Bank of America, Nelson & Gensler Mine a True Outsourcing Partnership

Bank of America's shift in focus from growth via mergers and acquisitions to creating a corporation that will "be recognized as one of the world's most admired companies" has prompted them to adopt the Hoshin/Six Sigma process to achieve this goal. A critical foundation step for the Bank was to devise a planning model that enabled the enterprise to optimize portfolio opportunities, reduce cycle time, set standards for delivery and collection tools, etc.-all ways to improve time to market and, ultimately both internal and external customer satisfaction. As part of that model, Bank of America decided to restructure its outsourced strategic and tactical planning services and engage Nelson and Gensler, two strategic planning, design and architecture firms, operating nationally.

The overall scope of the outsourcing spans approximately 200 of the Bank's largest administrative and operations facilities totaling over 35 million square feet. Approximately 25 million is managed with the Nelson team and approximately 10 million is the Gensler portion. For the most part the planning outsourcing is geographically divided: Nelson has the Eastern US including the headquarters in Charlotte, North Carolina, and Gensler manages the Western US portfolio.

For the purposes of this article, we are only looking at the Bank of America's Planning Function. This includes: site selection, rationalization of work environments, dividing the planning function within Corporate Real Estate (CRE). Activities include location and site decision making and alternative work strategy.

The objectives in the outsourcing were to:

1. Consolidate from five firms providing planning services to two
2. Standardization and improvement of delivery systems and service levels
3. Build a model to facilitate the integration of corporate strategy into national and regional planning
4. Develop the outsource relationship into one of a "partner" rather than that of a "vendor"
5. Leverage best practices
6. Leverage regional expertise

The strategic nature of the relationship can be demonstrated by several factors:

1. A recognition by the Bank that the Planning Partners would bring the planning tools and examples of best practices that would allow the Bank to "leapfrog" the competition in terms of capability and planning methodologies
2. The level at which the Planning Partners report into the Bank (at the senior vice president level)
3. The 'partnership' nature of the relationship which includes a Planning Partner representative in all senior real estate discussions
4. The Planning Partner team members are responsible for maintaining the process of project and activity review, evaluating every proposed activity prior to implementation

Previous real estate activity at the Bank has been focused on mergers and acquisitions resulting in a very immediate action-oriented approach (appropriate for the task and the time). However, this approach is less effective in times of stability, consolidation and process improvement. Nelson has been charged with formalizing and implementing a new corporate planning model that moves the enterprise away from a short-term focus and a reactive response to business requests. This more measured approach will result in more robust real estate decisions and a reduction in costs by minimizing redundancy and duplication of effort. In addition, this newly integrated planning team (Bank and Partner) promotes a more holistic view of real estate decisions that encourages the formation of cross-functional teams to tackle strategic assignments. Scenario planning, life cycle costing and flexible workplace solutions are among the components of this program, illustrating how the quality of services has improved with outsourcing.

"The key objective for the Bank is the creation of an integrated partnership," says Alan Drake, senior vice president, Corporate Real Estate, and Manager, Corporate Strategic Planning within the Real Estate team. "In many outsourcing relationships we have observed, the supplier is often seen as an outsider or "hired hand". In turn, the supplier looks at the enterprise as a client with discrete projects and little sense of connectivity or longevity. Neither approach provides the value stream we are looking for: a continuous blending of skills, experience and best practices across an integrated planning team."

"Developing a close working relationship with our Planning Partners means that we can remain nimble and resource activities across a wide spectrum of activities explains Lynne Rieger, senior vice president, Corporate Real Estate, and Strategic Services Executive within Corporate Real Estate, Bank of America, St. Louis. "While the ultimate responsibility for performance within the function rests with senior Bank leadership, both partners participate in goal-setting, and the creation of annual performance plans is integrated," says Rieger.

Metrics used to measure the success of outsourcing

The success of the outsourcing is judged by reviewing a number of factors such as:

1. Churn rate (has the cost of churn been reduced as a result of the strategic and tactical planning activities)
2. Routine service delivery (are services delivered with cross-regional consistency)
3. Percentage of tenancy in appropriate space (has it increased as a result of the planning initiatives)
4. Percentage of disposable vacancy within the portfolio (has it increased, as a relative percentage, as a result of the national and regional initiatives)
5. Percentage of vacancy within the portfolio (has it decreased, as a whole, as a result of the national and regional initiatives)
6. Space efficiency (is space being utilized in a more efficient manner)
7. Response time (is time from request initiation to implementation improving)

"In launching 'Planning' three years ago, we knew that we would need to bring more discipline and creativity to the planning process, but that we would also have to manage some level of uncertainty in how our Lines of Business might evolve, Rieger explains. "Communication, speed and responsiveness would be critical to our success. Building a flexible Planning Partner model allowed us to generate new ideas and resource projects quickly and effectively." Both Rieger and Drake declare that the partnering initiative was driven by improving performance, best practices and "speed to market." Cost reductions, while critical, were seen as emerging from the efficiencies of the whole process, not simply by an apparent reduction in Bank salaries. To manage the current portfolio, staffing levels include 11 Bank associates and 35 individuals across both Planning Partners.

