Published in the Journal of Corporate Real Estate, Vol. 7 No. 3, 2005
innovation can be essential to an organization’s survival in today’s
hypercompetitive business environment. A
new breed of worker is emerging to provide the required creativity. These highly sophisticated workers will demand
an environment that attracts them, satisfies their needs, and provides
incentive to stay. With the projected
shortfall of skilled workers in the
Research on the impact of technology on work patterns and the work environment that I conducted with a major corporate research laboratory led to some relevant insights. Leading-edge firms around the globe were identified, their senior management teams interviewed and work patterns observed. This data was analyzed systemically to understand the dynamics in play. These companies were found to be creating competitive advantage by aligning their strategic intent with their policies and the tools, resources and environments they were providing their employees.
The work environments that companies have provided for the past half-century are increasingly unsuited to emerging patterns of work and are inhibiting workers from performing to their full potential. An effective workplace solution allows a natural and efficient sharing of knowledge [figure 1]. Increased knowledge sharing leads to enhanced productivity, improved quality, and accelerated innovation.
What it is
The typical office environment has not changed much in forty years. Landscape partitioning, introduced in the early 1960’s, has become infamous as the “Dilbert cube.” As anyone who has worked in a sea of cubicles can attest, it is nearly impossible to have the speech privacy required for some conversations or to concentrate on focused reading, thinking or analysis. Enclosed offices, on the other hand, inhibit spontaneous communication.
The trend in corporate offices today is to have fewer and smaller individual workspaces and a greater portion of the space dedicated to interactive uses in an array of functions and sizes. The main function of the workplace is shifting toward intense interaction. Space is being optimized for all types of collaboration, ranging from large formal meetings to chance interactions as two people pass in the corridor. For quick transitions from one mode of working (collaborative) to another (heads-down), “thinking spaces” are needed for periods of concentration. A corporate facility must provide the right mix of these spaces and also support virtual interaction with globally dispersed teams of colleagues, partners and customers. Stone and Luchetti[i] suggested twenty years ago that the corporate office should provide a variety of “activity settings” to meet a range of needs, with workers moving to the most appropriate space throughout the day. Some organizations assign a “home base” to workers who are often in the office. Other firms opt to make workspaces available on an as-needed basis, provide shared spaces or use a combination of these approaches.
Many people are already working remotely for at least part of the week, and their number is steadily increasing. Workplace strategies are now catching up with reality to better manage and support these mobile work processes. Accessible broadband, voice over IP (VoIP), wireless voice and data on handheld devices, and other new technologies will continue to reduce perceived distances between dispersed workers. Better interfaces, more reliability and lower costs will further reinforce the trend toward remote work.
The home office is now seen as a viable alternative to commuting to a corporate facility. However, there are factors that can make the home a less-than-ideal work environment. These include interruptions, distractions, loneliness, technology support issues and lack of suitable space. Road warriors and free agents often opt to work in coffee shops, libraries and other public places. Client sites, airport lounges, and hotel facilities also serve as remote work locations.
Satellite facilities (also known as “third places”), where space and services are available on a flexible basis, are sprouting up to serve both free agents and corporate employees. These facilities can offer a place to work, to meet with clients, to make use of support services, to have access to advanced systems, and to make new contacts. Services range from simply being the address for mail delivery to providing space to incubate a business. Satellites are usually small facilities located within an easy commuting distance of their user base. Those operated for a single corporation can provide employees who reside in an area remote from a main facility with an alternative to commuting long distances or working from home. The corporation benefits by shrinking the number of workspaces in main offices.
are examples of how the work environment is being transformed. The workplace will continue to change as
business needs drive new solutions and emerging technologies enable
Why you should care
ability to embrace continuous change and respond rapidly with
products and solutions is vitally important in an increasingly dynamic
environment. Organizations that ignore the
changes in work patterns, workforce and work environment are likely to
themselves at a considerable disadvantage from which it will be
not impossible, to recover.
