Business today is global, interconnected, and highly complex. Here’s how space can help manage – even leverage – the way work gets done, and make life a bit more sane.

How did business get to be so round-the-clock frenetic, complicated, and well, just plain crazy?

It’s simple, really. Start with a global marketplace that creates nonstop competition and a continual need to innovate. Add an epic recession and waves of downsizing that left organizations in every industry with fewer workers who all have more to do. Top it off with the way business has become faster and more complicated in every aspect, from new technology to corporate governance.

Top executives feel it. Business leaders around the world reported in a 2010 IBM study of over 1,500 CEOs worldwide that their primary challenge is complexity, and 79% say they see greater complexity ahead. More than half of CEOs doubt their ability to manage it.

Managing an organization is more complex, too. Companies are more spread out and that makes it harder to maintain and build a corporate culture, no matter how many emails or videos are circulated. Talent engagement and retention gets tougher as the economy improves, yet workers feel stretched thin and economically precarious. Nearly three-quarters of Americans say their stress exceeds what they define as healthy, according to the American Psychological Association.

Managing complexity is itself complex. Understanding the underlying business issues and their impact on how companies operate and how people work shows just how much the workplace needs to change. For as we’ll see, in an age where people, technology, and information are more mobile and distributed, it’s the places we work that offer key connection points for building relationships, that help people get their best work done, and provide the nurturing ground for innovation. The workplace can make a huge difference in corporate performance, wellbeing, and even individual happiness.

Complexity Is “Glocal”

Complexity begins at the macro level with a continuing shift in the mature economies from manufacturing to services, the growing impact of developing countries in the global marketplace, and the continuing aftershocks of the recession. Collectively they drive “one of the deepest and most tumultuous economic transformations in all of human history,” according to urban studies expert and author Richard Florida. It’s a period of upheaval he compares with the Great Depression, yet also an opportunity “when new technologies and technological systems arise, when the economy is recast and society remade, and when the places where we live and work change to suit new needs.” These are long-term changes: Florida predicts this “great reset” will take two decades to play out. Yet we’ve experienced tremendous upheaval in the last two years alone.

The pace and degree of change have quickened considerably since the start of the recession. New technology, globalization, and increased competition between developed countries and emerging economies have helped to increase the interconnectedness and interdependent nature of business today.

Technology is always on, always with us. Consider the list of technological wonders available today that didn’t exist just 10 years ago: Wi-Fi, GMail, YouTube, Facebook, GPS, iPod, iPad, iPhone, Twitter, online music and movie stores, Kindle, and more. The average computer user checks 40 websites a day, and we consume almost three times the amount of information that a typical person consumed in 1960. Knowledge workers are an inherently curious breed. We constantly check email or text messages, even while we’re meeting with someone else. The reasons are psychological, and the benefits are the same as when checking for snail mail. You never know what could be there! News from an old friend or a mysterious package may have just arrived. Even a worrisome email can be stimulating. Psychologists call this process intermittent reinforcement: we check because something interesting could arrive at any moment, and in this crazy, interconnected world, sooner or later we’re proven right.

The iPad illustrates how quickly technology moves, and in turn, moves business. A year ago, there was no market for tablet computers. Then, in just nine months, 14.8 million iPads were sold. Publishers began announcing new iPad-specific magazines and books on the heels of the tablet’s launch. An iPad newspaper was introduced this month that includes audio, high-def video, interactive photo features, social media sharing options, embedded Twitter feeds, and more. Other tablets and tablet media are sure to follow as the “webification” of our lives, as one blogger termed it, continues apace. A tablet the size of a magazine puts anyone in touch with the “cloud,” that great, invisible toolbox of software, digital storage, and internet services, and equips a new competitor in the global marketplace. With the click of a mouse you can buy clothing from a women’s cooperative in Afghanistan, organic fair trade coffees from Asia, Africa, and the Americas, and any number of other goods from the remotest villages on the planet. Real competition now arises from anywhere, at any time.

As a result, the global economic playing field is leveling as developing nations, such as China, India, Brazil, and others, grow faster than the developed world, according to the latest McKinsey research. They predict that in the next decade, 40% of the world’s population will achieve middle class living standards, twice the number who enjoy it today. This remarkable speed of change and level of interconnectedness between economies, enterprises, governments, and societies, has created a global/local — “glocal” — world.

