Reducing Organizational Footprints
By Eric Johnson
The tidal wave of working from home experiences may ultimately push many organizations to permanently establish work from home capabilities even after the Covid crisis has ended. Some organizations will push for a majority of their employees to stay home fully, while others may require in office work periodically for everyone, possibly on a weekly or staggering scale, e.g. alphabetically by day or by specific business unit based on strategic need. Considering the above, organizations have a tremendous opportunity to extract expenses and improve both the balance sheet and P&L through the strategic planning of facilities.
Things to Consider
Key to keep in mind is the potential necessity for physical space if the organization experiences new growth. Leaders should map out potential scenarios for the next three to five years. Some key things to consider when looking to either downsize or sublet:
• Will there be new business units to support? While demand may be low now, simply looking back several years can show that significant fluctuations in demand do occur. When the economy is on the rise again, the organization may need the footprint and space that it is possibly giving up now. Ensure that there is flexibility in establishing new space should the need arise.
• M&A activity? M&A activity abruptly brings in new talent, resources, and other elements of the new organization that may differ completely from the acquirer’s current standpoint. M&A activity should take into account a plan that aligns with the footprint plan the organization wants to achieve.
• Market changes that suddenly propel products and services into new demand? A number of companies have experienced massive shifts in demand due to the COVID-19 emergency. Organizations such as Zoom, Amazon, etc. have experienced shifts in growth that have required them to expand their operations and thus their employee headcount. Some organizations may be able to sufficiently handle higher demand with flex work options, but others may need to employ additional workspaces to handle the shift. Additionally, if IT services and hardware are still established in-house, then that may necessitate footprint considerations as well.
• Cost benefit analysis between long term leases and workspace contracts. Organizations looking to reduce footprint should seriously consider performing a cost benefit analysis between the long-term leases and expenses of buildings, etc., versus the expense of using services like WeWork and Regis. The flexibility of workspaces comes with increased per capita costs that should be understood before shifting to these work arrangements. Furthermore, there can be risks of business stability with some of the current market workspace players, e.g. WeWork.
All of these elements need to be taken into account when considering reducing physical space. A comprehensive plan will allow the organization to meet future business needs while taking advantage of the asset costs reduction available to those that can meet customer demands remotely.