The KPIs of the office of the future

Work - Ford Maddox Brown 1865, Manchester Art Gallery

I’ve been reading much commentary recently on how to measure, to value, the modern office. Especially post Covid, as we clearly head into a world of distributed working, where the HQ is no longer the be all and end all of our working lives.

Mostly I’ve not been very impressed. The thinking seems to be too constrained by how things have been, and iterating the past seems to be hard to get beyond.

So here’s my take (as given within the #FutureProofOffice course I co-run, with Dror Poleg, at the Real Innovation Academy)

The workplace has a problem. And it has a problem in three main areas.

It has a problem in the area of having unaligned incentives, a problem in the area of having a lack of data, and a problem in that it suffers from organisational silos.

Let’s start with the problems of unaligned incentives.

The trouble is you have landlords, occupiers, and property managers, each with incentives that go in a different direction. So the landlord just wants the highest rent possible with the lowest costs and requiring of the minimum of effort.

Then we have the occupiers. They want the lowest rent, but they also want flexibility and they want the highest level of service.

And lastly the property managers. Well, they are sort of stuck in the middle. What ‘they’ really want is to have some pricing power, to not be commoditised, which is very much the situation in property management at the moment.

So you've got three stakeholders, with completely unaligned incentives.

This ‘landlord-tenant dilemma’, with the property managers trying to be the neutral party in the middle, is a well known issue in the office market, and very much a consequence of the way we transact, via leases. It is so easy for there to be a financial disconnect between those responsible for paying the capital expenditure for operational upgrades, and those who benefit from them.

When we look at how the office market is routinely structured it is really no surprise that each party continually feels aggrieved at their lot. And that so many buildings are underinvested in. Maintaining an up to date stock, utilising the most advanced labour and cost saving technology, and setting stretching sustainability goals, is nigh on impossible with how the industry is structurally configured. The 3 or 5 year rent review process itself is like mutually agreeing to having a heated argument periodically.

The misaligning of incentives is, using a tech term, a very serious bug.

If you then look at the subject of data, you’ll find that everyone collects some data. But few collect what is needed, few have actually put that much thought into what data they really need to collect. And mostly you will find that the data that is collected is all over the place. Some of it is over here, and some of it is over there.

The general situation within real estate in connection with data, is there is not enough of it. It is not well enough thought out, and it is not well enough stored and maintained.

And then you have organisational silos. In my mind to create a great workplace requires the skills of what are, today, six different industries.

So, first off you obviously need people with real estate knowledge. Then you need people with IT knowledge, and Internet of Things, network knowledge, and you need data analysts, and you need HR people, and you need hospitality skills.

So there's actually six individual industries, each with their own incentives, that need to be combined, to create a really good workplace.

And this is a problem. And this has really led to what the elephant in the room is. And that is, if we're honest about it, on average, offices are hashtag double fail.

If you look at data from the Leesman index, who have over the last ten years done more than 800,000 individual employee surveys, you will see that they ask one particularly telling question - ‘does your workplace enable you to work productively?

Well, after these hundreds of thousands of surveys, only about 50% of respondents agree that their workplace enables them to work productively. And then if you look at desk utilisation, we all know it is roughly 50%. In fact, most of the time it is probably a bit lower than that.

So we have this situation that if we are brutally honest about it, half our customers aren't very happy with what we are selling them. And they are not using what we are selling them very much anyway. That really is something of a double fail that we just ignore.

But it is coming to the stage where we cannot ignore it anymore. Because the fundamental point here, is that within the real estate industry, we think of ‘Offices’. But it is all a bit of a category error. Because we are creating offices, we think what we have got to sell, and all our customer is after, is offices. But there's no business that actually wants an office. What they want is a productive workforce. It is exactly the same as manufacturers of household drills. Nobody wants a drill. What they want is a hole in the wall.

Because we are selling offices, that’s what we think our customer actually wants. But they don’t. They don't want an office, they want a productive workforce.

So what if you made improving the productivity of people the core value proposition within the Office real estate market

What if we stopped thinking about space, and started  thinking about improving the productivity of people.

What if that was our offer to customers?

Now you have probably seen the graphic from the Green Building Council a few years ago that points out that on average 1% of the cost of running an office building goes on utilities, 9% goes on rental costs, and a full 90% goes on the people working in that space. So clearly, if you make a 10% impact on 1%, or a 10% impact on 90% you are making a massive difference in impact.

