Remember 1999, when big companies rushed to imitate the dot-coms by crafting hip workplaces? Suddenly, relaxed dress codes, refrigerators full of Diet Coke and Snickers bars, and dogs in the halls made the corporate life seem a little less corporate.
Most of that funky aesthetic disappeared faster than you can say “New Economy,” but one facet is making a quiet comeback: the open office arrangement. Motivated more by a desire to save money on real estate than to please finicky employees, companies including Motorola, Ernst & Young, and Cisco Systems report that they have cut real estate costs significantly by adopting “alternative workplace” designs. Cisco, for example, has seen 37 to 40 percent savings from its new approach.
Capital One Financial Services Corp. has made the concept a key part of its “Future of Work” initiative by swapping traditional offices and cubicles for a mixture of unassigned desks, sofas, and conference spaces. The company’s cafeteria is designed to accommodate informal meetings, and there are scattered café areas that look remarkably like the local Starbucks. Employees, equipped with wireless laptops, Blackberries, and cell phones, are free to work wherever they wish. Some companies are taking the idea further, combining new thinking on office space with an endorsement of telecommuting or the establishment of smaller, more-modest regional offices that employees can drop in to as needed.
The concept is not new; as Sandy Apgar, a partner with The Boston Consulting Group’s (BCG) real estate practice, says, “Over the years, many companies have touched on this topic but not gone much further. They run into significant resistance, especially from midlevel managers, and interest wanes.”
But there are reasons to believe that this time things may play out differently. A recent Gallup poll commissioned by CoreNet Global, a corporate real estate association, found that 20 percent of large companies expect to have between 25 and 50 percent of their employees working in unassigned spaces by 2010, and by 2020 the majority of large companies are expected to have adopted the practice to some extent.
The primary driver is economy: as managers work their way down the list of cost-cutting opportunities, real estate emerges as an attractive target. At most companies, property-related costs are second only to salaries and benefits. Some companies have already pared such expenses, typically by consolidating partly vacant buildings and either selling or subletting what’s left. Indeed, the average number of square feet per employee has been trending down for some time (see “The Incredible Shrinking Cubicle” at the end of this article).
Alternative workplaces offer an opportunity for deeper cuts because they represent a shift from thinking about occupancy (how many people a building can accommodate if each worker is assigned a specific seat) to utilization (how many people actually use a building or office at any given time). “Companies are starting to realize that instead of being satisfied that their building is 95 percent occupied they should instead be worried that it’s only 40 percent utilized, because people are often out of the office,” says Prentice Knight, CEO of CoreNet Global.