by John T. Anderson — At a time when the economy is still in recovery, companies are either trying to find ways to cut costs while maintaining their productivity or expand their organization while spending the minimum amount possible. A common thread in working toward both these goals is companies’ scrutinizing their real estate overhead in the hopes of uncovering potential cost reductions.
As Anton Troianovski recently noted in “The Wall Street Journal,” “Tenants are taking less space than they [have] before—both because they have fewer employees and because they are able to use space more efficiently.”
Cutting real estate costs can be a great way to save a significant amount of money, if it is done in a studied fashion. However, reducing space successfully depends on knowing actual space utilization so that the affected real estate changes don’t end up hindering rather than helping the organization.
The ability to capture actual space utilization has been the holy grail of real estate management because—while answering planned utilization questions is generally simple—answering actual utilization questions is more challenging. Unless one knows exactly how space is being used, one can’t know how to hone it for more efficient and effective exploitation.
Things aren’t always as they seem
It is a common misconception that planned usage and actual usage are not so different. However, a quick run-through of space scenarios shows this to be false. For example, people book rooms and resources with the intention of using them, then change plans and leave the space vacant. A room might be reserved for several different dates to ensure maximum attendance at a meeting, and then the meeting coordinator neglects to release the unused resources. Likewise, the number of attendees may be uncertain, so the largest conference room is booked for a meeting just in case, and ultimately the big room is inefficiently occupied by just a few people who could easily have fit in a smaller available space.
Since people tend to forget to release space and resources they have booked but don’t end up using, open space and equipment are often rendered unavailable to other employees. What’s worse, if the conference room in question includes video conferencing equipment or other resources unique to that location, meetings that require such resources may be forced off site, with the organization incurring unnecessary costs.
On occasion, management is also guilty of devising plans that don’t reflect actual space utilization needs. Companies sometimes expand or trim their real estate footprint without truly understanding how many people need to use the space and for what purposes.
For example, organizations may provide individual workspaces for employees who are on the road and don’t require dedicated workspaces. Or a company might design a space to be used in a certain way that does not end up matching the actual need, thus resulting in a space that is underutilized or insufficiently large to meet its intended function.
Given this state of affairs, it’s not surprising that the Boston Consulting Group recently concluded, “Many corporate real estate executives say projections of space requirements are off by 100 percent.”
The actual impact
It might not seem that actual space utilization data could make a significant difference but it can greatly impact productivity as well as the bottom line. With real estate typically accounting for a company’s second largest expense (after payroll), it’s essential for companies to be able to answer questions such as: Do we truly need all the real estate we occupy? How efficiently is our space really being used?
Questions like these have led to extensive analysis and research on actual utilization data.
For example, Dr. Andrew Laing, managing director of DEGW North America, recently concluded that “50 percent of all workspace currently goes unused.”
Such a high percentage of waste equates to throwing away thousands, if not millions, of dollars by maintaining space that could have been either removed or repurposed.
The shift to a mobile workforce
Advancements in technology are enabling an increasing number of employees to work outside of a corporate office. In fact, International Data Corporation believes that by 2013, 75 percent of the U.S. workforce will be mobile and able to work from home, various offices and on the road. As a result, more people are working remotely, which can lead to significant spatial, personnel, environmental and cost benefits.
As Justin Jaffe, senior analyst for IDC, noted, “Moving toward a mobile workforce can reduce costs for companies while providing workers with a more flexible schedule.”
This shift to a mobile workforce could result in economic pitfalls if companies don’t plan, manage, monitor and measure space usage properly. According to Gartner Group, providing a workspace to an individual employee costs an organization between US$8,000 and US$14,000 a year. Eliminating 100 workspaces can save an organization more than US$1 million annually. With stakes that high, it pays to know precisely who is using corporate real estate, for what purpose, when and for how long.
Managing alternative workspaces
To accommodate the mobile workforce, companies are beginning to employ alternative workspace programs (often referred to as office hoteling) to make it more convenient for mobile workers to find a place to work when at the office, while cutting down on space that is not being regularly used. A good office hoteling system enables employees to book space and resources on-site or remotely through their mobile device or laptop.
However, as previously mentioned, just because space is booked does not mean it is being used to its full potential, if at all. It’s crucial to obtain actual data in order to maximize utilization and lower overhead expenses.
Reduce and repurpose
Knowing which rooms and spaces are available is helpful, but understanding how they are used makes the actual data much more valuable and can lead to significant changes that cut costs and enhance productivity.