Within the real estate industry, we really do focus on the 1%, and the 9%. And historically, we really haven't paid much attention, at all, to the 90%.

And if you think about it, this is what left the door open for the Flex Operators. For all their subsequent difficulties, the WeWork founders are to be much admired for seeing that the human had been left out of the loop, and that a different type of ‘office’ was possible, one that actually looked, and was, human friendly.

With Flex operators having taken vast amounts of space over the last few years, and filled them, it is clear that customers loved the new product they were being offered. And people love the product because the product, the flex market, is human-centric. It appeals to people. The traditional real estate industry concentrates on the energy and the rental costs and the building. And almost ignores people altogether.

So I think to differentiate, you need really need to start thinking that the core value proposition, and what you're offering, is not space. It's not a building. It's improving the productivity of people in that building.

Now, if we did this, the real estate industry would actually no longer be about real estate. Everything that you know about real estate now will be as valid tomorrow, next week, next year, as it is today. But going forward, it will be ‘necessary, but no longer sufficient’.

Because really real estate is going back to what we've just looked at, as something that needs to be built up from a whole range of skills. So we will say IT, IoT, Data, Workplace, HR, Hospitality, all these skills are required to create great user experiences, and great user experiences will go a long way to being the key to creating productive workforces.

So if we thought like this, if we put people at the centre of our value proposition, we could look to how we can break down those silos, align incentives, work from data and add a huge component of human onto all this machine. This is very much a Human plus Machine world we are moving into. So if we did that, what data do we need to make improving the productivity of people the core value proposition?

Now, we've gone through hundreds of documents, hundreds of reports, and dozens of books within the literature - there has been endless amounts written about improving the productivity of people within the office. And there has been loads and loads of attempts to do it, some taking the form of asking hundreds and hundreds of questions. Mostly, they failed, because they haven't really focused, really focused on what is it we really need to know. What are the key variables we need, to be able to improve the productivity of people, within our office buildings.

And actually, we need quantitative data. And we need qualitative data. So we need objective data. And we need subjective data. And we need all of this data to start working together. Because the industry works in silos. A lot of this data that we're going to discuss is collected in some place. But it is never, ever joined up. It never works together, and it's never available to analyse properly, as one.

So let us have a look through what data we really need.

In terms of quantitative data, so the objective data, absolutely the key starting point, even more so now after the pandemic, is environmental conditions. So the big four are temperature, noise, lighting, and air quality, which includes the tracking of particulate matter, carbon dioxide and carbon monoxide levels, total volatile organic compounds, and humidity. These are the most important environmental factors that need to be measured in real time and at a very granular level.

Then we need to, at the FM services level, check things like Helpdesk requests, how many are received and in what categories. What is the Meeting Room availability, broken down at the individual room level? What is the vacancy ratio by room? What is the the speed of visitor processing? How quickly do we get people into our buildings? How welcoming is the reception they get when someone comes into a building.

More quantitative data is required about our workplace. We really need to understand the utilisation of our space, not just an average across a whole building or a whole floor, again we need to understand this at a very granular level, what space is being used, at what time, by what teams and in what location.

And then obviously density, we need to understand what is the space to desk ratio. And we need to measure some factors to give us an understanding of health and well being. So if you start to track the number of sick days taken, how many days are lost by people not being well?

How many health complaints do we get within the building? How many workplace accidents do we get? What is the staff turnover?

This is where you have to start working WITH HR,

because only they have this data, but it rarely gets incorporated into quantitative data studies. So a lot of the time you don't really understand how well a space is performing, because you just do not have access to this level of data.

Then you have the qualitative data. So this is the subjective data. This is derived by actually asking people how they feel. Now a lot of people dismiss how people ‘feel’ but it is actually incredibly important. Because a lot of time you have to correlate between how someone feels and how how a particular space is operating. And you need to understand people, people’s circumstances. If people have had a particularly tough time at home, or getting to the office, they are much more likely to moan about it's too hot, too cold, or whatever? So there's a lot of nuance that needs to come into this. And we need to understand how employees, as people who work in this space, how they feel about their space.

So in the spaces they work in, is the temperature, right?

Is the noise level okay? How is the air quality for them?

Do they have good lighting? And we need to know this for everybody? Everybody, because you cannot generalise here. Everybody has a particular thing that they are interested in. And we need to hone in on really understanding the needs of individuals.

