ARE WE BEING RUN OVER BY THE "VIRTUAL OFFICE" BANDWAGON?, TELECOMMUTING REVIEW, July 1994 SUMMARY: The buzzword "virtual office" is quickly displacing "paradigm," "reengineering," and perhaps even "downsizing" as the trendy business term of the day. While the virtues of the "virtual office" are noteworthy, this concept has begun to cover a multitude of situations - and a multitude of potential or actual sins. In your editor's opinion, we might create far more problems than we will solve unless we make some fundamental changes in how the VO is being implemented. Let me say at the beginning that this is mostly an opinion piece with a few selected facts and observations from others thrown in for good measure. I am prompted to write it because of preparation for my talk at "BUSINESS WEEK's Conference on the Virtual Office" that was held June 28-29 (more on that below), and by recent conversations with clients and respected colleagues. I get worried when I see such a headlong rush toward a concept like this without enough critical thinking about exactly what it is and the advantages and disadvantages. Let's Begin With Some Background In case you've been out of touch for a while, the term "virtual office" refers to a wide range of alternatives to let office workers do their work away from the office. Telecommuting as we typically describe it is one form of VO, but a much more commonly-understood example of VO is the de-officing of sales reps. These sales reps might have been assigned to their own office or cubicle, but actually spent little time in it. In an extreme example of the transition to VO, the sales reps all lose their offices and are encouraged (or required) to work from home, from the customer's office, from their cars, or from virtually anywhere. You can't argue with the underlying concept - or at least I can't. It makes very little sense to lease or build a large suite of offices for people who are hardly ever there to use them. Get rid of the offices, the argument goes, and two terrific things happen: overhead costs drop significantly, and the sales reps are thus encouraged (or required) to spend much more time with the customer - which should translate to more sales dollars for the company and more commission dollars for the sales rep. Though most of the VO examples cited are about field sales or service people, the idea is also used to describe other similar office displacements. For example, the Los Angeles office of advertising agency Chiat/Day has been repeatedly shown as a VO application in a non-sales setting. That office, and the Cranford, NJ sales office of IBM, are running neck-and-neck as the VO role models. I'll say more about both offices later. Is VO Really New? That's a good question. The answer depends on how you choose to define VO. If you're talking about the wholesale downsizing (oops, there's that word) of the office together with equipping these newly-mobile workers with a laptop, e-mail, voice mail, and so on, with the net result being a dramatic reduction in real estate costs, then VO is sort of new. But if you're talking about the underlying idea of alternative office strategies - such as the use of "free-address" or "non-territorial" offices, then it's not quite so new. I've written several times in past years about the work done by Prof. Frank Becker and his team at Cornell University, and about some examples of non-territorial offices in Finland and elsewhere. The differences between most of those "old" examples and today's VO are: more emphasis today on the goal of larger real estate cost savings, more emphasis today on mobile technologies, and more (though not exclusive) emphasis today on sales, service, and other traditionally field-based workers. Can VO Really Save Lots Of Money? No doubt about it. In fact, one of the points I've been making to clients recently is that we now have the opportunity to uncouple the space decision from the staffing decision in our organizations. There is no longer a need to have a one-to-one ratio between workers and workplaces; in fact, the ratio in many of the sales rep VO implementations is one desk to every three, four, or even eight sales reps. You can imagine the cost- saving implications, no matter whether the organization is increasing, keeping stable, or decreasing headcount. If you're growing, you can increase your space less than you increase your staffing; if you're stable, you can downsize your space a bit, and if you're decreasing, you can downsize your space a lot more than you're downsizing your staff. Even with today's relatively high real estate vacancy rates in most urban centers around the world, it's still cheaper to vacate space than it is to keep it occupied. Last month's guest article by Dave Peterson pointed out that it's not always easy to find a tenant for that vacated space, but that's no reason not to reduce your space needs. The best financial news about VO is the relatively short payback period for the technology investment; from what I've seen in several cases, the payback is from six to twelve months in most cases. That is, the cost of giving the mobile worker a laptop with all the software, peripherals, e-mail access, and everything else is recovered in 6-12 months of occupancy cost savings. After that, those savings drop almost entirely down to the bottom line - year after year after year. So What's The Problem? The title of my talk at the BUSINESS WEEK conference was "Taking The 'Office Work' Out Of The 'Office' Without Stumbling, Fumbling, and Killing The Goose That's About To Lay The Golden Egg." A bit long, perhaps, but it captures how I feel about this subject. We're on the verge of what is perhaps the most radical redefinition of the workplace since the Industrial Revolution, with some tremendous benefits involved, yet the early signs are that corporations are as likely as not to mess this up. Why am I pessimistic about something that's so exciting, and that's an extension of what I've been doing since 1982? Here are four reasons: 1. WE'RE DOING IT BEFORE WE UNDERSTAND IT There's a lot of confusion out there about what the VO is and is not. In fact, that was one of the themes of my BUSINESS WEEK talk, as follows: The Virtual Office IS NOT: About working somewhere else in particular. Technology-driven. A facilities-management issue alone. Oxymoronic mandated flexibility. About getting greedy. About working everytime, everywhere. The Virtual Office IS: About decentralizing the office in general. Technology-enhanced. A management team issue. An encouraged option. About saving money. About working anytime, anywhere. I contend that we need to clarify these and related issues before rushing into VO. It's not likely or even desirable that there be one widely-accepted definition of what VO is, any more than there's one single definition of what telecommuting is. However, I see lots of the discussion about VO today in what I have labeled as the "IS NOT" column above, and I don't believe that the much-desired benefits of VO will emerge if companies follow those "IS NOT" definitions. 