Weekly Thoughts: Office Space
Here is something that caught our eye this week:
When we moved to Maine, we felt it was more important to get up and running than to secure aspirational office space. We selected our current relatively sparse location based on two primary criteria, the brevity of the lease term (one year) and the proximity to a great coffee shop (about 20 feet). As Chenmark expands, we’ve been exploring the idea of moving to space that better suits our longer term needs, which of course, has ignited significant internal debate. How much space do we really need? How “nice” should it be? Should we have an open space or have lots of offices? Should we be in town or in the suburbs?
One of the primary issues we debate is how many people we may hire over the coming years, and whether or not those people will be onsite full-time (and need dedicated space) or whether we could scale with a distributed workforce. We can see the appeal of working remotely since in theory the practice offers better work-life balance for employees, the ability to source talent from across the country (or globe), and some financial savings (smaller office space means less rent and ancillary expenses). However, this week we were interested to read about a big policy reversal on this topic coming from IBM, which for several years has had almost 40% of its 386,000 global employees work remotely, and where it is not uncommon for all members of certain teams to call into meetings from entirely different locations.
This began to change when Michelle Peluso, IBM’s new chief marketing officer, announced that the 2,600 employees in its US marketing department would be required to relocate to one of six different offices (New York, Boston, San Francisco, Austin, Raleigh or Atlanta), meaning many employees will either have to move or leave the company. Peluso is not alone, and other IBM departments — as well as other companies such as Yahoo, Best Buy and Reddit — are reversing remote work policies and formally co-locating teams.
So why the shift? Although there seems to be tangible productivity and financial benefits associated with a remote workforce (IBM estimates that its policy has saved the company $100 million a year), the updated thinking is that these benefits are outweighed by an innovation factor associated with proximity. It turns out that being close to co-workers allows for a consistent but unplanned exchange of ideas, which increases creativity and leads to innovation. Paradoxically, many of the leading tech companies whose products enable remote work actually shun the practice themselves (according to Google’s CFO, “as few as possible” people telecommute and Facebook offers a $10,000-$15,000 bonus to live near its headquarters). Quartz explains further:
“IBM needs more than better productivity right now. As some of its core businesses, like technology services and systems, face challenges from cloud-based vendors, the company’s strategy has been to reinvent itself around new businesses like artificial intelligence and its own cloud-computing operations. Though these businesses are growing quickly and now comprise 41% of revenue, they still don’t compensate for losses in other areas of the company. IBM has been keeping its profitability afloat by unloading offerings with relatively low profit margins and aggressively cutting costs….What IBM should value most, says John Sullivan, a professor of management at San Francisco State University who specializes in HR strategy, are better ideas. ‘It turns out the value of innovation is so strong that it trumps any productivity gain,’ he says, pointing to companies like Apple and Facebook that make around $2 million per employee (IBM makes about $200,000 for each employee).”
At Chenmark, this issue resonates because the notion that proximity breeds creativity is consistent with our own internal observations. We have a small team and we try to regularly review how we operate, so we have experimented with several different work structures. We have tried connecting remotely via Google Hangouts and working in individually dedicated spaces, but our best work, and indeed our strength as a team, consistently comes when we are all sitting around a large table trading ideas back and forth. The point is that one never knows when inspiration will occur, or when an impromptu conversation will lead to a great insight, and, as such, being present and together is crucial. As we look for a new office, we are actively searching for space that will allow us to continue to foster the same sense of camaraderie and collaboration that we feel has been so critical to our progress to date. Of course, if we can maintain the proximity to the coffee shop, that would be nice too.
Have a great week,
Your Chenmark Capital Team