Nelson and Gensler also provide implementation services to the Bank through contracts established with the Bank's Facility Partners, Trammel Crow and Jones Lang LaSalle. This arrangement allows for synergies across the planning and implementation teams. For example, the Workplace Services department of Nelson in Philadelphia receives instructions through the strategic planning team after a space has been identified. "We're providing the detailed programming. We refine how much equipment they have and need, detail support requirements, site to site requirements and design phase work," says Susan Krauss, director of Workplace Services. Based on bank space standards relative to furniture, Workplace Services also does the design development, architectural elements, finishes, and specification selection for the East, except for Charlotte. "A significant portion of the work requires understanding the facilities and appropriateness of the services. It's about the relationship and cultural fit, says Krauss. "Most of the people on my staff can do everything down to move coordination. We provide what is appropriate from the cultural aspect of the client."

The history with Nelson goes back more than a decade to when Maryland National Bank merged with NationsBank and Bank of America subsequently acquired NationsBank. Gensler's relationship with the Bank of America dates back 30 years. Today, some Gensler staff members work exclusively on Bank of America and others part-time, or on specific Planning work. Gensler continues to execute design work for the bank and is doing implementation work for administrative facilities in the West and retail facilities across the country. For example, the retail banking prototype was designed by Gensler. And now, the retail work is a result of the Bank's commitment to higher standards following the merger of NationsBank and Bank of America and its commitment to customer service.

Contributing to the bottom line

While there were cost implications to Bank of America in consolidating to two partners, the focus for the Bank is on improving the quality of work, i.e. data capture and the resulting decisions that will reduce cost and minimize short-term decision making. By maximizing tenancy and space efficiency, reducing vacancy and churn and better aligning space use to the stated business plans, Bank of America will see substantial impacts in terms of occupancy saves and cost avoidance over time.

"This entire concept has been borne out of a sustained commitment to building the very best possible process, regardless of whether the individuals are internal or external. While many talk about it, the bank has proven the significant service enhancements and increased return to the shareholder which can result from such a comprehensive approach and partnership," says John "Ozzie" Nelson, Jr., president and CEO, Nelson.

"The bank is conservative. It's following what leading companies were doing five years ago. Most people would say they want to drive costs down. And the bank does," says John Francis, Director, Nelson Strategies, St. Louis. "However, to respond to banking industry trends and what the market is demanding we want to increase churn but keep the cost of it down. We need a workplace environment that will allow this to happen cheaply. We are creating tools to enable this to happen quickly and cheaply. Costs should not go down at the expense of being responsive, but we need to drive costs down while being less expensive."

For the Bank of America, outsourcing provides a number of professionals who can focus on the various facets of the planning process, both regional and national. Prior to the outsourcing, most all of these functions were performed by a combination of the internal staff and the 'out-task' vendor, making it very difficult to look beyond the day-to-day. This is particularly important in the post-merger phase where the Bank has a range of legacy facilities to assess as part of a rationalization program. In some instances, this means there are more facilities in one city than are needed, in others, additional space is required. Balancing potentially conflicting business requirements and a legacy portfolio is a critical component of the outsourcing task. A more rigorous look at corporate directives and business plans, and the resulting analyses of the real estate portfolio will lead to concrete savings and a better use of space.

"This is a true collaboration led by the bank who asked the partners to work side by side for strategic planning services. The bank had been doing planning but it was more tactical," says Anne Ferree, vice president, Gensler Consulting, Los Angeles. She is the general account manager and senior strategic planner, with the planning partner arrangement for two years. "Now it is much more strategic as both Gensler and Nelson partners changed teams and structure to meet the requirements. It has been a natural evolution of the relationship."

The true outsourcing partnership requires that the outsourcer is invited to all the meetings and made to feel as part of the bank, as if a bank employee. "The bank's approach is quite sophisticated. It's harder for the Bank to rate the planning performance because they are intertwined and both are working toward a shared role. Performers can be identified as contributing or not on both sides of the relationship," says Drake. "In this case," says Francis, "a mature relationship exists between Bank of America and its partners in planning and managing real estate. In meetings, it's very hard to tell who is employed by the bank and who is an external service provider."