years.  Once the domain of computer programmers and spreadsheet jocks, it is now possible to deploy affordable, powerful systems to all participants in the process, from executives to dealmakers.  Web-based and mobile applications based on a single enterprise database can deliver maps, demographic reports, aerial imagery and analytics that are tailored to the role and skills of the user.  However, this is the LAST step in the process.  Many companies rush out and buy a technology platform before they have even defined their business processes and designed their training programs.  This is putting the cart before the horse and will ALWAYS lead to pain and remorse, and can sometimes be career-threatening.  On the other hand, it is very difficult to take advantage of best practices (or at least “good practices”) without these tools.  Just remember that if you try to automate business processes that haven’t been defined, you will end up with (guess what?) automated chaos.

I would love to get some comments from people who have seen both good and bad examples of efforts to optimize structure and freedom in chain store real estate planning and site selection!


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