Your business is going to emerge from this recession lean, or dead. The sooner companies get to the point where they have skeletal but consciously designed office space utilized efficiently by a skeletal staff, the sooner they will begin to manage their way out of this recession. This is Reengineering 2.0.
Your business is going to emerge from this recession lean, or dead. The sooner companies like yours get to the point where they have skeletal but consciously designed office space utilized efficiently by a skeletal staff, the sooner they will begin to manage their way out of this recession. That is, they have to go on another diet. They need to shed the stupid.
So get ready to restructure; your business has accumulated a lot of stupid. At Not an MBA, we see this recession as an opportunity. Sitting at an historic crossroad in the evolution of contemporary management, we see an opportunity to re-visit many commonsense practices and behaviors that no longer appear very sensible. A fully digital and networked society and the current capital-scarce economy present new challenges and lay bare outmoded and inefficient systems and processes.
Change needs to occur along at least two lines. First, a large fixed spend on office space, and low utilization, is stupid; unless you have money to burn. Second, unless you're Google, you've never going to have all the expertise you need within your walls. Thinking otherwise is stupid. Get used to working with outside teams.
Picture the head of manufacturing walking into the board of directors and saying, "I will design our new manufacturing plant to operate at maximum of 40 percent utilization." They'd fire you and kick you out the door. Yet this goes on every day in corporate America with regard to real estate.
Mark Golan, Vice President, Connected Real Estate Practice Internet Business Solutions Group, Cisco Systems, in Corporate Real Estate Leader
The corporate office was born in a different age. Ubiquitous connectivity didn't exist, and work itself was substantially different. The phrase "go to work" captured the arrangement perfectly. There are several problems with the big office that employees go to work in today. First, a big office is expensive. Second, getting there costs employees an increasing amount of commute time and gas money. Third, the organization of most offices no longer reflects how people actually work.
Some of the most expensive annual costs for large companies-- real estate holdings with fixed desks for every employee, large IT systems with PCs on every desk, and Texas-sized utility bills for sprawling and increasingly underutilized office complexes-- remain on the corporate books because this is the way it's always been done. In a recession, such unquestioned commitments and expenditures can be the difference between survival and death.
How common is it for companies to ask any of the following simple, yet provocative, questions: How many of our employees actually need to be on campus to do their work? How fully utilized are the workspaces? What sort of savings could be realized if real estate holdings were drastically cut back and employees were encouraged to work at home or in so called third places? If employees were trusted to do their work when and where they choose, would this boost employee morale, commitment, and productivity?
In the last ten years, a small handful of companies have asked these questions and made changes. Sadly, the ease with which money flowed in the last four years obscured the incredible results these leading-edge companies obtained.
Sun, for example, says that they save around $70 million per year because roughly half of their 35,000 employees participate in their Open Work (i.e. no fixed desks) program. IBM suggests that they save about $100 million a year in a similar type of program.
Intel claims that, as a result of their program of flexible work, they have experienced a huge productivity gain attributable to improved employee engagement and morale.
A job at a big company is like high fructose corn syrup: it has some of the qualities of things you're meant to like, but is disastrously lacking in others.
Paul Graham in You Weren't Mean to Have a Boss
For the last 30 years, big companies acquired small companies and grew their top-line through non-organic growth, 1) because capital for acquisition was cheap, and (more importantly), 2) because big companies flat out fail at creating value through innovation in a capital efficient, operationally efficient way. The last few months of capital market turmoil have pretty much neutralized #1; however #2 is still in play, and probably will be forever.
So, get used to working with outside teams. Unless you're Google, you've never going to have all the expertise you need within your walls.
As Paul Graham suggests, the best people don't work for bosses--at least not in traditional corporate organizations. Historically many of them went to work for consulting firms and similar businesses with high reward for individual effort and achievement. Increasingly, they--especially the Millennial generation--are going to work for themselves or are starting small entrepreneurial firms because the barrier to entry is now so low.
You can't innovate fast enough within the walls of your corporate. There's too much operational overhead that needs to be in place, and that overhead/oversight/compliance/governance, acts as an impediment to an innovative culture.
Bottom line, the world moves too fast. You don't. And there's solid evidence that large organizations simply have to organize as they do to main a sense of order and direction and control. All anathema to speed, unfortunately.
