by John Kirkwood and Jim Padden
The Audit Commission’s study of local authority property management is to be welcomed — but does it go far enough? The authors have recently undertaken a review of the estates division of Sheffield City Council and in the light of their findings, they consider that the commission has failed to realise the need for property professionals to acquire new perspectives and new skills. In contrast, at Sheffield, this deficiency is being addressed through a programme of planned organisational change and skills training. The two approaches are contrasted within this article.
The Audit Commission’s recommendations are directed at three groups: central government, elected members and officers.
The commission’s recommendations to central government include the need to create “a more certain environment” for local authorities (whatever that means!), better incentives to encourage the development of underused land, and improved decision-making on school closures.
Council members, the commission suggests, “…should ensure that a property strategy exists in their authority …” and that appropriate structures are required for this purpose, identifying the property committee as the main example.
The recommendations to officers range from well-intentioned general objectives (“good relations with individual service departments”) to an overview of best practice management arrangements (eg Ensure that service committees are charged the opportunity cost of tenanted service property and vacant property).
To implement these recommendations will require high levels of managerial and inter-personal competency in addition to the traditional professional skills. The commission clearly assumes that such qualities are already present when it states that, “many local government property officers are highly skilled and committed people”. However, our findings show that while professional expertise and commitment are certainly high, there is a marked lack of understanding of how to achieve results through people.
Essentially the Audit Commission’s study presents property management as a series of processes involving structural, technical and economic issues. Emphasis is accordingly placed on issues such as the importance of strategic planning, the opportunity cost of holding property, need for good information systems. In other words, the commission’s study highlights the strategic aspects of property management.
These strategic aspects have a major bearing on the success of any property department. The report, however, begs some important questions. First, on the ability of managers to “think customer”, and to devise strategies which are seen by those who come under the customer label as providing value from their point of view. The need for a highly developed idea of the customer is, in our view, critical. That is, it must recognise all individuals and parties both within and outside the organisation whose interests have any bearing on the work of a property department. For example, it was clear from our study that there were important differences in the supplier’s perception (ie the estates professionals) of the value of the service they delivered, and the customer’s perception of the actual value they received.
Second, however well conceived a strategy may be, success is all about delivery. Property departments can only be successful to the extent that the management process creates a culture that takes into consideration issues such as the morale and commitment of staff, the competencies that are required in a rapidly changing business environment, together with the measurement of performance and the consistency of the service offered. The commission’s approach, we believe, focuses on the more traditional strategic aspects of success, while ignoring these key aspects of a property department’s operating culture.
The view which we take is that an organisation’s success is dependent on these two inter-related elements: how well the organisation can develop an effective strategy with regard to its customers and its constraints, and how well it can create an effective culture with regard to its staff and managerial effectiveness. With this framework in mind, the Audit Commission’s approach to local authority property management is appraised, and comparisons are made with the author’s recent review of Sheffield City Council’s estates division.
The Audit Commission’s approach
A clear theme of the commission’s study is a recognition of the importance of property. “One way or another the cost of holding and running property represents close to a quarter of total local authority rate and grant borne expenditure in any one year.”
As a way of measuring the importance of property the commission’s approach reflects a rather narrow perspective (perhaps to be expected from an organisation dominated by accountants and economists!). However, property is important to local authorities not just because of its financial value or the costs it generates; it is important because of the opportunities it provides. Property is the basic resource for service provision, urban regeneration and employment creation, income generation and recouping betterment, and the provision of the social and economic infrastructure. Landed property is fundamental to everything a local authority does.
Although considerations of cost and value are a vital part of good property management, it would be foolish to develop a property strategy based solely on this perspective. Excellence in management is difficult to attain because it involves consideration of a range of frequently conflicting financial, social, aesthetic and environmental objectives. It should not be reduced to a balance-sheet exercise.
This pursuit of excellence highlights once again the cultural aspect of an organisation; ie how professional staff view the relationship with various users, the nature of the service they should provide, and their ability to work with others in competition for scarce resources.
The commission suggests that progress “… will require a major change in attitudes by some elected members and chief officers from the current position of ‘what we have we hold’”. To achieve this they propose the idea of incentives to facilitate difficult decisions (eg school closures). But this represents a very mechanistic approach to property management which will inevitably involve additional controls and greater central government interference. Regulations are a sad reflection of a lack of trust in decision-makers and the inability of individuals and groups to resolve conflicts through skilled problem solving.
Management problems
The Audit Commission’s team was impressed by some of the excellent and imaginative property management it encountered. “Many local government property officers are highly skilled and committed people.” However, the commission suggests that such officers are often required to work within an environment that is characterised by a fragmented approach to property management, which results in the following problems:
- inadequate strategy
- inadequate management information
- no incentives to users
- inadequate property review
- opportunity costs not recognised
- confused objectives
- unco-ordinated maintenance
Of these issues, those which relate most closely to Sheffield City Council’s Estates Review are discussed more fully below.
Inadequate strategy
The report states that because property is not readily transferred between service departments it may lie unused or underused, and that “this fundamental weakness arises because authorities have failed to recognise the corporate aspects of property portfolio management”. The commission’s suggested solution to this problem is that the elected members should provide strategy and direction.
Many of the difficulties cited above were evident in our own findings and stemmed from a lack of clear direction from elected members. While we recognise that property is a complex resource for the layperson to understand, our view is that the “mission statement” and political goals should be the member’s main concern, with much of the responsibility for strategic planning resting with the senior officers.