And there are many qualitative data points in terms of FM services. People like to feel that they have control over their personal environment. Do they have that? They are obviously interested and keen on understanding the quality of the catering and refreshments. How easy is it to book meeting rooms? What about the cleanliness of toilets. It feels like a very trivial thing. But it is a very big thing to everyone if you have dirty toilets. How tidy is the workplace? Is it regularly cleaned? Does it look good?

What is the quality of the decor? Is this workplace a nice place to be?

What is the quality of the visitor management service. How well are guests treated when they come for a meeting. Do they feel welcomed into the building, or into a particular office floor. This matters. People often judge a company by such matters. After all, they can choose who they want to do business with.

And then of course, we should be undertaking regular wellness surveys. You cannot manage what you cannot measure, as they say, and that applies to wellness as well.

There is a lot of detailed data that is required around workplace settings. It is vital that people have the equipment that they need to do their job, but also access to the right spaces in which to do it. So you need to ask people, do you have the right space? For the personal meetings you have? Do you have space for thinking? Do you have space for creative thinking? Do you have space for relaxing? And is it easy to find somewhere to take a break? Are there spaces where you can learn from others?

Are there spaces where you can do individual focussed work which is desk-bound? And what is the quality of your desk? And what is the quality of the hardware and the software you've been given to work with? What is the quality of the meeting rooms? What is the quality of connectivity within your workplace? Can you work anywhere? Is there a good wifi signal everywhere?

Do you have storage for all your belongings?

And what are the end of journey facilities like, so if you're cycling to your building, what is it like when you get there?

These are really, really important factors and drivers in the satisfaction, or not, of office space.

Above all of that, we need to spend a lot of time actually looking at ‘Wellbeing’ in general. Now probably the best way to do this is to look at the work that the Well Foundation and Fitwel are doing because they are both tailored for Real Estate. But the point here is what we are trying to do. There is a great deal of research about the impact on cognitive function of environmental conditions. Many peer reviewed papers exist about this. It is not a subjective question about ‘can a workplace enable you to be more productive’. It can, because at the very least, what it can do is ‘do no harm’. And a workplace can be operated in such a way that it performs as well as it is capable of performing.

Because we know if a space is too hot or too cold, or has carbon dioxide levels that are too high, or is too noisy, or has poor lighting, or is too humid, or not humid enough, that the effect will be that the occupiers of that space will have their cognitive functions impaired, and that will, has to, reduce their productivity.

Get these environmental factors right and we know we can help enable people to be as productive as they are capable of being.

Now we cannot make a bad company good by putting

a bad company in a great workplace. But we can make a great company better by putting them in a great workplace.

Because the whole point here is really understanding the conditions, the best conditions, that this space can offer. And measuring and monitoring and optimising on an ongoing basis to provide optimum environmental conditions for the tasks that people have to do.

Now, of course, there's the question of, well, will anyone pay for this? And to an extent this is relatively early days, because frankly, very few people actually pay the attention to monitor their workplace in anything like the detail we are discussing here. But the RICS, the Royal Institute of Chartered Surveyors, put out a report last year, about the use and value of commercial property data. And there's a comment in there that says ‘there is evidence from Knight Frank of landlords in Europe, offering a top slice of rent over and above the market rent, geared to experience, in a similar way to turnover rates in retail.’

And I think the whole premise of this is that this is about creating a user experience that is dramatically better than the user experience of your peers and competitors, and a user experience that you can prove, with data. Will people pay for better? Historically, everyone pays for better.

So to sum it all up, what we're really looking at is how do we understand our building, through really in depth, granular and often real time data? So think about it. Think about it like this, we better understand how our building is actually working. We know the temperature, air quality, lighting, noise levels, everywhere, and through time as well.

Then we get to understand how the space is used, by the people within it. We learn about occupancy levels, density, footfall, desire paths. We are no longer guessing which spaces are busy or quiet, at any particular time of day, or day itself. We start to know enough to be able to predict how the building is going to be used.

And then we need to know more and more about our customers, the more we know about our customers, in terms of their ‘jobs to be done’, the tasks they need to do during the day. And the spaces they need to do them in. What are their wants, needs and desires. This is absolutely what this is all about - it is about how do we create a great user experience. You cannot do it without really understanding all of this sort of data.

If you had all the data referred to here, could you really not demonstrate value? Of course you could. We just need to do what we know we should. Forget how it’s been done to date, we know there is a better way.

How about we stop talking, and started doing?