In this glocal environment, business decisions made in one place can dramatically affect other areas, yet the ultimate consequences of a decision are often poorly understood. This is a very uncertain environment in which to conduct business, to put it mildly.

Technology, interconnectedness, increased competition, and fresh opportunites help to raise standards of living and further understanding between nations, organizations, and individuals separated by distance and language. Yet they also cause greater market volatility and uncertainty. News spreads instantly via traditional news media, or anyone wielding a cell phone that records video and streams it to the web. These tools can help people hold their leaders more accountable and help topple corrupt governments, but they can also spread misinformation and anxiety. As recent events have shown, economic crises in Greece and Ireland or political unrest in Egypt are no longer just local issues but events that impact the world economy. It’s little wonder that CEOs see complexity as their biggest challenge.

New Ways of Working

In the midst of this increased interconnectedness and uncertainty, individual working hours are increasing. Job demands on a downsized workforce, insecurity about our jobs, and higher lifestyle expectations are all contributing factors. Australians outrank all other developed nations in terms of hours on the job; in 2009 they averaged 1,855 hours for the year. That surpassed even Japan, notorious for overwork, and was 200 hours more than employees in other countries. The work week often exceeds the traditional 40 hours in the U.S. The Bureau of Labor Statistics says employed people ages 25-54 (with children) now spend 8.8 hours each day on work and work-related activity, or 44 hours a week. The European Union imposes a 48-hour maximum working week, as does Mexico.

People also are working differently, as organizations shift their notions about what type of work adds value. Traditionally, companies placed a premium on operational efficiency. Lean thinking was the way to control costs and minimize waste. While that’s still important, in the new business world, the most valuable skill is creativity. CEOs in the IBM research ranked it as the most important leadership quality, just ahead of integrity and global thinking.

Creativity fuels disruptive innovation and the continuous reinvention that organizations need to excel in a globally interconnected world. A willingness to challenge the status quo and shake things up a bit is needed not only in the executive suite but at every level in a knowledge organization. Companies that unlock the creative potential of their people reap multiple rewards. “People who are engaged in creative work will not only be happier and more satisfied, but they’ll add relatively more economic value,” says Florida.

Creativity alone is not enough though. A global economy favors companies who are not only inventive but also quick to market. Companies need to generate new solutions at a breakneck pace. There’s no time for extensive debates and lengthy implementation. As a result, product development is more iterative than ever before, as companies develop new ideas, test them, collect their learnings, revise and retest continually. Companies must cut through complexity, process large amounts of data to extract critical insights quickly, and make fast decisions. The design thinking gurus at IDEO say the point of an iterative process to rapidly prototype concepts is to “fail early and often” in order to reach a viable solution sooner.

Being fast, flexible, and creative with teammates who live and work next to you is hard enough. Managing people from different cultures, across different time zones and diverse locations is a bigger challenge. Workers find themselves interacting both in person and virtually with co-workers from next door or in New Delhi. High-definition videoconferencing makes possible distributed collaboration and investing in sophisticated digital tools can help globally integrated organizations succeed. According to a 2010 McKinsey survey, senior executives say boosting the productivity of knowledge workers is a critical imperative, but most are thoroughly confused or have a hazy understanding at best of what it really takes. What’s key, according to McKinsey, is identifying and addressing barriers that impede interactions, such as distance, cultural differences, and technology gaps.

New Worker Expectations

Like the world and the work we do, workers are changing. Starting in 2011 the first of some 78 million baby boomers began turning 65. It’s the age usually associated with retirement, but a survey of boomers by MainStay Investments, part of New York Life Insurance Company, found that many are pushing back their retirement dates in the face of shrunken nest eggs, a weak economy, and a desire to afford a particular lifestyle in retirement.

Women, who now constitute the majority in the U.S. workforce, are graduating from college and professional schools at higher rates – for every two men receiving bachelor degrees, three women do the same. Both male and female baby boomers who have spent decades building careers and families now want a better work-life balance. Meanwhile, younger generations are bringing new attitudes and needs to the office, and workers of all ages are adopting Gen Y workstyles and attitudes about work, such as an inclination to collaborate and an affinity for technology.

