OPX | The End of the Office As We Know It (Apologies to REM)
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The End of the Office As We Know It (Apologies to REM)

 

Dear Friends and Colleagues,

Imagine that you went to work in a different office every day. Some days you felt like working at the office near your house, and sometimes when you wanted to be in the city, you went to an office downtown. Sometimes, when the weather was bad, or there was an event that closed roads, your office could be in your house that day. For some of you, maybe you went to the office at the beach, or while you were visiting your children at college, or maybe even in another country. That might be really interesting, even fun and inspiring, but what kind of a job would let you do that?

 

What if the company you worked for had more offices than people, but only paid for the ones they used?

 

And imagine that all of the different offices were filled with people, like you, from a variety of companies, all doing their individual work and imagine too that ……

 

The Now of Work

If this sounds like an advertisement for the many coworking places that have sprung up, it isn’t. This is not the future of work, or even the future of where we work, it is the now of work.

 

If this is the now of work, what is the future of the office?

 

The coworking phenomenon coupled with the ethos of our current time: purpose and impact driven, environmental consciousness, and entrepreneurship, will result in unimaginable scenarios for both work and the future of companies. Add to this the confluence of out-sourcing, AI (Artificial Intelligence), and the challenges of getting to work, and the future gets really interesting.

 

A recent article in the Wall Street Journal, The End of Employeesrecounts the relentless drive by companies to use contract employees and to outsource. Here’s a couple of quotes that puts it into perspective:

 

Eventually, some large companies could be pruned of all but the most essential employees. Consulting firm Accenture predicted last year that one of the 2,000 largest companies in the world will have “….no full-time employees outside of the C-suite” within 10 years. (bold type is mine)

 

Another part of the article quotes David Cush, then CEO of Virgin America, as saying:

 

“We will outsource every job that we can that is not customer-facing,”

 

And again: Never before have American companies tried so hard to employ so few people.

 

So if there are no permanent employees, who needs office space?

 

Who Really Needs an Office?

Now, imagine you are the CEO of a company. Your company has a fairly long history, a well-established product or service, valuable employees, and a long-term lease on office space. You’ve been seeing the trends, you’ve been reading these articles, you’ve even used limited outsourcing and automation as a way to build competitive advantage.

 

You also see the enormous challenges of attracting and retaining employees, rising operating costs, the short-lived tenure of young employees, too much traffic…..a really long list of challenges.

 

Now imagine you’re that same CEO and your lease is up in two years. What do you do?

 

One of the first things to consider is the challenges of building a new office space. Here are the questions you’ll likely have to answer:

 

  • Where to locate it?
  • Do we put it near employees, near customers, or near you, the CEO?
  • How big will it be? What is the right size?
  • Who will help me find the right location?
  • How will we manage growth or shrinkage?
  • Who will help me design it?
  • Will it really help me work better? How will I know?
  • Will it reinforce our culture or hurt it?
  • How will it adapt to change?
  • How do we accommodate/account for innovations in our sector, our company?
  • What and who needs to be in it?
  • How much will it cost?
  • How do I pay for it?
  • How do I know I’m getting the right value?
  • How will I know I’m getting the right office environment?
  • How do I know it will last?
  • What if I don’t like it?

 

With questions like these, you ask yourself: “Why would I ever want to do this”? Couple this with the difficulty of being innovative, particularly in space and office design, and the problem gets worse.

 

Innovation

The notion of innovation may be over-used, but when considering building a new office environment (that ostensibly needs to foster innovation), innovation in that process can be elusive. Consider the typical adoption bell curve diagrams:

 

First, there are the early adopters (those folks who camp outside waiting for the new product to be released). When this number reaches about 15%, the rest of us buy. And the last bit are the laggards, who never buy (and even miss the next innovation cycle)!

 

Now consider the duration of these two curves. Currently in the technology world (software, mobile devices, video games, apps, etc.) this duration might be six months – so you don’t miss much by waiting a little bit. But if you’re not an early adopter of innovation in real estate, and how best to use it (assuming you even know what that is) you’re stuck in the past for likely TEN YEARS (or until mercifully the lease rolls over sooner)Can you imagine doing the same thing (in the same way) in your business approach for ten years? How will that affect the future of your company, your ability to be competitive, to attract and retain the best people, your ability to respond to change?

 

That’s pretty tough in today’s world, in tomorrow’s world, you’ll likely go out of business.

