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If it ain't broke, don't fix it. Sometimes simple folk wisdom qualifies as sophisticated business savvy. For years, Equitable Life Assurance Society of the United States had a centralized business operation. Then in the mid-1980s, it did an about-face and decentralized. More recently, with retrenching a way of corporate life, Equitable is fast-tracking back to centralized operations and cost-saving efficiencies.
Since 1961, all of Equitable (except field agencies) was housed in a single 38-story building at 1285 Avenue of the Americas in New York. Staffing, along with facilities management activities, was centrally organized. Then, in the mid-1980s, the life insurer decided to give each operating entity more individual control and bottom-line responsibilities, plus the authority to negotiate its own lease.
Why? It made business sense at the time, says vice president of facilities management James F. Doran, a self-described real estate centrist who believes in carefully maintaining a narrow span of control. Equitable's move from a centralized to a decentralized operation, he explains, stemmed from a strategic business decision to capitalize on the then booming financial services world and healthy real estate market.
Cashing in on profitable property
A key factor for Equitable's decentralization, Doran explains, is that its Avenue of the Americas structure was built in the early '60s as a landmark headquarters building, designed and heavily engineered with every necessity a corporate soul could ask for. And it was built in an area, once far afield of the midtown business hub, that evolved into corporate HQ row.
In the mid-'80s, prices in the often-volatile New York-area real estate market were climbing to the stars. As it watched its building's value rise, Equitable decided to cash in by leasing its very profitable space to someone other than Equitable. Technically, the headquarters building was owned by Equitable, which charge-backed rentals to its various business units.
The idea was to move some groups out, build a new HQ building, at 787 Seventh Avenue, now called Equitable Tower, and lease out all of the old headquarters building (since sold) and much of Equitable Tower. With this decentralization, each operating entity negotiated its own lease, explains Doran, a 22-year Equitable veteran.
But life rarely follows a neatly plotted plan. Equitable divested itself of several businesses, accounting for...