As a result of changing demographics in the workplace and a lingering post-recession fatigue, workers want employers to pay more attention to wellbeing issues. This transcends a simple focus on health and wellness (although that’s also important to both workers and their employers) to take a broader view about purpose and fulfillment, where physical, cognitive, and emotional needs are all being met. (See Wellbeing@Work, p. 16) In fact, employees say a key leadership attribute is the ability to connect with them on an emotional level. In a 2010 Global Workforce Study conducted by Towers Watson (20,000 employees in 22 countries), 79% said the most important leadership attribute was trustworthiness, followed by “cares about the well being of others” in second place.

As employees feel increasingly disconnected from their organizations and look for leaders who display integrity and empathy, forward-thinking companies are starting to realize that employees who have a sense of purpose and feel connected to the organization and its values are more productive and motivated. They are better able to cope with work stresses and are more creative and innovative, and thus fuel company growth.

How did business get to be so  round-the-clock frenetic, complicated,  and well, just plain crazy?

Real estate execs are shrinking individual workspace footprints to create more space for interaction and collaboration.

In an age of increasing uncertainty, wellbeing also includes a desire for greater personal control and choice. A growing number of jobs are now contingent positions: temporary, freelance, contract, etc. Coming out of the recession, half of all new jobs created will be contingent ones and constitute a full 25% of the total workforce, according to employment and labor law experts Littler Mendelson. At Best Buy corporate headquarters, for example, provisional workers make up nearly a third of the staff. Corporate human resource leaders predict they will increasingly add more flexibility into the make up of their workforces, meaning more contractors, freelancers, and other outside consultants, as well as a fundamental shift in how offices are planned.

Some workers have chosen to go it alone, as predicted by author Daniel Pink in Free Agent Nation over a decade ago. He described a worker utopia (for some) in which you worked for yourself and sold your services to a variety of employers. You could work at home in your pajamas if you liked and then move on to another buyer when it suited you. No doubt many workers, down-sized in the recent recession, have created free-agent careers, but a growing number of workers would simply like to stay in their current positions. Eight out of 10 employees surveyed in the Towers Watson study said they wanted to settle down in their jobs, with half saying they wanted to work for only one employer and the other half saying they want only two or three employers during their career. Employees seem to value security above all else, and are choosing – at least for now – the security of a sure thing. Predictions that Gen Y workers would change jobs frequently may be changing in a post recession world.

Not that employers can afford to become complacent. The best and brightest employees are always in demand, after all. The greater risk is what’s called presenteeism, where workers are present but not necessarily engaged and productive. A percentage of the workers of every company — experts say as much as half the work force — does the minimal amount of work required to keep from getting fired. Little or no discretionary effort is hardly a recipe for innovation and competitive advantage.

How the Workplace Can Help

In a global, interconnected world with a changing workforce and new expectations on the part of management and staff, the workplace is poised for dramatic change. In offices everywhere, many individual workspaces are empty, either through reduced head-count, increased worker mobility, or near constant collaboration. Chris Hood, global workplace program manager at Hewlett Packard, has studied workplace utilization rates throughout his organization. “People will say they’re in their workstations 80% of the time and the data shows that actual utilization is half that. It’s not any sort of deceit, they’re just seeing things through a set of spectacles that isn’t accurate.” HP found that in four of their typical buildings only 30% of workstations were in use at least six hours a day, while 33-42% of workstations were used three hours or less. HP isn’t unique. CoreNet Global says approximately 60 percent of desks are vacant at one time, and IFMA says two-thirds of knowledge work today is done outside the organization’s facilities.

As a result, offices are shrinking. The average amount of space per employee, including workstation, meeting rooms, storage space, etc., in the U.S. has dropped by over a third since 1985, from 400 square feet to 250, according to property brokers Jones Lang LaSalle. It’s expected to drop to 150 square feet within 10 years. A planned PricewaterhouseCoopers building in London allocates 75 square feet per person, thanks to an innovative approach to desk sharing (more on this later).

At Hewlett Packard, they’ve settled on maximum typical size of 48 square feet per workstation for individual contributors, and a minimum of approximately 25 square feet. “It’s not about the size of the workspace as much as the needs of the users balanced with the cost to provide,” says Hood. “In India, for example, our local real estate team started to plan workstations as small at 16 square feet per person. That’s where we drew the line. Those more aggressive space sizes are customary and they’re culturally acceptable. But we said no, 16 square feet was just too small for our employees to effectively perform their jobs, even though the small footprint was attractive for the organization’s financial competitiveness. Such advantages tend to be short-lived when measurement includes matters of productivity and the ability to attract and retain employees.”

