When Clay Hayden transitioned into real estate after 25 years with Merck & Co., Inc., there was one setback: the health-care and pharmaceutical giant didn’t have a real estate department. So, he and a small group of others banded together and partnered with Deloitte LLP—which had consulted with Merck up until that point—to create a centralized corporate real estate division. The proposal Hayden sent to the top showed that adding this function could save Merck $30 million over the course of several years.
Merck already had an extensive portfolio, but regional managers made decisions on how to maintain their properties. Hayden and his colleagues thought a centralized management system would give the company a smoother, standardized, and more efficient process. “It made more sense to do it centrally,” Hayden says. “We wanted form to follow function.”
Three years later, the worth of that department was thrown into sharp relief. Merck merged with Schering-Plough in 2009, and Hayden (who is now Merck’s director of global real estate services) says incorporating the second company’s real estate portfolio without a centralized function would have been extremely difficult and time-consuming. His real estate group’s three corporate divisions—strategy and analytics, transactions, and tactical execution—made the overhaul possible, and since then, the team has grown in function. Many such groups say they want a seat at the C-suite table, but “be careful what you ask for,” Hayden says. “We’ve proven our value, but once you have that seat, you’ve raised expectations for what you can deliver.”
Now his department is taking on another challenge. Merck has been relocating from its corporate headquarters, a one-million-square-foot office space in Whitehouse Station, New Jersey, to Kenilworth, New Jersey, over the past two years. At press time, Hayden said the company expected to be fully moved by the end of 2014, and once it is, the Whitehouse Station office will close. Several key lines of Merck’s business already take place in Kenilworth, and Hayden and the company’s leaders wanted their corporate headquarters to be close to other strategic sites. Hayden hopes the move will promote collaboration among employees and boost productivity. The company will also save tens of millions of dollars in operating costs each year once the move is complete.
Hayden heads up the analytics branch of the real estate department, and his division shouldered a heavy load when the move became a serious consideration. It ran metrics that measured, as part of the move’s cost, the impact the move would have on employees, including on their commutes and workspaces. “We weren’t moving far, but if somebody already has a 30-minute commute and this adds another 40 minutes, that’s a huge lifestyle shift,” Hayden says. “We wanted to help our employees plan it out so [that] their work-life balance wouldn’t dramatically shift.”
“We’ve proven our value, but once you have that seat [at the leadership table], you’ve raised expectations for what you can deliver.”
Clay Hayden, MCR, SLCR Director of Global Real Estate Services
Merck wanted to retain as many employees as possible and worked with division leaders to see to the needs of individuals. “Before we had a real estate department, that wouldn’t have been possible,” Hayden says. “It proved its worth when we planned this move.”
As part of the shift, Merck’s design team is relying on new theories about productivity and employee management to create offices that will boost efficiency, satisfaction, and retention. “If you’re in one of the high-walled cubicles from Dilbert, that’s not an optimal environment; you don’t collaborate,” Hayden says. “We’re solving that with our own internal branding, making these spaces ‘Merckspaces.’”
The approach to Merck’s relocation in New Jersey is being echoed company-wide around the world. Office space, Hayden says, is underused by nearly every business and in every industry in the world, and it’s something his corporate real estate group is trying to address in North America, South America, Asia, Europe, the Middle East, and Africa, even though the needs of each region differ. In Tokyo, for example, office space is hard to come by and extremely expensive, so Hayden’s team works to use smaller, denser spaces efficiently. Wherever the team is working, though, maximal use of space is the main goal. “How can we change?” Hayden asks. “Should we move down the street to a newer, more modern, smaller facility? Should we complete a full redesign? These are questions we’re constantly asking all over the world.”
“We’ve come so far in seven years, and I’m continually impressed by the capabilities my team has brought to bear for Merck,” Hayden adds. Senior leadership within the company seems to agree, considering that the corporate real estate group has grown in both complexity and responsibility since its founding. “In the future, we’re going to be able to do even more,” Hayden says. “Our work returns money to Merck—money that can be used in our laboratories, in research, in many other departments. We’ve given visibility to what’s possible.”