Strategic Analysis Report19 June 2000

Workplace Transformation: A Business ImperativeMichael Bell, Carolee Ross

Management Summary

This Strategic Analysis Report focuses on the critical management imperatives, strategies, and tactics to transform the workplace from the standpoint of location, settings and services to support the new style of working anywhere, anytime, enabled by the rapidly evolving connected economy. In this report, Gartner sets forth:

A decision framework for considering alternate locations of work from traditional to virtual work settings

A management model for building a sense of trust in the enterprise; planning and implementation methodologies, best practices, case studies and costing models

This report sets forth the argument that workplace transformation is a critical management imperative for the connected economy as a key element to attract, retain and enable talented employees, and to re-allocate financial resources between physical and digital infrastructure, or between “bricks and clicks.”

The Key Issues addressed in this report are:

What overarching facilities strategies optimize cost efficiencies and business effectiveness enabled by information technology?

What is the optimum implementation methodology for workplace transformation?

How will organizational strategies evolve to support transformation to the electronic workplace?

What are the appropriate management practices and policies to build an effective social context for the transformed workplace?

CONTENTS:

1.0 Introduction1.1 The Industrial-Based Workplace: A Historical Perspective

2.0 Location, Location, Location2.1 Strategy 1: The Virtualization of Office-Bound Personnel2.2 Strategy 2: Shift Customer Service From Office Settings to Point of Service2.3 Strategy 3: From Retail Settings to Cyber-Settings2.4 Strategy 4: Shift Back-Office Operations From Higher-Cost to Lower-Cost Locations

3.0 Management Questions on Workplace Transformation4.0 Methodology: An Integrated Approach

4.1 Success Criteria4.2 Workplace Transformation — The New Alchemy4.3 Best Practices in Office Design Enabled by IT Work Styles4.4 Integrating IT Into Facilities Projects: A Checklist for CIOs

5.0 Enterprise Total Cost of Ownership

5.1 Case Studies5.1.1 IBM North American Sales Case Study5.1.2 Sun Microsystems Case Study

6.0 Trustware: A Four-Part Management Strategy6.1 Management Strategy Part One: Leadership6.2 Management Strategy Part Two: Processes6.3 Management Strategy Part Three: Communication Tools and Systems6.4 Management Strategy Part Four: Hospitable Work Settings

7.0 The Trustware Index: A Simple But Powerful Measurement Tool8.0 What Is a Virtual Team and How Should It Be Managed?9.0 Summary and ConclusionsAppendix A: Acronym KeyAppendix B: Definition Key

1.0 Introduction

Transforming business infrastructure is perhaps one of the greatest management challenges of the new decade. The need to transform explains, in part, the continuing spate of mergers and consolidations, across industry segments to achieve economies of scale. It explains the public offerings of many privately held service industries such as real estate partnerships which need equity capital to finance the network infrastructure, and enterprise resource planning (ERP) applications that are mandatory for global service providers. And it explains why many companies are outsourcing noncore business processes across the administrative spectrum from back-office operations to logistics support. Such outsourcing transfers the overhead and particularly the infrastructure burden to the outsourcer, which can then spread the cost of staff, technology and fixed overhead across a portfolio of clients.

But the technology-enabled enterprise must combine traditional business places and spaces, with digital assets into a new or recombinant business infrastructure Gartner calls “clicks and bricks.” For many businesses, place is even more important particularly in the context of delivering products and services to local international markets. The business adage of “think global and act local” demands global communications and local presence for managing geographic markets imbued with unique cultures, mores, and consumer tastes. Retail infrastructure continues to grow in most markets for this very reason. And for knowledge-based enterprises, physical proximity of high-value-added workers is required for knowledge transfer, mentoring, and for building and sustaining the social glue and culture of the organization. So how can the enterprise optimize between physical and digital infrastructures? How should the enterprise allocate capital between information technology and physical assets? And what are the critical success factors for building an effective business context for the next decade? This report addresses these issues and provides detailed management guidance for developing a comprehensive workplace transformation initiative.

1.1 The Industrial-Based Workplace: A Historical Perspective

The evolution of work in this century began with the industrial-based workplace (Era 1), which reached maturity in the mid-20th century (see Figure 1). In the early 1980s, the first stages of the “informated” workplace emerged, characterized by flatter organizations, decentralized control and matrixed organizational structures. Work was still “place centric” in Era 2, which covered 1970 to 1990. Era 3 began in the early 1990s with the maturity of wide-area networks (WANs) and the early emergence of the Internet as a commercial communication utility. Work then shifted from a place-centric to a network-centric model. Enterprises evolved to decentralized, federated structures as work became focused in teams. Employee

empowerment became a preferred organizational strategy and the extended enterprise emerged with e-business, ERP systems and the growth of middleware applications. The 1990s also witnessed the “mainstreaming” or acceptance of telework and alternative workplace models, including remote access.

Era 4 is the evolution to the “virtual enterprise,” i.e., a loosely coupled, plug-and-play, network-centric Web of core competencies, free agents and alliance partners. IT is envisioned to be ubiquitous, high-speed and multimedia. As the organization of work evolves from a place-centric to a network-centric orientation, the location and style of work will inevitably transform, enabled by enterprisewide communication and data networks, remote access and interoperability between intranet, Internet and extranet applications.

Era 4

2010 – ?

HierarchicalTask-OrientedDifferentiatedSpecialized

Centrally Controlled

1950 – 1970

Industrial(Place-Centric)

Era 1

1970 – 1990

Era 2

Decentralized ControlProcess-Oriented

Flatter OrganizationEarly Distributed Work

Matrixed

Industrial/“Informated”

(Place-Centric)

FederalizedTeam-Based

Project-OrientedBroadly Distributed

Empowered EmployeesExtended Enterprise

Knowledge Workplace

Era 3

“Informated”(Network-Centric)

1990 – 2010

Determinants

SizeAge

IndustryCompetition

Culture

Knowledge-BasedContingent Workforce

Free Agency“Role Based” Organization

“Plug and Play” ITContinuous Learning

Loosely Coupled AlliancesAgile

Virtual Enterprise(Network-Centric)

Source: GartnerFigure 1. Evolution of the Workplace: Four Eras

2.0 Location, Location, Location

Key Issues:

How will organizations strategically replace or displace bricks and mortar assets with digital assets?

How will business enterprises plan and implement the transformation from traditional work settings and locations to the electronic workplace?

Typically, IS organizations implement enterprise upgrades to IT infrastructure and applications without considering its impact on facilities. By aligning IT strategy with corporate real estate strategy, IS management can identify potential cost reduction and operational efficiencies. Best-in-class enterprises must position certain roles and functions in work settings or “cyber-settings” that optimize efficiency and effectiveness (see Figure 2). Gartner offers a planning

framework called the Infrastructure Game Board, which provides a planning tool to assess workplace transformation opportunities, enabled by IT.

The Infrastructure Game Board maps workplace requirements in two dimensions: proximity and the complexity of work functions. Proximity represents the need for physical adjacency of employees. Complexity represents work functions along a spectrum from routine, simplistic tasks to complex, knowledge-based functions.

The Infrastructure Game Board Explained

Quadrant A (Office): Knowledge work benefits from the greatest physical proximity of employees, which is typically creative and collaborative (e.g., software design/development and media creation).

Quadrant B (Retail): High physical proximity to a walk-in market, such as where employees interact with customers, is required. Retail stores are located, designed, equipped and staffed to service transient customers, as are malls, hotels, theme parks, restaurants, resorts, customer service centers and fast-food outlets.

Quadrant C (Industrial): The industrial quadrant typically involves engineered processes, automated production, and material handling. The infrastructure is located near suppliers and freight delivery access points, and often located within global, regional or city markets to reduce distribution costs and time to market. The infrastructure uses low-cost, flexible, modular structures that can be rearranged or retooled easily, and that are adaptable to short customized production runs.

Quadrant D (Virtual): The virtual quadrant enables certain high-value knowledge work, such as sales, consulting, auditing and management, to be conducted without physical proximity. Global companies are discovering the effectiveness of redeploying organizational and infrastructure resources to this quadrant.

