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The impact of office designon businessperformance

The refurbished HMTreasury, winner ofthe 2003 BCORefurbishedWorkplace of the Year Award

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In a 2003 survey by Management Todaymagazine, virtually all (94 per cent) of thoseresponding said that they regarded theirplace of work as a symbol of whether ornot they were valued by their employer. Yet only 39 per cent thought that theiroffices had been designed ‘with people in mind’; and in another study no less thana third said that they were too ashamed of their offices to bring back colleagues or clients. This is the kind of gap whichshould worry management – and which,were it to occur in any other discipline in business, would almost certainly get urgent attention in the boardroom. So why do so many companies continue todress themselves in rags in a country whichmust, in the face of growing internationalcompetition, earn its living by its wits?

The answer may be that a company’s most natural response to that same forceof competition is to seek to drive down its costs – and premises represent a costthat is both readily identified and readilycomprehended. As in so many facets oflife, however, a preoccupation with costmay actually destroy value: but the ways in which office accommodation can createvalue for a business, not just througheconomy but also through improving the effectiveness of its people andbroadcasting positive messages about its values, are inadequately understood.

This study into the connection betweenoffice design and business performance is therefore both important and timely. It provides a positive route map for those facing the challenges andopportunities of addressing their business’s accommodation needs; and it does this by:

• summarising what we actually know, so that we can embed this learning ingood practice and avoid re-exploring the same issues

• summarising what more could be known,pointing to the need for further research

• proposing a framework for the analysisand application of accommodationfactors which affect businessperformance

• suggesting a standardisation of thelanguage and protocols by which this subject is pursued, so that we can accumulate a growing body ofknowledge on this matter of nationalimportance.

None of this will throw up easy answers,and one by-product of this study should be the abandonment of the very idea that there might be a single answer to any user’s question – a holy grail of officedesign. The report does, however, pointthe way by which individual users mightfind their answer, and demonstrates thatthe effort is worthwhile.

For those who get this wrong, the bestthey can hope for is a missed opportunity;and the worst is nothing less than the lossof their key people as a consequence ofgrowing dissatisfaction with their workingenvironment.

For those who get it right, the reward, if not the holy grail, can be somethingalmost as magical.

Paul Morrell, BCO President and CABE Commissioner

Foreword

‘My own experience…confirms thereare tangible benefits to be gainedfrom workplace and organisationalchange. The Treasury [refurbishment]project (left) illustrates vividly the waythe geography of an organisationcan reinforce its culture and itsmanagement aims. Through the newbuilding we have managed to createa sense of a modern, outwardlooking department, an organisationwith an appetite for change. Thebuilding has developed a sense of inclusiveness, breaking downtraditional hierarchy.

It has prompted communication, both formal and informal and hasencouraged flexible ways of working.Above all it has fostered a feeling ofself-confidence and presented anattractive image to the talent we need to recruit.’ 1

Sir Andrew Turnbull, Cabinet Secretary and Head of the Home Civil Service, May 2004

“The ways in which officeaccommodation can create value for a business…areinadequately understood.”

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“The collective failure tounderstand the relationshipbetween the working environmentand business purpose puts us in the position of early 19th centuryphysicians, with their limited and erroneous notions about the transmission of disease.”

When Frank Lloyd Wright designed a newoffice building for the Larkin Company inBuffalo, New York, exactly 100 years ago,he wasn’t working on his own. His clientswere pioneers in the rapidly expandingmail order business; and they wanted anew office building to enhance theirchances of commercial success. Theychose Wright as the best architectavailable to help them reinvent theworkplace to take advantage of the latestideas in technology and management.Wright, despite his notorious ego, played a deftly handled part within a carefullydirected and completely self-consciousmanagerial programme. His wonderfulbuilding, with its noble atrium, innovativeenvironmental systems, all-round visibility,interconnectedness and inclusiveness, and its powerful, if by today’s standardssomewhat paternalist, imagery, was atleast as much the Larkin Company’sachievement as his. Each detail in thearchitecture of this extraordinary buildinghad a business purpose: to support acommercial strategy, to accommodateinnovative work processes, and to broadcast a particular set of business values.

Why aren’t all office buildings today as purposeful as Larkin? How did we get from this shining example of usingarchitecture as the infrastructure ofbusiness achievement to where we are today – in the land of Scott Adams’melancholy comic strip, Dilbert, based on his own experience of working in the offices of Pacific Bell, where cubes and labyrinthine interiors had becomemetaphors of bureaucratic frustration?

