Business continuity is understandably a big topic today. Boards are talking about it, consultants are advising on it, and executives are implementing plans to promote it. There is, however, an enormous risk that isn’t getting the attention it deserves in the current discourse: many of our critical business processes are manually carried out and essential business knowledge is concentrated in a limited number of individuals’ heads.
The solution is to “institutionalize” these processes in software so that they are agile, scalable and redundant. This topic is often referred to as “Digital Transformation.” However, organizations tend to have a structural bias against addressing these risks, and consequently, business continuity plans are often left incomplete.
The structural bias against institutionalizing processes and knowledge in software
Staff that execute critical business functions often say they don’t need software solutions that streamline their workflow. These processes are in their head and they can do them as well and as fast as computers. Therefore, the thinking goes, the effort and expense of implementing a new software initiative is not necessary.
This thought process is completely understandable. After all, most of the staff that carry out these processes aren’t generally tasked with business continuity planning and systemic risk assessment. The metrics by which their performance is judged do not include things like process durability or the flexibility to adapt to rapidly changing conditions (the next article in this series on digital transformation will cover strategies leaders can use to better align all the members of a company to support these objectives).
This thought process is completely understandable… The metrics by which [staff] performance is judged do not include things like process durability or the flexibility to adapt to rapidly changing conditions
As the founder of a company that sells software to support drafting commercial real estate leases (which is both a highly manual and utterly existential activity), I do a lot of software demos for critical staff on in-house legal teams. So to make this point a bit more concrete, I’ll share a hypothetical drawn from personal experience. Here is an example of how a conversation could go after concluding the demo:
Me: Any questions or comments about how LeasePilot might fit into your team’s workflow?
Senior attorney: Software looks great! I can see how well it might work for other teams, but for us, we don’t really need it. Our team has worked together for years and we’ve become highly efficient.
Me: That’s fair. Can you tell me a little bit about the process? Is it documented anywhere?
Senior attorney: It’s all in our heads!
What’s the backup plan? When it comes to critical business processes, efficiency only matters when things are running smoothly. People and staff tend to move on for a whole host of reasons: promotions, transfers, retirements, parental leave, global pandemics, massive volcanic eruptions, asteroid impacts… you get the idea.
Business continuity during a global pandemic
COVID-19 offers a tremendous case study in how real estate companies with agile, scalable, and redundant processes in place are able to weather the storm with confidence. Whether it’s your sales team, finance team, or operations team, there are lots of fantastic software solutions out there that are purpose-built to help modernize the core processes of a given business unit. Dealpath, for example, is a software solution that allows investment teams to centralize their deal management and recently released a case study worth checking out on how Hutton developed processes for shifting to work from home. But for the purposes of this post, I’ll stick to what I know best: leasing.
Let’s run through a few different scenarios that illustrate how a landlord with a mixed portfolio of 50 assets across several states might use LeasePilot to build scalability, agility, and redundancy into the leasing team’s operations.
Scenario #1: Scalability
You’re facing a deluge of rent relief amendments.
Due to nationwide lockdowns, many of your tenants can’t pay rent. Hundreds are clamoring for a rent relief agreement
If your operation isn’t scalable:
You don’t have the capacity to churn out rent relief agreements, you’re left with three realistic options:
- Pay exorbitant fees to outside counsel in order to increase your drafting capacity
- Overwork your existing team and accept that you’re going to be unable to respond to tenant requests in a timely manner
- Quit. Build a cabin in the woods and figure out what it means to live deliberately.
If your operation is scalable:
After a few tweaks to your software automation, you’re able to draft and send rent relief amendments in under 30 minutes.
Scenario #2: Agility
You need to update all of your lease forms
In light of the chaos this pandemic has caused, your existing force majeure clause(s) will need revisions. Your janitorial specs could probably be updated to include more specificity, too. Is your operation agile enough to track all of them down and make sure that all of them are brought up to the latest standard? Can you guarantee that everybody on your leasing team knows where to find the latest version of the form?
If your operation isn’t agile:
You’re lucky if you even know how many forms are kicking around on the hard drives of your leasing team. Or maybe you have a dedicated form for each of your 50+ assets. This is beginning to look like quite a headache…
If your operation is agile:
Push one update to the cloud-based master form that your whole team uses. Maybe add a few asset- or state-specific clauses as a checkbox. Go have a nice long lunch and treat yourself to an afternoon cocktail.
Scenario #3: Redundancy
A long-time regional general counsel submits notice of retirement.
S/he has seen enough of the chaos (and frankly, you’d probably consider retirement if you could, too). Now what? Do you have the operational redundancy to manage the transition of responsibilities?
If your operation isn’t redundant:
Whelp. Everything is now on pause until you can make sense of all the cryptic post-it notes. And hopefully it won’t take too long to compare the files scattered around their computer desktop. Is
19Commerce_Form_Final(2).docx the right form? or is it
If your operation is redundant:
Your workflow and language library is already known to the whole team, so just focus on finding the right leader.
While the focus in all of these scenarios was specifically on leasing operations, the main takeaway applies to any core business team: the most effective solution is to institutionalize processes and knowledge in software. Note, this does not suggest or mean it’s efficient to displace people. Rather a flexible, agile and redundant system stitches together a thoughtful plan where people and software work together each doing what it is best equipped to handle.
The importance of digital transformation
As a real estate lawyer turned tech entrepreneur, digital transformation is a topic that I think about a lot. And if the current environment has shown us anything, it’s that digital transformation in commercial real estate is more important now than ever before. Over the next few weeks, I’ll be writing a few more posts on other areas where I think CRE companies could benefit from digital transformation. Next up: OKRs for Commercial Real Estate.