Dispersed

Face-to-Face

Routine Complex

A. OfficeB. Retail

C. Industrial D. Virtual

Work Function

Proximity

ProductionServices

AssemblersFabricatorsData-Entry-

ClerksProcessors

Symbolic AnalystsExecutivesManagers

ProfessionalsKnowledge Workers

In-PersonServices

Sales-clerks

AttendantsWaitersCashiers

TeleworkersMobile Sales and ServiceCustomer Service Reps.

Consultants, AuditorsExecutives, Managers

Source: GartnerFigure 2. Infrastructure Game Board: Different Work Requires Different Settings

The implementation of enterprise IT infrastructure and application upgrades enables transformation of the physical workplace. Senior managers who neglect to align IT strategy

with facilities and real estate strategy will forego millions of dollars in incremental cost avoidance and improved business effectiveness (see Figure 3).

2.1 Strategy 1: The Virtualization of Office-Bound Personnel

Strategic Planning Assumption: By 2004, 35 percent of enterprises will systematically re-evaluate job location deployment to increase enterprise effectiveness and reduce cost (0.7 probability).

This strategy mainly moves workers from offices to alternative workplace arrangements — such as telecommuting, office hoteling, desk sharing or virtual office modes — in which employees work continuously from the field using laptops, cellular phones and other mobile devices. Gartner defines this mobile work style as “telework.” Typical job functions include salespeople, service representatives, consultants or any other function that involves minimal team-based work and requires physical proximity, and where mobility enhances productivity.

Dispersed

Face-to-Face

Routine Complex

A. OfficeB. Retail

C. Industrial D. Virtual

4

2

Work Function

Proximity

3

1

Source: GartnerFigure 3. Four Strategic Moves

The technological infrastructure that makes this possible includes effective and reliable remote access to company systems and services, including:

Help desk call-in services

Office reservation systems to schedule temporary workstations

Portable technologies, such as pagers, cellular phones and laptops

Computing and communications essentials for the home office (e.g., business phone lines, fax machines, printers and docking stations or monitors)

Strategy Payoff: Net lower infrastructure costs and improved worker productivity.

Recommendation: Enterprises need to analyze office work patterns from the standpoints of proximity, need and mobility, and shift job functions to “cyber-environments” accordingly.

2.2 Strategy 2: Shift Customer Service From Office Settings to Point of Service

Strategic Planning Assumption: By 2004, large enterprises will shift at least 15 percent of customer service activities from traditional office settings to walk-in locations or self-service kiosks (0.7 probability).

This strategy shifts customer service and support from office settings to retail environments or self-service devices. A classic example of this strategy is the automated teller machine that has revolutionized retail banking. A variation on this theme is the repositioning of banking services into shopping malls and supermarkets. Similarly, a new retail industry has emerged to support the small office/home office market. Kinko’s, Mail Boxes Etc. and Staples have become the new office-support centers for the mobile or remote workforce. Hewlett-Packard has contracted with Mail Boxes Etc. to become the mail drop for its U.S. sales force.

Enabling technologies include point-of-sale devices, card readers, customer support applications and WAN connectivity.

Strategy Payoff: Increased customer service, incremental sales revenue and reduced occupancy costs.

Recommendation: Enterprises should evaluate all customer service and product demonstration activities as candidates for repositioning to walk-in or self-service facilities.

2.3 Strategy 3: From Retail Settings to Cyber-Settings

Strategic Planning Assumption: By 2005, 50 percent of traditional retail channels will be augmented or replaced by “Internet involved” sales and customer support applications (0.7 probability).

This strategy is the most dramatic in shifting retail sales from stores to Web sites. The 1999 holiday sales season broke all records, exceeding $9 billion in sales on the Web — up from $5 billion in 1998. Amazon.com (books), reel.com (movies), cdnow.com (music), virtualvin.com (wine), cigarsinternational.com (cigars), autobytel.com (cars) and peapod.com (home-delivered groceries) are a few of the Web-based retailers that shifted the experience from the store to the home computer. Technology enablers include sophisticated Internet connectivity, substantial Web-server capacity, personalization software, customer service and support applications, transaction processing capabilities and electronic links with such distribution partners as Airborne Express, Federal Express and United Parcel Service.

Strategy Payoff: Reduction in fixed infrastructure costs, reduced inventory, customized solutions, fast response and improved customer intimacy.

Recommendation: Enterprise management should evaluate facilities cost reductions and staff redeployment opportunities by shifting sales and service processes to the Web.

2.4 Strategy 4: Shift Back-Office Operations From Higher-Cost to Lower-Cost Locations

Strategic Planning Assumption: By 2005, 60 percent of large enterprises will shift at least half of their back-office operations to low-cost administrative centers (0.7 probability).

Many enterprises locate routine administrative operations in expensive downtown or suburban office facilities. Typically, headquarters locations in central business districts house large percentages of administrative and clerical staff. In addition, such office support operations as print shops, graphics, mail order, record retention and other industrial-type functions consume valuable real estate and technology infrastructure. Strategy 4 redeploys routine back-office support functions to lower-cost locations. Typifying this strategy, call centers are the fastest-growing component of corporate real estate. Relocated administrative operations depend on standardized order entry, billing and collection systems, very high-speed data connectivity (e.g., T1 or T3 service), workflow management and control applications. Additionally, sophisticated customer-support applications are critical to ensure effective administrative support, within and outside the enterprise.

Cost-saving components include:

Reduced occupancy cost associated with less office space

Net reduction in office rearrangement (churn) costs

Net reduction in office furnishings for individual employee workstations

Reduction in inventory carrying cost

Reduced administrative labor costs

Shorter asset lives (improved cash flow from tax effects)

Reduced property taxes

Reduced utilities costs

Reduced insurance premiums on fixed assets

Recommendation: Enterprises should evaluate opportunities to redeploy, reduce or eliminate back-office operations in conjunction with ERP and other shifts to IT-enabled, enterprisewide administrative processes.

3.0 Management Questions on Workplace Transformation

Key Issues:

How will organizations strategically replace or displace bricks and mortar assets with digital assets?

How will business enterprises plan and implement the transformation from traditional work settings and locations to the electronic workplace?

Strategic Planning Assumptions:

By 2004, enterprises that adopt integrated workplace transformation strategies will identify at least 40 percent of total IT-enabled cost savings in facilities, real estate and non-IT support services of the enterprise (0.7 probability).

By 2003, IT will merge with other corporate functions such as corporate real estate and human resources (HR) to provide shared services and integrated infrastructure management in 30 percent of North-American-based global organizations (0.7 probability).

Best-in-class enterprises consider the enabling effects of IT in reformulating the balance between physical and digital infrastructure. IT solutions such as ERP, remote access technologies, and Web-based applications fundamentally change the rules of business and the how, when and where of work. This is particularly true for service industries such as banking, insurance and stock brokerage, which are increasingly disintermediating the value chain.

However, IT projects are typically planned and implemented without assessing the impact on traditional facilities infrastructure and alternative deployment of staff. By adopting an integrated approach, management can exploit significant opportunities to eliminate or reduce facilities capacity, improve employee flexibility through various virtual workplace solutions, and improve customer service and response by shifting to Web-based sales and fulfillment. But how does management adopt an integrated workplace transformation process?

Workplace transformation begins with a strategic evaluation of the portfolio of traditional enterprise locations in the context of enabling IT infrastructure capabilities. The process is iterative. Key enterprise functions such as sales, marketing, logistics, administration, customer service and manufacturing identify opportunities for redeploying or substituting place-centric processes with network-centric processes. What capabilities are needed from the IT infrastructure? And how will these capabilities eliminate or change the need for traditional facilities? Once opportunities are identified and prioritized, action plans should be formulated and synchronized with critical-facilities lease termination or option dates.

As a first step, the planning process should begin by answering the key questions outlined below. These questions form the basis of a workplace transformation-planning checklist.

Finance: What is the enterprise total cost of ownership (ETCO) and what is the mix of IT infrastructure and facilities occupancy and support costs as a percentage of total revenue? How do these benchmarks compare to best practice metrics?

Field Operations: Are there opportunities to transform traditional office infrastructure by virtualizing operations staff such as sales, service, auditors, consultants, editors, technical writers, researchers or management functions?

Real Estate: What are the critical lease termination dates of the enterprise’s large facilities, and can these dates provide a window of opportunity to change the mix between IT infrastructure and traditional facilities?

IT: Conversely, are there major planned upgrades to the enterprise’s IT infrastructure and how can these changes reduce occupancy costs?