Work patterns are changing
In response to this demand for rapid innovation, work has become more flexible, distributed and collaborative. Remember the elusive promise of more leisure time thanks to technology innovations? That was obliterated when companies “reengineered” and “right-sized,” causing surviving employees to face ever-increasing demands for productivity. Although this productivity increase was meant to come from continuous process improvement, workweeks of sixty hours or more became common. Job requirements, enabled by advances in communication, have blurred the distinction between work and personal time. Specific hours, location, and dress codes are rapidly becoming obsolete. Anytime/anywhere has become the norm.
styles have become less hierarchical, job security has become an
artifact, and work is organized around collaborative teams, often
geographically dispersed. The
The workforce is changing
are shopping globally for high-quality services at the lowest price by
off-shoring, near-shoring and seeking low-cost domestic labor markets. Nearly instantaneous, low-cost
communication has enabled the globalization of work.
shifts in the domestic workforce are also inevitable based on current
demographic trends. The Baby Boom
generation is nearing retirement age and there are not enough workers
25-44 age range to replace them. For
example, even though companies will continue to seek low-cost labor
globally, the U.S. Bureau of Labor Statistics projects a shortfall of
million workers in the
Employers are beginning to appreciate the wisdom of keeping critically important skills, knowledge, relationships and experience from walking out the door. They are considering flexible retirement options that allow mature workers to continue on their own terms, with much more control over their schedule and location. In a Harvard Business Review article called “It’s Time to Retire Retirement,” Ken Dychtwald says, “The concept of retirement is outdated and should be put out to pasture in favor of a more flexible approach to ongoing work.”[iii] People are living longer, healthier lives. Motivated both by a desire to work and by economic necessity, many older workers are eager to take advantage of these options.
As a result, many more generations will be in the work force simultaneously. Younger workers’ priorities include creating a balance between work and personal time. Their expectations of their employers extend beyond salary to issues such as flexible hours, amenities (day-care, fitness centers, food service, etc.), the latest technology tools and the quality of the work environment. They tend to choose companies with values that are closely aligned to their own.
The number of women and minorities will better reflect the population. Women, already constituting nearly 50% of the workforce, will be better represented across levels and functions. Gender, cultural and racial workforce diversity offers employers competitive advantage in many ways. For example, as the workforce begins to mirror their customers, companies are better able to anticipate and meet customer needs. Diversity also brings multiple, overlapping and, possibly, conflicting values, traditions, needs and desires into the workplace. Careful attention must be paid to meet these needs.
The relationship between employees and their employers has shifted as loyalty and lifetime employment have become artifacts of the past. Workers are becoming entrepreneurial, relying more on their own abilities than on entitlements. Individuals are taking responsibility for developing and maintaining their skills. “Free agents” will account for a greater proportion of the workforce. Their marketability is directly tied to the benefits they deliver to their employers.
for key talent will be stiff. Employers
will be constantly challenged to attract and maintain a staff with the
that are critical to the organization’s success. Highly
talented individuals will wield a good
deal of discretionary power. Richard
Florida, professor at Carnegie Mellon, author and theorist, labels this
worker “the creative class”. Speaking
as one of them, he writes “In addition to
being fairly compensated for the work we do and the skills we bring, we
the ability to learn and grow, shape the content of work, control our
schedules and express our identities through work.
And companies of all types, including large
established ones, are adapting to this change by striving to create new
workplaces that are more amenable to creative work.
In this, they have no choice: Either
they will create these kinds of
environments or they will wither and die.”[iv]
While changes in work patterns and the workforce are occurring rapidly, changes in the workplace are taking place at a much slower pace. Investments in buildings, furniture and equipment remain on the books for long, fixed periods. As a result, work environments are likely to reflect outdated work patterns. Because many companies are still trying to shed excess space due to corporate mergers and staff downsizing, they may have little appetite to embark on new initiatives even if the investment would lower operating costs. As we have seen, competitive pressures and the impending labor shortage will require that companies adapt their work arrangements to support workers, to help them connect and to build a sense of community.
Flexible work environments:
The work environment must be responsive to multifaceted requirements. This does not mean that the workplace will be tailored to individuals or processes, since they are continually changing. While work tasks may be more specialized than ever before, tools are becoming more generic. The architect’s drafting table, the scientist’s lab and the researcher’s library are no longer specialized spaces or hardware – just software and access to information.
A corporate reorganization no longer foreshadows a series of staged moves and costly refits. With phone number portability, the ability to log on to any device and flexible furniture, this becomes a matter of moving boxes at most. The need for mobility has provided the incentive to reduce extra baggage, print less and have fewer personal items on hand, thus challenging long-standing assumptions about storage needs.
Teams need the ability to form and disband quickly and easily in response to project requirements. The key is flexibility, accomplished by providing a variety of spaces (quiet space, meeting rooms, gathering places, etc.), adaptable furniture configurations and technology tools to link geographically dispersed team members.
