What' the Optimal Workspace for Your Company?

As we are coming out of the pandemic, there is new thinking about the optimal workplace for businesses.  This Harvard Business Review article explores how now is the right time for many leaders to rethink how and where their employees work and collaborate.  Cresa is geared to helping you align your workspace with your business objectives.  We also represent your interests 100% of the time.  Let’s setup a phone call or meeting if you think Cresa can help with your workplace planning.

Summary of article by Maria Roche and Andy Wu:

More than two years in the Covid-19 pandemic, companies are struggling with how to reimagine their workspaces for their strategic needs. Too often, leaders push the decision down the road when, in fact, taking decisive action now can pay off later. But how do you determine whether in-person, hybrid, or remote options are best for your organization? Start by asking two questions: What is your strategy for future growth? And what is the size of the organization you need right now? Then, map your answers to better understand how your needs around innovation and execution translate to physical (or virtual) spaces.

 

What’s the Optimal Workplace for Your Organization?

by Maria Roche and Andy Wu 

February 09, 2022, Updated February 10, 2022 

As we reach the two-year mark of the pandemic, now is the right time for many leaders to rethink how and where their employees work and collaborate. Should businesses call employees back into the office or leave them working remotely? Is it time to try out a more new way of working all together? Lost in the ongoing debate, particularly in the popular media, is a simple insight: There is no one right answer because managers need to tailor their working environment to the business needs of their organization. This decision can be tough: recent surveys find that what employees think works best for them may limit the potential of the business as a whole. 

To help in this process, we propose a framework to guide managers on identifying the optimal work configuration for maximizing the effectiveness of their knowledge-driven organization. These insights draw upon over a dozen large sample empirical projects and case studies we’ve conducted both before and during the pandemic, across different industries. Our research suggests that managers need to account for two key organizational features to identify their most effective working model: size and growth orientation. Depending on where an organization falls on those two dimensions, we recommend that managers implement one of four stylized working configurations: a stand-alone office or campus, hybrid with flexible space, coworking environment, or fully remote. Each has benefits when it comes to two difficult trade-offs: collaborative creativity versus individual productivity, and the agility to change and expand versus coordination.

Unfortunately, we see too many managers today wavering on making a decision and falling into half-hearted working configurations. There is no cutting the baby in half here: choosing a working orientation requires making these trade-offs. But decisively implementing one of the four working configurations optimizes on what the organization needs at the expense of what it can thrive without.

Mapping Your Needs to Your Office

Based on our research, we have identified two questions about where your organization is going and where it is today to help you determine which of the four models is right for you. First, what is
your strategy for future growth? Second, what is the size of the organization you need right now?

What is your strategy for future growth? 

First, you need to decide whether creative innovation or efficient execution is more central to your strategic goals. If fostering creativity is paramount to your business, your workplace needs to
bring knowledge together by bringing people together, ideally in person. If execution is your primary objective, your business must make sure that individual contributors are as efficient as possible
in their own work; being around others may actually distract from the job that needs to be done and impede efficiency.

What is the size of your organization?

Second, it’s important to recognize that small businesses and large enterprises need to rethink office design differently. On the one hand, large enterprises have access to a rich base of expertise and talent right at home, but the challenges can arise from coordinating that activity at scale. On the other hand, a small business can be nimble and agile, but there is a much smaller pool of knowledge to draw on. With the right workplace that plays on your strengths and addresses your weaknesses, however, a smaller business can position itself to grow into a large enterprise and a large enterprise can stay agile like a smaller startup. To identify which your business falls into, the U.S. Small Business Administration provides a useful classification for identifying whether your organization is large or small; depending on the industry of your business, the range of what is considered a small organization is wide, but for many services or technology businesses, 100 employees is a good rule of thumb to start with. For really knowledge-intensive work — like development of new technology — our research suggests the cutoff can be much lower: even 10 employees or less in some high-tech sectors.

Identifying the Optimal Workplace for Your Organization 

After assessing your organization along these two dimensions, your company can be categorized into one of four stylized working configurations: stand-alone office, hybrid with flexible space, coworking environment, or fully remote. We outline the benefits of each below, and offer examples of organizations that have implemented each configuration well.

 Stand-alone office or campus: For creativity-oriented large enterprises.