Marketing and Customer Service: Are there customer service or product demonstration and sales facilities that would be more effective as a Web-based application?

Logistics and Real Estate: To what degree can the enterprise move product and service delivery to the Internet? Can a portion of the retail portfolio be reduced to finance investment in Internet technologies?

Administration and Real Estate: Are there back-office functions that could be consolidated and relocated from expensive office facilities to lower-cost remote or even international call center locations? Can the surplus space that is vacated be reused or subleased to finance relocation costs and IT investments?

Sourcing: Are there portions of the infrastructure (IT and facilities) that could be outsourced to third-party providers such as executive suite operators, professional service firms and property management firms?

Organizational Design: Are there opportunities to reorganize and merge infrastructure management such as IT, facilities management and HR responsibilities to facilitate integrated planning and implementation, and to provide a single point of accountability?

Project Management: At the project level, are the functional groups working as a team to coordinate and integrate IT, HR and finance with major real estate projects?

Workplace transformation must occur during major inflection points in the enterprise such as real estate lease termination or option dates, or the implementation of major IT change projects such as ERP or Web-based projects. However, without considering the impact of IT enablers on the traditional infrastructure of bricks and mortar, and the alternative deployment of staff, management will squander millions of dollars in incremental overhead and support savings.

4.0 Methodology: An Integrated Approach

Key Issue: What is the optimum implementation methodology for workplace transformation?

The transformation methodology integratesorganization, technology and facilitiesresources into an optimized system.

HR IT

CRE

StrategySWOTGoalsAlignmentPortfolio AssessmentTechnology PlatformProcesses

PlanLocation(s)ConfigurationIT Plan/HR Plan/TrustwareSecurityFinancial PlanProject Plan

Project Execution(Pilot, Then Syndicate)Project TeamApprovalsSite SelectionContractsDesign (IT and Building)Build Out (IT and Building)Move

People Considerations:Desired BehaviorsProximity NeedsSkills and CompetenciesRecruit and RetainMobility Needs Trustware

CRE Corporate real estateHR Human resourcesSWOT Strengths, weaknesses, opportunities, threats

Source: Gartner

Figure 4. An Integrated Approach to Methodology

A three-stage integration methodology describes how workplace transformation is actually implemented, based on documented best practices (see Figure 4).

The process begins with a strategic assessment or reassessment — first of business indicators which includes assessment of the business strengths, weaknesses, opportunities and threats — or SWOT analysis. The assessment then re-examines business goals and evaluates infrastructure capabilities and processes to meet the intended goals.

The second phase moves to project planning. The project plan converts the strategic plan to a project action plan. The plan is a cross-disciplinary effort including operating company (Opco) management, IT, corporate real estate and HR. The project plan is converted to a business and financial plan. It is here that the elements of trustware (see Section 6.0) are formulated.

The third phase includes project approval. Once approved, the project moves to site selection, contracting, design IT infrastructure and application specification/acquisition, build-out and physical move. Plans are vetted with users and other stakeholders and training is implemented.

A post-project evaluation and adjustment phase is typically conducted to measure project success against planned budget, scope, employee expectations and schedule targets.

4.1 Success Criteria

Strategic Planning Assumption: By 2004, those global enterprises that adopt a systematic and integrated workplace transformation process will achieve an 80 percent project success rate, based on management and employee feedback (0.7 probability).

After a decade of experience, a wealth of documented best practices exists that, when taken in the aggregate, form a cogent profile of success through each phase of implementation. In the strategic phase, it is essential that workplace change be driven for business reasons including improved productivity, customer service, workplace flexibility and cost efficiencies. Workplace change, however, should not be driven exclusively by cost reductions.

A workplace profile is developed and compared to competitive benchmarks.

A “to be” scenario is developed that will identify the redeployment and disposal of facilities.

In the planning phase, successful projects flow from a detailed business plan, including a comprehensive financial plan.

It is essential that any workplace change be tested in a controlled pilot before an enterprise rollout.

Trustware components should be developed and documented in the planning phase.

Finally, a multifunctional team must implement project execution. And training, communication and surveys of all project participants is key to ensure project success.

Recommendation: Enterprises should approach workplace transformation with the same disciplines and best practices associated with other business change management. Perhaps the single, most critical practice is embracing the principles of trustware in planning and implementation.

4.2 Workplace Transformation — The New Alchemy

Key Issues:

How will organizational strategies evolve to support transformation to the electronic workplace?

How will office systems, groupware and intranet technologies, component products and architectures evolve through 2004 to deliver on the promise of the electronic workplace?

Workplace transformation by necessity must cut across organizational boundaries. In this section we explore the rationale for utilizing a cross-disciplinary workplace transformation team and describe an effective implementation process.

Strategic Planning Assumptions:

By 2003, IT will merge with other corporate functions such as real estate and HR to provide shared support services and integrated infrastructure management in 30 percent of North-American-based global organizations (0.7 probability).

By 2003, 80 percent of workplace transformation projects of the Global 2000 will be implemented by interdisciplinary project teams consisting of representatives from the IS organization and telecommunications, facilities and real estate, HR, finance, legal and business operations (0.8 probability).

The traditional workplace has evolved slowly during the last 100 years. Office work mirrored factory work in that jobs were principally task-oriented and pre-defined. Work is now what you do, not where you go. Building the platforms and contexts of this new workplace is the mission of workplace transformation. But the workplace is not just about building and supplying the connectivity — the hubs, routers, servers, cable plant and remote access capabilities. It’s not just about building and servicing the myriad of new work settings such as team rooms, hot desks, call centers, multimedia centers, telework centers and home offices. It’s not just about building workplace policies, procedures, practices, social contexts, business cultures and leadership styles. It’s not just about designing and delivering shared and user-specific applications. And it’s not just about sourcing the necessary support services to care and feed the new workplace. It’s all of the above as an integrated system; and the key word is “integrated.”

Workplace making is evolving into a new professional discipline; a hybrid management function like the combination of biology and chemistry into biochemistry. A three-phase integration methodology describes how workplace transformation is effectively implemented, based on documented best practices. The process begins with a strategic assessment or reassessment — first of business indicators, which includes a SWOT analysis of workplace configurations and capabilities.

Strategic questions might include:

To what degree can we virtualize field sales and service personnel and eliminate traditional sales offices?

Can we split back-office from front-office locations and move administrative operations to self-service Web-enabled sales channels?

Should we supplement traditional retail locations with a Web sales and customer service application?

The second phase moves to project planning. The project plan converts the strategic plan into a project action plan. The essence of the planning process is to explicitly define the range of behaviors within specific workgroups needed to deliver enterprise goals. These behaviors might include team collaboration, maximum face time with customers, a consultative vs. transaction approach, or customized vs. pre-engineered work products. Next, the planning process assesses the need for proximity within and between work teams to achieve the spectrum of desired behaviors.

Which employees must work immediately adjacent to each other?

Which employees must have walking-distance proximity or driving-distance proximity, and which workers need maximum mobility or can work from anywhere?

This process redefines infrastructure (places and connectivity) around two primary workplace requirements: proximity and mobility. The plan is best accomplished as a cross-disciplinary effort including operating management, IT, facilities and real estate and HR. Specific workgroup needs translate into specific projects; projects that eliminate certain locations, rearrange or enhance certain locations, and add the IT infrastructure, mobility devices and applications to meet both traditional and virtual work processes. The project plan is cast as a series of action steps with definitive time lines, milestones and budget allocations.

The third phase includes project approval and implementation. Once approved, the project phase moves to site selection, contracting, design, IT infrastructure and application specification/acquisition, build-out, and physical move. The interdisciplinary project team should oversee the projects throughout the implementation cycle, insuring cross-functional coordination, issue resolution, and communications with stakeholders and executive management. A post-project evaluation and adjustment phase is typically conducted to measure project success against planned budget, scope, employee/management expectations and schedule targets.

Workplace transformation is about fundamentally changing the context of work, and thus rebalances the equation between, people, places, processes and technology. Best practices embrace a holistic and integrated approach to workplace making by forming interdisciplinary teams and following a systematic project planning and implementation process. IS managers who resist a cross-functional approach do so at their peril.

4.3 Best Practices in Office Design Enabled by IT Work Styles

To increase the employees’ ability to choose how, when and where they work, enterprises are rethinking traditional office configurations. Gartner explores best practices in office design.

