Rethinking the Office: |
Can Workplace Design Help Transform Corporate Culture?
by Rowan Gibson
An interview with BusinessWeek, July 2003
“In these soft and squishy economic times, companies appear to have very little interest in investing in great architecture and design for their workplaces. Most are still trying to recover from the burst of the dotcom bubble, which has put fun and frills on the backburner and made Gen X/Gen Y look about as fashionable as Pokemon.
Yet the truth is that there is a lot more happening in business than people would think. In fact, we are in the middle of one of the biggest changes, if not the biggest change in business and in society in several hundred years.
Look at white collar work. That’s what offices were created for. We all know about technology liberation - the fact that computer and communication technology makes desks and offices increasingly irrelevant by enabling us to work anytime and anywhere. But the next step is where it starts getting nasty. Because the technology is now starting to make us irrelevant, too.
For about 100 years, we have been obsessed with blue collar productivity. We know what the forklifts did to the distribution center, we know what containerization did to the docks. We know what the robots did to the automobile factories.
But the point is, about 10 or 15 years ago, we realized that we live in a white collar world, not a blue collar world. And what we are now beginning to unleash in the white collar world is exactly analogous in terms of magnitude to what we have unleashed over the last 30-60 years in the blue collar world. Call it whatever you want to call it - ERP, SAP or any damn three letter combination of gibberish in the world - the simple point is that what’s being developed is essentially white collar productivity software. Tom Peters refers to it as ‘forklifts for the mind’ and it’s going to revolutionize white collar work the same way that forklifts and containers revolutionized the blue collar world.
I mean, we all acknowledge that what goes on in the white collar world is 95% totally unnecessary, right? We laugh about the stupidity of it all (Think of Dilbert) and the answer is ‘It’s leaving’ (Makes you wonder what Scott Adams is going to write about in a few years).
The internet has already made a lot of clerical jobs irrelevant, and over the next 25 years artificial intelligence and expert systems will literally pose a daunting challenge to everybody doing white collar work. The fact is that 75% of what most of us do for a living can be readily captured by about 40 well-written decision rules in an expert system.
You’ve probably heard about IBM’s ELIZA system - it’s based on artificial intelligence and it’s aimed at dealing with problems that arise in computer networks and designing solutions that have never been designed before - on its own! ELIZA is not going after the 35,000 dollar a year clerical jobs, it’s going after the 100,000 dollar a year computer technician jobs.
Then there’s global outsourcing. We have spent the last 25 years outsourcing manufacturing, and we will spend the next 25 years outsourcing white collar jobs. And we’re not just talking about call-centers.
It is estimated that India will expand its GDP by 1 trillion US dollars in the next 10 years by insourcing back-office white-collar jobs from western Europe and US. Already the Bangalore area is considered to be the second largest software center on earth, directly behind silicon valley.
It has been said that the only difference between the Indians and the Americans is that they work much harder, they work much longer, they work for much less money and they speak much better English.
But now Indian wages are rising fast, so what’s happening? Companies are outsourcing to other low-wage economies. One of America’s biggest insurance companies - the ETNA corporation is now doing most of its claims processing in Ghana!
The only difference between outsourcing manufacturing and outsourcing white collar work is that don’t have to build plants and highways, all you have to do is have a nice tidy satellite network.
So where does this leave us?
Well if we’re outsourcing or computerizing all the non-awesome stuff (which is 75% to 90% of what we do), then how do we organize the stuff that we can’t computerize or outsource? Because that’s the stuff that’s going to make all the difference.
And that’s why we see a shift in management focus. From the concept of ‘hired hands’ who are basically just tools that we use to implement our strategy, to the concept of ‘hot talent’ - people who in fact ARE our strategy. They are what make us unique. Their brains and their skills represent the company’s only enduring basis for competitive advantage.
David Ulrich, of the University of Michigan’s School of Business, says that people are “the only competitive weapon left”. What does he mean?
Well, in the old days you could base your competitive advantage on something like cost, or technology, or distribution, or manufacturing, or product features. But, today, most of those traditional forms of competitiveness can all be quite easily copied. They are now merely tickets of entry to the marketplace.
These days, the focus of competitive strategy is on building unique organizational capabilities. Companies are finding out that the only way they can win in the new economic era is by developing the kind of capabilities that meaningfully differentiate them from the rest. Capabilities that make them the fastest, or the most responsive, or the friendliest, or the most innovative, or the most flexible, or the most competent player in their field.
These are all ‘people’ issues. Which explains why companies are so intent today on strengthening their human capital. A groundbreaking study by McKinsey in 1997 introduced the business world to the notion of ‘talent wars’ - the battle to attract and retain the brightest minds in your industry.
Mike Ruettgers, Executive Chairman of EMC Corporation explains why organizational talent is such a burning business priority. He says, “The one resource your competitors cannot duplicate - perhaps the only one - is the pool of talent you create and cultivate.”
