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10 Barriers to Improvement

Thursday, September 14th, 2017

Just about anyone you talk to grumbles about how some things are “done around here”. But, try to get something changed and suddenly you become the Grim Reaper.

So why is it so hard? What are the barriers that prevent us from improving the way we work?

1. It is not my job

How wrong-headed is this? There is no one more capable of identifying opportunities to make the process better and faster than the current operator of that process and there is no one more likely to gain from the improvement.

2. Fear of offending

Let’s not upset our prima donna, best coder, Stewart, by asking him to document the customer’s requirements. Let’s not upset our functional expert, Indira, by asking her to justify her assumptions in a business case. Beware of Dez. He is likely to fly off in an angry, defensive rant if asked to change something.

We’ve known for 40 years that the irony here is that the manager who is too afraid of challenging the status quo because of the ‘pinch’, will likely face the ‘crunch’ of having to lay people off when their department doesn’t perform. *Sherwood and Glidewell (1973, 1975)

3. Worried that changing will lead to delays

“I don’t have time for continuous improvement. I’m too busy to change the way I’m doing things. “

Don’t worry. You’ll have plenty of time to think about it when the company cuts your product line or moves it to another state or country because it is no longer competitive here.

4. Not wanting to get delegated the task of fixing it

I knew a senior manager who responded to all improvement ideas with, “Great idea. Please form a task force and report back when you’re done”. People stopped suggesting changes because they always led to more work for them.

5. Unable to change it anyway

For whatever reason, we feel powerless to make changes. These might include we know it is not working but we don’t know how to improve it, we are new around here, we’ve tried to change it before, or the problem is in an upstream or downstream department. These are all just cop outs because it will take some effort.

6. Blame game

Too many of us fear being singled out and blamed for a failure or poor performance if we bring attention to the process failures that affect our work. This is really a failure of management to differentiate system or process failure from the failure of individuals within that process. I hope you don’t work in a place like this.

7. Fear of the career limiting move

Higher up the chain, expensive programs are often put in place on the whim of a powerful, senior executive. No one wants the black mark of suggesting the matrix isn’t working, or that HR’s new bonus system is un-motivating, or that the new perfume for dogs won’t sell.

This kind of resistance is probably the only one with any credibility. You usually have very little power in the scenario. Luckily, many companies offer an anonymous suggestion box. Unfortunately, few employees believe that it is truly anonymous and most won’t use it.

8. Past Success

Perhaps the most insidious of all is past success. The more successful a person has been in the past doing something, the harder it is to convince them there that they should be doing something else. Think for a moment about how this played out for Kodak as digital photography overtook film and they failed to adapt.

9. Strategy is a secret

God help the manager who shares the plan with those charged with execution. Way too many staff are treated as part of the problem rather than the answer to any challenge facing the company. Make staff feel like soldiers and they can move mountains. Make them feel like victims and that is what they become.

10. Fear of losing their jobs

People are afraid that if we become 5% more efficient, then we might shed 5% of jobs. Well, that might be true but the opposite thinking is rarely applied. If we don’t improve, we’ll lose our competitiveness and potentially lose 100% of our jobs. Another way of looking at it is that we can do 5% more work that customers are willing to pay for, innovate more, respond to threats and opportunities and thereby make our jobs more secure.

We have to improve at the same or faster rate as our competitors or we will lose our market share to these more agile adversaries. How do we overcome these barriers to even suggesting Improvement so that we can create a culture of continuous improvement?

*Sherwood J. and Glidewell J. (1973, 1975) Planned Renegotiation and the Pinch Model

Commercial Property Condition Assessment (PCA)

Thursday, September 14th, 2017

The purpose of all Commercial Property Condition Assessments (PCAs), ASTM standard E2018, is to make sure that the property and building you believe you are purchasing or leasing is actually the property being received. You will have reached that decision, in part, from the information attained via a professional inspection and Property Condition Report (PCR). Every real estate transaction is different and each transaction has its own unique set of considerations and conditions to validate before finalized. The utilization of professional third party experts in the physical property due diligence process is critical to the overall accuracy and cost efficiency of your property transaction.

The Purchase or Leasing of Commercial real estate, whether it be a basic commercial net lease, a commercial triple net lease, the purchase of a church facility, a retail outlet, or the purchase of a million square foot office/warehouse, the prospective buyer or lessee absolutely must conduct an adequate level of due diligence when investigating the physical quality of the commercial real estate they are investing in.

You need to know not only the physical characteristics of the real estate and buildings being acquired, but the approximate condition and age, to assess the good with the bad, such that you can adequately balance the risks and rewards being offered in conjunction with your real estate deal. The single most important part of the real estate transaction process, aside from the purchase price and profitability balance, is a well-documented review of the actual physical condition of the real property. Otherwise, you could find yourself the not so proud owner of a commercial property that, doesn’t suit your needs, costs more than you can afford in upkeep, or the ultimate remorse for investors – capital expenditures are being sunk into a property on a regular basis that someone else is utilizing and making money off of, and you are not. Suddenly, that long term lease with a solid anchor doesn’t seem so attractive anymore.

The process of commercial real estate inspection begins before the offer to purchase real estate is drafted or signed, by visiting the site and discussing the physical condition of the property with the Owner and real estate brokers. This process should be considered invaluable to establishing relationships required to obtain the information that will be necessary to concrete your due diligence with a Commercial Property Condition Assessment (PCA).

During negotiations and drafting of the real estate sales/lease contract it is important to recognize seller or lessor reluctance to points such as the existence and availability of important documents such as warranties, maintenance contracts, architectural and engineering plans and/or local municipality reviews and inspections. Negative reaction to the request for release of these documents by seller or lessor can imply possible deferred maintenance and/or inattention related to property and building condition(s) and inspection issues.