A 1999 study by Cornell University concluded that significant proportions of headquarters office staff, from executives to administrative staff, are absent from assigned offices or workstations at some time during the typical workday. The study determined that the average

at desk rate for all job classifications ranged from 43 percent to 58 percent. This study validates the general workplace trend that office workers are becoming more mobile both outside and inside traditional workplace boundaries.

A growing trend among office workers exists to work more collaboratively in team environments such as team work areas, huddle rooms, conference rooms or project rooms.

A parallel trend in office design is the shift from office size as a perquisite or symbol of rank, to office size and configuration based on need. Many enterprises are adapting open-plan workstations for all personnel, including managerial, professional and executive employees.

A third trend in office design is the adoption of alternative workplace solutions such as office hoteling, shared space, free address, group space and off-premises solutions such as teleworking or satellite facilities.

Enterprises have begun to adopt three best practices to increase employee flexibility, enhance collaborative work practices and better utilize office space. They are:

Space Utilization: Enterprises are generally moving to smaller allocations of personal space per employee. On average, workstations range in size from 65 square feet (open plan) to 120 square feet (enclosed offices). Enterprises that utilize open-plan workstations are adopting a “universal” planning standard for workstation size (i.e., no more than one to two workstation sizes), making it possible to move people rather than walls in response to frequent organizational or workflow changes.

Space Configuration and Furnishings: Open-plan workstations and flexible furnishings greatly enhance ergonomics and employee interaction. Leading vendors offer a broad array of workstation solutions that provide ergonomic seating, adjustable work surfaces, ambient and task lighting, sound masking, and computer support and cable management. Team room solutions combine individual workstations with conference tables that can be re-configured to suit specific requirements. Innovative work modules offer highly functional, private, space-saving work areas that meet requirements for visual and acoustic privacy.

Alternative Workplace Arrangements: Best practices are producing a shift in office arrangements from individual spaces to group spaces that enable employees to choose work settings according to task requirements. Because of increases in employee mobility and the employee demand for greater workplace flexibility, enterprises are adapting nonterritorial or unassigned office arrangements such as office hoteling, where employees either reserve workstations in advance through an office reservation system or utilize nonassigned cubicles, offices, huddle rooms or “hot desks” as available. A key success factor in these arrangements is universal network connectivity within the work area. Employees must be able to “plug and play” (i.e., access files from any workstation, conference room, team room or work setting within the office or campus). In these alternative workplace arrangements, employees have personal storage facilities and lockers for files or personal items. Such alternative workplace arrangements foster flexibility, increase the settings for collaboration, and allow offices to “scale” easily as head count grows or contracts.

The Cornell study determined that, on average, 10 percent of employees were absent due to vacations or illness, 10 percent were absent for unknown reasons but were assumed to be traveling or at off-site meetings, and 30 percent were at on-site meetings or temporarily

absent from their workstation or office. Importantly, the study validated that employees today are less “tethered” to assigned workstations, and suggested two opportunities:

Minimize personal space

Increase collaborative space

Traditional office areas are shifting from individual to group settings, as work becomes more mobile and collaborative. Employees are demanding greater workplace flexibility and choice, and management is demanding greater cost efficiencies and employee collaboration. Thus, management should reconsider the benefits of alternative workplace settings and arrangements. Those who fail to match effective office arrangements with new IT-enabled work styles will run the risk of having underutilized facilities and disaffected employees.

4.4 Integrating IT Into Facilities Projects: A Checklist for CIOs

Facilities projects require close coordination among the IS, HR and real estate groups. Failure to do so results in cost overruns, dysfunctional IT operations and employee defection. In this section we provide a project checklist for success.

Strategic Planning Assumptions:

By 2003, IT will merge with other corporate functions such as real estate and HR to provide shared support services and integrated infrastructure management in 30 percent of North-American-based global organizations (0.7 probability).

By 2004, companies that integrate IT planning with facilities project plans will reduce the risk of facilities project failure by 35 percent (0.7 probability).

Increasingly, IT infrastructure is central to the operational viability of most business facilities; it is no longer just a data center issue. IT infrastructure permeates business facilities, just as the human nervous system runs throughout the body. It is critical for IS management to actively participate in facilities change projects. Thus, IS management should address the following questions to minimize the risk of IT causing a facilities project to fail.

Strategic Issues: To what degree can information technology impact the location, size and configuration of the planned facility? IT can enable workplace alternatives such as telecommuting and “hoteling.” In addition, WAN connectivity enables companies to split back-office from front-office operations, which can reduce overall costs. IS management should raise these issues during the project planning process.

Labor Availability: What are the critical site selection criteria from an IS labor standpoint? The IS department must ensure that the site selection criteria specify access and availability of qualified staff with the necessary skills required to support the IS mission at the new location. In the event of a distant relocation, IS management must assess the expected defection of staff and the impact on relocated operations.

Utilities and Communication Services: Does the site selection criteria include specifications for sufficient electrical power and communication services? It is critical that the IS organization specify the electrical requirements and communication services to include trunk lines, data lines and cable TV service availability if required. Redundancy in power backup and connectivity access is essential. And the differential in communication

costs can vary widely from one location to another; a critical issue needing IS review and input.

IS Support Services: Does the site selection criteria ensure that IS support and maintenance services are readily accessible in a timely fashion? The site selection criteria should ensure that communications and data equipment and systems will have reliable, prompt, 24x7 (24 hours a day, seven days a week) maintenance services.

Building Infrastructure: Does the building selection criteria include specifications for IS infrastructure requirements? It is essential that selection criteria specify the horizontal and vertical chase-way capacity for communication cabling. In addition, the building criteria should specify the number and size of equipment closets by floor for network terminal equipment.

Building Services: Many IS operations require 24x7 capability for data centers, including multiple shifts, help desk or network operations. If required, the building selection criteria should specify the need for 24-hour employee access, utilities and HVAC services (heating, ventilating and air conditioning).

Security: It is essential that the building offer the necessary perimeter security, guard services, closed-circuit television surveillance, card key access, and other security measures required for secure IT operations. In this regard, the location of critical data centers should be positioned to minimize the impact of violent weather, vandalism or acts of terrorism.

Office Furnishings and Layout: IS management should participate in the specifications for office configuration to ensure that the IS staff has adequate conference and team rooms, work surfaces, storage, equipment connectivity, lighting, acoustics and ergonomic features in seating and desk height adjustment.

Project Financial Analysis and Justification: IS management should collaborate with the HR and facilities project staff in the financial analysis and justification of the proposed facilities project. Total capital investment, one-time project costs, related tax effects and ongoing costs should be scrutinized to ensure that the IS component of the project budget is fully covered, including adequate budget contingencies.

Facilities change projects offer windows of opportunity to transform the workplace, which can result in improved efficiencies and effectiveness. A change of location offers a unique opportunity to upgrade IT infrastructure capabilities and services. However, IS managers who fail to become actively involved in significant facilities change projects early in the planning process, risk staffing issues, financial overruns and operational failure at the new location, requiring lengthy and costly remedial action.

5.0 Enterprise Total Cost of Ownership

A new accounting standard, ETCO, offers a broader framework to evaluate IT TCO for office work, offering powerful new insights into IT investment relative to total infrastructure costs. The IT TCO chart of accounts includes five direct cost elements:

Hardware and software

IS management

IS support

Development

Communications

Two indirect cost elements are:

End-user IS costs

Downtime

ETCO adds direct and indirect costs to IT TCO from the workpoint framework to include direct and indirect occupancy costs, home office setup, direct and indirect non-IT equipment, and direct and indirect non-IT support costs.

Strategic Planning Assumptions:

By 2004, 30 percent of global enterprises will implement ETCO frameworks and analytical models to improve infrastructure cost effectiveness for office-type work (0.7 probability).

By 2004, 30 percent of global enterprises will implement workpoint accounting and use ETCO frameworks and analytical models to improve infrastructure cost effectiveness for office-type work (0.7 probability).

By 2004, those enterprises utilizing ETCO will identify at least 50 percent of total IT-enabled cost savings in the fixed infrastructure and non-IT support services of the enterprise (0.7 probability).

