CEOs and CFOs describe the impact of workplace strategy on business results

by Diane Coles Levine, MCR — More and more CEOs are realizing the impact of workplace strategy on business success, and we expect this trend to continue. The enlightened executive is leveraging the connection between people, place, process and technology for competitive advantage. Susan Wiener and I interviewed CEOs and CFOs in the technology, entertainment, media and health care industries to better understand how they view their workplace transformation’s impact on business results.  In our interviews, we found five common themes.

Talent attraction and retention
The right design with the right technology can be leveraged to attract and keep the right talent.

 

Marketing
The workplace can be a powerful marketing tool used for competitive advantage

 

Culture
A company’s values can be reflected through and enabled by its physical environment

 

Productivity
People are more productive in a well-designed, comfortable environment

 

Cost
A workplace transformation is an opportunity to examine how new ways of working can improve return on investment

 

Let’s look at each of these areas more closely to learn what CEOs and CFOs are saying about the impact of place on business results.

 

Talent Attraction and Retention

According to Harvard Business Review, of the top three things that CEOs worry about the most, talent management is number one (Groysberg 2015).[1] Fortunately, CEOs and CHROs are paying more attention to the impact of place on talent attraction. This is especially true for companies who need to hire in large numbers, such as for cyclical business models or during high growth or in highly competitive markets.

“Marc Levine, CFO at JDA Software in Arizona, understands the effect of workplace on talent retention. As an integrated retail and supply chain solutions company competing for high-tech talent, JDA transformed their workplace from a traditional layout to one with a completely open plan. Their former space’s closed offices and high-walled cubes didn’t facilitate transparency, communication or collaboration – all qualities that are important to software engineers. “The new space is completely open with lots of conference rooms, lots of glass and lots of visibility to everyone in the office. I’m out in the open office now and so is the CEO,” said Levine. ‘The space is actually used as a recruiting tool. Now, when people come in to interview, human resources staff walk them around and this allows our space to help tell the story about our culture. When potential recruits come by our floor, I often hear the human resources staff saying, ‘And this is our CFO!’ The new space is a strategic competitive advantage for recruiting. The energy level is high and it’s a cool space to be in.”[2]

Keep in mind, applicants interviewing for jobs get a sense of the company through the look and feel of the office space. They notice the parking situation, building condition, office design, cleanliness, etc. It’s important that there is no disconnect between space design and the image projected verbally by recruiters and hiring managers. Research shows that “the way space is used also communicates the values of the organization. For example, a firm that has a non-hierarchical work culture can express that through the non-hierarchical allocation of space. By having the CEO in an open-plan work area, the company demonstrates in a tangible way its commitment to openness and equality” [3]

Christoph Pachler, CFO at Playboy in Los Angeles, California also “leveraged the workplace to attract the right talent. ‘At Playboy, we wanted to attract a creative crowd, and they needed a place to work with high energy where everything is open. There are relatively few offices and the space is conducive to collaboration with all-glass conference rooms and no meetings behind closed doors’,” [4]

 

Marketing

Workplace can be a powerful marketing tool. As Martha O’Mara states in her book, the workplace can “impact a company’s relationship with their customers both directly and indirectly. If a customer interacts with a company on its premises, there is a direct relationship between facility location and design and the customer’s opinion of the company” [5].

At Playboy, “Pachler recognized this correlation when he envisioned a future workplace designed to represent company nostalgia while also appearing young and hip. When repositioning their brand, Playboy asked the questions, ‘What is our brand? Are we a nostalgia or a nudity brand?’ Pachler explain ‘In our workplace, we tried to find the representation that it is deeply rooted in the past (e.g., America after World War II, the sexual liberation movement and the rise of the middle class). But the best days are not behind us. We are modern, forward-looking and increasingly relevant to millennials’.”

