Even though office space is such a large chunk of the budget for just about every large corporation, until a few years ago companies didn\u2019t seem to expect much of a return on that investment in space. It was simply considered a necessary cost of doing business. Today that\u2019s changing in a hurry. Workplaces need to become business enablers that improve employee experience, attract talent, and boost productivity to help companies compete in the knowledge economy.<\/p>\n
That\u2019s why every day we see more companies embarking on the journey to implementing modern workplaces that help them meet their business goals. That process often starts small with pilot programs and small projects impacting a floor or a few teams at a time. Positive results at this stage encourage CRE teams to push for more of a good thing. However, gaining approval for a workplace redesign on a larger scale typically requires proving the financial payback for the workplace transformation with a business case.<\/p>\n
How do you quantify what your business can expect to gain as a result of the workplace redesign? Here at Serraview, we work with large, global companies in all stages of workplace transformation, and these are the strategies we see them using to establish a solid business case.<\/p>\n
Reducing your current expenses is the first place to look for the cost justification you need for your workplace redesign plans.<\/p>\n
SPACE COSTS<\/strong><\/p>\n It\u2019s no secret that office space is a big-ticket item, so reducing space by optimizing your property portfolio is where you\u2019ll find the biggest cost savings with workplace redesign. Modern workplaces reduce property costs by eliminating assigned seating and implementing agile shared spaces instead. Think about how much space you could take back that\u2019s currently under-utilized by mobile workers. A traditional office is commonly only 40 percent occupied at any given time. With an agile working strategy, you can eliminate that all wasted space by consolidating and exiting leases or subletting extra space, increasing utilization to 90 percent or more.<\/p>\n If you know your approximate space usage, you can make a ballpark estimate about how much you stand to save. Here\u2019s an example: if your space is 40 percent utilized each day, how many workpoints (or desks) are being used each day on average? If your target is 90 percent utilization, how many workpoints can you eliminate? Most companies spend between $10,000 and $15,000 per workpoint on space. If you can eliminate 1000 workpoints, you can potentially save $10 million to $15 million per year in space costs.<\/p>\n This is just a starting point; with modern space utilization technology and analytics you can gather actual utilization data for each business team and each area you plan to transform. Having hard evidence from sensors, heatmaps and usage analysis allows you to plan your workplace redesign correctly so you have enough space (and the right types of space) to support each business team. That maximizes your cost savings while also ensuring you\u2019re providing the best employee experience.<\/p>\n <\/p>\n OPERATIONS COSTS<\/strong> With workplace redesign, eliminating unnecessary space also allows you to eliminate the operations costs associated with that space, including:<\/p>\n STAFF REPLACEMENT COSTS<\/strong><\/p>\n According to the Society for Human Resource Management, every time a business needs to replace an employee, the cost is between 6 and 9 months\u2019 salary. And that\u2019s for mid-level workers. For a top executive, the cost can be double their annual salary. That\u2019s just one reason why companies are looking to the modern workplace to help retain talent.<\/p>\n What\u2019s the current attrition rates for the teams in your traditional workspaces? Comparing those figures to attrition rates in modern spaces with a better employee experience can be eye-opening. How many people can you save from leaving the company with your workplace redesign and how much in recruitment costs when you don\u2019t need to replace them?<\/p>\n In some parts of your property portfolio, you may find that you\u2019re not in a position to eliminate space with your workplace redesign. That\u2019s because certain parts of your business may be growing very quickly and adding to the workforce faster than you can provide adequate space. That\u2019s good news for your business. And it doesn\u2019t mean you should skip over that property in your plans for workplace redesign.<\/p>\n Avoiding leasing or purchasing new space can save you just as much money as eliminating space in other parts of the business. When your business is growing and changing rapidly, you often find yourself having to pay top dollar for more space in the right location to meet an immediate need.<\/p>\n By implementing modern, agile workspaces in locations like this, you can accommodate more people in less space, and build in the flexibility needed to accommodate growing teams and changing business structures with short notice.<\/p>\n How much space do you expect to add in growing regions? How much could you save by accommodating that growth in your existing space with a workplace redesign? Also don\u2019t forget to account for the operations costs you\u2019ll forego when you don\u2019t need that new space.<\/p>\n This may be the toughest part of building a business case for workplace redesign, but one you should not leave out, since it addresses the essential goals of your business.<\/p>\n Ultimately your company is looking to grow and be more competitive by increasing productivity and innovation.\u00a0A well designed knowledge-based workplace clearly improves productivity levels, which can have a significant impact on the bottom line.<\/p>\n Here\u2019s a recommendation from Peter Affleck, formerly head of real estate\u00a0for Suncorp, a banking and insurance company that\u2019s well ahead of the pack in implementing modern workplaces.<\/p>\n \u201cBank the space and operational costs as a first start, but then be bold and focus the conversation on the real value-add: the revenue side. Without even considering the extent to which a smart workplace redesign could ignite revenue growth, productivity improvement alone will significantly bulge enterprise profits. Even a very small 3% productivity improvement will expand profits per employee by ~$4,500 in most financial services companies, and significantly higher in the IT giants such as Google and Amazon. It becomes a no-brainer!\u201d<\/p>\n That means quantifying the productivity impact of the modern workplace, using metrics like these:<\/p>\n
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Step 2: Calculate COST AVOIDANCE<\/h4>\n
Step 3: Project TOP-LINE GROWTH<\/h4>\n