Once the commercial real estate sales contract is signed the due diligence period begins, focus on maximizing efficiency of time and cost and prioritizing concerns to start checking off the costly big ticket items from the top down. Assuming adequate documentation is furnished by the seller for review, adequate time should be allotted to verify the information provided. Additional effort and monies that that will need to be spent to make up a shortcoming of available documentation through extra property condition assessment and additional field inspections and/or experts should be considered essential and figured into the cost of the property transaction. Ask the seller for all documents and contacts the seller received during his due diligence process when he purchased the property to speed up fact finding.

Review of existing property documents where available may include:

Accessibility surveys, Architectural Building plans, Certificates of Occupancy, Citations from Authorities Having Jurisdiction, Emergency evacuation plans, Environmental studies, Electrical System Construction plans, Fire-detection test and maintenance records, Fire-door inspection reports, Fire-Protection System Construction plans, Fire and Restoration records, Maintenance records, Mechanical System, Construction plans, Violation Notices from Authorities Having Jurisdiction, Construction Permits, Plumbing System Construction plans, Previous inspection reports, Roofing System Construction plans and Warranties, Safety inspection records, Seller condition disclosures, Sprinkler System Test Records, Systems and Material Warranties, Current tenant information, Current policy of title insurance, Notices of any environmental conditions, Notices of any new or special assessments or taxes, Copies of all current bills for the property, Service contracts, Evidence of current zoning, As-built plans and specifications, All construction related documents including warranties, All past and present uses of the property, Third party reports or inspections, Any surveys of the land and improvements in seller’s possession.

One of the best tools available to the commercial property due diligence team is the interview process which can unlock a plethora of potentially useful information regarding the subject property.

Interview of any available key personnel with specific knowledge of the property conditions may include:

Owner, Tenants, Maintenance Foreman, Contracted maintenance services personnel or other contracted companies that routinely work on the property and/or building.

Property Inspection, Real Estate Inspection, Building Inspection, Due Diligence Survey, as they may be labeled in the due diligence report is essential to ensure sufficiency of construction considering the intended use of the occupants and the surrounding geography and climate. The furnishing of any available plans and specifications should be helpful here, but will not end the investigation. A current commercial property condition assessment should be done by a qualified third party inspection company experienced in the type of property to be inspected. A previously performed property condition assessment or inspection is nearly always furnished for the use of a single party in a single transaction and is protected under law and not reusable nor transferable to any other party. The focus of the inspection should be primarily on site condition and building components such as the site drainage, parking, building structure, mechanical and electrical systems and general accessibility and usability of the property. Various climates and geographical regions will require more specific inspection knowledge, thus hiring a local inspector is always a good idea if possible, in lieu of hiring a company out of Wisconsin to perform due diligence on a California high-rise building on a fault line.

Site Survey and Walk-Through to Observe Existing Conditions may include:

Grounds and Topography, Parking, Paving, Access, Building Exterior and Fa├žade, Building Interior, Roofing systems, Structural systems, Mechanical systems, Electrical Systems, Plumbing systems, Fire-protection systems, Vertical transportation systems, and any number of other specialty systems.

The 2010 Americans with Disabilities Act is the current guideline for accessibility standards nationwide and is a federal law, hence non-negotiable and to an extent, yes, it’s retro-active even for older commercial and public buildings. Many states also have additional and/or more stringent or specific accessibility standards as well. Most professional property condition assessment and inspection companies can also perform both abbreviated and complete accessibility surveys as part of a real estate transaction.

Basic abbreviated and full compliance Accessibility surveys may include:

Abbreviated survey looking only for basic ADA Accessibility components visible during the walk-through and documented according to the ASTM abbreviated survey form and checklist gives a quick check as to the general status of compliance. Full compliance survey involves physical measurements of distances, slopes, and push/pull forces required within the accessibility standards to allow for a certain level of physically disabled person to be able to successfully navigate a property, site, and building.

Environmental Due Diligence known as Environmental Site Assessment (ESA) is the most utilized Environmental Inspection Report. The typical level of report preferred by lenders to demonstrate adequate due diligence is called a Limited Phase I Environmental Transaction Screening ASTM standard E1528. This explores the past use of the property and the surrounding properties to identify any potential onsite or adjacent environmental problems or future liabilities. These reports normally require a significant monetary investment and take a number of weeks to complete so they should be done as soon as you have determined you will be moving forward with your due diligence. The purpose of this inspection is to determine if the property contains any hazardous materials or poses a threat in any way to its surroundings. This could be caused by underground storage tanks located on the property or runoff from the property into the water table or any other number of hazards listed by the Environmental Protection Agency. While the report is expensive, the cost of cleaning up an environmental hazard can be astronomical. While not every deal will require you to obtain a Phase I Environment Site Assessment, many lenders will require it as part of their loan guidelines. In case of a fairly new development with a clean environmental record and no neighbors of an industrial nature, a simpler less expensive and much quicker Environmental Transaction Screening ASTM standard E1528 may satisfy lender and legal requirements.

Any basic environmental due diligence report may include:

Research of historical site usage, aerial photography records, property transaction records, construction records, building records, EPA mapping data, local municipality topography mapping, and a through site walk-through to visually identify potential environmental issue indicators.

The information contained herein is purely professional opinion and provided for general real estate inspection reference only and is not intended in any way to be a definitive guide, nor a guarantee of past, present, or future legal or state or federal requirements, nor a measure of performance of any professional services company. Best of luck to you in all of your future property, real estate, and building dealings!