The Death Of The Central HQ And The Birth Of The Flexible Economy
Covid-19 accelerated the move toward flexible work and digital transformation seemingly overnight. Companies had to create a digital workspace for a remote workforce through the use of collaboration tools like Slack, Zoom, MS Teams, and Webex.
In the past, working from home (WFH) was seen as a benefit reserved for startup employees or progressive organizations. Now, WFH has become mandatory across many industries in order to save lives. As of April, as many as 62% of employed Americans worked from home during the crisis, according to Gallup. For many companies, the results of working remotely have been better than imagined. It turns out that 80% of people surveyed by McKinsey enjoy working from home, while 41% feel more productive than before, and 28% are just as productive.
The world’s largest home office experiment is underway, and it's working. This forced digital transformation has fostered trust — or at least confidence — in the idea of a remote workforce. There are a number of other business processes that will be questioned and analyzed and will require a monumental organizational change after Covid-19.
As employers start looking at cost-saving measures to make up for the losses incurred during the pandemic, they will review their largest cost centers, from human capital to real estate. The future of work, office spaces, and collaboration may very well change dramatically.
The Flexible Economy And The Future Of Work
Work is multifaceted, with many moving parts that are interconnected. What we are seeing is a shift away from hierarchical organizational structures toward more flexible models where individuals, organizations, and institutions more efficiently adjust their goals and resources to changing constraints, opportunities, and uncertainties. At the end of the day, having a flexible model allows companies to move faster and be more efficient when allocating resources and technologies to effectively compete in their respective markets.
For example, knowledge-based companies are moving away from the traditional office where people stick to their chairs from 9 to 5, clocking in hours to get important work done. Working remotely has turned this concept upside-down. While people may have mandatory online hours for meetings, many are given the freedom to organize their schedules — as long as they get their work done.
Not only is the nature of work changing, but people are rethinking how and when to collaborate and what is best served with in-person experiences. Companies are still paying for their costly unused office spaces, and that has challenged them to look at their real estate portfolios like never before. Enterprises have a large footprint of real estate that often expands globally. They need to take a hard look at these office space expenditures as we move toward a more flexible work style. The focus should be on how we can give back time to people to reduce commutes and keep employees as productive and safe as possible.
Many tech giants are making big moves in this direction. Facebook is one of the most notable; it is moving away from an office-centric culture, allowing employees to work from home and matching the local costs of living. This is in stark contrast to its giant campus, free shuttle buses, cafeterias, and other personal amenities. This came after similar decisions by Google, which extended its WFH policy until the end of 2020, and Twitter CEO Jack Dorsey, who announced employees could WFH “forever” and extended the same opportunity to Square employees.
Companies like Facebook see remote work as a way to broaden their recruitment, keep valuable employees, reduce their carbon footprint caused by commuting and improve the diversity of their workforce. And they aren’t wrong. With more companies realizing that employees are still able to accomplish their tasks and achieve results, more employees are able to choose where they work. These real estate costs can then be redirected to employee wellness benefits and productivity measures.
As we steer away from the office centrality model, companies must rethink how they work, where they work, and what productivity truly means, as well as the health, safety and well-being of their people.
Revamping The Office Footprint
Prior to the pandemic, offices were seen as imperative to productivity, culture and talent acquisition, which created competition for office spaces in major cities. This is why the flexible space/coworking sector has emerged within the office market. This sector has been growing significantly at an average annual rate of 23% since 2010 and has claimed 29.4% of U.S. office absorption in 2018 alone.
Freelancers helped fuel the demand. As we reopen after Covid-19, the office experience will change entirely to support the health and safety of employees. But even then, 36% of people would choose flexible work over a pay raise.
Leaders from every industry will need to take the lessons from the scaled WFH experiment to envision how work is done and the role offices will play in the future. As a result of increased confidence in remote teams, companies will need to reevaluate their real estate portfolios because employees will likely demand more flexibility in how they work and collaborate with others.
"Choice-based" working provides more flexibility in this new paradigm. Coworking spaces, for instance, can offer an alternative to the traditional leasing models and the typical WFH environment (i.e., a home office). This transformation will require a mix of creative real estate portfolios because there is no one-size-fits-all solution.
In the end, organizations will need to determine which offices are necessary. The idea of the business campus or a headquarters in a big city might be a thing of the past or simply used as the center of culture or for important collaboration.
To attract and retain talent in a post-Covid-19 world, companies may want to consider on-demand coworking spaces that enable employees to thrive and be effective no matter where they reside. This shift in demand for office real estate will require companies to be more flexible than ever before and can help reduce expenditures from multiyear leases and attract talent outside of big hub locales.