Real estate is the largest corporate expense after people, so there’s a natural tendency to target office space. But since the workplace does so much — offering personal connection, helping us communicate and collaborate, building organizational culture and brand, even offering a sense of wellbeing and inspiration — thoughtful real estate executives are not simply reducing real estate; they’re rethinking how they use it
so it works harder than ever through:

• real estate optimization, including shifting to more group spaces that support new ways of working
• supporting collaboration locally and with distributed teams
• using space to attract and engage workers
• reinforcing company culture and brand through the workplace
• supporting employee physical, cognitive and emotional wellbeing

Companies can begin by carefully measuring how people work and how the workplace can better support them. At Horizon Healthcare Services Inc., headquartered in Newark, New Jersey, workplace surveys for the company’s corporate strategy and development group revealed that only 20% of workers’ time was spent in heads-down work, while 80% was spent in collaboration with others and most of that time was with two to four people. That drove a new workplace design that supports 65 workers in the same space that formerly housed 38. Working with ISS, one of the world’s largest commercial providers of facility services, Horizon installed smaller but more open workspaces (in place of traditional cubes) designed to support individual work and impromptu discussions with others as the day goes on. The office includes a number of collaboration spaces for small groups. “Everyone gave up personal workspace, but gained in collaborative spaces,” says Donna Celestini, vice president of strategy and development at Horizon Healthcare Services. The response to the new workplace has been very positive with staff and management, and the planning approach is being considered for other company locations. On top of that, the company expects this single workplace will save in excess of $100,000 a year in real estate costs.

PricewaterhouseCoopers in London expects that eight out of 10 desks will be used each day, according to Robert McLean, head of workplace strategy and design. “We’ve stepped back from having 100% occupancy because it leads to a lot of frustration and potentially wasted time by some people who are coming into the office and can’t find a workspace. We’ve done a lot of time utilization studies using our access control system smart cards, and we present the data to the different business units. I show them their occupancy rates in the last five months or so, and they can see a seasonal pattern, peaks and drops. So we look at the historical headcount, we factor in a growth pattern, and on the busiest days, given our use of hoteling and desk sharing, desk use will be at 90%, but on average, 80%.”

New office for Horizon Healthcare Services

New office for Horizon Healthcare Services, in Newark, NJ, exemplifies the interconnected workplace: individual workspaces that invite collaboration, with a range of spaces nearby for group or solo work.

Engaging employees means supporting their need for choice and control. Emily Ulrich, Steelcase WorkSpace Futures senior design researcher, who recently completed a study of knowledge workspaces, says, “Knowledge work responds to changes in venue. These workers are content creators, analyzers, developers. It takes some autonomy to do this kind of work, and choosing your environment is part of that. Sometimes you need a stimulating environment, other times your need to get away to someplace quiet.”

This range of worksettings, often called a palette of place or work landscape, has common themes.

Smaller: Workstation footprints are shrinking. Fortunately, smaller, portable technology takes less space, and many organizations are implementing or encouraging paperless offices. Physical storage space is correspondingly reduced as employees keep documents electronically and reserve file and drawer space for coats and other personal items.

In smaller workspaces the furniture has to work harder. Work surfaces are often dual purpose: a mobile pedestal provides storage and a short-term perch for a visitor; desktops provide work surface, access to power, and height adjustability to fit workers of different sizes and support seated or standing work. Ergonomic seating must adjust to fit and support tall and short, large and small workers. Lighting and privacy screens are easily adjustable.

Small huddle rooms close by workstations provide work settings for phone calls, confidential discussions, etc. They also can be used for heads-down work.

Shared: Fewer people work at an assigned desk each day. More workers are choosing from a pool of unassigned workspaces. Even private offices are being shared by workers, or used by coworkers when the owner is out. At IBM, 40% of the employees have no fixed office space.

Collaborative: The reduction in workstation footprints along with the increase in group work requires a range of collaborative spaces for two or more people. Ideally they are adjacent to workstations. A mix of reservable spaces and impromptu spaces support scheduled meetings and quick collaborations.

Cafés and small kitchen areas in offices are another form of collaborative space for small groups. They offer a change of scenery, the chance for casual meetings with colleagues, and a place that’s diverting and energizing. At Horizon Healthcare Services, newly installed kitchen area and coffee bar spaces are so popular that employees are making fewer trips downstairs to the cafeteria and spending more time with colleagues.