Distributed work environments:
Mobility has already happened even without formal policies. Whether someone is in the office, on the road or working from home has become largely irrelevant. Non-traditional workplaces include home offices, airports, workplace clubs, satellite offices, libraries, coffee shops and any wireless hot-spot. Historic sites and rural locations that could not function effectively when everything needed to be hardwired are now finding new uses. Wireless voice and data are making workers increasingly independent of a fixed location, even within the corporate office.Work is coming to the worker. Employers go where they find qualified labor at the best rates. Skilled workers are more in control of their location. Work can even follow the sun. For example, at the end of the work day in
Off-shoring and near-shoring trends will continue and accelerate. Employers are actively seeking ways to best manage and support all remote workers in order to make the most of the potential productivity gains and cost savings. McKinsey & Company’s TomorrowLab co-founders, George Goldsmith and Cory Lefebvre, found four factors that lead to an efficient and effective virtual team: a shared vision and process, great people, effective communication and appropriate technology.[v] By providing remote workers with the tools and infrastructure they need, perceived distances are reduced.
Collaborative work environments:
More collaboration, both face-to-face and virtual, is required than ever before. Collaboration is critical to innovation (many minds working toward creative solutions), efficiency (enhanced decision-making) and quality (more knowledge-sharing, leading to better results).
What will draw employees to the office are amenities such as fitness centers, food and collegiality. Physical proximity has the benefit of informal and serendipitous information sharing. A distributed team must create norms for interaction and should get together at regular intervals to reinforce personal connections. Even though most knowledge work can now be accomplished remotely using increasingly sophisticated tools, trust must be established and periodically maintained with face-to-face interaction.
Seven Myths of Workplace Strategy
longer “the workplace of the future” or “alternative officing.”
workplace solutions are becoming critical to organizational success.
is here (in places) and alternative approaches are becoming mainstream. Through trial and error, best practices have
emerged. However, some of the more
widely publicized failures may have left executives wary of trying any
approaches. To them,
Workplace Strategy might mean….Myth 1
…it’s going to cost a lot.
Creating physical and virtual environments that support new patterns of work does not have to be costly. Look around the typical workplace on any given day. A high percentage of offices and work areas are not being used. Corporations are finding that the office environment is used at 30% to 50% of its capacity at any particular time. Assigned workspaces are often unoccupied as employees become increasingly mobile. This inefficiency points to a tremendous potential for cost savings.
…we’ll have to start from scratch.
Since the environment consists of social, physical and technical components, simple changes can make a big difference. For example, relaxing rigid workplace policies and norms, increasing air-quality control or introducing new technology can have a positive effect.Myth 3
…hoteling (also known as moteling, free-address, hot desking or unassigned) i.
Workplace strategy does not have to include mobility, unassigned workareas, or any specific element. It is important that the strategy adopted be designed to meet the particular needs of an organization. It may exclude distance collaboration altogether.Myth 4
…more employees will be packed into less space.
Corporations can choose to have a workplace strategy of offices for every employee (like Microsoft) or no private offices for anyone. They might provide specific functions, such as software engineers, with dedicated offices and team space (like SunMicrosystems). With the emphasis on collaborative space, employees have the ability to move from place to place throughout the workday, choosing the most appropriate space for their current activity.Myth 5
…employees will be forced to work differently.
A workplace strategy might mean planning to better support current patterns of work while capturing potential savings by improving space utilization.Myth 6
…there will be less face-to-face interaction.
In a traditional office, the person you need to see is not very likely to be sitting in the office awaiting your arrival. Since gatherings of mobile workers are planned at regular intervals, there may actually be more face time.Myth 7
…the corporate office will become extinct.
The main function of the corporate office will shift from individual to interactive space. Taken to the extreme, some organizations may choose to go “virtual” and hold gatherings in non-corporate venues.
Implementing Workplace Solutions
Corporate Real Estate often finds itself in the position of introducing these concepts within their organizations. This is fine. However, to be successful, the implementation of a workplace solution must ultimately be championed by the CEO and the rest of the C-suite. Active partnership with human resources and information technology staff is critical. Equally important is establishing the trust, involvement and ownership of those affected by the change. As a major shift from their traditional roles, CRE executives may find themselves in the position of raising critical issues to the C-suite level to obtain support, orchestrating a cross-functional team, and leading change management efforts.
The basis of any workplace solution is an understanding of current business processes (obtained through interviews, surveys and observation) combined with deep knowledge of industry trends and best practices. Traditional methods of programming relied on quantitative measures such as linear feet of shelving and square feet of work surface, which derived from historic work patterns. Workplace solutions must take into account such diverse qualitative variables as business drivers, employee demographics, brand image, and desirable patterns of work.
An effective workplace strategy must simultaneously address the social, physical, and technical components of the work environment as well as financial considerations, since each factor impacts the others.
