The document discusses strategies for reducing real estate and facilities costs through workplace changes. It identifies three main cost drivers: employee churn which leads to moving costs; lack of flexibility in physical space layouts; and inefficient space utilization. The document recommends reducing employee moves, increasing space densification to use less square footage per person, and implementing alternative workplace strategies like telework and hot desking to improve flexibility. Case studies show these strategies helped companies significantly reduce real estate costs.

1. Driving Down Cost Through Workplace
Strategies
Installment 1- The Physical Space
by Erica Stricker and Gina Payne
The Challenge: down. At a high level the drivers can be put into
Cost containment is no new subject when it three categories: 1) Type of space, 2) Amount
comes to running a business, and with the state of space, and 3) Space procurement and
of today’s economic environment, it is a subject maintenance. In the first installment, we will take
that continues to shape corporate real estate a look at real estate and facility drivers that are
decisions. directly related to the physical environment or the
“work space” itself.
Executives who are faced with cost reduction
initiatives must turn toward real estate and
Cost Driver #1:
facilities management as a cost driver. Churn
Challenges emerge as we are called to respond Churn is the process of moving employees-
to ever changing business needs, and the as individuals or as small or large groups.
impact those needs have on physical space. Organizations are dynamic, and as a result,
While recommending appropriate workplace people and equipment move on a regular basis.
solutions, we consider viewpoints of all those Whether it is a corporate restructure, or a new
who have a vested interest in directional changes project that requires cross pollination of ideas
within an organization, and the impact those across work groups, churn is necessary to meet
changes have on people and place. Success the changing demands of an organization.
can come in quantifiable and non-quantifiable
In dynamic organizations, moves can be
ways. We are continuously called upon to work
the vehicle used to open up the lines of
within the parameters of the physical space, as
communication between work groups, improve
well as the parameters of the bottom line, and
workflow and increase productivity. There are
recommending workplace solutions that won’t
typically three types of moves:
jeopardize the strategic goals of an organization
is critical. 1. box move (moving a person with telecom),
This paper is a first installment of three, in which 2. furniture move (requires furniture re-
we will take a look at cost drivers in real estate configuration)
and facilities, and how we keep those costs 3. construction moves (requires some type of
construction to accomplish)
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2. Box moves account for the most common type work environments and inefficient space go hand- encompass telework, mobile workers, hoteling,
of move experienced by a corporate real estate in-hand. When a rigid space cannot respond home offices, and satellite office space. Through
portfolio. easily to the ebbs and flows of a business’s a study between Steelcase and CoreNet Global,
changing needs, cost is incurred in multiple ways. these strategies were categorized into five
Although there are benefits associated with
This could mean 1) not only box moves (moving sections:
executing a move, with it, comes cost. According
of people), but 2) furniture reconfiguration or
to the IFMA 2010 benchmarking study, the A) Telework or Telecommuting in which an
change in furniture, 3) and/or construction costs.
average churn rate across all industries in 32%, employee works from home, substituting
Lack of versatility also drives space inefficiency
and the average cost of a box move is $142. telecommunications for the commute to work.
because 1) building partitions will eat away
Monitoring churn is very important to understand at square footage, 2) changes are made in a B) Mobile Work, a work style in which a person
areas of cost containment opportunities, but reactive mode and solutions are designed to work consistently uses multiple spaces, both inside and
churn is not all bad. It is a necessary activity for around existing space constraints. out of the office, to accomplish his/her work.
the reasons previously discussed. As such, it is a
Solution – Quick hit #2: C) Hoteling, temporary workspaces assigned
part of business that is here to stay.
Increasing Efficiency through Densification of Space through a reservation system; typically used by
Solution- Quick Hit #1 Talk to a planner about a corporate real estate mobile workers, but also used by any worker not
Reducing Churn portfolio, and they will likely begin asking for near his/her assigned workstation.
Reducing churn can have more of an impact on metrics as an indicator of the existing view, or
D) Home Office used as an alternative location
cost than merely lowering the cost of moves. It baseline, of the portfolio. Square footage per
to the primary office. Employees may work from
can also have an impact on employee retention. person and efficiency of the space are go-to
home on a set schedule or on an as-needed
There is new work being done to try and considerations. If you find yourself with an
basis.
understand the correlation between business that expansion need and your portfolio metric is
have high churn and the resulting rate of staff 350 square feet allocated per person, it is quite E) Satellite Offices which are smaller spaces
retention. possible (depending upon your industry) that you located in the areas closer to employee’s homes
could reduce that footprint to accommodate your for greater convenience.
