As organizations grow, more demand is placed on their real estate portfolios. Many organizations begin with facilities departments responsible for maintaining owned buildings and delivering capital projects. As the organization evolves, it requires oversight of capital planning, portfolio management, acquisitions, leasing, and long-term asset management.
Organizations will continue to rely on structures put in place years ago when the VP of Real Estate was hired, long after the organization’s strategic goals have outpaced the structures reliability.
Read on to learn how one large academic healthcare system evolved its traditional facilities planning and construction organization into a broader enterprise real estate and asset management function. This is the seventh article in Keel’s Corporate Strategy & Governance Series, an ongoing series exploring leadership lessons learned from a large healthcare capital program.
Healthcare organizations increasingly rely on sophisticated real estate portfolios that extend far beyond hospital campuses: ambulatory networks, research facilities, medical office buildings, infrastructure systems, land acquisitions, and development partnerships to help realize the organization’s evolving strategy.
As one large healthcare system’s capital program and real estate portfolio continued to expand, this gap became difficult to ignore. Leadership recognized that the organization’s existing facilities structure, built around delivering individual projects, was not equipped to provide the strategic oversight, clear accountability, and enterprise level alignment a growing portfolio required.
The organization recognized that its traditional facilities planning and construction department had reached a point where it needed to evolve into a broader enterprise real estate and asset management function, not simply grow larger while doing the same job. Over time, staff who had expressed interest in particular areas of the growing range of services migrated into positions of authority, though not always with the training and perspective to effectively manage the business of the healthcare enterprise.
The core of the approach was rebuilding the organization around distinct functional divisions rather than one undifferentiated department where portfolio strategy and day to day delivery competed for the same people’s attention. The new structure organized leadership around four functions: planning and design, construction, engineering, and real estate and asset management, each with its own defined leadership tier and its own accountability. A parallel leadership search brought in dedicated senior leadership to run the combined organization, supported by a multi-tier leadership structure spanning executive director, director, and associate director roles across the new divisions.
The objective was to make sure that acquisitions, leasing, and portfolio strategy had a defined organizational home, distinct from the divisions responsible for delivering active construction projects and engineering infrastructure, so that neither function had to compete with the other for leadership attention.
The new organizational structure provided visibility and accountability across the full real estate lifecycle for the first time. Rather than managing a collection of individual projects, leadership could manage assets as an integrated portfolio, with construction, engineering, and real estate each accountable for their piece of it and coordinated at the leadership level.
Separating these functions clarified accountability and allowed each to develop real specialization, rather than asking one generalized team to be expert in everything from active construction delivery to long term lease strategy.
The restructuring also established portfolio level reporting to the CFO, consolidated lease tracking that had previously been dispersed across multiple systems and connected capital planning directly to the enterprise strategic plan. Leadership began managing real estate as a strategic organizational asset, not a maintenance function that happened to also deliver projects.
This experience shows how large organizations can move from project centric thinking to portfolio centric management, without pausing the ongoing operations and capital delivery responsibilities that can’t simply stop while a reorganization happens.
As real estate portfolios grow in size and strategic importance, organizational structures have to evolve to match, not just add capacity to the existing structure. Dividing the organization around distinct functions, delivery, engineering, and portfolio strategy, is what actually created that shift. Once buildings are managed from a portfolio perspective instead of a maintenance one, they can be recognized for what they actually are: strategic resources that support long term organizational objectives.
Mature governance and organizational structure matter most precisely when they’re hardest to build: during periods of change, when leadership continuity and decision making are under the greatest pressure.