Dispersed: “When people are this mobile and can choose where to work, an effective individual workspace no longer means an assigned workstation. It’s the space that best fits the work you have to do right now. This means choice, flexibility, and enriched ‘I’ spaces that allow the user to do things they can’t in a home office, the client’s office, or at the local coffee shop,” says Mark Baloga, a principal researcher at Steelcase.

Florida foresees an overarching shift from “a single workspace in a corporate office to multiple workspaces, some of them in a corporate self-standing facility, some in a shared facility, some at home.”

Many workers opt for a coffee shop, library, or other third place; an office-away-from-the-office has a certain allure. “We like to be around people but not necessarily with them, and that makes the proximity to others in a coffee house so appealing. What our brains are looking for is a kind of steady beat, a backdrop to knowledge work that’s also energizing. Who doesn’t like the whole friendly, funky, community feel? The problem is that people try to do serious, individual work there,” says Baloga. “The tables are small – retail is all about sales per square foot, hardly big enough for a laptop, phone, and a drink. No room for files or other materials. When that backbeat of conversation gets too loud, it’s tough to concentrate. Keeping information confidential is tricky. And then after a while your back tightens up, your shoulders start aching,
and your butt gets numb from the hard wooden chair. We trade comfort, ergonomics, and privacy for the great vibe, but soon a large worksurface at the right height and a comfortable chair are missed.

“The problems of confidentiality, ergonomics, comfort, adequate workspace, and all the other factors that are important to knowledge work can be easily addressed by a series of well thought-out office spaces. They can be assigned spaces or unassigned and available on a first-come, first-served basis. The idea is a continuum of spaces,” notes Baloga.

Where Goes the Office?

Could the office be a thing of the past? Articles recently in Dwell Magazine, Fortune, CNN.com, and Inc. Magazine, have suggested that portable technology and costly real estate may have made physical offices superfluous.

Many of these articles are inspired by the promises of networking software developers and wireless service providers, but the demise of the office has been often reported in the past. Now that the office is becoming a globally interconnected workplace and work can happen in virtual space, some see the need for a physical office space expiring. Yet proximity to others is key to knowledge work. Personal communication, collaboration, and group work are fundamental to innovation, and that all happens in personal workspace.

The IBM CEOs study not only identified complexity as the biggest corporate challenge but also how some companies were able to navigate complexity superbly. These standout companies (defined as six times the revenue growth of other companies) focused their attention on creativity in leadership, reinventing customer relationships, and operating dexterity. They set the stage for innovation and made their organizations faster, more flexible, and capable of using complexity to their advantage. They recommend embracing ambiguity: proactively exchanging knowledge, eliminating communication barriers, engaging with the new generations of workers, and piloting radical innovations.

Could this kind of work happen via text message or teleconference? Technology can aid communication, but no one ever built a long-term relationship by being “friended” online. Teamwork has time and time again shown its superiority over individual effort. The great “Aha!” breakthroughs happen when people put their heads and hearts together, in person.

The physical environment provides a place to study, explore ideas, and create new ones. It gives us the space and tools and, most important, the people with whom we work, think, and build. It also brings people together to build organizations. Rubbing shoulders breaks down barriers and cultural differences. As work becomes busier and virtually inseparable from the rest of our lives, our offices have a greater impact on our wellbeing as individuals and as organizations.

“We’ve seen how working practices have changed over the last five years or so, with fewer people coming into the office and using technology to work elsewhere,” says PwC’s McLean. “Lately we’ve had a bit of a swing back, with some groups spending more time in the office because it got a little bit too fragmented in some areas of the business in terms of people working outside or at home too often, and losing a little bit of that glue which holds the teams together. A lot of it has to do with our junior staff, who is mentored within the office. If the senior people aren’t there to be accessible and assist them, then we’re missing something.”

The Gallup Organization has researched extensively the issues of employee engagement, development, and wellbeing. They have identified a strong link between wellbeing and the people around us. One of the best predictors they’ve found for whether or not people are productive at work is whether they have a best friend in the office. When they do, they are seven times more likely to be engaged with their jobs. For people without a best friend at work, someone who cares about them and socializes with them, their odds of being engaged are just one in 12.

It’s difficult, if not impossible, to build genuine relationships without the personal interactions that have such a profound impact on our work and life. Leaders can’t lead via text message. Colleagues don’t bond via email. To build a business community, there’s nothing like a great space.

To read the whole issue, click here.