“We balanced this in the office design with big, winding staircases to look like an Apple store and also included old leather couches. It’s working well. We walk people through the space and use it as a marketing tool. The space tells our story – ‘Here’s a picture of our first publication in 1953; here’s what’s happening in China now (where we have a significant presence)’.”[6]

 

Culture

A company’s values can be reflected through and enabled by its physical environment. Lack of alignment between place and a culture’s values is obvious to existing employees and recruits who are touring your space. Research shows that even if basic physical health and comfort needs have been met, and operational performance has been optimized, a workplace can still fail dramatically if it conveys messages which contradict organizational values. [7]

Although most of SCAN Health Plan’s staff in Long Beach, California, including the CEO, had their office sizes reduced due to cost-cutting measures, the organization was able to keep employees engaged and focused on their mission throughout their redesign. As CEO David Schmidt said, “Even though almost everybody was getting their space cut, there was a way to do it that maintained our culture and employee satisfaction. As a mission-driven company, SCAN was able to keep employees engaged through a design that reflected the culture.[8]

Playboy also leveraged their redesign to enhance culture. “We were very keen on establishing a company culture that was open, collaborative and creative, one with duality of being both rooted in the brand’s history and also forward-looking. Our space reflects this goal,” said CFO Christoph Pachler.[9]

 

Productivity

When people feel they are working in a more comfortable physical environment (e.g., temperature, noise, lighting, etc.), they believe they are more productive, with differences in productivity as high as 25 percent reported between comfortable and uncomfortable staff.[10]  A business’s competitive advantage increasingly depends on productivity, and productivity is often achieved through collaboration.

At SCAN, we wanted to create a space that was highly efficient but also comfortable and welcoming. Our intent was to facilitate a different way of working and to enhance our productivity and our connectedness. The space satisfied that very well. The workplace helped further the mission and vision of the company by creating opportunity for collaborative work,”[11] said Schmidt.

“At JDA Software, we changed from having fewer formal meetings to more ‘on the fly’ casual conversations. Our dynamic space is flexible, open and engaging and facilitates collaboration. Although we’ve only been here a little over two months, it’s amazing how quickly the environment has transformed our employees. In fact, people who might have worked virtually, are now coming into the office,” stated Levine. “With the C-Suite in open cubicles, our CEO said he learned more about what was going on during his first two days in the new office through casual conversations than he previously had in our old space.[12]

Pachler noted that most young companies have a place for people to step away from their job, with pool tables and pin ball machines. “At Playboy, we deliberately built an element of play into our offices that is also good for productivity. The pool table is in constant use and employees can talk and collaborate while playing.[13]

Paul Yanover, CEO of Fandango in Beverly Hills, California brings up an interesting point about how the physical space supports a manager’s role.  He explains, “Place can take the role of what management should be doing, which is creating conditions and an environment to let people thrive and produce. The physical space should do the same thing. The workplace can have a massive impact on recruitment, retention, morale, energy and motivation. I view the workplace like a home. You go home at the end of the day, and say, ‘my home makes me recharge my batteries, the workplace has the potential to do the same.”[14]

 

Costs

A workplace transformation is an opportunity to examine how new ways of working can improve return on investment both in individual functions (e.g., real estate, facilities, human resources, information technology) and for the organization as a whole. For example, implementing employee mobility not only reduces real estate costs, it increases management span of control, decreases employee costs, increases productivity and lowers technology spend as employees become less dependent on information technology support. “At JDA, the collective goal was to become more efficient, and we were embracing modified means of working as one of the ways to achieve that goal. We absolutely believed we had to reduce the amount of square footage per person to save costs,[15] said CFO Levine.

SCAN Health Plan intentionally redesigned its space to save money and increase productivity. They saved over $7 million in construction and furniture and $1 million per year in real estate. In addition, they increased employee productivity by 18 percent.[16]  When planning the space, SCAN looked at each business function’s performance measurements and worked with them to design for productivity and process improvements.

