By Tim Oldman
Research across a quarter of a million employees in over 2,000 workplaces reveals that organisations are not getting what they should from their corporate workplaces. Our study exposes that opportunities are being consistently missed and the impact of the physical and virtual infrastructure of workplace grossly underestimated. This presents both a huge challenge and an opportunity for finance directors. On the one hand, can they move from a monochrome view of corporate workplaces as simply the second largest P&L cost, while on the other, accept that an employee’s workplace experience impacts output? This last leap of faith is where we believe those stewarding organisations’ financial durability have an unparalleled opportunity to reclaim this lost value.
This comes at a time when there is much talk of corporate resilience and adaptability. But the stark reality is that while employers continue to endure economic uncertainty, too many of their employees are having to endure workplaces that fail to support their basic working day. Leesman data reveals that half of British offices are simply not actively supporting organisational performance. Segment those workplaces further, to those that have been surveyed shortly after relocation or refurbishment works have been undertaken, and the figures are even more worrying – only 18 per cent of new workplaces surveyed deliver noticeable operational benefit.
This is perhaps the most worrying finding: that the huge capital resources and management time wrapped up in projects designed to create value actually achieve below average results, with some appearing to be an inexcusable waste of time, money and effort. The exact reasons for these deficit results vary but the simple answer is that organisations, alongside the designers they engage, are failing to place the employee at the heart of the workplace solution. A relocation or refurbishment project should be seen as a workforce optimisation project, not merely as the necessary response to a lease event, business acquisition or headcount growth.
Of course, in any such conversation, “productivity” soon surfaces. We’ve seen a bombardment of references to the UK’s “productivity puzzle” over recent years and, according to the most recent ONS Labour Productivity release issued in October 2017, the financial and insurance sector is one of the slowest services industries when it comes to noticeable productivity gains. Having surveyed over 60,000 employees in the financial services, our data reveals that the sector significantly lags behind the Leesman+ (an elite group of the world’s highest performing workplaces) average when it comes to creating the right sort of environment in which productivity can flourish; only 56 per cent agree that their workplace enables them to work productively, compared to 73 per cent.
This could well be the result of the immense efforts invested by the financial services sector to cut its cloth post financial crash. But the simple spreadsheet response from many who see physical workplace as a liability, has been to exert pressure to reduce operating cost of workplace wherever possible. So it’s understandable that space utilisation is seen as a cost saving initiative, but it’s important to recognise that it can also be a curveball in the pursuit of profitability. Any workplace designer or manager can squeeze a space, increasing the number of employees it accommodates. But what if in doing so, the productivity or effectiveness of those employees is actually reduced? You may have reduced property operating cost per FTE, at the same time as reducing revenue per FTE.
This is where the focus needs to shift on the targets and objectives being set. When managers at Wells Fargo were told they would be measured on the number of new accounts opened, few who set those objectives thought that would result in managers opening “ghost” accounts for existing clients. But the $180m fine should act as a stark warning to others. In contrast, when challenged by the CFO to demonstrate clear links between workplace investment and productivity, the team at Nokia developed a formula based on pre and post capital project occupancy statistics. The statistics not only revealed that workplace design and employee satisfaction impacted perceived productivity levels, but that an increase in perceived productivity also correlated to an overall improvement in business output. In this case, the workplace transformation project demonstrated clear ROI. Mathematics and statistics aside, organisations are more likely to be more successful when the workspace supports the combined efforts of a workforce. The provision of an effective workplace has also been proven to reduce absenteeism.
Employers appraise employees every year to see whether they are fulfilling the requirements of their roles, but they rarely appraise the business space to find out whether it is effectively supporting the employees in question. Until now, fundamental decisions are being made by organisations with little or no evidence of their direct impact on employees. Leesman has changed that; benchmarking how employee workplace experience impacts key business indices like productivity or pride. PwC, the second-largest professional services firm in the world, define the value of benchmarking as:
– Helping leaders to make choices with confidence, and track progress over time based on empirical evidence, rather than opinion.
– Providing clear evidence of where opportunities lie to improve efficiency and effectiveness, the size and value of the opportunity, and a roadmap to achieve results.
– All major change or transformation initiatives need to start with benchmarking, giving a clear understanding of what leading performers and competitors are doing, keeping you ahead of the pack.
Their words not ours. But reaffirming our view that the workplace is a component of organisational performance – before you can hope to create a workplace that works, employers need to understand how their employees work and how the infrastructure will support them.
If there is one bottom-line message for us, it is this – finance directors need to recognise that under investment in the workplace can initiate a domino effect of lost value. While we believe that it’s important to measure how many people can fit into a space, it’s surely more important to measure how that space actually supports the people working within it. Rather than play at the edges of the cost of delivering a workplace, a better approach would be to optimise the output rather than trying to minimalise the input.
Our research consistently shows that finance directors who refocus attention on how real estate and workplace strategies support business competitiveness – not by the usual concentration on cost cutting but through enhancing the employee experience – will reap the rewards.
Tim Oldman, pictured above, is CEO of Leesman