2. WE'RE DOING IT FOR (SOME OF) THE WRONG REASONS It's bad enough that some organizations are pursuing VO solutions before they know what they're looking for. It's worse, however, to see companies playing follow-the-leader without knowing where that leader is going. Many of you have heard me say (or read) that telecommuting is the kind of innovation that almost no company wants to be the first to use, but that almost every company wants to be first to be second to use. VO, on the other hand, is an innovation that almost every company wants to be first to use, will gladly be second to use, and hopes it isn't last (among its competitors) to use. A client recently described this to me as the VO frequent-flier program problem. When American Airlines started its frequent flier program - the first in the industry - most other airlines followed along because they couldn't afford not to. Every time one airline sweetened the program, the others followed right along. The result? Whatever value an individual airline's program had for generating customer loyalty was greatly diluted because every airline was "buying" the same loyalty. Also, the cumulative liability of earned but unused miles has become an albatross for the industry. The very program that an airline couldn't afford not to use, became a program they almost couldn't afford to continue. The same thing is starting to happen with VO. It seems there's a race developing among industry competitors to see who can close down their sales offices fastest. I have to wonder if all these VO implementations have been carefully thought out, and if they make good business sense for reasons other than competitive catch-up. 3. WE'RE SQUEEZING THE WORKERS, NOT JUST THE WORKPLACE "In the mobile 90's, the laptop computer, fax machine and cellular phone are supposed to be the great liberators, allowing professionals to work anytime, anywhere. Empowered employees would be freed from the supervisor who squelches creativity by lurking near their desks, unchained from the tyranny of the structured day, released from the quiet desperation of life at the office ... Once again, however, euphoria and reality collide.... Untethered, or mobile, employees may have more freedom from supervision, but they work longer hours under more severe deadline pressure than do their tethered counterparts at the office ... For many employees, the phrase "leave it at the office" has become obsolete." That's an excerpt from a June 15 NEW YORK TIMES article titled "Electronic Liberation or Entrapment?", and it aptly describes the situation that concerns me. In the name of faster response time, better customer service, and lower costs (all worthwhile goals), we are starting to see that the virtual office has become a virtual nightmare for some. The good news about using technology to separate "office work" from the "office" is that the former can be done away from the latter; the bad news, it seems, is the creeping expectation that the former will be done away from the latter, at times far beyond what had come to be accepted as a normal and fully acceptable work day. The technology - and managements' expectation about its use - seems to be having the opposite effect from what was envisioned. This isn't a bleeding-heart plea for the return to the 35-hour work week. I have no delusions about how tough it is in the business world today, nor do I think we're ever going back to the staffing and budget levels of the past decade. But that's no reason to chain mobile workers to their jobs 16-18 hours a day, and on weekends, is it? Thanks to the "wonder" of satellite paging systems, laptops, fax store-and-forward systems, and all the rest, many of these mobile workers are now expected not only to be accessible over longer hours but also to be responsive. That is, you not only must be reachable by pager at 10 p.m., but you then are expected to send that e-mail, revise that budget, or fax that proposal right now - not the next morning. I say enough is enough. There are limits to what can be reasonably expected of even the most dedicated employees, and I think we're going beyond those limits. The corporation that squeezes that much more work from these dedicated mobile workers will not win in the long run. It is an incredibly short-sighted perspective, one that will burn out the best employees and will be the final proof that VO concepts taken to an extreme will benefit no one. Paul Saffo (from the Institute for the Future) talked about both the realities and the problems of the extended workday at the BUSINESS WEEK conference. "If your business or clients stretch across four or more time zones, it's impossible for you to work a normal 9-to-5 day. The notion of the "workday" is a quaint, outdated idea." Later, however, he added this observation: "The most valuable feature of any piece of equipment is the off switch, and the most valuable learned discipline is knowing when to use that switch." In other words, business realities might demand longer hours and a break from traditional schedules, but there's still a need to draw some boundaries around the lengthening workday. 