Your top resource is your people: your employees are the fountain of knowledge that drive the creativity you need. Thus, your workplace needs to facilitate what scholars refer to as knowledge
recombination among your staff; this is the process by which innovation arises when existing knowledge is combined in novel ways. Our research shows that knowledge recombination works best when you bring people physically together. Why? Because knowledge transfer — especially the type that is not written down or easily codified — is easiest face-to-face and aided by other nonverbal cues. Immediate feedback and updating are crucial for well-functioning discussions and brainstorming.

This means that a Zoom meeting isn’t enough, since not all the knowledge translates well through a webcam and virtual meetings don’t often serendipitously take place in the moment. You need to bring people together both so they can brainstorm in a conference room at the whiteboard, and also to create situations where people can run into each other in the hallway on the walk to the bathroom, elevator, kitchen (or at the proverbial water cooler). Larger organizations have more opportunities to benefit from these happenstance opportunities: a five-person company can have 10 possible interactions at the water cooler, but a 10-person company has as many as 45. You can exploit that size for exponential creative opportunities.

 At the same time, a large enterprise faces a coordination challenge. Across functions and products, your people need to communicate regularly and easily to make sure they advance in the right direction as we show in our research in partnership with Google. Thus, you need to bring people together not only to drive innovation, but to engage in active coordination between employees where they can iterate towards common goals going forward, or resolve bottlenecks towards existing goals, like if one team is holding up another.
Large enterprises can deliver on both knowledge recombination and active coordination by choosing to centrally gather employees in-person in a stand-alone office or campus. Consider Apple: there are plenty of reasons that Apple is Apple, but the company is clearly thoughtful about how they assemble
their people. Just a few months before his death, Steve Jobs went to the Cupertino City Council and laid out his vision for a futuristic circular house of glass that would foster creativity and collaboration. Jobs believed that serendipitous moments that lead to innovation are lost when a building’s design doesn’t encourage collaboration. 

To shape these social interactions, mangers need to pay attention to the architecture of their office: creating spaces for groups to congregate in or for individuals to incidentally see one another as they pass through increases coordination and knowledge recombination. Inaugurated in 2017, Apple Park now offers ample opportunities for employees to run into each other: at the 100,000-square-foot gym, parks, one of seven cafes, or on route to the bathroom. Hosting many Apple employees in one facility enables relationship building across teams, idea sharing with coworkers of different specialties, and opportunities to collaborate. The division of the building into modular sections, known as pods, facilitates teamwork and social activities. Everyone placed into these pods — from the CEO to summer interns — builds connections and can discover mentorship opportunities. 

Hybrid with flexible space: For the execution-oriented large enterprise. 

Your top resource is still your people, but they need a different kind of “space” to execute efficiently. You need to give them the flexibility to be where they are most productive. As Leslie Perlow, a renowned Organization Behavior scholar at Harvard Business School points out in her research on “time famine,” constant interruptions at work can have dire consequences for productivity, creating a feeling (and a reality) of having too much to do and not enough time to do it. This is why it’s necessary to structure independent work time for your employees to execute. The best place to do this is not always the office; it may be in the place each employee determines is the best environment for themselves, which could be at home, a coffee shop, or even on a tropical island. So, giving employees the space to be remote at least some of the time may be beneficial. As a couple of extra pluses, you can save on real estate costs and your employees can save on commuting time, which research shows can enhance their productivity. But we also believe full remote work has serious problems. For one, it cannot facilitate the level of coordination — team meetings to divide up projects, manager check-ins to motivate and track individual progress, etc. — necessary to align their employees towards a corporate goal today. Though virtual meetings can host occasional planned interactions, there is still considerable friction in interactions and just plain physical exhaustion. In fact, during the pandemic, we wrote a case study about Zoom Video Communications, the breakout brand in video conferencing. We can assure you that Zoom is well aware of Zoom fatigue, which the technology available today cannot yet eliminate.

 If you want to allow your employees to independently execute remotely, but still need coordination, how do you bridge these needs? The key is to take a new view on how you think about the time your employees spend together in-person. Instead of packing their time with meetings in a conference room, your goal is to drive coordination through culture building. By giving your people the time and space to socialize in person, your organization builds shared language, norms, values, and ultimately culture. This has long-term value and aids in ensuring consistency in the decentralized decisions your employees make when they are working remotely and independently. It also minimizes the need for constant coordination with coworkers and managers.