ETCO Links Space With Cyberspace: TCO for distributed IT infrastructure has become an industry-standard methodology for measuring the cost implications of various distributed hardware and software configurations in the enterprise. However, a new accounting standard issued by the Institute of Management Accountants (IMA) in mid-1997 offers a broader framework to consider IT costs and investments in the context of total infrastructure and support costs. The statement of management accounting (No. 4BB), titled “Practices and Techniques: The Accounting Classification of Workpoint Costs,” issued by the IMA in 1997, maps closely to the overall cost classifications of TCO and results in a similar unit cost per-employee. Gartner refers to the new framework as ETCO (see Figure 5). By expanding the cost measurement to include all direct and indirect knowledge worker support costs, CIOs can spot cost-reduction opportunities or unforeseen, incremental costs resulting from IT infrastructure investments elsewhere in the enterprise.

The new workpoint accounting standard was prompted by the transformation of the office workplace from traditional place-based settings to highly dynamic virtual settings. Cost analysis needed to shift from a “place-centric” model to a “people-centric” model. Similar to various IT TCO accounting classifications, the workpoint model measures the total cost to support the office worker, whether in the traditional office, working at home, or traveling on the road.

+

TCO for IT

Direct Costs:Hardware and SoftwareIS ManagementIS SupportDevelopmentCommunications

Total Direct Costs

Indirect Costs:End-User IS CostsDowntime

Total Indirect Cost

Total TCO per Employee

Workpoint Standard

Direct Costs:Direct Space (Including Home Office)Direct Equipment and SupportConnectivity

Total Direct Costs

Indirect Costs:Indirect SpaceIndirect Equipment and Support

Total Indirect Costs

Total Workpoint Cost per Employee

ETCO (TCO + Workpoint)

Direct Costs:Direct Space (Including Home Office)Hardware and SoftwareIS ManagementOther ManagementDirect Equipment and SupportConnectivity (Including Communications)IS SupportDevelopment

Total Direct Costs

Indirect Costs:End-User IS CostsIndirect SpaceOther Indirect Equipment and SupportDowntime

Total Indirect Cost

Total ETCO per Employee

=

ETCO Enterprise total cost of ownershipTCO Total cost of ownership

Source: GartnerFigure 5. Chart of Accounts

New Insights, Better IT Investment Decisions: The CIO can glean a number of new insights by integrating the results of the TCO analysis with the other cost elements of the workpoint cost model. Consider the following three scenarios (see Figure 6):

Higher IT TCO, But Lower ETCO: Management is considering the relocation of the corporate headquarters to a smaller downtown setting, and relocating back-office operations to a low-cost call-center operation in the suburbs. IT TCO analysis results in an increase from $10,000 to $12,000 per employee. However, overall ETCO costs were reduced from $32,000 to $30,000 per employee, a net savings of $2,000 per employee. The lower real estate costs and other non-IS support costs more than offset the higher IT investment.

Lower Real Estate Costs But Higher ETCO: Management is considering the elimination of 25 sales offices to save real estate costs, moving the sales force into a telecommuting

environment equipped with laptops and cellular phones. IT TCO costs will increase considerably from $8,000 per employee to $12,000, even though real estate costs will be reduced from $9,000 to $7,000. The overall ETCO cost will go from $17,000 to $19,000, a possibly ill-advised real estate strategy according to the ETCO cost analysis.

Marginal IT Investment Is Actually a Winner: Management is evaluating a Web-based customer service strategy to replace traditional customer service operations. The IT TCO cost is significant. With development cost, hardware upgrades and training, incremental IS staffing doubles the IT TCO metric from $8,000 to $16,000 per employee. But when the ETCO model evaluates overall infrastructure costs including the elimination of customer support staff, administrative space, non-IT support costs and other direct and indirect costs, the overall ETCO per employee is roughly break-even. The business payoff is gained on improved customer service, quicker response time, and increased order rate.

Relocate corporate headquarters

Split back office to a call center

ETCO < $2,000

Scenario 1

PSI

ITI

PSI

ITI

$32,000$30,000

Before After

Move customer service to the Web

Eliminate administration centers

ETCO = Break even

Scenario 3

PSI

PSI

$24,000 $24,000

ITI

ITI

Before After

Eliminate 25 sales offices

Virtualize sales teams

ETCO > $2,000

Scenario 2

PSI

$17,000$19,000

PSI

ITI

Before After

ITI

ETCO Enterprise total cost of ownershipITI Information technology infrastructurePSI Place/space infrastructure

Source: GartnerFigure 6. Three Scenarios for Assessing Virtual Workplace Alternatives

Action Item: Enterprises should utilize a holistic cost framework, such as ETCO, to evaluate workplace economics and compare these costs to alternative workplace strategies. Specific focus should be aimed at the incremental costs associated with remote access and data transfer.

ETCO Creates a Bridge to Better IT Decisions: The workpoint accounting standard and its derivative framework, ETCO, provide a bridge between the major asset management and service functions in the enterprise. ETCO ties the worlds of space and cyberspace to reveal interdependencies and cost tradeoffs across functional boundaries. It gives the CIO a much more inclusive view of infrastructure investment and payoff.

Recommendation: Enterprises should evaluate the broader cost implications of IT investments that use ETCO frameworks to identify the cross-functional impact of these investments on traditional brick-and-mortar operating costs.

The new IMA workpoint accounting standard doubles the power of TCO analysis. With ETCO as the new derivative analytical framework, the costs of IT office infrastructure investment can be optimized across the enterprise. CIOs who fail to adopt the broader perspective of the IMA

workpoint accounting standard and its derivative metric, ETCO, will risk understating or overstating the IT investment impact on total operating costs, and thus squander real business value to the enterprise.

5.1 Case Studies

5.1.1 IBM North American Sales Case Study

Strategic Planning Assumption: By 2004, those enterprises that are using ETCO will identify at least 40 percent of total IT-enabled cost savings in the fixed infrastructure and non-IT support services of the enterprise (0.7 probability).

For the last eight years, IBM has implemented a far-reaching employee mobility program for field sales and service employees throughout North America. More than 12,500 employees have given up their assigned workstations, and as of 1998, approximately 17 percent of IBM’s worldwide workforce was equipped to work anytime, anywhere. The program was piloted first in Asia, then Europe, and in 1992 was imported to North America.

Between 1992 and 1997, IBM’s ETCO, as a percent of revenue, dropped from 5.3 percent to 2.2 percent. Virtually the entire cost reduction (nearly $1 billion per-year) was yielded from reductions in office space. Data and telecommunication costs remained constant throughout the six-year period, moving from 10 percent of ETCO to nearly 35 percent. Overall, ETCO per-person dropped from $15,900 to $9,800 and productivity increased as measured by increased revenue per-salesperson.

Recommendation: Enterprises should use a holistic cost framework, such as ETCO, to evaluate workplace economics and compare these costs to alternative workplace strategies. Specific focus should be aimed at the incremental costs associated with remote access and data transfer.

5.1.2 Sun Microsystems Case Study

Sun Microsystems, a leading global provider of Internet products and services, increased its market capitalization value to more than $100 billion in 1999. A key success factor in Sun’s business performance is its innovative approach to workplace transformation, a strategy that Sun chairman and CEO, Scott McNealy, has termed “clicks-no bricks.”

Problem: In 1995, Sun’s staff growth began to exceed the capacity of its Silicon Valley campus. The enterprise needed to expand its facilities portfolio to accommodate staff growth that was expected to continue globally through the balance of the decade. Sun embraced a traditional private-office work environment for its engineers, professionals and managers. It also required most employees to work at company locations. With growing labor shortages in IT, rising cost of real estate in the San Francisco Bay Area, and the need to scale the workplace infrastructure, Sun adopted a comprehensive strategy to transform the workplace environment for its worldwide operations.

Objective: Sun articulated four strategic goals for its workplace transformation initiative:

Penetrate markets and serve customers

Attract and retain talent

Drive change and productivity

Contain costs relative to growth

Approach: Sun executed a comprehensive workplace transformation strategy that was enabled by a three-part planning model.

First, Sun analyzed expansion sites outside its traditional home base in Palo Alto, California. The enterprise targeted IT cluster locations that offered the combination of a talented workforce, geographic diversity, high quality-of-life factors, and a high-bandwidth communications infrastructure. Sun targeted growth sites in Denver, Boston and Munich, Germany. Future sites will include Bangalore, India, Dublin, Ireland, and Grenoble, France.

