Combining Predictive Analytics & Mentoring to Solve the Experience Gap
Rutherford International has sought executive and management talent for the commercial real estate sectors since 1986. Since the early 90’s, we’ve surveyed the opinions of senior industry executives, asking SWOT questions correlated to macro-industry concerns. Currently, we are canvassing the industry about threats and opportunities leading up to Q4/2020. This article addresses one key concern, the experience gap, and how strategic management of resources might be able to provide a workable solution.
A preview of the feedback on human resources in our Q1/19 survey indicates the executive suite is keenly aware of the experience gap between those retiring from critical positions and those backfilling them. The issues of employee productivity and erosion of institutional knowledge, both by-products of an onslaught of staff retirements, are trending in this study’s data collection, as they have in past studies since 1995.
This is not a surprise. Within the last ten years, large industry employers and academic institutions have responded accordingly by increasing their financial support for and focus on educational programs. However, the percentage loss of experience-based knowledge due to retirements continues to outpace skills training. Within the last five years, the cost of the experience gap has gone from intangible to tangible. It’s biting the bottom line through increased compensation, errors and missed opportunities.
The Experience Gap is Biting the Bottom-line
Consider the following functions and the financial impact of sticking to the status quo:
Building Operations:
In building operations, particularly in high-rise offices, community/regional malls, and technology campuses, the experience gap has less to do with learned skills and more to do with a lack of access to experienced, hands-on mentors. Today’s commercial and retail structures are networked hubs of SMART technologies, often requiring the skills of costly building engineering firms. However, lifecycle maintenance programs still require the building operator to know how to adjust the boiler or dismantle a chiller. Without adequate knowledge transfer through mentoring, building owners are becoming dependent on outsourced building science engineers to coordinate their preventive maintenance programs. Property Managers and their on-site operators are missing opportunities to positively impact NOI by extending the life cycle of their building(s).
Leasing Managers (Commercial/Retail)
Leasing experience correlates with the maintenance of institutional and personal relationships. Institutionally, companies rely upon their senior leasing representatives to migrate their accounts to junior and intermediate representatives. This development of leasing relationships is driven less today on the golf course and more by extending confidence to the corporate tenant that the landlord can scale with their organizational needs.
I believe a leasing executive’s success is measured by the breadth of their network and the extent of their external self-awareness. The latter is an inherent trait; however, network expansion is a function of time, introductions to clients by senior associates, and acceptance by end-users. This can’t be achieved by marooning oneself behind email communications but requires building collaborative bridges to street brokers and vested relationships with corporate tenants. The experience gap in this function stems from poor network migration prior to senior leasing representatives’ retirements and from hiring the wrong behavioural profile, driven by old paradigms for measuring success.
In retail leasing, our early research indicated that only 20% of Intermediate/Senior Leasing Managers had the wherewithal to be successful in development leasing. We would include in this definition the tenant remixing and/or repurposing of an asset. At the time, this was a surprising discovery, but understandable when we determined only 50% of their superiors had experience and/or the profile for development leasing.
It takes a special mix of attributes and behavioural competencies to lease different types of real estate. With innovative remixing and/or repurposing of community retail being top of mind for many Owner/Developers, having the right leasing attributes on the team is critical to success. I’ve found that some Leasing Managers are better suited for renewals and infilling stable assets, whereas others are better able to lease from drawings or repurposing.
The latter is a rare breed but identifiable through our benchmarks. In the past, individuals with development leasing acumen were pegged for the Development Officer role, a common role that mentored under a proven development executive. If a development officer’s role was not feasible, then you assigned the person to your most troubled assets. What an Owner should avoid, however, is placing an identified development leasing resource into a broker-reactive, non-hunting leasing role.
Development Managers
Large Owner/Developers traditionally compartmentalize their development departments both by product and functional specialty. However, SME Owners/Developers, and more specifically Merchant Builders, often don’t have the organizational or financial bandwidth to afford separate front-end and back-end development executives. The behavioural competencies that make up a front-end development manager, as opposed to a back-end manager, are quite different. It takes a unique combination of competencies for a Development Manager to transfer from front to back or back to front, so when hiring a full-cycle development executive, it’s essential to recognize this inability before hiring a candidate from a large outfit.
Development is the orchestration of nuance
Development is an exercise in the orchestration of nuance, particularly as it relates to project vision, the agendas of internal/external stakeholders, and understanding cost in relation to project feasibility. I recall placing the development executive responsible for building the first office tower in Toronto’s CBD (actually, it was on the CBD edge) post-90s real estate depression.