Taken together these changes will force a shift in how managers run their businesses. This is Reengineering 2.0, the wave of change in contemporary management that follows in the footsteps of Business Process Reengineering (BPR), Outsourcing, and similar structural and operational imperatives of the past. This restructuring will play out along the lines of:
Looking at work one more time, the fact is that most managers in most companies do not trust their employees and refuse to relinquish control over the when and where of work. It is almost this simple. This is a third example of Stupid in business. And it leads to bloated and overpriced operations and Fat Companies. At the same time it robs employees of respect, autonomy, dignity, and (almost by definition) discretionary effort, productivity and results. Trust someone totally, and they are likely to give you their best work. Rob them of their dignity, and they will game you in return.
- Andrew Jones
- Todd Sundsted
This is a great article. Very Succinct and to the point and really hits close to home. I work FOR a company that sits on the precipice of this very subject. We are small and have been aquired by a larger company that uses our profitability, in large part, to keep the doors of their lesser successful aquisitions doors open. Within our walls we succedd at sevral of the above points and fail at many others. Unfortunately, where we fail seems to be where the momentum is at the moment and it affects production morale and, ulitimately, the bottom line. Ironically, I say this even amidst the steady growth that our company reflects. Outer appearance definitely does NOT reflect inner realities. The question is, how much fat do you trim and where do you cut it before you rob your juicy steak of flavor and render it a dry lump of charcoal? It can be a delicate recipe and without the appropriate master chef making these decisions it can just come out tasting a little funny.
As always, thanks for the insight. Good food for thought. Gives me something to chew on. [okay, I'm done. Promise.]
Can't wait for the book!
Thanks Kevin. We've rounded the corner on the book and are now talking about things like layout. That's given us time to start writing here again.
I think your analogy contains the answer! What we want is a nice juicy stake--in other words, a profitable, productive businesses. We have to first focus on that outcome. Then we have to ask, what takes away from that? The fact is, for many businesses (but maybe not yours) it really doesn't take a master chef to decide where to cut--the layers of fat and hide and hair are so obvious everyone can now see them. What's it takes is courage!
Take care!
Hi Todd and Drew,
I was put on to your website by Andrew Carey at Triarchy Press. Great site! It looks like we are interested in the same area (the future of business/ how corporate structures & cultures are changing), but from slightly different perspectives, though still using the '2.0' angle. My focus is leadership and how managers/CEOs are having to change to accommodate the shifting world around them.
Amidst the stress of credit crunches, shareholder demands and the constant call for innovation, allowing for changing employee values is just one other headache - but clearly one for managers to ignore at their peril.
Loosening up corporate structures and allowing for more flexibility in working practices is definitely the way forward (we know that!) but security and privacy are such massive concerns for many large companies. What's the best way to approach that hurdle?
Jemima,
Thanks for writing!
Readiness is a huge issue; both measuring the current state of and preparing to make changes. Drew and I have been talking to companies and business leaders that have made or are starting to make changes to both the workplace and work itself. Companies like Sun, Capital One, and others have found a way, so we know via demonstration that change is possible.
I'll focus on readiness for a moment and put implementation aside. At it's core, the necessary changes are functionally integrated in nature; and that is often the first challenge. A company has to address departmental, IT, HR, and ultimately real estate issues. However, many of the necessary changes can (and should) be planned and applied in situ. Software and infrastructure for collaboration and communication can be implemented and used without anyone leaving the hive. The necessary results-focused management changes can be made, and will benefit the organization, before anyone works from anyplace other than their desk.
Privacy and security, specifically, are both red-herrings. In most companies, privacy and security are either an illusion/delusion, or necessary and proper controls are already in place. In either case, privacy and security are orthogonal to the concerns above. I work in New York City. Every office building has post-9/11 security. That security is either effective (the security officers check my badge and scan my bag going in and coming out every time) or ineffective (they wave me along after the first week and prop open the turnstiles during the 5 o'clock rush out of the office). What matters is how well you control what enters and leaves the office. If I leave the office (which I will do eventually) with a customer list in my back pocket then the damage is done. The only alternative is some sort of prison arrangement for employees. Sadly, I'm sure there are managers who might find that attractive ;-)
I'm heading over to check out your blog.
[...] Re-engineering 2.0 Young mavericks Andrew Jones and Todd Sundsted question corporate ideologies as they try to bring back common sense to the boardroom: “The corporate office was born in a different age. Ubiquitous connectivity didn’t exist, and work itself was substantially different. The phrase “go to work” captured the arrangement perfectly. There are several problems with the big office that employees go to work in today. First, a big office is expensive. Second, getting there costs employees an increasing amount of commute time and gas money. Third, the organization of most offices no longer reflects how people actually work.” [...]