Despite the gloomy backdrop of a global recession and fierce public spending cuts, many charities are rising to the challenge of the new funding landscape. It's a landscape in which change occurs quickly – some arts charities were left reeling last week by the Arts Council's funding decisions. Response to change might see the closure of an organisation, or severe reductions in its workforce and services.
However for others, it brings a sharper focus on strategic priorities and a rationalisation of what they have and how they are using it.
Pruning now provides the opportunity for future growth – fertility that's essential for continuing survival. A crucial element of every organisation's response must be a clear-headed examination of its property portfolio.
Carving out the dead wood
Two key questions to start: do you need all your properties and are you running them efficiently? Many organisations carry much larger property portfolios than necessary for historic rather than strategic or operational reasons. More than one in eight British workers regularly work from home, a statistic that will continue to rise as employers accede their employees' demands for greater work-life balance and take the opportunities to down-size their premises.
The Hub & Spoke business model, with centralised resources supporting dispersed operational units, is a very cost efficient way for an organisation to stretch itself over vast areas without having commensurately vast rent and servicing bills. Take a hard look at each and every component of your property portfolio and ask the questions: "do we need this property, and, if we do, is it worth the money?"
Using what you have more wisely
If it's decided what you have is strategically necessary and cost-effective, then it's time to delve into the detail. Many portfolios are grown organically over time, and without careful management the various leases, licenses and other agreements tend can end up in disarray. Scheduling and charting the key lease events and liabilities is essential. Are there break clauses or rent reviews coming up? If so, do they have strict notice periods that must be adhered to? Understanding the precise costings, timelines and legalities of your portfolio can present myriad opportunities to save money and mitigate risk.
Discovering marriage value & the benefits of a collaborative culture
For many smaller organisations without portfolios to rationalise and eek out savings and efficiencies, there are still options to be considered. Do you need all the space you currently have? 'Marriage value' is created when two or more organisations join forces to drive up value or force down costs. For example, two charities sharing an office and splitting the costs.
This isn't a merger or a takeover (although may be a good place to start for organisations considering merger – living together before getting married!); merely an agreement to share premises and facilities. In the new funding landscape, many smaller organisations will be forced into such arrangements just to survive; however, those charities doing so with strategic purpose will be the ones that thrive.
Formulating a strategy and deploying it
Major efficiencies are often to be found in outsourcing the management of your property. Professional agencies constantly have to deliver a high level of performance for fear of losing you as a client. By linking and tapering their fee arrangements to the size and performance of your portfolio, you can create a cost-effective solution that significantly outperforms in-house management - this is certainly for small to midsize portfolios. Charities must question whether they have the expertise and resources to deliver professional portfolio management under their own roof.
If you do decide to outsource or contract a property manager, ensure that reporting is regular and effective. It's easy to pull out a multitude of statistics and data from the performance of a portfolio, but make sure that what is put in front of you allows you to make effective, strategic decisions. From a facilities perspective you should be looking for the most commonly-occuring issues and how they can be resolved: supplier administration is a huge part of reducing costs on a portfolio. Many charities don't use their size to their advantage by contracting services such as water coolers, photocopiers and other core facilities across their portfolio, allowing significant economies of scale to go to waste. Savings of 20% or more can often be made by contracting nationally rather than locally. Smaller, local charities should consider forming purchasing consortia with other organisations to access similar savings.
On the professional side you need your property managers to be focussed and incentivised to look for opportunities to make savings or control risk. You need clear lines of sight to upcoming lease breaks and rent reviews, obtaining timely market analysis to understand the cost and consequences of these lease events.
Ultimately, for most charities and voluntary organisations, property forms the top two expenses on the balance sheet (alongside human resource), but is often the most neglected, misunderstood and under-managed. By intelligently managing your portfolio - creating and maturing property functions, designing a property strategy appropriate to service provision and funding - you can hedge against the economic and political turmoil and keep a roof over your head.
Tim Waldron is the vice-chairman of Third Sector Property and the chairman of YMCA England
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