Are current approaches to lease commitments and owned property portfolios a barrier to workplace change?
Globally, disruptive business models and technology trends are causing continual change to the way organisations deliver their services, requiring a rethink of workplace accommodation strategies.
Businesses now acknowledge that workplaces can be the drawcard in attracting and retaining talent, supporting employee well-being and engagement and, ultimately, leading to increases in productivity. In addition, the ongoing evolution of office accommodation from private offices to open plan from the early 2000s, to the current approach of agile and flexible workplaces, has demonstrated the benefits of collaborative and innovative working environments.
Many aspects of the traditional approaches to portfolio planning, procurement and management, are now inadequate to deliver agile working outcomes. In many organisations, the inconsistencies in workplace philosophies and quality standards across locations do not provide environments that harness employee engagement. Instead, they likely impact staff retention, increase absenteeism and limit productivity improvement.
Current approaches to lease commitments and owned property portfolios, founded on the correlation between tenure and cost, with a premium for flexibility, also constrain the ability to respond rapidly and cost-effectively to business changes.
Ideally, workplace accommodation portfolios should promote agility through property tenure commitments and internal design, with flexibility to meet changing demand patterns. Workplaces also need to promote collaboration, supporting service excellence and productivity by attracting, engaging with and empowering employees. A starting point is to clearly define the workplace portfolio principles that support evolving corporate strategies.
Technology has destroyed the monopoly enjoyed by location. Landlords have specialised in making profits by exploiting ‘prime’ property locations. But technology now enables many business functions to be location agnostic.
Location still matters; however, now it should be focused on local amenity and convenience of access provided by jobs closer to employee homes. More remotely located talent pools, with individuals enjoying the lifestyle benefits of avoiding congestion, can still be employed to support service excellence.
The underlying location principles need to provide guidance on supporting coordinated approaches to long-term workplace planning and, as relevant, lease commitments. Workplace locations in the future will be driven by employee homes, local talent pools, the availability of cost-effective spaces and the ability to collaborate within business communities.
Structuring agile workplace portfolios requires being open to a variety of accommodation solutions. No longer is the debate between lease versus own, but planning now focuses on the appropriate mix of accommodation and commitment options, to create a portfolio with a range of coordinated, but different places. This approach may, for example, include a core portfolio incorporating shared, flexible and adaptable workplaces on longer-term lease tenure, surge portfolios of flexible and shorter-term leasing commitments and ‘just in time’ co-working spaces.
But, to be cost-effective, the portfolio needs to be managed on a ‘user pays’ principle, providing both dedicated and shared facilities across business units, as needed to support operational requirements and service delivery.
Key to the portfolio is being able to respond rapidly to changes in the way employees work, as well as business unit reallocations and evolving corporate strategies. Short-term tenure and lease flexibility tend to be expensive and should not feature in core portfolios. Rapid responses to changes should form part of surge portfolios, comprising shorter-term leases, exercisable options and co-working spaces.
Agile working is all about choice, with employees able to determine how, when and where they work. Workplace design needs to provide multiple types of work points that are consistent in theme, flexible and collaborative. The designs need to support efficiently and effectively, differing operational activities, service delivery needs, creativity and innovation.
Discipline is required to manage required behaviour changes, with employees no longer assigned work points, but rather empowered to select where they work and when they may be physically present in a location. Planned work activities, and as teams are formed, will determine daily workplace decisions. There should be no employee ownership of work points – with fewer work points than employees – to eliminate accommodation waste.
Technology is the enabler of alternative disruptive business models and making different ways of working possible. Technology continues to evolve, and new possibilities cannot be ignored. New talent and entrants to the workforce expect the latest technologies.
Corporate technology is now consuming large portions of the corporate budget, some of which was previously wasted on excessive office entitlements and layouts. The efficient and effective use of workplace, enabled through technology and functional activities, can be supported without excessive property costs and accommodation waste.
The key to working anywhere, anytime and in any way is having consistent and effective technology integrated across workplaces, building systems and locations. The technology principle should be to not only support workplace use, within and across locations, but also to promote formal and informal collaboration, innovation and creativity.
Improved workplace utilisation across a variety of work settings, and the elimination of workplace waste, justifies the investment in the enabling technologies.
Workplaces are ultimately all about the people. For corporates, the investment in workplace commitments is usually significantly less than the investment in people. As such, having a portfolio of workplaces designed to be preferred places of employment enhances talent recruitment and retention, and simply makes sense.
Likewise, workplaces that support employees’ health and well-being, entrenching positive work attitudes, also make sense. Workplaces with appropriate amenities, which are accessible to all, safe and fit-for-purpose, will reduce absenteeism and boost talent retention.
The shackles of the past accommodation fitout standards need to be removed if the workplace expectations of future employee talent and new graduates are to be met. Priorities will be focused on technology, community and flexible working arrangements that support a work-life balance.
To be successful in attracting top-rated employees, with workplaces as preferred places of employment, corporate real estate executives need to meet these underlying people principles when planning workplace portfolios.
The principles of portfolio sustainability have matured over the last decade, but in many cases this has been relegated to tokenism rather than real commitment. With the growing environmental awareness of new business entrants, however, there will need to be a renewed focus on portfolio sustainability.
Underpinning this renewed commitment will be the realisation that the rising cost of energy usage will continue creating upward pressure on portfolio outgoing and occupancy costs.
Embracing sustainability principles in all portfolio workplace planning and facilitating the use of resource-efficient technologies and services will drive efficiencies in the use of energy and water, as well as minimise waste generation by maximising recycling and reducing landfill.
Eliminating accommodation waste and excesses supports the sustainability principle – the most sustainable workplace square metre is the one eliminated from the overall portfolio. Being sustainable is not only a commitment to the future (by minimising the portfolio’s carbon footprint), but ultimately saves money.
As with many things in life, workplace portfolio planning cannot be done in isolation of the financial implications. As long as all the other underlying key principles drive the planning process, thinking about the money makes sense.
Driving the financial efficiency across all workplace locations, and eliminating occupancy cost waste, means that more of the corporate budget can be allocated to people and technology budgets. This financial principle is centred on optimising value-creation opportunities, with the appropriate levels of consolidation and tenure flexibility across the portfolio.
Part of implementing the financial principle is changing business unit demand patterns, through implementing robust workplace ‘user pays’ and risk allocation processes.
Provided financial decisions do not contradict or prevent the implementation of the other planning principles, a workplace planning portfolio will deliver financial benefits. In addition, additional positive financial outcomes can be realised by the business as a result of reduced employee absenteeism, improved staff engagement and retention and, ultimately, productivity improvements.