How it varies by context
In a directly-managed institutional portfolio, the variation tends to concentrate around individual asset managers’ relationships with local contractors, letting agents and tenants — relationships that are rarely documented anywhere and disappear, taking their value with them, whenever a manager moves on. Steven Kerr’s research on reward systems, published in the Academy of Management Journal, offers a relevant lens here: Kerr found that organisations frequently reward one set of behaviours while stating they hope for another, and that “most organisms seek information concerning what activities are rewarded, and then seek to do… those things, often to the virtual exclusion of activities not rewarded.” Where an asset manager’s own performance is measured primarily on void rates or on speed of transactions, and the portfolio’s stated priority is long-term tenant relationships, the manager’s behaviour tends to follow the measure rather than the stated priority — and the resulting variation between assets often reflects which manager is optimising for which incentive, more than any underlying difference in the assets themselves.
This dynamic is easy to miss because it does not require any manager to be acting in bad faith. A manager measured on void rate is behaving entirely rationally by prioritising fast re-lets over the kind of longer negotiation that secures a stronger long-term tenant, and the resulting difference between two similarly positioned assets can look, from the portfolio level, like one manager simply being better at their job than the other.
In a joint-venture or co-invested portfolio, the variation more often traces to genuinely different reporting standards between partners rather than to management quality at all — one partner’s definition of “stabilised occupancy” can differ meaningfully from another’s, so two assets can appear to diverge in performance when what has actually diverged is the yardstick.
This kind of definitional variation is particularly persistent because it is nobody’s error in any given moment — each partner’s definition may be entirely sensible and consistently applied within that partner’s own reporting; the mismatch only becomes visible when the two are placed side by side, which a standard portfolio review, built around a single template, is not always designed to do explicitly.
In a portfolio spanning multiple geographic markets, variation frequently reflects local market conditions the central reporting template was never built to distinguish from management performance — a template designed around one primary market tends to treat every asset as though it operates under the same demand curve, which flattens exactly the differences a leadership team most needs to see.
A fourth, less obvious context is the mixed-vintage portfolio — one combining recently acquired assets with long-held ones. Variation here often has less to do with management or market and more to do with how much institutional memory exists about each asset. A long-held asset carries years of accumulated, undocumented knowledge about its specific quirks, tenants and maintenance history; a recently acquired one does not, regardless of how capable the manager assigned to it happens to be, which means comparing the two on the same standard metric compares not just performance but how much time each asset has had to accumulate the knowledge that performance quietly depends on.
What explains the variation
V. F. Ridgway’s research on the dysfunctional consequences of performance measurement, published in Administrative Science Quarterly, examined how single, multiple and composite measures can each distort the behaviour they are meant to track. Ridgway’s own conclusion was pointed: “Quantitative measures of performance are tools, and are undoubtedly useful. But research indicates that indiscriminate use and undue confidence and reliance in them result from insufficient knowledge of the full effects and consequences… The cure is sometimes worse than the disease.” Applied to a real estate portfolio, the uniform standard that was meant to make comparison fair can itself be the reason comparison misleads — a single reporting template, applied without adjustment for what differs genuinely between assets, produces numbers that look comparable while measuring different underlying realities.
This has a direct implication for how portfolio-level performance conversations tend to go. When two assets diverge, the reporting format itself frames the conversation as a search for what one asset manager is doing differently from another — a comparison of people, in effect, even when the underlying driver is a comparison of markets, measurement definitions, or accumulated local knowledge that has nothing to do with either manager’s competence.
Where this shows up
The pattern described here is most recognisable in real estate businesses, part of the wider Asset and Production-Based grouping. The same organisational questions appear, under different names, in other sectors.
Questions worth considering
- Which part of the current variation between assets reflects the assets themselves, and which reflects how each is measured or who currently manages it?
- Where do two assets use the same reported metric to mean subtly different things?
- If the current best-performing manager left tomorrow, how much of that asset’s performance would leave with them?
- Would the portfolio’s standard reporting template actually reveal a genuine market-driven difference between two assets, or would it flatten that difference into what looks like a management one?
Your team is facing similar challenges?
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