Developing an Optimized Workplace 

More and more corporations are struggling with designing real estate strategies that meet critical but conflicting business objectives: reduce real estate costs, increase ability to quickly respond to change, attract and retain the best and brightest employees, stimulate productivity.

PdK Consulting has found that by following a rigorous process of defining business objectives, establishing performance benchmarks, creating performance based solutions, and measuring the results, real estate strategies can demonstrably increase profit by 2% to 5% while satisfying the most aggressive and conflicting business objectives.

Typical design process start with a “programming” study that is single dimensional focusing on workplace design only as reflected by the current staff perceived requirements based on their current views of how their present workplace fails to support their current needs.  PdK’s research and the work of the best workplace thinkers indicates that performance is enhanced by having the right people doing the right work with the right tools.  This implies that the workplace is only a single leg of a stool.  Workplace strategy and design must be fully integrated with employment of the most appropriate technology supporting work processes aimed at improving business results.  Even that does not guarantee success if the process of identification is not accomplished in a participatory way and that the behavior changes necessary for increased performance are carefully facilitated and supported by organization development experts (this often is erroneously called “change management”).  In our experience performance driven workplace assessment studies leading to new workplace strategies, improved technology, revised wok processes and organization structures lead consistently to pre-tax profit increases of 2% to 5%.

Long-term real estate strategy starts with a blank sheet of paper.  Questions such as where to locate, what is an optimum campus size, what are optimum buildings sizes, what are optimum floor plate sizes, must be answered.  While PdK practice does not have direct experience with the determination of the optimum location or optimum campus size, we have helped real estate advisors formulate rigorous answers.  We are also aware of research on the subject.  We believe that both Sun Microsystems and Raytheon have researched the subject.  When an office campus exceeds 2,000 to 3,000 employees negative economies of scale can be observed. 

PdK has direct experience with the impact (or lack of) of floor plate size on knowledge workers performance and productivity.  Knowledge Capital now represents as much as 2/3^rd of GDP and generates close to 90% of corporate profits.  Famed MIT economist, Lester Thurow, states that “with everything else dropping out of the competitive equation, knowledge has become the only source of long-run sustainable competitive advantage, but knowledge can only be employed through the skills of individuals”.  We also recognize the impact of teams on performance.  In his seminal book “The Wisdom of Teams”, John Katzenbach states that “Teams outperform individuals acting alone or in larger organizational groupings, especially when performance requires multiple skills, judgments, and experiences”.  How does this relate to floor plate size?  Optimal team size has been determined by various researchers to be somewhere between 15 and 20 people.  Other researchers have established that single individuals rarely communicate on a regular basis with more than 50 to 60 people.  Still other researchers have established that workers rarely go spontaneously more than 150 feet from their home base.  Our own experience with a client insisting that they had teams of over 200 was that in fact those teams were comprised of approximately 10 teams of 20.  The 200 were simply groups of teams.  In summary, we do not know of any evidence, scientific or empirical, linking performance with floor plate size. 

While PdK does not have direct expertise in the field of building efficiency since our practice focuses on establishing knowledge workers performance metrics, and uses those to design performance enhancing workplaces, process improvements and supporting technologies.  We have cooperated with Dr. Vivian Loftness of Carnegie Mellon who has accumulated considerable empirical data linking floor plate size and building efficiency.

PdK has extensive expertise and experience in determining performance measures and developing performance enhancing workplace strategies.  Following is an example of a workplace strategy (based on an actual case but modified to protect confidentiality).  Another example illustrate a return on investment of 131% (based on another actual case but also disguised to protect confidentiality).

The key to the PdK approach is to identify performance drivers (leading to improved business results) and then to identify workplace strategies that positively affect those drivers, thereby improving profit.

