As the dust settles at the end of this downturn, what may well separate the winners from the also-rans is great leadership, plain and simple. At the opening session of NAIOP’s Development ’10 conference in Orlando, top CEOs discussed the effects of the downturn on their businesses over the past two years and what they were doing to weather the storm.
Moderating the session was William J. Ferguson, co-chairman and co-chief executive officer, FPL Advisory Group. Ferguson, author of Keepers of the Castle: Real Estate Executives on Leadership and Management, interviewed more than 100 top executives in the business, seeking to understand the common factors that made these leaders successful.
"What’s going to get us through the next three years, what I call the new normal, is all about leadership," he said. "It’s about strong, experienced leadership and ultimately, values."
Ferguson discovered nine leadership traits that these top executives exhibit:
- Top leaders do not let their egos get the best of them. The high-profile persona is ultimately distracting and counter-productive.
- Good leaders do everything possible to avoid intra-organization competition.
- Successful leaders take risks but they are measured risks. Unfettered risk is what caused the bubble that popped.
- Any CEO who pretends to have all of the answers ultimately fails. "Those people ultimately drive organizational opposition underground," explained Ferguson. "The only way to build a healthy company is to listen to those views on the other side and on some basis respond."
- Great leaders build an infrastructure below them because they know that they cannot do everything themselves. They need a great management team.
- Wise leaders understand that there is no way to avoid change. Change comes and you deal with it.
- Top leaders know that going global in the wrong way raises risk exponentially. While local management teams need to run the business, corporate controls are needed to manage the risk.
- The best leaders avoid hiring prima donnas and rock stars. They want people who will take care of the client’s needs.
- Top leaders take responsibility for mistakes.
The four panelists on this program--all top leaders themselves--offered their insights into the commercial real estate markets:
Eugene Reilly, president/The Americas, AMB Property Corporation, was asked his perspective on today’s market: "We are relatively optimistic about industrial space in the near term. We still see the leading indicators of demand as positive…Saying that, our customers tell us they make decisions slowly and most say they have six months visibility into their businesses. That is tied to many different things. Part of it is political uncertainty. There is also ambiguity about what their cost structure will look like in the future. From a public policy perspective, we really need to fix that. The inventory balance is helping us right now but if we do not see increases in employment in this country and abroad, we will not have a sustainable long-term recovery."
William Hankowsky, chairman, president and chief executive officer, Liberty Property Trust, was asked about coping with the tough times we are experiencing right now. "As a public company, the obvious answer is to move our occupancies up. There is a flight to quality today--not only asset quality but also landlord quality."
Hankowsky said that companies in the commercial real estate business face four operational challenges today: first, we are in for a long slug-out in the business; second, it is critical to keep development capabilities sharp; third, maintaining operational efficiency is important; and, fourth, employee morale must be maintained. "All of our employees have been fighting a tough battle. Our approach is that our company is a team and we will keep the team together," he explained.
David H. Hoster II, president and chief executive officer, EastGroup Properties, was asked where a company can make money in the business today. He said: "The fundamentals are getting better. We are looking forward to new construction. From a development standpoint, we are encouraged. A year and a half ago, users were looking for the cheapest rent possible. Now users are looking to trade up to better space. They are confident enough in their own businesses to do this. This is encouraging. Build-to-suits will be the next step."
Patrick Duncan, chairman and chief executive officer, USAA Real Estate Company, was asked how to keep employees motivated in a tough period: "You want to keep your key employees and high performers happy. They probably don’t have many opportunities right now, but once the market begins to improve they will have a lot of opportunities so we want to have people feel that they are needed. We take a lot of time and attention with our key people and it has worked out for us. Our turnover rate is very low. During this downturn we took the position that we were not going to downsize the company. As long as key people see growth in the future, they will stick with you."