Undoubtedly an interesting aspect of this is how the interface between these two groupings is managed. Posing the “customer/supplier” model raises questions on how an estates department should best position itself to give members what will be of most value to them. What constitutes a professional service and how is competence judged? In the environments in which all professionals operate today (market forces and higher customer expectations of service) it is no longer appropriate to judge the competence of estates personnel solely in relation to their professional specialisms, which would seem to be the apparent assumption in the Audit Commission’s report.
The essence of many of the problems we encountered was that while estates officers are competent within their specialisms (eg valuation) their managerial and marketing abilities have not been developed sufficiently to cope with strategic issues. In consequence, they frequently operate reactively (responding to requests) rather than proactively (taking the lead). It is this deficiency which lies at the heart of the property management problem, not questions about appropriate structures or the members’ role. If the officers do not possess the necessary skills, no amount of strategy and direction from members will make any difference.
The difficulty is that the acquisition of appropriate management skills requires time, resources and patience, and improvements in performance are difficult to quantify. Hence there is a tendency to opt for structural change because it can be implemented quickly and creates an illusion of improvement.
Inadequate management information
The commission’s findings on local authority property management information systems confirm our own experience. “In many authorities there is a conspicuous lack of information about property. Land terriers are frequently out of date and omit important information about property holdings. Many authorities do not, therefore, know what they own.”
In the light of this, one would expect specific recommendations from the commission, plus an indication that more detailed consideration is being given to the establishment of property databases. However, in the commission’s conclusions there is no reference to either information systems or property databases. Forthcoming special studies are mentioned but none of these are to cover the subject of property information systems.
A brief appendix summarises the findings of a working party set up to define the basic property data items which should be contained in a property database. The summary contained in the appendix is of little value and is a sad reflection of how little progress has been made in this field. It is not unreasonable to suggest that local authorities ought to have reached the stage of discussing how their established computer-based property information systems could be exploited, whereas the reality is that most are still stranded defining the basic elements. If it is possible for a bank customer to use an electronic cash machine anywhere in the country to obtain details of his or her account, why is it not possible for council members to gain accurate information on the property held by local authorities via a computer system?
Possibly the best example of the need for adequate information systems is where local authorities hold property as an investment. As the commission rightly states: “Authorities should, in the same way that property companies would, have clear objectives for owning investment property and for managing properties in an active way — identifying and disposing of poor performers, investing to improve performance where justified, adding to the portfolio where this would enhance the value of existing property (‘marriage value’), refurbishing property prior to rent reviews and so on.”
To undertake such active management it is necessary to be able readily to undertake frequent portfolio valuations, to make regular cash flow projections and to analyse the performance of property investments. Computer systems have been developed to aid valuers in these tasks, and yet, so far as we know, they are not used in local government.
Unfortunately, most local authority valuers do not know what is available because they receive inadequate guidance from the professional bodies and from central government. And data-processing staff within local authorities frequently have a vested interest in ensuring that packaged solutions are not acquired.
In view of the slow progress that has been made in this field, we feel that the Audit Commission should instigate a special study into the use of information technology for property applications within local government.
Confused objectives
The commission’s report states that “few authorities have clearly stated reasons for holding property”, citing the lack of distinction made between investment property and service property as an example. However, the absence of clear objectives is a symptom rather than a cause. It arises because officers find it difficult to reconcile meet in a complex professional environment. When local authorities were simply required to acquire land to meet narrow statutory obligations, there was little ambiguity about the objectives estates officers were required to achieve. Gradually, however, local authorities have adopted a more political, corporate approach towards serving the needs of their communities.
In Sheffield today, for example, members are concerned with regenerating the economy, providing for disadvantaged groups, generating additional revenue, supporting the social and economic infrastructure and attracting international events (eg the World Student Games). The result is that the development and management of the council’s property is more complex than it was, say, 20 years ago.
A similar situation prevails in other major local authorities, and property professionals have the difficult task of resolving conflicting objectives and determining priorities. But traditional professional training does not develop the skills required to tackle these issues; instead it emphasises technical competence in disciplines such as law, economics and construction. In consequence, many surveyors act in a reactive way to demands for their services, rather than adopting a positive role.
A long-term strategy
If the quality of property management within local government is to be improved then, in addition to the measures suggested by the Audit Commission, a longer term strategy is required to improve the commitment, competence and consistency of the officers involved. This strategy must include provision for the development of managerial and marketing abilities.
Organisations are only as good as the people they contain, and although structural changes and incentives may result in some improvement, they will not address the central problem — the competence of the estates personnel. To use a simple analogy, a football club may have a sound financial structure and a good system of bonuses, but if it does not bother to coach its players and create a team spirit they may not win many games!
Our review of the Sheffield City Council estates division has been a catalyst for rethinking for many groups. Recognising the deficiency, the council has asked us to follow on from our survey and to initiate programmes for management assessment and training. That these initial programmes have been received enthusiastically by the professional staff is in part due to their involvement during the diagnostic review and their acceptance of its findings. Perhaps more importantly there is now a strong acceptance that new competencies are essential as an integral part of the property professional’s role. The prime examples of this are the ability to think and act in a customer-orientated fashion, and the managerial abilities of achieving objectives through people.
Finally, although this article was prepared with the approval and co-operation of Sheffield City Council, the views expressed represent the authors’ own personal opinions.