 

So why would you commit to using the same real estate for ten years – especially since realistically it can’t be changed? One way to avoid this? NO OFFICES. (at least not permanent ones anyway).

 

The Temporary Office

Years ago, Chris Anderson of Wired magazine wrote an article about ‘The Temporary Company’. His thesis was that opportunities and business challenges would arise that resulted in groups of people (at that time made up of mostly ‘free-agents’ first discussed by Daniel Pink in his book Free Agent Nation) forming temporary ‘custom-made’ companies whose half-lives would be measured (and limited) by how quickly the opportunity was resolved or goals met. The model of the producing a motion picture – where all parties only come together long enough to produce a movie – was similar to this vision. Adam Davidson of Planet Money has written a compelling article in the NY Timesabout the ‘Hollywood Model’ as an approach to modern business. (And by the way, as of 2014 there are reportedly 53 million freelance workers, making up 34% of the workforce)

 

Two of the major challenges of this model are: One – how to assemble this temporary company staff, and two – how and where to house them? My sense is that Anderson was not interested (or at the time couldn’t imagine) in how these two challenges would be addressed (in fact, the article didn’t mention it).

 

But what if Anderson’s idea was reversed – that the office where the company worked was temporary, and the company more or less permanent? Maybe not much imagining is required, as that day has been here for some time. But what if we took this to its eventual conclusion where all offices are temporary with no permanent workplace for anyone?* Behold the advent not of the ‘Virtual Office’, but of the ‘Temporary Office’.

 

Temporary Offices (and those companies that provide them) are more nimble – they can keep up with research and new ideas in the changing workplace, adjust to fashion and customer wants more quickly, and operate on a completely different cycle – and the typical 10-year horizon (completely artificial for tenants, but critical for asset financing) disappears. Each ‘Temporary Office’ responds to the cycle of growth and maturity of the individual businesses that work there.

 

As an aside: The effect on building owners could be profound – a required change in strategy. Developers, REITS, banks and other lending institutions, and investors would potentially have to come up with radically different approaches – but that’s another article.

 

With the advent of no (permanent) office space, some advantages emerge for companies: since the Temporary Offices will most likely be comprised of a variety of companies, more business development opportunities will be available. Proximity and interaction lead to more collaboration. New joint ventures, new mergers, and other business opportunities will now be possible. With a ‘permanent office’ sales people have to develop leads, answer RFPs and are rarely anywhere near their customers regularly.

 

Could you imagine a business development tactic that placed sales people in key temporary offices where their current clients (or new clients they want to do business with) are working? If you were to do that now you would have to sign a multi-year lease in every building that your customers are in and hope you catch them in the lobby or the elevator! Multiply the number of your customers by ten years, and by the rental rate per square foot for each office, and you’ll end up with a cost that rivals some gross national products of some countries! Not a workable approach.

 

The ‘no-office’ solution solves another problem: getting to work. I often tell people that ‘Today was the shortest commute of your life.’ Some people get it, and some people say something like, ‘my commute was pretty good today’ – meaning it was just short of a living hell for an hour or two. What I mean by that statement is that cities (where most of the jobs are) are only going to get bigger, and more crowded, with more cars, bikes, etc. all adding up to more congestion and longer commutes (A recent poll by corporate real-estate advisory firm, CBRE, noted commuting times are in the top five concerns when considering a new job). If your offices are ‘everywhere’ your employees are – problem solved. Also, guess what one of the most effective retention strategies is? Letting people work remotely!

 

The advent of the Temporary Office is an idea that embodies the ethos of our time (and likely for a long time to come) – entrepreneurial, innovative, purpose driven with little patience for ‘the same old thing’. The Temporary Office could usher-in a significant shift in the business landscape. With yet-to-be realized potential for agility, innovation, better customer response, and cost-reduction on the part of businesses bold enough to engage in it. It will also provide new, flexible, and engagement-enhancing environments for workers who will ultimately determine the success of every business.

 

How Different will the Future Be?

Is all of this going to happen to you and your business? Probably not. Will some of it happen? Will most of it happen? Will you and your business benefit from it, or be hurt by it? Will your business run to it, or run from it? All of these questions are nearly impossible to predict, but here’s a prediction that is likely to come true: If you don’t spend some time imagining what the future will be like, your future will, in the words of Peter Drucker, be different…with the difference being, your business might not be in it.

 

Steve Polo

Steve Polo

polo@opxglobal.com