Although conclusions are still on the horizon,
businesses growth without an acquisition of more Case Studies
there are some who believe the more stable of
space.
an environment you can provide your employees, Case Study #1: Major US Financial Institution
the happier they are. This, of course, assumes According to the 2009 CoreNet survey, Strategy: Maximizing space utilization saves $9
the type of space they occupy fits the type of companies are trending toward allocating less million
work they need to produce. workspace per employee. The global benchmark
Location: Louisiana & Texas
of 200 or more square feet per person is
While move costs can be significant, employees
beginning to change. Smaller increments are Size: 5 million SF, 38 buildings
are the single most expensive part of any
becoming more common, with almost 50% sitting
company. If stability truly increases employee Timeframe: 1 year
within range of 125-199 square feet per person.
longevity, occupancy planning will become a
Savings: $9 million
major factor in cost containment for all. The Sustainable Solution:
NELSON was engaged to develop a post-merger
Cost Driver #2: Increasing Space Flexibility through Alternative
Workplace Strategies strategic facilities consolidation plan for a major
Lack of Flexibility and Space Inefficiency
Lessons of the current recession will have long US Financial Institution. The project included the
Flexibility can be defined in different ways. It
lasting effects on future strategies, as companies survey of 150 branches throughout the state of
can be defined in terms of a lease commitment
now realize that they don’t have to choose Louisiana within a two-week period. By utilizing
or the adaptability of a physical space. In this
between traditional and alternative workplace strategies discussed in this installment, and
installment, we will focus on the physical space,
strategies. They are blending varied alternatives looking at the overarching goals of the business,
but we will come back to space procurement
to improve space efficiencies, increase this strategic plan maximized their space
in installment three. The adaptability of a built
productivity, and continue to attract and retain utilization and identified areas of cost savings,
environment can be attributed to how it is built
employees. The time-honored traditional office as well as, efficient use of the workplace.
in regard to codes and standards, what type
environment is adapting to new strategies in NELSON was selected for this assignment
of furniture is in use, space entitlement and
an effort to increase worker productivity and because of the client’s strong confidence in the
adjacencies of groups within an organization.
optimize portfolio assets. firm’s strategic planning capabilities, expertise in
Lack of versatility is often the major contributor implementation and cost effectiveness.
to an inflexible work environment, and will Many strategies are currently in use and
ultimately create space inefficiencies. Inflexible employees are taking advantage. The varying
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3. Case Study #2: American Multi-national Financial The NELSON Differentiator
Services Firm At NELSON, we recommend using these
Strategy: Implementing Alternative Workplace strategies as part of the overall solution to
Solutions reducing occupancy costs:
Location: Northeast Region ƒ Reduce churn by better strategic planning
Size: 72 buildings, 15 million SF ƒ Maximize space utilization by decreas-
ing square footage per person. Consider
Savings: Reduced seats by 6,500
implementing space standards or new
NELSON was engaged as a partner in the ways of viewing space
development and implementation of the client’s
ƒ Increase space flexibility and adaptability
strategy in the New York Metropolitan region.
through alternative workplace solutions
In an effort to reduce costs globally the client
developed a high-level AWS approach and ƒ Build a longer term view of CRE – strategic
established regional targets for seat reductions planning, benchmarking comparisons,
and cost savings. NELSON was asked to further workplace / standards and guidelines,
develop the AWS program specific for the AWS, creative facilities management ap-
Northeast region and assist in implementation. proaches
NELSON’s support included: At NELSON, we provide services as solutions
drivers, with 30+ years of experience we have
ƒ Assessing the regional portfolio to deter-
recommended to our clients a combined savings
mine the impact of the AWS program
over an estimated $230 million. NELSON
ƒ Assisting early adopter teams in imple- Strategies will differentiate itself based on an
menting the AWS program approach that is focused on organizational
performance, building the data, utilizing
ƒ Supporting the development of a strategy
highly innovative, fully tested, experienced and
for rolling out the AWS program in the
flexible processes, and a core value of working
region
collaboratively with clients as trusted partners in
ƒ Developing AWS workplace kit of parts driving the solutions.
and design guidelines
ƒ Monitoring and tracking AWS participa-
tion
ƒ Developing marketing materials to assist
in the engagement and adoption of AWS
ƒ Ongoing support of the AWS program
team
NELSON was selected by the client because of
the firm’s proven track record of developing and
implementing AWS programs for other clients. NELSON offers our clients a full range of strat-
The NELSON team worked to ensure a program egies, interior design, architecture, engineer-
was developed that would be adopted by the ing, and information management solutions.
business units and supported achieving CRS’
cost reduction targets. The given timeframe was For more information please contact Donna
three years, with a targeted savings of 6,500 Schroeder, Strategic Services Director at
reduction in seats. DSchroeder@nelsononline.com or
+1 312.917.6228.
www.nelsononline.com
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