Control your company’s destiny with a work strategy

In many ways Brexit news hit like a splash of cold water – a shocking surprise. In the weeks that have followed, many organizations are now experiencing a constant, sprinkler-like flow of information and activities needed to manage internal and external stakeholders with preparedness during business as usual (BAU). But BAU this is not.

As this period of uncertainty continues, organizations need to think about alternative strategies for deploying its future workforce to manage potential risk exposure.  Rather than start from scratch, organizations can leverage existing principles and methods for workforce planning to be more agile through the Brexit process. Whether Brexit impacts your business or not, workforce planning can be a lynchpin for delivering on strategic goals and driving greater workforce performance.

Whether Brexit impacts your business or not, workforce planning can be a lynchpin for delivering on strategic goals and driving greater workforce performance

An unsettled and potentially divided workforce

One of the benefits of the E.U. has been free movement of labor and access to a single market for talent. An unintended (or perhaps intended?) consequence of Brexit could be the loss of easily accessible, highly skilled talent beyond the local market, like those in technology who are critical for building out and scaling key capabilities.

Not only is this is an opportunity to think of alternative strategies for talent deployment, but it also can be a strategic pivot point in how an organization makes talent sourcing decisions overall.  To what degree do we need to “own” our talent going forward, and how might that differ for critical or hard-to-fill roles?  How important is it that we are in a “center of innovation” (like London) or is there something to be gained by following a non-traditional route to work?

Triage the work

Given the magnitude and lasting impact of these potential decisions, organizations need to work through some key steps to determine the best approach for themselves:

1. Work strategy

What are the business priorities and what is the critical work that needs to get done?  When thinking about critical work, organizations should step away from a job mindset to one of “work models” to determine needs and priorities. A work model lays the foundation for how work flows through the organization:

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With work and work flow defined, now some of the alternatives for getting work done may be considered. If our premier work, as outlined in the level one descriptor above, is currently based in London, we can look to alternative strategies such as basing the work in another labor market, evaluating the benefits of co-location with the work found in level two, and so on.

2. Workforce planning

With defined work requirements and prioritization, the data review and scenario planning aspect of workforce planning can occur. How many people will we need by work model or role in the future?  How many people will we have based on our historical workforce dynamics?  How will external market factors and potential Brexit activities and timing influence labor supply and demand projections and what talent gaps (shortfalls and surpluses) could be created?

3. Action planning

With both strategy and evidence in mind, the organization is better positioned to understand the trade-offs for moving high-value or high-volume work from London to Paris or Frankfurt. In addition, this same approach allows for more effective decisions on where to keep the work intact in these markets, or conversely, automate some of the work and change the roles at the same time.

While the degree of uncertainty may lead some organizations to “wait and see,” those that are more proactive in planning their future will likely end up with a significant strategic advantage.  In essence, they are managing the flow of talent intentionally and systematically vs. making bigger, more dramatic shifts later in the transition.  To come back to our analogy, they are watering through a drip irrigation system – with ongoing attention to the nature of work and action planning that provides for an efficient and effective outcome.

The Continuing Rise of Alternative Investments

Rising interest in alternative assets has been a prevailing trend over the last five years. Many now see student accommodation as a mainstream asset class – with nearly £6bn of investment last year. Meanwhile, the emerging build-to-rent sector will also receive its first tenants this year as schemes by Essential Living, Westrock and HUB open to the public.

Service stations, data centres and other such assets blur the lines between property and infrastructure. And what’s clear is that as investors continue to diversify from retail, office and industrial property, more opportunities will arise.

Since 2003, investment in alternatives has increased from 4.2% to 11.3% of investors’ property allocations.

In its 2015 report, ‘What Constitutes Real Estate for Investment Purposes? A Review of Alternative Assets’, the Investment Property Forum (IPF) said that since 2003, investment in alternatives had increased from 4.2% to 11.3% of investors’ property allocations. Many funds, such as L&G, have predicted this will rise to 20%.

The Risks of Diversification

Most investors agree that diversification is increasingly important for success. This is one of the main drivers of the increasing appetite for alternatives. But it isn’t without risk.

Although the office sector historically displays far more volatility than sectors more dependent on demographics and social factors, such as student housing, as an asset class, it is well understood. The lot sizes are also huge which makes them attractive for institutions who see little benefit in smaller scale transactions. This lack of stock has been one of the key barriers in establishing the Build to Rent sector, for example.

Unlike niche assets – such as marinas – the market for prime office or retail is also relatively liquid. That said, one of the biggest portfolios of marina changed hands last May when the Wellcome Trust acquired Premier Marinas from BlackRock for an undisclosed sum.

Irrespective of whether it’s a hotel, housing block or leisure park, operational risk is a much higher consideration across alternatives.

The IPF’s report said it was “a major distinguishing feature of alternative real estate assets” and indeed, it stands to reason that an office block rented in its entirety as a single bank will be simpler in many respects than a student housing block with 300 beds. Indeed, the skill sets for managing operational risk are entirely different from traditional asset management. This is why many investors – such as Round Hill and M3 Capital Partners – partner with premium operators who specialise in managing the company at the end of the chain.

The boundaries between operators and their investors routinely crossover. Yet the skill sets and management structures employed have a crucial role to play in defining just how much risk is acceptable.

Protecting Against the Risks

From an insurance perspective, there is an increasingly sophisticated market for protecting both the operational risk and the development or construction risk of alternatives.

Looking at insurable risks from a property owner’s perspective, insurers are generally comfortable with alternative asset classes as long as there is a clear dividing line between the operator’s and owner’s exposures.  For example, faced with student accommodation, insurers operating in the specialist real estate arena would expect any risks associated with the provision of pastoral care, leisure facilities and anything similar to be catered for under an operator’s policy.

Clearly, a high level of due diligence, focused research and market benchmarking is essential before entering new territory. But as demand drives up investment in new areas, the knowledge-base and familiarity we have will only grow. It’s worth remembering for instance, that retail parks never existed before the 1980s. Could there be a more familiar experience for many than a Sunday-morning drive to a local DIY emporium?