Gérald de Kerchove
Founder & Principal
PdK Consulting

Example 1: 
New Workplace Solution Strategy

(Example based on an actual case, but appropriately modified to protect confidentiality)

To maximize the impact on the Workplace Drivers, the Workplace of the future can be conceptualized as follows:

1.       Real Estate Structure

Remote office workers work from home or from fully rented fully serviced offices if the home does not have adequate space or privacy for appropriate home-office environment.  Workplace setting, tools and technology fully enable the remote worker to perform his/her independent functions essentially as if he/she were in home office.

Satellite offices are deployed near major grouping of customers and of remote offices of the remote workers servicing them.  Satellite offices provide facilities for interaction between front-line staff and customers.  They include meeting rooms with access to videoconferencing.  They are inviting, accessible (with ample economical parking nearby), comfortable, and have convenient food availability.  The prototype resembles an airline club at major airports.

Production Centers are located in population centers offering an ample supply of qualified labor.  Staff accessibility and low Real Estate costs are essential selection criteria.

2.       Workplace functionality

Private or Individual workspaces support activities require high level of concentration or creativity, as well as activities performed independently such as data entry and analysis.  Acoustical privacy as well as individual control over the environment (layout, light, temperature, accessories) are maximized.  Size of individual workspace is a function of time spent in the workspace and of the need for supporting equipment and material and not a function of rank.

Collaborative or team spaces enables and stimulates activities performed by two or more individuals.  They include areas for project team to get together for work sessions such as brainstorming sessions, project review, personnel matters (performance review, career planning, etc.).  Some collaboration activities include only members of a work group, others include cross functional groups, other still include key customers.  A variety of settings are available for the different activities, from small private comfortable room for one on one conversation, to dynamic stimulating brainstorming session, to relaxing group discussions or reflection, to videoconferencing with one or more outside locations.

Communal spaces enable larger groups to communicate informally for activities such as celebrations, or briefing in spaces such as a lunchroom, or more formally for activities such as training or formal presentations, or informally relaxing in setting such as library or playroom.

Nomadic spaces enable “visitors” to maximize the opportunities while visiting.  Visitor centers might look like an airport club with casual meeting spaces, private meeting space, access to food, to videoconferencing, to food services, and to booth to check e-mails and phone messages.

3.       Workplace Flexibility

New office standards are established to recognize that organization structures and work processes have a much shorter life expectancy than buildings or furniture systems.  Consequently the new workplace is designed so that supporting infrastructure enables a large variety of work settings without requiring reconfiguration beyond that can be done by the users themselves.  A project room can become a brainstorming room, or a workgroup private room, or lounge, or a laboratory, without any reconfiguration because the wiring, A/C, lighting, power distribution, and furniture enable a large variety of re-configurations.  Private and Team spaces are also adaptable in such a way that different users with same or different needs can rearrange the space to respond to their peculiar work habits or special needs.  To that end furniture is highly modular and mobile.  Technology is mostly wireless.

4.       Social interaction

In addition to the above, a number of performance drivers require the ability for staff to interact spontaneously.  Social spaces are created to stimulate casual and even accidental interactions in order to exchange knowledge.  These social settings may include space to host social events (which may include food), casual coffee/snacks centers, exercise centers, or even day care centers.  They may also include design elements stimulating staff feeling of belonging or well being such as culturally diverse design elements, health spaces for mothers and fathers, etc.

Example 2: 
 ROI of 131%

(Example based on an actual case, but appropriately modified to protect confidentiality)

The company was in need of creating additional space to accommodate their growing workforce of software developers and associated knowledge workers.  The company felt that a change in workplace strategy, away from its historical strategy – “we build generic floor plans and they will come” – could have a significant positive impact on the performance of those knowledge workers; however, there was a lack of analytic data to support that intuition.  PdK Consulting was brought in to work with the company and the design team to develop new space that would support management’s objectives, as summarized below:

1.       Senior Management Directions

During interviews with various members of the senior management team, the following directions regarding the new environment were given:

• Enable space flexibility to facilitate quick reaction to the rapidly changing business climate
• Remove physical/design obstacles to productivity by “pushing” people into working collaboratively, and avoid physical settings that could drive staff apart
• Insure adaptability of the environment to allow for the co-location of various team members during a portion of, or for the duration of, a project – with team size varying from 8 to 200 members
• Provide every opportunity for informal communication
• Stay close to the median of industry benchmarks, particularly density (area per person)
• Reduce annual churn rate from well over 100%
• Stimulate adolescent energy and discourage adolescent selfishness
• Favor “evolutionary” over “radical” change

2.       Solution: “Team Molecule”

PdK Consulting and the Design Team proposed a solution based on a series of interconnected “team molecules”.  A team molecule is a flexible and adaptable team area, owned by a development team which tailors the area to meet its particular needs, and that is adaptable enough to convert practically overnight for a new team to move if and when needed.  The following outline explains the solution strategy, which clearly responds to senior management direction:

• A single design is appropriate for all development teams for all stages of projects life cycles:

•   Scoping and Planning

• Designing

• Constructing

• Testing

• Packaging

•  Releasing and Shipping

• Post-ship customer support

• A single design is appropriate for all teams developing all types of products:
  • Incubating
  • Emerging
  • Established
  • Maintenance
• Development Teams generally include 8 to 12 “permanent” core members augmented from time-to-time by 8 to 12 “part-time” support members who may come from marketing, strategy, documentation, testing, quality and training
• Each Product Group can be made of 2 to 6 development teams, forming a community of “teams of teams”
• All teams members perform different activities balancing individual and collaborative work best performed in different settings:
  • Working alone and thinking hard – high level of concentration
  • Working together and thinking hard – high level of acoustical/visual privacy
  • Working alone with low level of concentration
  • Working together with low level of concentration
• Team Molecule includes 4 types of space (which is “owned” by the team):
• Individual space which can be permanent space, loaned space (days) or drop-in space (hours)
• Team space which include team room, sandbox, testing room, labs, project room
• Team Support space which include coffee area, print, fax, supplies, storage areas
• Shared Support areas (shared between 5 to 6 teams) which include game room, test room, group meeting (16 to 24), assembly space (40 to 60), storage
• Density is decreased by 14%, which includes increasing individual workstations to 120 sf (more area per person)
• The proportion of “shared” spaces is nearly doubled to be 2/3^rd of the total area (yet density is still decreased)
• Deploy technology infrastructure maximizing versatility of use for both private and shared spaces (network, telecom, plug-and-play)
Invest in change management and training to “tailor” users to the new environment

3.       Benefits

• As determined through the Balanced Scorecard and Disaggregation Analysis, the new workplace accounts for 10% of the developers’ performance (the remaining 90% is accounted for by factors such as pay and incentives, manager’s directions, skill-to-task matching, technology, processes, opportunities for advancement, work-life balance)
• The new workplace component of developers’ performance, as measured by the Balanced Scorecard, increased by 15%
• The net benefit of the new workplace is therefore15% of 10%, or 1.5%
• The historical Valued Added Revenue for developers (defined by netting pass-through costs from total revenue) is $203,000 annually
• The net annual benefit per developer is 1.5% of $203,000 or $3,045
• There are 1,600 developers affected by the new workplace.
• The annual net benefit of the new workplace is therefore 1,600 times $3,045 or $4,872,000.

4.       Investment

As reference, the new workplace described above is more expensive to build and operate than the previous workplace:

•   Construction cost was 10% higher

• Flexible technology is 20% more expensive

•   Density is reduced by 14% (more area per person)

• There is $500,000 additional project cost from consulting, data gathering and analysis, and for change management/training expenses

•                The resulting Total Occupancy Cost (TOC) per developer is $8,400, $400 (5%) higher than the previous $8,000 TOC

•                For the 1,600 developers, the annual incremental cost is $640,000

•                With a 5 year amortization the total investment is 5 years times $640,000, plus $500,000, for a total investment of $3,700,000

5.       Payback and ROI

The payback is just over 9 months. The ROI was conservatively calculated at 131%  (assuming that the project expenses are amortized over 5-years and that there is no residual value at the end of the 5 years)