4. WE DON'T UNDERSTAND THE CULTURE LINKAGES If you apply some fresh paint on a dirty wall with lots of imperfections, the new paint job might look good for a little while but it will soon begin to peel off, leaving the same old blemishes underneath. If you try to put wallpaper on a wall covered with bumps and holes, those bumps and holes will still be visible under the surface of the wallpaper. A lot of VO implementations are being done this way - trying to paint or wallpaper over an existing surface that isn't ready for the new covering. When I wrote about my visits to the Lindstrom Company and its successor organization, SOL, in Helsinki, Finland [see 10/91 and 7/92 TR], two highly innovative organizations with unique office designs, I wrote that "the change to this [non-territorial] style of office followed the change to the culture and set of management assumptions. It would be a mistake to install this design of office in a traditional, authority-oriented, organization-chart-based type of company." For me, this was the clearest example of the need to address the corporate culture before or (at the very least) simultaneous with changes in the physical structure and design of the office. If you give office-based professionals a bunch of technology and anoint them as "mobile workers" but you don't do anything about the command-and-control style of management that was the norm, those mobile workers are still going to be as micro-managed and frustrated as before. The only difference is that the boss will make his or her presence known electronically instead of in person. On the other hand, if you are making a major change in the corporate culture, there's no better way to send a signal about the seriousness of the change than to give up the old style office. The best example of this kind of change is the IBM office in Cranford, NJ. A May 30 article in COMPUTERWORLD described this office, and noted that "what makes Cranford so impressive is its underlying set of assumptions about IBM and its customers. The 4-to-1 employee-to-desk ratio assumes that IBM sales and service people should spend their time in the field, not behind a desk ... The stark, no-frills atmosphere of the Cranford warehouse and the fact that no one - not even the general manager - has an office, sends a pointed message. Cranford says corporate hierarchy doesn't count for much any more." Despite all the publicity about the Cranford site, I think this message about the underlying culture change has been buried under all the talk about real estate cost savings. The cost savings are real and desirable, but they won't be achieved and sustained unless those cultural issues are part of the process. Insights From a Pioneer on Culture vs. Space One of the most engaging speakers at the BUSINESS WEEK conference was Jay Chiat, co-founder of the Chiat/Day advertising agency that has received so much attention for the design of its Los Angeles office and which just opened a similar flexible-space office in New York. He described how he began thinking about the failings of the traditional office while skiing in Colorado last year, and came back with a plan to completely redesign the California space. As he described it, there were several flaws in the firm's organization and culture. "We were a functionally-focused organization in which everyone associated with their own department instead of with the agency as a whole and with the client. We were management-driven; the managers saw themselves as the central figures and felt they had to control everything. We realized the architectural change was only part of what we had to change; we also had to change the way we were organized and managed." He noted that the agency shifted to a team structure in which people from different disciplines were assigned to account teams. The plethora of titles that are typical of most advertising agencies was abolished, and the role and power of the manager were diminished. "We used to treat people like they were in kindergarten," said Chiat. "Now, we treat them like adults. We say to them, 'Here's your assignment. It's due in two weeks. It better be great. Work on it wherever you want.' As part of the change in the office design, the agency also eliminated most of the typical furnishings and office trappings that reinforced the status differences. "We took away all the ego perks and replaced that stuff with a clubhouse in the office. That's where people gather to eat or drink, to relax, or to play games," explained Chiat. He showed a photo of one area that had a series of punching bags, each of which had the face of one of the managing directors of the agency painted on it. "It's a great way for our people to get rid of their frustrations," he said. While Chiat/Day made a rather major shift in the design of its offices, it did so against a background that was probably quite "liberal" to begin with, compared to most organizations. "You have to remember that we did away with walled offices in 1978," Chiat reminded the audience. As another indication of his values and attitude toward his people, he gave an interesting response to a question about trust. He was asked if he was worried that he will "virtualize his competition," that is, make it so easy for people to work at home that they can moonlight or do work for competitors. "That's been happening in this business for years," he said. "At last count, there are 26 agencies that have been formed by our former employees. I'm very proud of that," he admitted. Unfortunately, that attitude probably isn't typical of most corporate executives today. Some Closing Thoughts I checked the dictionary and thesaurus on my computer to see what they said about "virtual". The word is define as "nearly," "close," and "proximate," but the alternative meaning I liked best was "being such in essential character." Most VO projects I've seen or heard about do not share the "essential character" of the office as we know it. Most of that is by design, but some of it is an unhappy accident. There's no virtue in virtual offices that only replicate the design and effectiveness flaws of the traditional office, but there's also no virtue in creating something else that becomes so dysfunctional and counterproductive that it no longer allows mobile professionals to do their "office work" wherever they are. I'm really not trying to deny the value of the VO concept or to lock everyone into the four walls of a traditional office. I'm just trying to draw some attention to the less-discussed aspects of VO and encourage you to plan your VO projects carefully instead of simply hitching your organization to the bandwagon. ________________________ Gil Gorden Associates 10 Donner Court Monmouth Junction, NJ 08852 (908) 329-2266 Fax: (908) 329-2703 Email: 74375.1667@compuserve.com David L. Peterson 235 West 56 Street, #11-F New York, NY 10019 (212) 586-5235 Fax: (212) 582-2038 Email: dlp@pipeline.com TELECOMMUTING REVIEW © Copyright. All Rights Reserved.