Conclusion

The IFMA Workplace Evolutionaries http://we.ifma.org/, better known as WE, works to expand the collective workplace consciousness and show executives how place can impact business results.   As you can see from these CEOs and CFO comments, they get it.  They understand the impact of place on business outcomes.  For those who don’t, Facility Managers need to take the lead to help their senior executives understand the strategic role of the workplace.

[1] Groysberg, Boris; Connolly, Katherine. The 3 Things CEOs Worry About the Most. Harvard Business Review. March 15, 2015.

[2] Coles Levine, Diane and Johnson-Sanquist, Nancy.  Work on the Move 2: How Social, Leadership and Technology Innovations are Changing the Workplace in the Digital Economy. IFMA Foundation, 2016.

[3] British Council for Offices. The Impact of Office Design on Business Performance. Commission for Architecture and the Built Environment (CABE). British Council for Offices, 2006.

[4] Coles Levine, Diane and Johnson-Sanquist, Nancy.  Work on the Move 2: How Social, Leadership and Technology Innovations are Changing the Workplace in the Digital Economy. IFMA Foundation, 2016.

[5] O’Mara, Martha A. Strategy and Place: Managing Corporate Real Estate and Facilities for Competitive Advantage. Simon & Schuster, Inc.: New York, NY, 1999

[6] Coles Levine, Diane and Johnson-Sanquist, Nancy.  Work on the Move 2: How Social, Leadership and Technology Innovations are Changing the Workplace in the Digital Economy. IFMA Foundation, 2016.

[7] British Council for Offices. The Impact of Office Design on Business Performance. Commission for Architecture and the Built Environment (CABE). British Council for Offices, 2006.

[8] Coles Levine, Diane and Johnson-Sanquist, Nancy.  Work on the Move 2: How Social, Leadership and Technology Innovations are Changing the Workplace in the Digital Economy. IFMA Foundation, 2016.

[9] Coles Levine, Diane and Johnson-Sanquist, Nancy.  Work on the Move 2: How Social, Leadership and Technology Innovations are Changing the Workplace in the Digital Economy. IFMA Foundation, 2016.

[10] British Council for Offices. The Impact of Office Design on Business Performance. Commission for Architecture and the Built Environment (CABE). British Council for Offices, 2006.

[11] Coles Levine, Diane and Johnson-Sanquist, Nancy.  Work on the Move 2: How Social, Leadership and Technology Innovations are Changing the Workplace in the Digital Economy. IFMA Foundation, 2016.

[12] Coles Levine, Diane and Johnson-Sanquist, Nancy.  Work on the Move 2: How Social, Leadership and Technology Innovations are Changing the Workplace in the Digital Economy. IFMA Foundation, 2016.

[13] Coles Levine, Diane and Johnson-Sanquist, Nancy.  Work on the Move 2: How Social, Leadership and Technology Innovations are Changing the Workplace in the Digital Economy. IFMA Foundation, 2016.

[14] Coles Levine, Diane and Johnson-Sanquist, Nancy.  Work on the Move 2: How Social, Leadership and Technology Innovations are Changing the Workplace in the Digital Economy. IFMA Foundation, 2016.

[15] Coles Levine, Diane and Johnson-Sanquist, Nancy.  Work on the Move 2: How Social, Leadership and Technology Innovations are Changing the Workplace in the Digital Economy. IFMA Foundation, 2016

[16] Coles Levine, Diane and Johnson-Sanquist, Nancy. Work on the Move: Driving Strategy and Change in Workplaces. IFMA Foundation, 2012.

WORKPLACE MANAGEMENT SOLUTIONS (WMS) is a global strategic management consulting firm that leverages a company’s move or redesign to transform the workplace into an environment that is engaging, productive, sustainable and economical.  WMS helps companies think in new and creative ways by eliciting the best from all players involved in a move or redesign (e.g., HR, IT, Real Estate, Facilities. Sustainability, Architects, Real Estate Brokers, Furniture Suppliers).  WMS uses analytics to drive decision-making at all phases of the move and also helps employees rally behind change.