The second component of the workplace strategy was to link business goals with organizational behaviors enabled by appropriate workplace settings and communication linkages. The model articulates specific business-unit goals, identifies the desired organizational behaviors to achieve the stated goals, and then provides a “bundle” of workplace settings, work practices, IT tools, workplace services and communication linkages to support the desired organizational behaviors. The approach is business-driven and user-centric. It creates a hard linkage between business goals, organizational behaviors and supportive workplace infrastructure and services.

Business Goals:

Increased employee flexibility

Increased customer intimacy

Faster cycle time

Lower enterprise total cost of ownership

Desired Behaviors to Achieve Goals:

Ability to work anytime, anyplace

More face time with customers

Increased team collaboration

Willingness to abandon facilities as perquisites

Workplace Solutions:

Mobility tools and remote access connectivity

Flexible work processes and protocols

Team work settings and collaborative applications

Workplaces provided on basis of need rather than title

The third component of Sun’s workplace transformation strategy was the creation and adoption of the organization connectivity model that analyzes a workgroup’s need for

physical proximity. Sun’s workplace planning process analyzes proximity needs between departments in four connectivity categories.

Connectivity Categories (types of working links between groups or individuals):

Development (joint, parallel, complementary and support)

Business (customer and supplier)

Reporting (mature or emergent)

Collocation Categories to support these types of working connections:

Immediate: Need to be within 50 feet of each other most of the time (in department)

Proximate: Need to be within 10 minute walking distance (on campus)

Distant: Need to be within day-trip distance most of the time (by plane, train or automobile)

Virtual: Can work from anywhere, anytime

Results: Sun’s workplace transformation strategy is expected to save $200 million annually in workplace costs within two years. The enterprise has successfully diversified its expansion sites within planned budget and schedule targets. Due to the connectivity model, the enterprise has reorganized around product group proximity as opposed to functional or organizational identity. A large percentage of the sales, service and support staff has adopted a virtual work style. By shifting from bricks to clicks, Sun expects to scale its organizational growth without increasing its brick-and-mortar portfolio.

By utilizing the connectivity model, Sun discovered more-efficient workgroup clusters and virtual workplace alternatives such as telecommuting and office hoteling. The process aligns work styles with work settings and tools. From a service delivery standpoint, Sun has organized all workplace-related resources into a shared service organization. The facilities and IT infrastructure including desktop, mobility devices, servers and connectivity (data and voice services) are integrated into a workplace resources organization reporting to a vice president, who is a member of Sun’s executive committee. Non-user-related IT functions, such as application development, were transferred to a business unit.

Conclusion: Sun has redefined its workplace as an integrated system that is more aligned with business goals and desired organizational behaviors. Many global enterprises are moving toward workplace support as a shared service model. Business leaders that fail to rethink their workplace environments and technology tools and practices as integrative resources will lose substantial competitive advantage to those that do.

6.0 Trustware: A Four-Part Management Strategy

Key Issues:

How will enterprises foster a sense of workgroup community in a dispersed workforce through 2004?

How will organizational strategies evolve to support transformation to the electronic workplace?

Strategic Planning Assumptions:

Through 2002, at least one-third of all initial telecommuting deployments will be canceled within the first year (0.7 probability).

Through 2002, initial telecommuting deployments that implement the principles of trustware will experience an 80 percent favorable employee satisfaction rating (0.7 probability).

By 2003, more than 137 million users worldwide will engage in at least part-time telecommuting as a function of their employment contracts (0.7 probability).

By 2005, those enterprises that adopt the principles and practices of trustware will improve telework implementation success by 30 percent (0.8 probability).

How can management build an effective social infrastructure for the remote workforce? The move to alternative workplace programs such as telecommuting or virtual office can face management and employee resistance unless appropriate steps are taken during the planning and implementation process. Change is always disruptive and stressful, and moving to a telecommuting or other form of alternative workplace is no exception.

Successful remote work initiatives have similar characteristics. Most importantly, alternative workplace programs must be built on the foundations of trust in the social fabric of the enterprise. Remote work changes the fundamentals of working relationships between employees and managers. Employees fear being “out of sight, out of mind,” while managers fear losing a sense of supervisory control. Thus, it’s essential that explicit efforts are taken to build a work environment and organizational culture that is grounded in trusting relationships. Gartner calls this management strategy trustware, a set of explicit management actions that build foundations of trust in the social infrastructure of the enterprise.

In brief, trustware consists of four interrelated components:

Leadership sets the vision and demonstrates by matching actions with words that management supports the new way of working

Processes are designed that ensure explicit communication protocols and work practices

Communication tools and support services are selected to facilitate remote access and virtual collaboration

Workplace settings are redecorated over the long term to accommodate a transient workforce that needs “just in time” workstations, conference rooms, storage facilities and administrative support when periodically visiting the company premises

6.1 Management Strategy Part One: Leadership

Workplace transformation must flow from senior enterprise leadership, which must demonstrate by word and action that it supports the new way of working.

Set the vision: Hatim Tyabji, former chairman and CEO of VeriFone, managed the entire worldwide enterprise from his home in Washington state. As a telecommuter himself, Tyabji describes his leadership vision: “Leadership requires moral authority. You can’t have moral authority if you behave differently from your people. Though global in scope, we define ourselves as a virtual company, one that operates continuously through traditional barriers of time and distance. The entire company communicates around the clock via electronic mail and other information systems and tools.”

Walk the talk: Senior management must explicitly affirm (or reaffirm) the enterprise’s commitment to the virtual work style. Communications in company newsletters, Web pages, town meetings and focus groups should articulate the rationale for telework and link it to the enterprise’s vision and business strategy. During AT&T’s launch of its virtual office initiative, the CEO declared a telecommuting day throughout the enterprise. All employees who could do so, including management, were encouraged to telecommute for a day to experience a virtual workday.

Recommendation: Enterprise management must assume ownership for telework success and demonstrate by word and action that it fully endorses and supports the new way of working.

6.2 Management Strategy Part Two: Processes

When launching a telework program, best practices adopt a series of explicitly designed processes that build a sense of confidence and trust between management, employees and co-workers.

Validate eligibility: Managers must encourage employees to conduct a self-audit to validate their eligibility for remote work. The audit should consider organization and planning skills, project management skills, time management, self-discipline and the ability to manage the friction between personal and work commitments. For certain employees, telework is an inappropriate work style and should not be arbitrarily imposed. At Cisco Systems, workplace specialists work with employees and managers in developing and conducting self-audits for telework eligibility.

Strike a fair deal: Managers and teleworkers must agree on key objectives and expectations, and negotiate agreeable communication protocols that promote a productive and trusting relationship. American Express established a telecommuting work agreement that outlines a working contract between sales manager and employee.

Define success: The manager and teleworker must agree on performance measures and success criteria for annual performance reviews, promotion and bonuses. A key shift in managing a teleworkforce is managing results vs. managing activities. Focus shifts from inputs to outputs. What gets done replaces focus on how, where, or when work gets done. At Quantum, a multifunctional team devised a scorecard or dashboard that measures individual and virtual team performance based on outcomes, not activities.

Build the linkages: The manager should encourage the teleworker to establish explicit communication linkages and protocols between colleagues and teammates. These might include weekly audio/teleconferences, monthly face-to-face meetings, and ad hoc discussions on the enterprise’s intranet, i.e., chat rooms or special interest groups. Company sanctioned social events such as team picnics, outings, or sports contests can foster and build trusting relationships between colleagues and managers. Sprint’s small business division in Kansas City received recent press recognition for its occasional sales team bowling games, baseball games, evenings of karaoke, mock casinos, and other

social events to build team spirit and inject fun (and social bonding) into the work process. In the same vein, the manager should encourage the teleworker to establish explicit communication protocols with clients. These might include weekly phone meetings, or immediate client access through a pager, cell phone, or “follow me” phone connectivity. At Gartner, clients can pre-arrange phone conferences with research analysts, utilizing the company’s communication hub, the Bridge, which connects clients and analysts anywhere in the globe on a group call, or one-on-one conference.

Train continuously: Training is arguably the most critical process in building the social infrastructure for telework. Training curricula should be targeted at managers, teleworkers, and managers and employees who work in traditional settings and who may harbor resentment or jealousy toward their teleworker counterparts. Topics should focus on the strategic, tactical and operational aspects of telework with particular emphasis on managing results (not activities) and building trusting relationships. AT&T developed a workplace education series to help its business leaders, project teams, managers, and employees understand the issues, opportunities, and challenges associated with operating in a telework environment. The program was so successful, AT&T now offers the training on a commercial basis. And Merrill Lynch has set up three telecommuting simulation training labs where prospective teleworkers trial the virtual work style in a mock-up home office environment.