We needed to find a solid Back-end development executive who had experience coming out of the ground with steel and who could transition to the FE under the right supervision. At the time, market conditions and academia were not turning out the standard Development Officer profile typical of the late ’80s. The educational profile for career success in real estate development and construction in the late ’80s was B.Com/MBA Finance / B.Com/MSc RE (MSRE was rare in Canada) for Front-end and BSc.Civil/MBA for Back-ended roles. However, everyone with this educational profile, other than MSRE (which was rare outside of CIBC Development) during the nineties, wanted to be an investment banker.
Ultimately, our referral network pointed us to two key prospects, both with the required experience and education. One had the behavioural attributes to recognize the value of ‘listening and learning’ from a supervisor willing to mentor, and the other didn’t. We recommended the former. The successful candidate reported to an old-guard SVP Development (he probably resents me describing him as such), whose pedigree spanned commercial towers in London, Mexico, NYC, and Toronto. The young development executive spent weeks developing project costing, only to discover that his square-foot estimate and the napkin estimate his boss wrote during the concept/feasibility phase varied by less than 40 cents.
Today, this gentleman remains one of the most sought-after commercial project directors in Canada. For me, his career path has always remained a perfect example of how understanding nuance in development is both a combination of natural behaviours and skills learned through mentorship.
Project Management – Owner Reps & GC Project Managers
Finding capable owner representatives and construction project managers globally is increasingly difficult. It is particularly difficult in the Greater Toronto Area, where both owner/developer and General Contractor struggle with project management competency. General Contractors are losing contract bids due to weak project teams, while Owner/Developers are paying for higher cost overruns and missed deadlines, having promoted project managers beyond their expertise. On large projects, GCs are known to have two complements of staff on-site: one to schedule the project and the other to log change orders in anticipation of litigation. In both examples, the Project Managers have the skills but lack the necessary experience usually gained through mentorship and seasoning.
Knowledge is Retiring Out the Door
Time is inexorable, and knowledge is effectively walking out the door every day into retirement. In the past, the ability to land a project and to complete it on time and on budget has required a king’s ransom in compensation to ensure the experienced project lead stays on the job. However, project risk, once managed by entering a few extra zeros to the pay packet, isn’t offering the same enticement today. The professional’s desire to gear back is the greater enticement. The one caveat to this statement is project scope: a project with place-making status within or affecting the expansion of a city’s CBD is a crown-jewel assignment. Tier One Project Directors, regardless of age, line up for these jobs.
The experience gap has caused labour costs on a project’s pro-forma to skyrocket. It’s getting to the point where Owners and Contractors have to compare the cost of repairing project deficiencies resulting from the experience gap against project profitability. The reporting is anecdotal, but we’ve been told that GC’s and subs are refusing to or walking from the bid process due to compression on fees and rising delivery costs. In some instances, GC’s will bid knowing the Owner’s development and design team has a history of multiple changes.
Traditionally, the service providers responsible for project delivery earn their fees from the arbitrage between the bid and the cost of delivery. Fees cascade through a project as milestones are achieved, so meeting the schedule and cost targets is essential to the process’s equilibrium. I don’t believe that quality and lower profit are mutually exclusive. By applying an effective resource management strategy that focuses on having the very best people on a project, you mitigate the need for a stakeholder to consider one outcome over another.
Workable Solutions Around the Experience Gap
Time may be intractable for both large and small enterprises, but it doesn’t mean the challenges above are not without workable solutions. It is possible to forecast, with 85% predictive accuracy, an employee’s or prospective hire’s potential for on-the-job success. Research indicates that employees hired through our methods are 55% more likely to perform well in mission-critical responsibilities and, on a per-hire basis, are 25% more profitable than your average employee in the same role.
Data Analytics & Referral-based Hiring
We can achieve these results through the careful application of data science, which is changing traditional business paradigms, including the strategic management of talent. Predictive analytics is a subset of big science especially in the field of analyzing a person’s future potential. It has become a lever to enhance profits by creating performance-based teams.
What I’m describing is not about matching skills but about determining whether an employee or prospect has the behavioural competencies that correlate with success in the job in question. Despite claims of AI- and algorithmically matched skills by professional online networks and job boards, the most useful talent acquisition outcome remains tied to recommendations from internal staff and to industry connections backed by predictive analytics.
Rutherford International is an executive search/management consulting firm which understands the importance of sourcing prospects through influencers within corporate and industry hierarchies across multiple countries, particularly in real estate finance, development and operations. Our ReferralNET reaches into the following disciplines.
Our Value is Connecting Proven Executives
Our value is connecting proven executives and skilled independent project consultants with clients in need of Just-In-Time expertise. We also offer a roster of experienced independent On-Call Knowledge experts who are available to mentor key members of your staff.