April 18, 2016 | Rick Zelinsky
The Fable of Lease Administration – Getting to Just Right
Lease administration has always made me think of that famous fable, Goldilocks and the Three Bears. I’m sure you remember the story – and how Goldilocks was looking for an outcome that is “just right”. I think it’s a great analogy for how companies are evolving their thinking, learning from the missteps of the past and expecting more, and rightfully so, of their technology. Lease administration is not immune from that thought process.
Most lease administration organizations contain a specific department with role-orientated resources. That is, team members focus on a specific discipline like abstraction, payment processing, document management and expense reconciliation. This structure proves to be efficient within the respective functions, but struggles at an individual level when you include factors such as job satisfaction (or burn-out). The model is too hard to keep operating in today’s collaborative organizations despite being easy to manage.
Recognizing the shortcomings, many organizations have started working on a different approach. The hard horizontal lines were redrawn as vertical lines, having team members provide “full service” across a geographic portion of the portfolio. A single resource abstracts the lease, manages landlord correspondence, processes payments and reconciles expenses. While this approach was much more customer-focused (and allowed a stronger understanding of everything about a particular lease), it was too soft on trying to maintain data consistency across team members. It also allowed too much subjectivity on how employees should spend their time – finding savings through reconciliations, answering landlord inquires or abstracting more lease information.
Neither of the above options are ideal. While an initial hypothesis may lead you to believe just right is simply blending the above two approaches, it’s actually quite different. The biggest challenge to a Director of Lease Administration is the accuracy, completeness and quality of lease information in the system. Fundamentally, neither role nor geography-based resources solve or impede this issue. The key to a better results involves three factors: outcome-based lease abstraction, collaboration and mobility.
Outcome-based Lease Abstraction
Most teams I’ve worked with have started a lease system implementation with some form of abstract template to determine what data they want to extract. Coupled with the abstract template is a Lease Summary report to show all of that same information in printed format. Ironically, the abstract template and Lease Summary (Abstract) Report is the greatest cause of issues. Leases are over-abstracted, creating an inordinate amount of work, both initially and on-going, which makes keeping data complete and current challenging.
Specific outcomes should be considered when determining lease abstract content rather than abstracting lease clauses just for the sake of reporting. Simply put, if decisions are not being made from those clauses – don’t abstract them. Involving key representation from real estate, construction, store operations and accounting will provide in the needed insight into what information must be abstracted. Data requests beyond outcome-based abstraction can be found by going directly to the lease – which most people do anyway.
Historically, little information flowed to and from other team members across the company, and lease administration teams were bound to the content found in the lease and other legal documents received from landlords. This has shifted over time and information exchange now supports an effective lease administration department. For instance, field real estate teams provide key information regarding new leases as well as insights on lease renewal actions and store operations provides background on maintenance issues and co-tenancy violations.
To accommodate this shift, lease administration systems need to enable collaboration in a user-centric, easy-to-use way that allows information to be readily accessed by all parties. It is not good enough to rely on email correspondence for this exchange; focused system functionality needs to be part of the solution.
Mobility is transforming all aspects of our personal and professional lives at an unprecedented rate. Many corporate applications have looked at this as an extension or “nice-to-have” but haven’t fully embraced mobile apps as likely replacements for their current design. Mobility provides a unique capability to share and exchange information closer to its origination, in smaller focused groupings and with less overhead of exchange. Mobile lease administration solutions will allow greater efficiency to access and capture lease information of all kinds.
Technology has been, and will continue to be, a significant factor driving next generation standards around core lease administration practices. Through more thoughtful design, users are immersed in the system and process and are able to easily transform old practices into more innovative, just right concepts.
Interested in learning more about Tango’s Lease Administration capabilities?