What will happen to the office?

6/18/2024

Irja Rae, Figure Baltic Advisory leading partner

In the Baltics, home offices were quite common already before the pandemic, but  similar to the rest of the world, corona changed the dynamics of our working environments drastically, having a significant influence on costs and demanding employers to make adjustments. It has also affected the new homes being built – oftentimes a tiny office space is added to new apartments to make it more convenient to work from home.  

More and more, we can hear employers asking people to return to the office, but employees will hear nothing of that. Employers reply by trying to agree on principles of office use. Usually this results in hybrid work: some days are spent at the office, some at home. The most common model is 3 days at the office, 2 at home. Our survey indicates that the time spent at the office varied between 50-80% -  2,5 to 4 working days were spent at the office.

Empty office – unnecessary cost?

Since there are less people at the offices, a question arises, what will become of the office, or rather, what should be done there. Remote work is something that can be approached from different angles: finance and administration, value proposition and employee experience, management and organizational development, to name the main ones, but there could be more. Let’s take a look from the financial and administrative perspective. 

The focus here is on the costs of a single job, which are by no means limited to the salary. As a rule, the calculation is based on the assumption that 1 person equals 1 workplace, unless it is a shift job. In addition to salary and taxes, hardware, software licenses, IT infrastructure, support, and maintenance services need to be taken into account. These costs are independent of the location of the employee, but remote work may require additional investments in the security of technological solutions. The employee also needs a room to work, a desk and a chair, suitable physical working conditions (temperature, light, ventilation), all of which need to be supervised and cleaned up. These costs are inherent in an office and it is easy to come to the idea that if half of the workforce works from home offices, we need half the office space because it doesn't make sense to pay for more, so we spend significantly less per person.

But this is not the whole truth. When considering the share of remote and office work from the cost perspective, the total cost per workplace should not include the costs that have to be done in any case, such as software, hardware and IT administration. Often, in fact, employers have to maintain a double infrastructure to allow employees to work from home and from the office. For example, the ICT sector subsidies remote work with €36 per employee per month on average. The savings of the world without the office is the part that remains after subtracting all other costs except those directly linked to the physical office from the total cost of the workplace.

So what do you do in a situation where there is an office but there are no or not enough people per square meter? New offices are already planned for fewer people than are actually employed. As a rule, an office can accommodate 50-75% of the workforce. This is where the second view of the office comes into play - that of value proposition and employee experience or management.

Why do we still need the office?

It is important to understand why we still need offices, how the synchronized time and place of work might influence its efficiency. London Business School professor Lynda Gratton describes the need for offices in her book “Redesigning Work” based on the time and place of work.

Firstly, the office has advantages that remote work cannot replace. Offices are good for cooperation and innovation, offering opportunities for direct communication and idea exchange. Direct contact is the basis of creativity and new solutions. Also, a shared room for work helps to strengthen team spirit and organization culture, which in turn is the basis of employee motivation and satisfaction. Secondly, the office allows direct support and guidance, which is especially useful for new employees and those in need of more support. Also, access to specialized tools and resources might be easier to organize at the office than at home. All these aspects support efficient and good-quality work.

Gratton’s concept defines four ways of organizing work: activities at the same place at the same time, activities at the same time at different places, activities at different times at the same place and activities in different places at different times.

Working at the same time at the same place, like traditional office meetings and project work, allows for fast direct communication, which is relevant and needed for difficult tasks and fast decision-making. It has a good influence on teamwork and strengthens the organizational culture.

Working in different places at the same time offers flexibility regarding the place, e.g. virtual meetings and simultaneous work online. It allows opportunities to work in a preferred environment, but presents challenges like time differences and technical failures.

Working from different locations at different times offers flexibility and allows the use of global resources, e.g. asynchronous collaboration via email and project management software. However, slow feedback and decision-making can slow down work.

Working at different times in the same place, for example in shared workspaces where staff use resources at different times, allows efficient use of resources. However, this can reduce team spirit as employees do not meet frequently.

A flexible approach that combines different ways of working can help maximize employee satisfaction and productivity. To achieve the best results, employers need to strike a balance between taking into account the needs of employees and the nature of the work.

Flexible office space is the solution

The solution is one that many employers already understand. Offices need to be structured differently, with workstations being shared and additional space created for collaborative activities. In terms of the employee experience, an acute physical environment is where people want to come, where good ideas are generated and a sense of belonging to the team and the organization is strengthened.

A manager recently said that he wanted to create a homely environment in the office, so that people feel comfortable to work. Not everyone can do this, but every employer can think about what is done in the office and how to make it better for those activities. Saving money in the office and putting the surplus money into the payroll fund may work for people in the short term, but they will soon start to miss the support of the organization and the team.

It is estimated that the office accounts for around 30% of the cost of the workplace and every organization needs to decide how best to spend it. Savings may not be the most sensible in the long term, as opportunity costs and efficiency losses are involved, and a diluted sense of team can lead to lower loyalty and higher employee turnover.