Michael Ratliff, Associate Editor
(Originally published on CPExecutive.com)
Corporate real estate leaders are increasingly aware that flexible work space is a valuable tool for attracting and retaining employees. The practice is also an effective way to boost revenues through reduced footprints, increased worker productivity and collaboration—features that should make any C-suite happy.
On Tuesday, a panel of world-class corporate real estate leaders at the CoreNet Global Summit in Orlando gave some valuable lessons on the ‘before, during and after’ stages of adopting a workplace flexibility program based on direct experience.
The ‘before’ flexible workplace point of view was presented by Joe Flock, director of real estate development and facilities, Horizon Blue Cross Blue Shield of New Jersey. His presentation was a subset of a presentation he had just made to his CEO regarding the renovation of the company’s 770,000-square-foot headquarters in Newark, N.J., with the aim of creating an asset that is more conducive to flexible space and mobile work patterns. A bonus of the plan will be the ability to lease out six floors of vacated space.
The company’s overall goal is to have 60 percent of staff work in the office full-time, 20 percent part-time in the office/part-time at home, and 20 percent full-time at home. The plan should shrink the group’s total real estate footprint by a third from 1.9 MSF to 1.3 MSF over the next five years.
“The plan will reduce the total footprint and cost, but that is not the primary goal,” Flock said. “The primary goal is to transform the workplace so that it allows for increased collaboration and productivity.”
The 16-story headquarters will see a drastic renovation as part of the plan. Floors 8 – 16 will receive a second life with an open floor plan. The first floor will receive a brand new amenity space. Floors 2 – 7 will be leased out to tenants in beginning in the first quarter of 2005 with a $6 million rent target assuming 100 percent occupancy.
“A big part of our real estate strategy is getting some tenants into the building,” Flock said. “But do we have enough capacity? Do we have enough parking and elevators? Our team made sure to have all the answers before presenting this to the staff.”
The plan began with a pilot program on half of a floor. All of the offices were pulled away leaving an extremely open-floor plan. Vice presidents received a 10’x12’ office next to a 10’x12’ conference room. They have priority over the conference room, but not sole use. Each floor has a business lounge that also serves an area for small group meetings. The elevators will receive a destination dispatch system— instead of pressing and ‘up’ or ‘down’ button in the lobby, the user will actually enter the floor number. The system leads to an orderly traffic flow with less travel and waiting time.
Flock expects that the biggest hurdle will be a cultural resistance to change. The new space will be better for most, but there are always some who work better in a more rigid work environment or are hesitant about change. As the great philosopher Spock once said, ‘the needs of the many outweigh the needs of the few’.
“One size might not fit all, but you can squeeze your foot into a shoe that doesn’t quite fit,” Flock added.
Carrie Bandman, senior director of the portfolio strategy team at Capital One, provided the audience with the ‘during’ flexible initiative point of view. The company’s original incarnation of a flexible workplace program began in 2004 and is currently in its second manifestation. Prior to the recession, the company’s portfolio was operating at a 33-34 percent vacancy with a goal of getting that number down to 20 percent. The slowdown that resulted from the financial crisis helped the portfolio tighten thanks to a deliberate decision to defer investment in new space. But in 2010, the institution saw an unforeseen uptick in hiring that has continued throughout 2012. The growth was not sustainable as far as space utilization was concerned, and Bandman began working on a plan to alter office floor plans and practices in the company’s 143 office/10.5 million-square-foot portfolio.
“I had business units saying ‘Look, I just want a seat for my associates,’” Bandman said. “We added seats and assigned conference rooms to teams, but even with good controls like an approval process for rooms, it was not surprising that every request was business critical. Over 45 percent of collaborative space was 100 percent occupied all of the time.”
According to Bandman, the senior leadership is her biggest support for the initiative to reach a 200 RSF seat target with a desk share ratio of 1.3 to 1. The plan will involve furniture that the employees can quickly reconfigure themselves depending on a project’s given needs. Capital One also plans to bring back the ‘quiet zones’ that they did away with when space was scarce. A distraction-free zone becomes a necessity when work spaces become smaller, more open and more collaborative. Her team also invested in tools, such as an instant messaging system with desktop video, allowing employees to be more mobile. Small meeting rooms for 12 – 18 employees called ‘speed pods’ were added. A team calls the space home for three to six weeks while completing a project and then they move on. The most important thing that Bandman stressed was to let employees know that change is coming.
“This is not something that you can bring online overnight. We reinforced the notion that help was on the way by launching a communication program which helped to calm things down on the business side,” Bandman added. “There is a great benefit in communicating that you are addressing long-term spatial needs as early in the process as possible.”
Robert Maynard, senior program manager at GlaxoSmithKline, was directly responsible for giving the flexible workspace treatment to 2 million square feet of office and lab space. He was able to provide the audience with a clear ‘before’ and ‘after’ point of view.
“Our traditional model was 200 square feet per person, but you have to understand that at the time we were making money hand over fist,” Maynard said. “In 1997 we did studies on how space was utilized and found that 35 percent of space was left empty every day. The higher the pay grade, the higher the vacancy.”
The first approach at fixing the traditional model of space is what Maynard called the ‘hybrid approach’. His team eliminated offices for managers and decreased the size of director offices from 12’x16’ to 9’x11’. The end result was a space averaging 125 square feet per person with lowered partitions, quiet spaces and small meeting rooms. His team did a quarter million square feet in renovations in the model. While the space was much more efficient, there was not as much communication and collaboration as Maynard and his team had hoped for—mainly due to the fact that the directors and vice presidents still tried to hide out in their largely opaque offices. Luckily, he had executive support in the form on a mandate that required all new renovations to have flexible space.
In 2009 he decided to do something about the collaboration problem when 1,500 administration staff and 300 lab staff were relocated into a 1.37 million-square-foot space. All the offices received glass walls. The new target figures were 108 square feet per person. Each admin employee received one 3-foot file drawer. Desk spaces were shared at a minimum ratio of 10 people per eight seats. Monitors and video conferencing was added to all meeting rooms. Height adjustable tables represented 60 percent of the desk space so employees could work standing up. The space was made 100 percent wireless and employs a distributed antenna system to ensure there is not a single dead zone for cell service. The plan even included a south masking system that generates sound in the human speech range that self adjusts to ramp up in the morning and fall in the afternoon. The devices actually make it so that a worker cannot understand a conversion being held a few feet away from their seat. If they cannot understand the conversation, their brain cannot become engaged and distracted.
“When they moved into the new environment, some people met each other for the first time after having worked in the same building for several years,” Maynard said. “The group became much more collaborative. We saw email usages drop by 45 percent. That is a lot of saved time.”