Substantial improvements can be made when actual room and space utilization is recorded, analyzed and understood. Consider a company that just implemented a flex-work program. Many of the mobile workers who used to work from their office cubicles are now working remotely—leaving their personal workspace in the office empty for the majority of the work week. By knowing exactly how much of the space is being used and how often, the company can repurpose the vacant cubicles and other unused spaces, or retract its overall real estate footprint, contributing to a reduction in its real estate expenses.
Likewise, rooms and space can be repurposed to increase productivity. Take for example a conference room with a capacity of 20 individuals. Although the room may be frequently booked, it may turn out that the average number of people using the room is no more than eight at a time, with the exception of the monthly department meeting when the room is filled to maximum capacity. Based on actual utilization knowledge, the company might split the room in half with a divider, creating two conference rooms that can better accommodate smaller meetings, while still enabling the room to be used for larger conferences by moving the divider when necessary.
Going beyond snapshots
Knowing when and how long rooms, resources and spaces are being used is invaluable to companies seeking to get a handle on maintenance expenses. There is more than one way to obtain such information and not all methods are equally effective.
One way companies commonly seek to acquire data about how and when rooms and space are being utilized is the bed check method. Employees go around the workspace periodically, checking if rooms are being used and, if so, by how many people. Although this might seem like a legitimate way to measure actual usage, it can be completely off base and not reflect actual usage at all.
For example, an intern may go by a meeting room, find it empty and note that, although it had been reserved, it is not being used. The truth may be simply that the meeting took place but wrapped up early. Alternatively, the intern may confirm that a reserved room is indeed in use and filled to capacity. However, the person checking the conference room may not realize that it was booked for several hours but only actually used for 20 minutes, leaving the room empty yet not available for other employees to book.
It’s clear that seeing only a snapshot of data doesn’t tell the whole story of how a room or resource is being used. With continual recordings of room and space usage, occupancy data can be collected to see when and how long rooms were actually used and by how many people. This information can then be compared to the planned utilization—providing vital data regarding actual versus planned utilization that can be leveraged in the real estate decision-making process.
Service and equipment management
Understanding traffic patterns within buildings tells an organization how often areas and equipment require maintenance work. For instance, a conference room may be heavily used Monday through Thursday afternoons but rarely inhabited on Fridays. Knowing this, the company can avoid scheduling cleaning services on most afternoons and can completely eliminate services for Fridays.
In general, knowing what equipment and resources are being utilized and how often informs the company when resources need maintenance or replacement. It also lets them know if something is just taking up space and is not actually being used at all.
Using technology to determine actual utilization
Only when management understands actual space utilization can it can make objective, cost effective decisions regarding real estate, equipment, maintenance and services. Fortunately, technology is now available that allows them to obtain this critical information.
Charlie Colon, executive director of Gallup Organization, noted that his company uses technology-based resource management software to assess which rooms are being used most often and why. “When a room is underutilized, we can determine whether it is due to a lack of resources or other issues that might be able to be easily addressed.”
There are numerous ways technology can be used to measure utilization. One approach is using an active system, where people check in and out of a room or resource reservation. However, the data derived from this method is not always precise, as it relies on employees’ performing several steps. If these are not completed correctly, true utilization isn’t recorded.
A passive approach
The most reliable way to capture accurate space utilization data is by using a passive system. A system of this type records data without relying on the conscious activities of the employees—eliminating inaccuracies based upon faulty actions. One example of a passive approach is using Internet Protocol detection to track who logs on to what computer, when and where, thus showing who is actually using the equipment and in what location.
A more accurate method is using a video-based image-detection counting system. Such a system automatically tracks the number of people entering and exiting a specific space. The most advanced image-detection systems can even differentiate between a human and an inanimate object (i.e., an audio/visual cart being pushed into a room by a meeting attendee), resulting in near perfect accuracy and reliable data upon which to base informed real estate decisions.
Wise real estate investments start with actual utilization data
Having an accurate picture of how employees are using rooms, resources and space gives companies a chance to find ways to reduce their real estate overhead, maximize space utilization and enhance employee productivity—all while saving money.
For years, actual usage has been the missing link in effective real estate management. Fortunately, companies now have the opportunity to gain insight into the many ways they can improve their organization’s bottom line through effective management of real estate and resources. FMJ
John T. Anderson has more than 25 years of experience managing the successful start up and turnaround of companies. He has led PeopleCube through 10 years of sustained growth. PeopleCube provides intelligent on-demand workplace management solutions that help 7,500 customers in small, medium and large enterprises around the world to cut real estate, meeting services, travel and energy costs based on actual workspace usage.