In the current global environment, traditional space and footprint requirements are being challenged and at the same time being supported by new technology and innovative work practices.
Here in this seven step guide series, we explore how clever companies are saving OPEX while creating business enabling spaces.
I. Introduction
Growing lean addresses an age old business story. Conventional wisdom requires a business to increase its capacity and real estate footprint as it grows. Yet pricey real estate means every square foot of expansion is an increase in cost.
With rent, limited supply and other factors being significant hurdles for growth in financial hubs, businesses are forced to introduce measures to increase output while reducing real estate overhead.
- Options are limited, especially in a saturated market
- Moving from central business district areas means moving away from clients based in prime locations
- Relocating to a new building that is the right fit can be an arduous task
- New fit-outs require a huge commitment – these are risky, costly and require time
So why not work with what you’ve got?
- Structuring an office around productivity saves space
- Communications and change management can be used to engage staff and increase “ownership”
- Payback, on a strategy based on needs, can be as little as 2 years, realising 4 years of savings on a typical 3 years plus 3 years lease
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II. Business Enabled
Recent conditions have proven to most organisations that they can function at a certain level with home/remote working. In the midst of the world’s largest work-from-home experiment, some businesses have not needed to modify their operations significantly, while others have been thrown into challenge and turmoil.
1. Cost
With cost of corporate real estate being typically the second largest operational cost, driving that cost to deliver for the business is key.
2. Measurement
A great first step is reviewing how staff function and what they require through measurement.
3. ‘We' & 'Me'
Staff commonly perform a series of activities that can be broadly categorised into “we” and “me” spaces. Whereas “me” space typically includes concentration-oriented tasks such as reading and tasks that may disturb neighbours such as phone calls, “we” space includes interacting and collaborating both formally and informally through various means.
4. Evolving Work Habits
As our work habits become flexible, our physical setting should also reflect how staff work. Even prior to COVID-19, numerous companies worldwide had already implemented some degree of flexible working policy. (Such is the reality of continual advancements supporting work from anywhere and at anytime.)
5. Productivity
Structuring an office around required spaces versus personal entitlement supports productivity, energises an office, reduces silos, and enhances morale (all measured results on Merx projects) - essentially “enabling” staff. As a consequence, valuable real estate is put to good use and opportunities to reduce overall footprint arise.
III. Create Purposeful Spaces
A large number of organisations globally have geared space around dedicated desks combined with a range of often-too-large meeting rooms, possibly a pantry, and a back office area.
But organisations are rethinking this model completely. The reason? Because a space more geared around enabling business energises productivity, enhances morale, diminishes siloed behaviour and empowers staff to excel.
A fit-for-purpose fit-out addresses:
Concentrating
Workstations, focus workstations, quiet zone, library etc
Collaborating
Team booths (2-4pax), team rooms (2-3pax), small meeting rooms (2pax) etc
Socialising & Interacting
Pantry & loose tables, booths, bar seating, sofa seating etc
Private Discussion
Phone room, team rooms (2-3pax), small meeting rooms (2pax) etc
Brainstorming
Whiteboard area, meeting rooms etc
Group Briefing
Team rooms, meeting rooms etc
Internal & External Meetings
Conference room/boardroom, meeting room, high table/casual seating meeting space etc
Results:
- Space oriented around these activities supported by a series of functional areas (eg. photocopying, scanning, printing, shared storage, reception etc.) create energised areas that typically occupy smaller spaces.
- Dedicated desks are empty when staff need to use alternative spaces.
- Layout geared around purposeful spaces will be more energised, business enabling and flexible.
- When layout planning is done well, it minimises spaces that are underutilised or overcrowded, and truly serves end-users.
IV. The New Technology ‘Normal’
The shift in technology over the last decade has moved exponentially, with the net result of freeing staff from being desk-bound. Acknowledging this as an organisation empowers the business to move forward.
Advancements:
Cloud computing services now defines business technology
Laptop processing power has now progressed to a level that makes desktops no longer vital for work
Phone systems have migrated to mobile devices and video conferencing software
Video conferencing software such as MS Teams, Zoom, Skype, Webex, Google Hangout are common forms of face-to-face interactions
Implications:
All the above and more have delinked staff from desks. This results in viewing the office as a location for a range of activities (such as concentration, collaboration, interaction, socialisation etc.) versus a traditional hierarchy bound environment of entitlement.
Objectives:
A collection of technology enabled and supported spaces allows staff to
- Work in a variety of ways freeing up significant footprint
- Optimise both office-bound and virtual work with easier access to, and sharing of information
- Enhance efficiency in collaboration
V. Manage Employee Happiness and Sense of Belonging
Considering that employees are at the heart of every organisation, managing employee happiness and reinforcing their sense of belonging is of vital importance towards business function.
The concept of “growing lean” can be very daunting for employees for various reasons, including the fear of losing personal space, of reduced autonomy and even of being stripped of hierarchical privileges. Identifying and addressing these fears is critical. An environment that allows staff to work in the way they need to ultimately enhances morale.
Aspects for consideration include:
1. Staff Perception:
Changing the perception of the office from “my space” to “our space”.
2. Leadership Ownership:
Ensuring endorsement from top-down (and cascading the positive attitude downwards) whilst listening from bottom up.
3. Expectations:
Aligning expectations upfront and preparing staff with a clear vision of the space. Cost reduction is table stakes but should not be the focus of staff alignment.
4. Staff Involvement:
Engaging staff through their input on the space. The degree of input may vary, but even a choice as simple as the task chair for all staff will make a difference.
5. Role Affirmation:
Having a physical environment that is aligned with the employee’s view of themselves and their role in the organisation. Staff measure and compare horizontally against their peers, hence irrespective of what is achieved consistency across company layers is critical.
With close to half of our day spent working, ensuring that the space promotes employee happiness and sense of belonging is the basis for talent retention.
VI. Time/Process
The driver behind “Growing while Shrinking” is lower recurrent real estate cost.
The result is optimised business enabled space that drives productivity.
The impact is a period of business interruption to undergo change.
What is required to get from the driver to the result and how long does the business interruption take?
VII. Cost Benefits Case
To put into perspective just how much cost saving can be yielded from growing while shrinking, consider the following scenario:
Business Case (artificial example only, excludes reinstatement):
- 1. Existing Rental USD9.36 Million
20,000sqft space x 3 year lease x USD13/sqft/month (assumed rent)
- 2. OPEX Savings USD3.12 Million
By simply shrinking a third of the footprint, the OPEX saving for 3 years is: 20,000 x 1/3 x USD13/sqft/month x 36 months
- 3. CAPEX USD2 Million
Cost of retrofit (medium level fit-out): Fit-out Cost = 20,000sqft x 2/3 x USD150/sqft fitout (incl. furniture, excl. IT)
- 4. Pay Back Savings USD4.24 Million
With a Capex of USD2 million and rental savings per month of USD86,667, payback would be 23 months. This means the retrofitted space would pay for itself within 2 years’ time. Over a six year lease (3 years + 3 years), this would add up to savings of USD4.24 million.
Benefits Case:
Aligned with cost saving, there is also a strongly demonstrated business enabled benefits case.
- Purposeful spaces with variety of meeting areas
- Flexibility on where/how to work
- Allow for flexible headcount numbers, adding additional staff does not require additional space
- Productivity with increased morale, reduced siloed behaviour, increased staff communication and enhanced cross functional business
Download Workplace: Growing Lean full guide here.
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