The other big shift in management is from optimization to innovation. I mean, the issue here is ‘how do you create wealth today?’. And the answer is not by optimizing the hell out of whatever it is you do. Because we’ve already done that.
Management guru Gary Hamel told me recently, “we've been on this hundred year quest to take inefficiencies and costs out of our organizational processes, and now we're getting pretty darn close to the bone.” In other words, most of the strategies that companies have been using over the last decade to prop up their share prices are reaching their arithmetical limits. They are essentially unsustainable methods for creating shareholder wealth.
We’ve done the reengineering thing, the downsizing thing, the overhead reduction thing; we’ve cut costs, we’ve completely revolutionized our supply chain management, we’ve done the mergers and acquisitions, and now the question is, what do we do next?’
Because if we’re all completely optimized and we’re all outsourcing, then we’re all basically doing the same things and we’ve raised the bar for everyone but nobody gets ahead. What we need now is not just strategies for wringing out inefficiencies but strategies for creating value. And the only way to create value is by innovating. By doing something great for the customer that nobody else is doing - which is mostly about creating a unique brand experience.
So the challenge today is cultural change. Companies are asking themselves:
How do we attract and retain the best talent? How can we create a culture where they can work most effectively? How can we speed up the flow of work, ideas and decision making? How we make our organization more adaptive to change? How can we build innovation into a core competence? How can we do all this in the most cost-efficient way?
And this is where the A & D (Architecture and Design) community comes in. Instead of saying, ‘Can we interest you in some great architecture and design?’, the community should be saying ‘Can we interest you in the most powerful way to bring about cultural change?’ Because that’s what office design should be about today.
Here’s the key point:
By changing the design of the workplace, we can actually transform the way people and organizations perform.
Over the last few years, we have discovered that office design is not merely a cosmetic issue. In fact, we’re finding out that the design of offices can actually change the very nature of organizations because it has an extremely powerful impact on the corporate culture. That’s why it’s such a hot issue today. And it’s starting to come to the attention of a lot of senior executives. Personally, I believe it’s going to be the next big thing in management.
Let’s not forget that the global 1000 spend upward of 2 billion Euros a year on culture change programs and they estimate that 70% of them don’t work. Most of these culture creating efforts ignore workspace design - it’s the powerful missing link.
Here’s why - office design can be used as a tool to accelerate organizational change. It can act like a catalyst by providing the conditions that make change possible. There is a proven relationship between habitat and behavior. So the way the workplace is laid out will have a big effect on the people who work there.
What happens is that the office communicates to people about the values of the company. It sends out a strong cultural message. And this communication works on a subconscious level. Vision is our strongest sensory source. We take in 80% of our information through vision. And what we see has a tremendous impact on what we do and how we do it. Because the company’s beliefs and values are hard-coded into the space. The design of the office is either going to say, “We are a company that believes in transparency and open communication and creativity and flexibility” or it will say, “We still believe in hierarchy around here - and we want to separate and divide people.”
When Michael Bloomberg took the reigns from Rudi Guiliani as the mayor of New York, the first thing he did was change his workspace. He ripped down the cellular offices that quietly spoke of Guiliani’s ‘behind closed doors’ management philosophy, and instead he huddled in with his staff in a ‘no frills’ open plan environment. Why? Because we knew that would be the best way to communicate his radically different management approach.
Where a lot of cultural change programs go wrong is that somebody gets up and points to some words on piece of paper and says ‘things are going to be done differently around here. We want a lot more communication and teamwork’ but nothing actually changes because the office doesn’t encourage or even allow communication and teamwork. If, however, we change the physical space, it goes a lot further than words on a piece of paper. The physical environment projects the message in way that is so powerful - so sustained and persistent - that no other medium can compete with it. You walk into the space and you can see that it’s designed for people to communicate and interact with each other. And that’s what people then start to do. The physical environment actually changes their organizational behavior.
We can see some very positive examples of this today from companies around the world. Let me give you a few, starting with Avaya, the U.S. networking solutions company.
When Avaya split from Lucent Technology, they had an identity problem. Who are we? What’s our culture? What do we stand for? They decided to define their identity based on ‘Communication without boundaries’, which is what their technology products are all about, too. So they started looking for ways to embed these values in the physical workspace. Their business today calls for highly integrated solutions, which means that the company needs to bring a lot of different specialists together - employees, suppliers, customers, even competitors - and help them to work as teams. ‘Communication without borders’ is therefore not just a corporate slogan. It has to be a daily reality at Avaya’s offices around the world in order to get important decisions made fast and to respond rapidly to their customers’ needs.