Large enterprises can allow for both flexible execution and cultural coordination by being hybrid with flexible space. One organization that has been at the forefront of this model is Github, a leading provider of software development tools. Even before the pandemic, GitHub did not require its employees to come to the office: employees were encouraged to work wherever they wanted in the world, and kept formal meetings to a minimum. Despite this unconventional model, GitHub has
always maintained an office in San Francisco, where most of its leadership team resides. The headquarters acts as a gathering space for teams across the company to host in-person team summits, for members of the GitHub community to host events or workshops, and for “GitHubbers” to have cultural hub to engage with. Outside of San Francisco, employees can gather in a network of smaller formal offices and co-working spaces all over the world.

Coworking environment: For the creativity-oriented small startup. 

The main challenge of being a small business is a more limited pool of knowledge, carried within the minds of employees, to source from within your organization; these pieces of knowledge, when reshuffled and recombined, are required for innovation. But innovation can come from more than your own employees interacting with each other. Creativity-oriented startups need to make sure their workplace facilitates knowledge spillovers from and to peer firms by looking outside their own four walls. But it doesn’t need to be that far outside: perhaps just down the hall or next door (ideally no further than 20 meters).

By locating your office close by other companies (and even competitors) — in the same city, neighborhood, building, floor, or even in the same room — you can benefit from knowledge
spillovers. Further, we find that creativity arises from being near other organizations that are very different, not just in technical skills and target markets, but also in demographic background. This allows people from different companies to socialize face-to-face and build trust, comfortably sharing mutually beneficial knowledge over time so both organizations can thrive.

 Again, managers need the right office architecture to promote the social interaction where individuals can exchange information. Although our research suggests that very short distances are especially potent, creating common spaces such as kitchenettes can functionally make people closer, even if they sit in more distant places. Remember: your employees still need private space to execute efficiently, so a completely open office design may be counterproductive.

As your business grows, you will also need to adapt. We suggest designing your workplace with fully reconfigurable scope: you need to be able to move your employees around so that the right people are together to coordinate on an innovation you may not have imagined when you picked your workplace. A reshuffling of office assignments may be useful to stimulate exchange among individuals that would otherwise be less likely to interact. Physical location can serve as a tool to enable unplanned information exchange.

One solution is to locate your business in a coworking environment, popularized by companies like WeWork and Social Impact Hub. For example, the Atlanta Tech Village, a coworking space where several startups — which have now grown into notable unicorns — exploited the advantages of coworking. Sales engagement platform SalesLoft moved to the Atlanta Tech Village as one of its first members. Shortly after, marketing platform Terminus also started renting space at the coworking hub. Being physically close to other nascent businesses dealing with similar problems helped Terminus, SalesLoft, and the many others in the space learn from each other; for example, about useful web technologies to support their online operations. It also led to the incorporation of technologies produced by neighbors: SalesLoft continues to use Terminus products today. 

Full remote: For the execution-oriented small startup. 

Some small startups just need to execute: you know what your people need to do, and so do they. In organizations like this, you must make sure you empower your employees to execute with independent efficiency.

At the same time, you know you will need to grow rapidly. Much like the scalability offered by using cloud computing services as opposed to on-premise servers, you want to make sure you have the fully expandable scale to grow your workforce without being limited by four walls of an office.

If it isn’t obvious already, we are not remote work evangelists: our research demonstrates that there are serious downsides. But there is a time and “place” for it, particularly if you’re an execution oriented
small businesses. Consider Toptal, a company that provides a freelancing platform connecting software developers from around the globe with companies for remote work. Both its internal team and its network of contract developers are remote, now spanning over 93 different countries. The company matches developers to one or more companies at the same time where they take on projects with objectives that can be clearly specified and evaluated by the client. Having clear objectives allows works to be completed individually with less back and forth coordination.

Note that there may be limits to the fully remote model. Another organization, online education provider Treehouse, began their journey as a completely remote company. Initially, this was the
appropriate model for them. But once they reached around 40 employees, Treehouse managers recognized that with growth, coordination became more difficult. In response, and in order to
maintain employee independence as far as possible, they decided to open offices in Orlando and Portland and shift to the hybrid with flexible space model described above. Today, teachers and
other roles requiring coordination can collaborate from these offices, while designers and other roles who can execute independently continue to have the option to work remotely.

The opportunity to reimagine your workplace doesn’t come along often. Today, too many managers are letting this opportunity slip by, letting their organizations revert back to where they were before the pandemic. Even worse, some are floundering in an ambiguous workplace mixing the past and the future while suffering from all the tradeoffs between workplace configurations. It is time to design your organization for the future based on your size and goals for growth. 

End of Article 

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