Take the temperature: Management should conduct periodic attitude surveys of the telework community to check for employee dissatisfaction with the social infrastructure and identify priority issues that need management attention. At Work/Family Directions, a Boston-based HR consulting firm, managers survey teleworkers and customers to gauge virtual workplace effectiveness with focus on qualitative, not quantitative indicators of satisfaction.

6.3 Management Strategy Part Three: Communication Tools and Systems

Best practices in telework implementation include a comprehensive assessment and retooling of communication tools, applications and services, with a focus on matching the tools to specific job requirements.

Check the tools: Management should conduct periodic audits of the technology infrastructure and focus on remote access, file transfer, security, legal compliance and software applications that support intragroup communication and collaboration. The audit should be particularly focused to assess congruency between teleworker expectations and actual functionality. One company equipped its telecommuters with PC-based video cameras and Integrated Services Digital Network (ISDN) lines, assuming that visual connectivity with colleagues and supervisors would facilitate communications. The result was that no one turned on the cameras for fear of surreptitious surveillance and an intrusion of privacy.

Retool the tools: Matching the technology to the work process can reveal opportunities to simplify and streamline. As mentioned above, VeriFone built and connected its globally virtual enterprise on a simple e-mail system. The communication network is nothing elaborate or state-of-the-art, but is enormously effective in connecting the enterprise and achieving a pre-eminent position in point-of-sales technology and market share. For virtual work teams, upgrading to groupware may be needed as jobs change; downgrading the tools may also be appropriate.

6.4 Management Strategy Part Four: Hospitable Work Settings

Best practices in telework implementation re-configure traditional office settings that support transient mobile workers who periodically visit the company premises.

Redecorate for mobility: As a final step in the trustware model, management should develop strategies to convert traditional office settings into environments that are more conducive to teleworker interaction and collaboration during visits to the company premises. These settings may include a greater proportion of conference rooms, team rooms, project rooms and touch down cubicles that can be used on a just-in-time basis for quick phone or e-mail sessions. Citibank is experimenting with a new concept in office space they call Citispace. Managers work in small “personal harbors” or privacy pods. Two or three person conversation rooms facilitate confidential interaction. Larger collaboration rooms support team-based work, complete with white boards, tack boards, multiple computer terminals, monitors, speakerphones, and other collaboration tools and support furniture.

Add to the virtual portfolio: Telework centers may be considered that are closer to the remote workforce, or company-sponsored membership in airport clubs or executive suites might be an effective supplement to the teleworker workspace beyond the home or company premises. Many enterprises are entering into national contracts with small office/home office (SOHO) retailers to offer office services to remote workers, such as office supplies (e.g., Staples); graphics, printing, and videoconferencing (e.g., Kinko’s); and shipping and distribution services (e.g., Mail Boxes Etc.). Ernst & Young has pioneered innovative activity settings for remote workers in its office facilities. Team work rooms, communications pods, one-on-one conversation rooms, and other settings are designed explicitly to support and enhance the remote and transient teleworker while visiting the company premises. Outside of London, IBM has created a business club environment for its mobile sales force. Banks of phones, hot desks, plug-and-play stations for e-mail download, a sales collateral library, cafe, and workrooms provide a hospitable oasis for the salesman on the move. Corel has entered into a pan-European contract with an executive suite operator to provide fully equipped and connected workstations to its teleworkers on a just-in-time basis; sort of an airport business club membership, but not at the airport.

Telework in all its manifestations is becoming a mainstream workstyle for global business. Improved productivity, cost reduction, organizational flexibility and agility, public policy, and enabling technologies are key drivers of the virtual workplace. But for many enterprises, telework is meeting with rejection and failure. A key strategy to restore and sustain an effective telework initiative is to build an explicit social infrastructure or trustware, for the enterprise that enables relationships built on the foundations of trust, dependability, consistency, congruency and mutuality. To build such an infrastructure, enterprise leadership must set the tone and reinforce the vision and rationale for the virtual work style. Management must institute processes that create the skills, communication protocols, performance standards and expectations that facilitate building and sustaining trustful relationships between the teleworker, the enterprise and external contacts.

Finally, trustware aligns and integrates the social infrastructure with the communication and physical infrastructure so that the work tools, communication systems and work settings foster trusting interaction and collaboration whether in space or cyberspace.

Trustware is eminently applicable to the traditional workplace. It is a coherent way of thinking about leading and managing a knowledge-based enterprise where intellect, creativity and

learning are the new progenitors of value; where people matter the most. But trustware is essential for the virtual enterprise where trust, not command and control, binds, energizes, and sustains the organization.

7.0 The Trustware Index: A Simple But Powerful Measurement Tool

The Trustware Index is a quick but powerful method to assess the level of trust within the enterprise by ranking the work environment in the four categories of trustware: leadership, processes, communication tools and systems, and hospitable work settings. In the ranking, consider the following four key perceptions from the standpoint of the teleworker.

Dependability: To what degree do the processes, procedures, policies, support services and tools instill confidence by engendering a sense of predictability, reliability and certainty? For example, help desk services are dependably available within a set number of rings. Teleconference team meetings are scheduled regularly and begin promptly.

Consistency: To what degree do processes, procedures, policies, support services and tools instill confidence by assuring fairness and a sense of equality throughout the workforce community? For example, eligibility criteria for telework are applied consistently across the organization, and traditional office-bound personnel are given equal consideration and support.

Congruency: To what degree does perception match reality? Are things really as they seem? For example, do enterprise facilities actually meet the needs of visiting teleworkers? Does management practice align with management pronouncement?

Mutuality: To what degree do processes, policies, procedures and expectations instill a sense of reciprocity and shared benefit between the teleworker and the employer? For example, are compensation incentives aligned with company goals?

Component Indicator Score

Leadership Rate senior management’s communication of thecompany’s commitment to the virtual work style.

Rate management’s behavior in supporting the virtualwork style: Does it “walk the walk”?

Processes Rate how well management validates eligibility for remote work.

Rate how explicit the agreement is between management andemployees on remote work processes.

Rate the performance measures and success criteria for remote work.

Rate the communications processes and protocols that facilitatecommunication between employees, colleagues and supervisors.

Rate the training processes for remote workers and supervisorsin working and managing in a remote workplace.

Rate employee satisfaction processes.

Rate the effectiveness of remote access systems from thestandpoint of speed, reliability and accessibility.

Rate the support services such as help desk, equipment maintenanceand repair, supplies, and mail services for the remote worker.

Rate the effectiveness of collaborative software applications.

Rate the suitability of office settings explicitly designed for thetransient worker such as visitor workstations, team rooms, storagecabinets and conference rooms.

Rate management support for alternate work settings such as executivesuites, airport club memberships or retail facilities with workstations.

Total

CommunicationsTools and Systems

HospitableWork Settings

Source: GartnerFigure 7. Trustware Index Questionnaire

An enterprise should use the Trustware Index questionnaire (see Figure 7) and score each question as follows:

1 = Poor

2 = Below Average

3 = Average

4 = Good

5 = Excellent

Analysis of Scores:

13 to 23 — Poor. The remote work program is in serious jeopardy and will eventually fail. Management “triage” is recommended. Fix the most critical problems first.

24 to 34 — Below Average. Aggressive remedial action is urgently needed.

35 to 45 — Average. The enterprise may be at risk; management is advised to evaluate the remote work program and institute corrective action on a proactive basis. Fix those issues that could grow into serious problems.

46 to 56 — Above Average. In general, the remote work program should be operating effectively.

57 to 65 — Excellent. The enterprise has instilled a strong sense of trust in the work environment and should be demonstrating superior organizational performance and low employee turnover.

Remedial Action Plan Prioritization: For those enterprises scoring below average (35) on the Trustware Index, remedial action is urgently required.

Priority No. 1, management should target high-impact, rapid-deployment actions including a comprehensive employee communication program, an overhaul of policies, procedures, and practices, and most importantly an urgent commitment to employee and management training or retraining.

