ULI UK: Keepers of the Castle highlights leadership lessons from economic downturn

The real estate industry has experienced difficult years, and the factors that determine success or failure during economic crises are hotly debated.  On June 15th, Bill Ferguson, CEO of Ferguson Partners, one of the industry’s leading consultancy and executive search firms, spoke at the Sofitel London St. James Hotel on what he sees as the biggest issue behind the downturn: poor leadership.  Mr Ferguson interviewed over 100 industry leaders during four of the most volatile years (2005-2009), noting their mistakes and distilling out the factors behind successful crisis management.  His findings became the foundation of a book, Keepers of the Castle: Leadership Lessons from the 2008 Meltdown.

Mr Ferguson concluded that the prime differentiator between success and mediocrity in the downturn was strong, balanced, and values-based leadership.  At the event he outlined nine leadership traits that negative impact firms, which if corrected could benefit them across real estate cycles:

•    Letting your ego get the best of you.  Managers with high profile public personas can be counter-productive, distracting from the mission.
•    We paid people to generate volume, not to underwrite risk!  Create incentives for employees to collaborate, not compete.  Focus on and reward company performance over individual performance.
•    Forgetting the proper risk balance.  Unfettered risk kept the bubble inflated. Successful CEOs take measured risks and create environments where people grow from their successes and failures.
•    Pretending to have all the answers.  “Know-it-all” CEOs drive organizational opposition underground!  Never claim to have all the answers.
•    Allowing lax management to become a business strategy.  Successful CEOs retain their entrepreneurial instincts and yet appreciate the importance of corporate infrastructure, a strong management team, and a well-conceived strategy.
•    Avoiding change.  The playing field constantly changes under any circumstances; change cannot be avoided.  Complacency can kill any business.
•    Going global the wrong way.  Risk is magnified exponentially with global expansion and expansion strategies are often flawed.  Well-managed companies recognize that local management needs to be given discretion, but with the appropriate corporate risk management oversights.
•    Hiring prima donnas.  Winning management teams discourage “rock star” hires – the company and clients need to take precedence!
•    Avoiding responsibility.  Successful leaders take responsibility for mistakes.  Underscore the importance of accountability throughout the organization and establish a strong value system.

The event also brought together a panel of senior industry figures who helped navigate their firms through the crisis.  Mr Ferguson moderated and panellists included:

•    Ian Coull, Chairman of Galliford Try,
•    Jeff Dishner, Senior Managing Director at Starwood Capital,
•    Gerard Groener, Chief Executive Officer of Corio N.V.,
•    Dennis Lopez, Global Chief Investment Officer at AXA Real Estate Investment Managers, and
•    Ed Siskind, formerly Head of the Real Estate Principal Investment Area at Goldman Sachs.

The panel offered their own insights and lessons, as well as addressed questions including:  How would you describe the strategic landscape and operating implications facing our industry?  What were the lesson of the 2008 US meltdown and how can they be applied to Europe’s present situation?  What is the biggest unknown moving forward and how does one manage “against it?”  And, how does one position an organization to take advantage of what is going to occur in Europe?

Panellists pointed out that the crisis was not caused by the commercial real estate sector (through overbuilding or other practices), but rather by the creators and distributors of financial products.  However, problematic developments in the industry, like the erosion of alignment and incentivisation, have not helped.  The panel had many words of advice, including that in today’s environment investors should manage on a cash flow basis, not on vague long-term notions of value accretion.  Other recommendations included cycling people through acquisitions and asset management to help motivate and educate.

The event was sponsored by Ferguson Partners and the Urban Land Institute, and the book is available through the Urban Land Institute’s bookstore.