How Companies Are Redirecting Office Spending to Attract Employees

As businesses and workers continue to try to figure out where and how work will take place in a hybrid environment, the costs being spent on existing office spaces previously built around the five-day 9-to-5 workweek are closely examined.

Flexibility has become the buzzword on both sides of the employee-employer power dynamic. Workers have taken advantage of the empowerment gains they have made amid the pandemic and a tight job market to conserve personal time tied to working from home. Companies, many of which fear eroding the culture that could increase revenue as well as stifling innovation by having a predominantly remote workforce, have tried to meet workers somewhere in the middle pushing gently, not pushing, workers towards the desk.

The question then becomes, what impact does this have on budgeting and spending on typically expensive workspaces when much of your workforce won’t be there every day, if at all? Is there an opportunity to cut costs, or do these spaces now require additional investment to try to bring workers who are at home back to the office?

Scott Dussault, the chief financial officer of HR tech company Workhuman and himself hired during the pandemic era, is seeing the change firsthand.

“I always quote Larry Fink [2022] letter [to CEOs] where he said that no relationship has been more altered by the pandemic than that between employer and employee; that’s never going to change and we’re never going back,” said Dussault, a member of CNBC’s CFO Council.

For many companies, that means modernizing offices to meet this new normal and employee demands, while investing in other tools to ensure connections are still made efficiently – efforts that could mean spending more money. money even if the square footage or leases are adjusted.

“I’m not sure it will be a negative cost,” Dussault said. “I don’t know if people are going to take less real estate; they’re just going to change the way real estate works.”

Workhuman is currently coming to the end of its lease at its Boston-area headquarters, and Dussault said the company is considering expanding its space, which would provide a “clean slate” to adapt to this new work environment. work.

He recalled his time at a job in the 1990s where it was a “cabin football field” – the kind of situation where you could “go to work and sit in a cube all day and never interact with whoever it is – you could really lose that connection.”

Dussault said he sees the office becoming what he calls a “collaboration destination,” part of a hybrid environment where while you can work from home on days when you catch up on work or email , the office can serve as a space that’s “all about connection.”

“You’re going to see a lot more open spaces, collaboration spaces, conference rooms, huddle rooms, breakout spaces where people can sit down and get together,” he said. . “It’s going to be about connection, which I think is frankly positive and that’s an evolution – it’s going to be about making those connections more meaningful.”

That would mean investing more in things like a gym, where employees could take a physical break, or other spaces that would provide a place to take an emotional break or meditate, Dussault said, which he says drives a shifting of costs “from one bucket to another.”

“We have to understand and recognize that when employees are home and productive, they have those things, and we have to try to make sure those things exist in the office as well,” he said.

It also places an additional burden on investment in digital tools, as there must still be ways for workers to connect with their peers even when they are not in person.

“Companies always talk about the importance of employees and that employees are the most important investment – they haven’t always acted that way,” he said. “It’s a good thing that came out of the pandemic.”

Neal Narayani, human resources director at fintech company Brex, noted that in 2019 the company had employees traveling to its offices five days a week in San Francisco, New York, Vancouver and Salt Lake City. At that time, “no one was working from home because it was seen as negative,” Narayani said. But as the pandemic forced employees to work from home, where they managed to take on several big projects, that view changed.

“We recognized very quickly that we were able to work more productively and faster, and that video collaboration is a very productive tool when you don’t have to travel somewhere to find a conference room in the office,” he said.

Convinced that a remote-first approach was the future of work, Brex leaned in. Of the company’s more than 1,200 employees, 45% are fully remote. The company still maintains these four office location centers where workers can go if they choose, but the company has changed its approach so that every process is designed for remote workers.

It also changed the thinking that entered these spaces as Brex planned for growth.

“When you reduce property costs, we could see how many people would walk into an office if we were to make it completely optional, and it was around 10%,” Narayani said. “So we were able to move to a 10% real estate option, maybe even less, and then take the rest of those dollars and reallocate it to travel, talent development, diversity and inclusion efforts, and anything that enhances the employee experience.”

“It turned out to be a much better experience for us because that real estate cost was very high and those markets are very expensive,” he added.

About a third of the cost of the company’s previous real estate strategy was invested in the company’s new offsite strategy, Narayani said, with other parts of that cost being used to pay for the four office spaces and d other coworking spaces.

Larry Gadea, CEO of workplace technology company Envoy, said he thinks many companies are currently looking for ways to cut costs, with spending on office space an area potentially ripe for cuts.

However, Gadea warns that “people need to be together, they need to know each other”.

“They have to have a sense of purpose that’s unified, and you have to bring people together for that,” he said. “How are you going to bring people together when they’re all over the country? I think there’s a significant number of people who think they’re going to save money on real estate, but United and others airlines and Hilton and other hotels get it instead.”

Gadea said that as companies try to navigate a restricted work environment as well as other market challenges, more time needs to be spent “thinking about how to bring teams together.”

“The number one reason most people stick with a company is that they love the people they work with,” he said. “It can be a lot harder to like these people if you never see them because they’ve turned off their video on Zoom or they don’t even know them at all.”

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