Social (culture, human networks, communities of practice, policies, behaviors, norms and organizational structure): The workplace should support and enable work activities that meet business goals. At a minimum, it should not create obstacles, inhibit productivity or attempt to force change in ways that may have unforeseen results. The environment and the integrated use of technology can reduce barriers to communication, create opportunities for casual encounters and help build community. While the workplace alone cannot transform work cultures and behaviors, it is a powerful tool for supporting desired changes and can serve as a symbol of organizational values to employees and customers. Workplace innovation sends a powerful message of the intent for transformational change. This message must be synchronized with internal and external communications, management behavior and performance measures. Mixed messages are a recipe for failure.
Physical (place and space): Considerations of the physical work environment must include geography, climate, political boundaries, urban vs. suburban vs. rural, architectural configuration (campus, tower, etc.), amenities (such as daycare, fitness, cafeteria), and workarea configuration, furniture, fixtures, finishes and environmental quality (heat, light and air). These factors can have a tremendous impact on performance – how we think, act and feel. Within the work area, noise has consistently been identified in employee surveys as a primary inhibiting factor in workplace effectiveness. Surprisingly, too little noise can be as distracting as too much; any isolated sound becomes intrusive. A background “buzz” of activity can actually improve performance. On the trading floors of large financial institutions, professional workers are intentionally located in close proximity in order to create a hub of intense activity and make the spontaneous sharing of information possible.
Technical (tools and infrastructure): Workplace technology enables flexibility, remote work and collaboration. Mobility both within the office and externally is becoming seamless for both voice, image and data. As technology becomes more intuitive, ubiquitous and cost-effective, acceptance and use proliferate.
Financial (revenue and expense): Benefits accrue both through improved revenues and reduced costs. Workplace optimization enhances profitability by leading to increased quality, productivity, and innovation. Costs savings are achieved by reducing recruiting, training and lost productivity while new employees are found and brought up to speed. Costs are also saved through more efficient use of space. For example, it is estimated that each virtual worker without an assigned seat in a corporate facility reduces occupancy expense by $6,000 to $7,500 annually. Increased spending on information technology is offset by reduced real estate requirements and facility costs. It helps tremendously if the CRE and IT budgets are considered as a single entity so that the initial financial impacts of the initiative can be properly evaluated.
These components traditionally fall within discrete departments of an organization. Social considerations are largely the domain of human resources. The physical environment comes under the real estate and facilities department, while the technical belongs to the IT department. Because no single function owns all the components, implementing an effective workplace initiative may require a shift in traditional processes, relationships and work habits. While these functions will most likely remain autonomous, it is important that their goals and metrics are aligned in order to achieve optimal results. This alignment is best achieved by involving all parties early as equal team members, valuing their perspectives and working together toward solutions.
The successful implementation of a workplace strategy requires an interdisciplinary team, internal and external to the organization.
Senior executives and business line managers provide critical leadership. Without their commitment, any workplace initiative is highly unlikely to succeed.
Employees who are directly affected hold key knowledge of social networks and know how work is actually accomplished. They will feel more ownership in the outcome when they are involved in the process.
Human resource professionals monitor and assess the behavioral impact of any workplace intervention, and provide training and coaching for management and staff before, during and after the transition. They may need to engage external expertise if change management capability does not reside in-house
Corporate communications staff orchestrates the communication strategy.
Information technology people introduce solutions based on suitability and cost-effectiveness.
Real estate, project management and facility personnel gather business requirements, monitor best practices, introduce innovative solutions and manage implementation.
Strategic partners (architects, facility managers, etc) provide an external perspective and professional expertise. Bringing them into the process in the early stages ensures that the full intent of the initiative is well understood.
A workplace consultant may be retained to engage the team, help define success criteria, manage the process, and assess results. Through the active participation of all stakeholders, the resulting solution will be more robust, more readily embraced and more successful.
Pilot projects are a great way for a company to begin testing some of these concepts as they apply to their own situation. Identifying an operating unit that is a willing participant is best. If this is not achievable, using CRE or another function as the test organization will get you going. By approaching initial efforts as “pilots,” risk is limited. There is an implicit permission to experiment with innovative solutions and approaches to their implementation. Successful pilots will create a “buzz” of excitement within the organization. CRE organizations may find themselves in the position of being inundated with requests for similar projects while they are still in the post-occupancy evaluation stage.
