The property puzzle.

• Author: Russell, H. Bruce
• Position: In-house real estate management at Eastman Kodak Co. - Corporate Real Estate

While many companies are outsourcing their real estate management, Kodak is convinced it can create the most value by driving the process in house.

Like other functions in Corporate America today, corporate real estate management is going through a transformation. In the past, the function was either nonexistent or being driven by facility people, not financial people. But companies are beginning to look at their real estate--land, buildings, and space--as a financial asset. They use their real estate assets to create value, and they run their real estate operations as businesses. They also see that the corporate real estate group's role is to provide working environments that minimize the investment in real estate and space.

At Kodak, our goal is the same. Our internal corporate real estate office, called CREO, reports directly to Kodak's CFO and employs these individuals: a director of property management, who runs our properties; a director of asset management, who keeps track of all the assets the company owns and leases throughout the world; a director of field real estate, who runs our field facilities; and a financial manager, who handles all the legal, financial, and administrative aspects of our businesses. We also have several staff people, including one who leads an R&D function that examines new products for us.

We run CREO as a "not-for-profit profit business." Our recently revised mission statement sets as CREO's objectives not only to provide real estate solutions but to examine how we can improve the return on assets, to look at cash flow, and to evaluate the operating performance of our business units. That's how we measure our financial contribution to the company.

We decided up front which businesses we want to be in. We call these our core competencies (more on those later). To each of these core competencies, we apply four principles:

* Finance--We use the financial concepts of the real estate industry. We think and act like a for-profit developer or owner. When we benchmark, we don't benchmark against other corporate real estate functions; we benchmark against developers and property owners. Anything we spend above what a developer would spend is too much. The more we align our corporate performance to that of the market, the greater value we create.

* Quality--We use the quality principle in everything we do. That means focusing the entire organization on a common mission and vision--and then empowering teams to execute. Every manager who runs one of our facilities is running a business. We look at his or her performance every month. We're very conscious of all costs. Through the quality process, we continuously improve, based on the principle that in a business you break down everything into tasks, then you optimize the tasks and measure the performance of each.

* Marketing--In CREO, we believe if we have a good product, all we have to do is market it and not rely on any corporate rule that insists that Kodak units do business with Kodak's CREO. If we're truly creating value, we'll be very busy. If we're not creating value, we'll be out of business.

* Negotiation--Rather than take the litigation route, CREO has developed a conflict resolution process. We've learned that, instead of throwing rocks at each other, we should bring together all those involved in a...