Priority No. 2, a focused upgrade of the communications infrastructure to include remote access connectivity, collaborative software applications, and mobility support tools. Equally important is to upgrade support services with emphasis on reliable help desk support and remote supplies and equipment maintenance support.

Priority No. 3, a comprehensive assessment of the physical work settings to insure that activity areas, furnishings, and office support services are tailored to the transient workforce. On a longer-term basis, changes to the office portfolio regarding location and configuration will enhance teleworker access and convenience.

Successful remote work programs must be supported by the components of trustware, a four-part management strategy that weaves and sustains a fabric of trust in the social infrastructure of the enterprise. The Trustware Index can reveal fissures in this social fabric, and inform a corrective action plan. Enterprises that ignore the principles of trustware risk failure in remote work initiatives and can suffer inferior business performance.

Recommendation: Enterprises should focus on building a high level of trust in the social fabric of the extended workplace. These actions must be initiated by senior business leadership and included as a key component in a workplace transformation pilot project and rollout plan.

8.0 What Is a Virtual Team and How Should It Be Managed?

A virtual team is a workgroup of individuals that conducts most of the work of the team physically apart in a synchronous or asynchronous communication medium, utilizing a spectrum of groupware applications from simple e-mail to collaborative applications such as:

Intranet/Internet discussion groups

Lotus Notes

Microsoft Exchange

Microsoft NetMeeting (videoconferencing)

Centra Software’s Symposium, a distance learning tool

The members of the team, who are typically based in various locations, periodically meet face-to-face to maintain the social bond of the team (an essential imperative for maintaining trust and group esprit). Virtual teams are typically formed to accomplish a specific project goal. The team is formed, usually of members representing multiple disciplines and skills, and formulates a team work plan that outlines individual roles, responsibilities, task assignments, project milestones, communication protocols, success criteria, and performance measurements.

Another key guideline for virtual teams is the concept of empowerment. It is imperative that the team be empowered to plan and execute its work within preset levels of authority and accountability. The power of the virtual team is derived from its ability to execute work quickly and efficiently, unbounded by the barriers of time and space. Virtual teams can also describe traditional workgroups such as sales or service teams, whether they work predominantly in the field or from the home. To the degree that team members collaborate on specific work assignments such as a major account proposal or a new product launch, the characteristics and methods of the virtual team apply.

Best Practices in Managing and Sustaining Virtual Teams: Typically, a virtual team is sponsored by enterprise leadership, with a manager or executive that serves as team champion. The team champion can also be the traditional team manager. In this role, the team champion serves as a management advocate to the team and assists with interorganizational communication and political air cover, or protection. The team champion marshals the resources required and connects with the team periodically to review team progress against agreed-to goals, and to identify issues and other constraints requiring team champion action. The team champion’s role is to serve as facilitator, coach, resource provider and “constraint eliminator.” In addition to the team champion, the virtual team needs a team coordinator or administrator. The team coordinator administers the team schedule, sets up audio or video conferences, maintains meeting agendas and minutes, organizes and catalogues team archives and work files, and assists with the development of team deliverables.

It is essential that the virtual team meet face-to-face at the commencement of a project or work assignment to establish a rapport and set expectations for the group’s work plan and individual participation. In addition, the virtual team must agree to a set of communication protocols and other procedures that will govern the team’s interaction; work product development and review; and assignment of work responsibilities, accountabilities and deadlines. While the team can complete most of its work in cyberspace, best practice dictates that the team must periodically meet to maintain the social glue of the team and to minimize conflicts, misunderstandings or misconceived expectations. Depending on the nature of the virtual team assignment, face-to-face meetings can occur as frequently as once a week or as seldom as once every six months.

What Is the Downside of Virtual Teams?

Virtual teaming may not work for certain projects or work assignments and may result in project failure and employee defection. Projects that depend heavily on physical proximity and frequent ad hoc meetings are a high risk for virtual teams. Similarly, certain product development start-up projects with compressed deadlines are poor candidates for virtual team implementation.

What Is the Difference Between Virtual Teams and Distributed Workers?

A clear distinction exists between a group of distributed workers or telecommuters and a virtual team. A virtual team can consist of traditional, premises-based employees and remote workers. Because team members — despite their different physical locations — are working toward a common purpose and depend on each other for team output, a virtual team is by definition one that must collaborate primarily in cyberspace.

Through 2004, a growing proportion of knowledge work will be conducted in the context of virtual teams, requiring new work arrangements and management styles. Enterprises that fail to focus on building and sustaining a level of trust in the virtual work environment will risk eventual failure in virtual work initiatives and suffer inferior business performance.

9.0 Summary and Conclusions

The new connected economy is changing the fundamental rules of business, and the fundamental nature of work itself. No longer will the traditional, static, compartmentalized, and hierarchical model of the workplace suffice in a speed-based, agile, global, and knowledge-based economy.

Mobility, connectivity, integrated processes, and highly interoperable systems and applications are the emerging drivers of enterprise efficiency, effectiveness and inventiveness.

At the center of the new economy are people — specifically people’s skills, intelligence, relationships and imagination as the currency of value. And new hybrid business infrastructures that combine the power of IT with places and spaces newly conceived and adapted for more mobile and collaborative work are proving to be a key ingredient in the electronically mediated workplace.

The fundamental reality is that enterprises will be compelled to substantially increase their investment in IT through 2002 to maintain competitive advantage in the connected economy. This increase in IT investment will compel enterprises to transform in part: ”bricks to clicks” to shift resources to these incremental investments.

The second fundamental reality is that many traditional workplace locations, settings, and furnishings are incompatible with the highly mobile and collaborative style of the knowledge-based workforce. To attract and retain talented employees, traditional workplaces must be adapted for new flexible workstyles and expectations. For these reasons particularly, workplace transformation is emerging as one of the key drivers of change in the over-all e-business transformation.

Gartner has outlined the major strategies, implementation processes, success criteria, organizational best practices, and performance metrics of workplace transformation. But these alone are insufficient without the commitment and resolve of senior enterprise leadership to embrace workplace transformation as a key imperative in re-inventing the enterprise to compete in the new economy.

Appendix A: Acronym Key

CIO Chief information officer

ERP Enterprise resource planning

ETCO Enterprise total cost of ownership

HR Human resources

IMA Institute of Management Accountants

ITI Information technology infrastructure

PSI Place and space infrastructure

SWOT Strengths, weaknesses, opportunities, and threats

TCO Total cost of ownership

WAN Wide-area network

Appendix B: Definition Key

Caves and Commons/Privacy Space: A combination of individual workstations and group work area.

Conference/Multimedia Space: Special communication, teleconference or presentation facilities that are provided in a separate space.

Enterprise Infrastructure: The combination of two broad categories that are increasingly interdependent. The first is traditional workplaces and non-IT support services including offices, warehouses, retail outlets, manufacturing plants and administrative centers. Gartner defines this as place and space infrastructure (PSI). The second component is the digital infrastructure, which includes all shared enterprise IT infrastructure including components such as servers, hubs, routers, cabling and shared IT services such as help desk, maintenance, training and other cross-user-group support services. Gartner defines this as ITI (information technology infrastructure). Enterprise infrastructure is the combination of PSI and ITI as an integrated system.

Free Address: A mix of unassigned private and open-plan offices and team and retreat areas combined in one large integrated space.

Home Base: An arrangement where an employee has a permanent workstation as well as a workspace with another group.

Hoteling: Employees call to reserve a workspace.

IT cluster locations: Geographic areas that attract IT technology talent by virtue of location characteristics such as quality of life, university presence, entrepreneurial activity, high-bandwidth infrastructure and concentration of IT-related industries.

Moteling: Employees check in on arrival and are assigned a workspace with no advance reservation.

Office hoteling: Virtual workplace alternative in which workstations are unassigned. Employees reserve offices and workstations by the hour, day or week.

Organizational proximity: The relative degree of physical proximity required between employees, which is necessitated by daily interactions, collaboration and other work process requirements.

Relief Space: A huddle area where employees can interact with other employees to generate spontaneous or creative problem solving.

Satellite Offices and Telecenters: Alternate work facilities located closer to employees’ homes.

Shared Space: Two or more employees share a workstation.

Team or Group Address: This work environment is designated for use by a specific project team for the duration of a project.

Teleworking/Telecommuting: Employees work at home, at an alternate work facility or in a virtual environment.

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