Pre- and post-occupancy evaluations should be carefully designed and well executed to determine if program objectives have been met. The measurements of a workplace initiative should be both qualitative and quantitative, with a “balanced scorecard” approach[vi] that gives weight to dimensions such as the organization’s and employees’ ability to learn and grow, customer satisfaction, business process improvements and financial management. In this way, the business case can be made for investing in the workplace that informs further initiatives.
Stories of Workplace Solutions across Industries
The following are some snapshots of companies from a variety of industries that have successfully implemented workplace solutions. Each situation is unique and, even within the same industry, solutions will vary tremendously.
FleetBoston Financial (now part of Bank of America) was able to take advantage of a lease expiration to move its software programmers out of an urban tower in a crime-ridden neighborhood with limited nighttime access. They moved the group to a suburban location with safe 24/7 access at a lower occupancy rate. To improve collaboration among the programmers, several team rooms and two coffee bars were located within the office area. Individual workstations were smaller than those vacated, but they were more enclosed and had more storage space and better acoustic properties. At the same time, the programmers were equipped to work remotely. This not only improved their emergency response time but also enabled the new facility to double as a disaster recovery site.
Hewlett Packard is targeting a metric of 50 gross square feet per employee in their Sales and Service offices, down from 150 today. It does not plan to accomplish this by drastically reducing the size of workspaces but by better supporting employees working remotely, recapturing underutilized workspaces, and providing more collaborative spaces. Achieving this metric is a gradual process. HP recognizes that a significant amount of remote work is already happening. The new design and management of the workplace gives these mobile employees “permission” to be away from their desk. As a result, individual work space is less in demand. This allows another pass at reducing the number of workspaces provided in a facility. To avoid the possibility of an employee not being able to find a place to work when he or she comes into the office, actual utilization of seats is targeted at 70% - a moving target as more employees become mobile. HP finds that the use of free-address workspaces drives efficiency gains. However, the company warns against formal policies for home-based working; both employees and employer are wary of them. HP is also aware that face-to-face interaction is critical and periodically creates events to ensure that it happens.
Termeer, Chairman, President and CEO of Genzyme Corporation in
Consulting and Accounting
consolidated their Midtown Manhattan practice last summer from two
a new location on Madison Avenue. While maintaining headcount, PwC was
reduce square footage by 20%. The
facility is a showcase for an office design concept that PwC calls
Workplace. Already in use in 25 cities across the
Enterprises, the agency responsible for the economic development of
We are at a tipping point where these innovative concepts will become basic requirements. Workplace strategy is a triple win. Organizations like it because it enhances their ability to hire and retain key employees, increases productivity and saves money. Employees find it easier to collaborate and to balance work/life issues. The natural environment is also a winner as commuting requirements are reduced, and mobility becomes a key driver of the elusive “paperless office.”
In the past several years, many companies
have shrunk their
real estate portfolios to keep pace with declining headcount. Now, as the global economy shows signs of
recovery, companies are starting to see revenue growth.
However, the number of new jobs created may be
less than we have experienced historically due to increased
outsourcing. Square footage requirements
will grow even more slowly, if at all, as the trend continues toward
work. The role of corporate real estate
needs to shift. CRE executives must
become leaders in the integration of space, technology, policies and
practices. They will need to consider
the social and behavioral aspects of the workforce, current and optimal
patterns of work and creative workplace solutions in order to create
sustainable competitive advantage. Done
well, this cross-disciplinary leadership role could become a critical
factor to an organization.
[i] Phillip J. Stone and Robert Luchetti, Your office is where you are, Harvard Business Review, March-April 1985, Volume 63, Number 2, Page 102
[ii] Gary Hamel, Leading the Revolution: How to Thrive in Turbulent Times by Making Innovation a Way of Life, The Penguin Group, 2002
[iii] Ken Dychtwald, Tamara Erickson and Bob Morrison, “It’s Time to Retire Retirement” Harvard Business Review, March 2004, Volume 82, Number 3, Page 48.
[iv] The Rise of the Creative Class and how its transforming work, leisure, community and everyday life, Richard Florida, Basic Books, 2002
[vi] The Balanced
Scorecard: Translating Strategy into Action, Robert S.
Kaplan and David P.
[vii] Building Consensus, Fast Talk: Better by Design, It can be a catalyst, a transformative force. Five corporate leaders who "get" design talk about how it has influenced their companies' strategies. Christine Canabou, Fast Company, Issue 83, June 2004, Page 51
[viii] Commercial Real Estate; A New Office Can Mean Making Do With Less, Terry Pristin, New York Times, May 26, 2004
[ix] Working without walls: An insight into the transforming government workplace, DEGW / Office of Government Commerce, Crown copyright 2004