When I was at Medtronic in Santa Rosa, CA, in 2012, I learned that individual office cubes and offices were in use only about 37 percent of the time, as the occupants were traveling or in meetings. Worse, many employers had significantly under-planned the need for meeting rooms. The size of individual office cubes were reduced during the switch to open office bays in the 2010s. The environment became crowded and a disaster leading to huge distractions for office workers and poor productivity.
These are the reasons why Medtronic implemented a hybrid work environment in 2012: to cut the cost of wasted office space and reinvest the money in research and development. It required us to redesign our office space with fewer unused offices and cubes and add more collaborative and meeting space. It also required us to lead employees differently and put new office and team norms in place. The transition was worth it. We saved $2 million a year in real estate costs and saw office worker productivity soar.
Now the advent of Covid-19 has forced remote work and hybrid working models on companies for the safety of workers. The problem for many executives is that it has worked tremendously well—they would say, “too well.” Workers want their flexibility and uninterrupted workspace at home. Many CEOs are having a hard time arguing with the increase in productivity.
Gabe Burke of Accenture wrote an excellent article on LinkedIn on January 31, 2022, which all CEOs, Real Estate, Finance, and HR VPs should read. His article calls for office real estate portfolios to be restructured because they no longer make sense after two years of Covid-19.
The article’s title says it all, Corporate real estate has become a black hole that devours money. Time to fix it.
Here is how Burke sums up the past two years:
“We have learned something since March 2020—we will never use the office as much or as often again. This conclusion is well supported by new research. Certainly, there are many people who can’t wait to come back, but it won’t be like it was. We know too much. We know the freedoms of flexible work. We have experienced the safety and the convenience of choosing our daily location. Most of all, we feel empowered. With only a laptop and a phone, we can accomplish the same or more from almost anywhere. A significant increase in hybrid work will be permanent. That means more desk sharing, which in turn means less office space. For many businesses, it is time to rationalize their real estate and to capture the savings.”
He continues that most employers are still undecided and waiting. They have “kicked the can down the road.” But delays, he warns, don’t come free. He concludes that a substantial amount of office space is now functionally obsolete. Citing research, he writes that many firms plan to reduce the number of individual workstations in exchange for more collaborative and social areas. Real estate is often the second-highest cost for a business, after payroll. Other companies should follow the lead of these early leaders and move aggressively, he advises, to streamline their office portfolios.
Gabe Burke writes a compelling article. I recommend you read it and the research studies he cites.
I will add that switching permanently to hybrid work models, which I highly endorse, requires changes in how managers listen to and lead their teams. At the very least, this new situation is creating new team operating and decision-making norms. When implemented well, these changes will continue to improve productivity, employee retention, and attract new outstanding employees.
To learn more, I suggest you read my article on how to get started with today’s hybrid work models.
Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting and managing partner of InnovationOne.. He works with companies to transform HR and recruiting, implement remote work, and develop extraordinary leaders, teams, and innovation cultures. He is the author of the highly acclaimed book, Hack Recruiting: the Best of Empirical Research, Method and Process, and Digitization. Subscribe to his weekly blogs at www.VictorHRConsultant.com.