In Holland, Avaya’s original office was said to have “the body language of a 1950’s East Bloc hotel.” It certainly did not fit Avaya’s modern team-based corporate culture. People were separated by enclosed offices and had only limited contact with each other. This made it harder for the company to attract and retain talented employees. The new office, which is just a short distance away, is based on an open plan environment with plenty of eye contact and much more of a team spirit. When they are not at their desks, people can work or meet in temporary project rooms, semi-enclosed ‘privacy pods’, touchdown areas or the central café and lounge area. The new office concept gives people a variety of different spaces for concentrating, collaborating, contemplating and conversing.
Avaya’s employees were heavily involved in the redesign of the office. After analyzing people’s patterns of work and interaction, the design team invited employees to brainstorm and collaborate on the project, noting their comments and views as part of an interactive process. In this way, Avaya’s work community could contribute to the final design of the new workplace. Based on the company’s own research, the new office has helped to increase communication and face-to-face interaction by 50%. Employee satisfaction has increased by 40% and the occupancy ratio has improve by 25%. Since then, Avaya has implemented similar workplace concepts at their offices in Italy, Australia, Argentina, Great Britain, the USA, Hong Kong and South Korea.
Another example is NCR’s new research facility in Dundee, Scotland, which houses the company’s Financial Solutions Group - the R&D people for ATM’s. They play a pivotal role in NCR’s corporate strategy, which could be described as ‘Innovate or die!’.
Previously, this group was situated directly inside NCR’s manufacturing facility, which was proving to be an increasingly unsuitable environment for the group’s workforce of 1500 people. Knowledge-sharing was difficult, and the inflexible office layout made organizational restructuring very costly and time-consuming. Simply put, the old building was holding the group back, standing in the way of innovative product-development teams and disrupting the road to market.
For these reasons, the decision was made to build a new office where ideas could be spread around as fast as gossip. And one that would help to attract the industry’s brightest minds. One that reflected the company’s business objectives and the organizational needs of the workplace community.
The new building is a quantum leap forward. The modern architecture features few interior walls and numerous windows, offering lots of natural light. Bright green and blue décor, accents and fabrics announce NCR’s new-found vitality and openness. Movable screens and subtle post-and-beam divisions serve to liberate and democratize the workplace. Many workers carry wireless phones. Data ports are everywhere. Projectors abound. Smart boards digitally capture notes from brainstorming sessions. And movable furniture and touchdown spaces throughout the offices - plus an all-day café -let people gather where they work and work wherever they gather.
The results are impressive. 6 months after moving into their new building, NCR’s people were surveyed to measure improvements against 5 objectives that were set up at the beginning of the project. The post-occupancy results are:
What was becoming clear to PwC was that the old offices in Belfast reflected outdated and inefficient ways of working. The floor plates were small so the workplaces were crowded, and the space layouts were based on a hierarchical organization structure, with lots of individual offices and plenty of high partitions dividing people from one another. What they decided to do was invest in a new office that would reflect the new face and the new culture of the company. One that would support more flexible ways of working, more innovation in their service delivery, and more efficiency in their work processes.
They like to think of the new facility as a twenty-first century office for a twenty-first century organization - a place where the company could unite all of its resources in Belfast and simultaneously embrace a much more modern work culture. The workstations are situated in an open plan environment with minimal partitioning, which creates plenty of eye contact and much more of a team spirit. When they are not at their desks, people can work in flexible group spaces, spend downtime in breakout areas, move to quiet rooms for concentration, or get together in the company’s dining room, informal café/bistro or club area.
As a result, PwC has been able to:
Personally I believe this is just the tip of the iceberg. In the years ahead, as more and more companies recognize the transforming power of office design, we are going to see many more examples all over the world.
Why has this field so far received such little attention in general from the business community? Maybe it has to do with the focus on short term financial results. Quarter to quarter. Bottom line. You know, why should I invest all this money in office design? What’s it going to deliver in terms of direct, bottom line results? And, of course, it can deliver significant results in terms of efficiency - increasing the density of the office by having more people per square meter, using smaller workstations and having people work at home .- therefore saving office space. But while these issues are important, what’s more important is attracting and retaining the brightest, most talented people and creating the conditions under which those people can work effectively in teams. These are the indirect results, they are not about efficiency, they’re about effectiveness - in other words, the ability of the physical workspace to add value to the organization.
I think, though, on the whole that companies now realize how important it is to nurture the right kind of corporate culture – one that enables them to adapt to the rapidly changing business environment, rather than one that anchors them in the past. But that’s easier said than done. And what managers are coming to understand is that, if they genuinely want to change their organization’s culture, they have a very powerful tool available to them in the redesign of their office environments.
It’s a strategic tool. Which is why corporate leaders need to get involved in the design office process. It’s too important just to leave it to other folks. If a company’s only true strategic advantage comes from its unique organizational capabilities and its culture - its social architecture - and if office design has such a powerful impact on culture and behavior - then office design should be a crucial issue on the leadership agenda.”
Rowan Gibson is founder and chairman , a company which helps organisations to rethink core strategies, and author of the international bestseller Rethinking the Future.
Copyright Rowan Gibson. All Rights Reserved.
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