What better place to begin a column on design than where we spend most of our time awake, the office? People work in many places, but because an increasing number of us are office based, this column will focus on the workplace of the “white collar” worker. There have been a number of recent articles about how the individual’s personal space at work is “shrinking,” and the articles cite cost reduction and better use of technology as the cause. What these articles usually miss is the fact that the design of the office is a powerful but underutilized resource that can enable people to work better and smarter.
What follows are examples of three companies that have redesigned their workplace as part of a six- or seven-year effort to reinvent their companies’ culture. These very different companies were responding to different challenges but achieved similar results. They shared at least two common objectives: to enhance their ability to focus on their customers and to be more innovative. To achieve these goals, they believed that their companies had to work more collaboratively, that there needed to be better communication, and that it was important for very employee to feel he or she was an important part of the organization. One thing all three companies did was create an open workplace with no private offices and more shared space, including large common spaces, circulation space, and conference rooms.
In 1997, Muzak was a stagnant brand known for “elevator music.” The company was losing money, was shrinking in size, and, in the words of CEO Bill Boyd, was “desperately afraid of change.” Boyd knew the culture had to change. He also believed that the first steps were convincing his colleagues that change was necessary — and then deciding what the company’s real focus was. The company’s 1,500 employees had 1,500 different descriptions of what Muzak did.
It turned out that Muzak had the largest digital music library of original artist recordings in the world. Boyd and his employees came to a mutual understanding that they were in the music business, that music was the raw material with which they created experiences, and that they were “audio architects.” They hired the design firm Pentagram to create a new identity for the company. But this reinvention was about much more than just a visual identity, and Pentagram, initially through the firm’s discovery process, helped the whole company understand the broader issues.
Late in the process, Muzak executives decided to move the company from Seattle to a new space in Fort Mill, South Carolina. Boyd wanted the new building to represent what the company was so that “everybody is on the same playing field and communication paths are very open.” Muzak had an opportunity to continue to utilize Pentagram’s understanding of the new culture by working with the firm’s architectural partner, James Biber, in New York. To Biber, a workplace “is as much a social place as a functional place.” He wanted to provide a forum for interaction. In October 2001 the company moved into 100,000 square feet of new space housing 325 people. Everyone, including the CEO, was in the open with no cubicle walls.
How has it worked? One of the benefits Boyd cites is that he gets ideas from people he never would have asked for input because the open environment makes it easy for people to ask questions and offer ideas. The difference is apparent in more dramatic measurements: In 2003, the company did in 10 days the amount of business it did during the entire year of 1997.
Powering up in Vermont
Green Mountain Power (GMP) is a publicly traded Vermont utility that provides power to about one third of the state. Chris Dutton became CEO in 1997, just when the company was requesting a rate hike, which was turned down. The company was in trouble. Revenue was dropping, and banks were threatening to cut off their credit. The company was very slow, not efficient, and not focused on their customers. Mary Powell, COO, saw an opportunity to change the culture and reduce costs.
Teams of employees began a six-month process of looking at everything they did every 15 minutes, asking one simple question: “Does this serve the customer better?” Team members reviewed recommendations, and some were chosen and implemented. In one example, the bill collecting function was outsourced to a local bank.
Dutton had read an article about how the CEO of Alcoa had used the company’s headquarters to help reinvent the company — and saw an opportunity to do the same thing with GMP. The company consolidated from its existing lavish headquarters overlooking a lake into the building that housed the service operation. Like Boyd at Muzak, Dutton felt that all employees should be together in completely open offices to facilitate communication. To do this they worked with local architect John Andersen creating an open workplace in which the CEO and COO have desks in the busiest circulation area in the building. It works. They love it.
Most of all, they love what has happened to the company. Work is faster and more disciplined. The company is now on strong financial footing and a darling of Wall Street. Visitors comment that people “seem happy” and “seem to enjoy working there.” GMP’s office has become a sales tool that demonstrates that they are different. Employees like the fact that everything is out in the open and “there are no secrets.”
Reinvesting in SEI
SEI Investments located in Oaks, Pennsylvania, provides institutional investment services. In the late ’80s, the company, in the words of CEO and Founder Al West, was “doing OK.” Growth was 15%, but West was frustrated with the silo mentality of the three divisions that neither collaborated nor cross-sold services. He also felt that it was “not a fun environment.” With these thoughts in mind, West began a seven-year reinvention process to make the company open to change, open to taking risks, and more client driven. He wanted his people to “get out of their box., to think differently.”
Reinventing SEI’s culture involved many organization changes. One of the things that West did was eliminate all secretarial positions because he felt that secretaries had no place to go in the company. Everyone at SEI would have the same opportunities for advancement.
During the long change process, West and his management team realized that their existing facilities, which they had tried to retrofit, simply would not support their new culture. In describing the process of choosing an architect West said, “We didn’t have a design run-off, we had a cultural run-off.” It was very important that the architectural firm fit SEI’s new culture. Meyer, Scherer and Rockcastle did, with stellar results.
Like Green Mountain Power, SEI discovered that a company’s office can be a powerful recruiting and sales tool. One SEI division has achieved a 90% close rate if potential customers make an on-site visit. The company has boosted its customer referral rate to 100% compared to earlier rates that ranged from 20-80%. Not surprisingly, employee turnover is down all across the company.
For each of these three companies, the redesign of the workplace became a very powerful tool both to change and to enable an emerging corporate culture. All three became more innovative by being more focused on the customer, and they achieved this by enabling members of their organizations to work together more easily and communicate more effectively. One of the first benefits of the open office environment that every CEO inevitably mentions is “chance encounters” because “this is where innovation happens.”
What were some of the key things these companies did to achieve this? First, they recognized, though not always at the outset, that the physical environment was an important component of a successful organization. They also recognized that the design of the workplace could enable communication and collaboration and could in fact become a place that people enjoyed coming to. Second, they worked with architects and designers to make this change happen. They selected those professionals based not on what they had done in the past, but on how they worked with their clients, i.e., process more than product. Third, they did not ask their employees what kind of space they wanted — most will say they want more space with a door. Rather, they involved them in the process by talking about what kind of organization they wanted to be and what they needed to do to get there.
In these and many other examples, many employees were initially against the idea of an open office. That is to be expected; it is after all, an environment with which they are completely unfamiliar. It is important to note that in each of the companies cited here, and in many other examples, the concern they had been most worried about, distracting noise and conversations, turned out not to be a problem at all. Very often, the general ambient noise was such that one could not understand individual conversations, and they therefore were not distracting. For an example, observe the people in a Starbucks: About half are meeting with one or two other people, while the others are reading or working on their laptop, all in the same room.
Perhaps most important are the comments by employees and people visiting these companies that “people like coming to work.” They are ” having fun.” And why not? If it is where we are spending most of our time, why shouldn’t the workplace be something we look forward to?