This question is the background to thisstudy commissioned by CABE and theBCO to review the academic and scientificliterature that has, over the last century,attempted to assess the relationshipbetween the design of the workplace and business performance.

Those who commissioned this report andits authors share a strong desire to applypast research to lay the foundations of a rich and effective programme of study in an area of endeavour that is by anystandards, a continuing challenge to social scientists, designers and, mostimportantly, clients.

This is an ambitious endeavour in acomplex and little understood field, and it is hardly an exaggeration to say that the collective failure to understand therelationship between the workingenvironment and business purpose putsus in the position of early 19th centuryphysicians, with their limited and erroneousnotions about the transmission of diseasebefore the science of epidemiology hadbeen firmly established.

Research on the relationship betweenoffice design and business productivity has generally started from design variablesand then has sought to establish someorganisational or business consequence.We have come to believe that one of thereasons for the relatively small amount of progress that has been made by suchendeavours in this field is that this maywell be the wrong starting point. Analternative perspective, tantalising butfugitive, has been expressed occasionallyby business writers such as Tom Peters,who have looked at office design throughthe business end of the same telescope.They are far less curious about theconsequences of design variables onbusiness, and much more interested in the office design implications of businessdrivers and priorities.

Consequently, we have conducted this study using two different but highlycompatible analytical frameworks. The firstframework is DEGW’s ‘three e’s’, a meansof measuring the potential of the officeenvironment to help businesses becomemore efficient, more effective and more

Why office design matters

Courtesy The Frank Lloyd Wright Foundation, Taliesin West, Scottsdale, AZ

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expressive, The second is the widelyrespected ‘Balanced Score Card’, whichwe have found to be a useful means ofcommunicating to management that theoffice environment is more than a financialmatter but is relevant to business purposein at least three other ways, in terms ofhuman capital, customer relations, andbusiness process. These frameworks havehelped us to discriminate between thevarious insights that we strongly believebusiness people and designers should bedemanding from research on the physicalworking environment namely: ‘Whatevidence exists – or should exist – of waysin which office design can be used to helpclients achieve their business goals?’

Looking coolly at the data we havesurveyed, there is certainly a disappointinglack of relevance in most office workplaceresearch to business performance, and we believe that a different approach willcumulatively lead to much more usefulresults. The recommendations to

developers, designers and researchers withwhich we introduce this report are basedon what we see as the crucially importantbenefits of a research programme that linksoffice design to business performancethrough maintaining a sense of businesspurpose within a systemic framework.

No single perspective can provide a complete set of answers to such a wide range of inherently interdisciplinaryquestions. An integrated researchapproach is essential because research in this complex and changing field cannot be conventionally academic. The experience and judgement of all of the key constituencies involved are vitallyimportant to the success of any researchprogramme. As one illustration of this, the economic dimension of the results of design initiatives is obviously critical.Developers need to make investmentdecisions that are more likely to lead togreater profit and are less susceptible torisk; and corporate real estate managers

need to demonstrate to seniormanagement the contribution thatworkspace can make to stimulating and supporting business success.

At the same time, because of all thesecomplexities, a robust medium isnecessary to communicate measures ofthe performance of office space in relationto business goals. For example, theHarvard Business School case studyapproach provides an interesting precedent in communicating complex datainvolving many interests in a coherent andrigorous way. There are many similaritiesbetween the kind of data that are useful inthe context of a business school, and therichness and complexity of the data thatare necessary to explain the context, theobjectives, the interplay of disciplines andinterests, the timeline, the co-ordination,and the consequences that attendattempts to make the design of officesactually work for business purposes.

Francis Duffy, DEGW

“There is certainly a disappointing lack of relevance in most officeworkplace research to businessperformance, and we believe that a different approach willcumulatively lead to much more useful results.”

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Recommendations for tenants and occupiers

• Diminish risk. Reduce exposure toinflexible real estate commitments

• Think harder about efficiency. Evaluateproperty decisions based on total cost ofoccupancy rather than initial capital cost

• Consider intensifying the use of spaceover time taking into account increasedinternal and external mobility, achievinggreater efficiency

• Engage many people in the designprocess

• Encourage user control of the workingenvironment supported by responsivefacilities management

• Take greater responsibility for relatingoffice design to business strategy at all levels

• Align workplace design with workprocesses, but anticipate continuouschange in all areas of knowledge work,aiming for greater effectiveness

• Shift from thinking primarily about thedesign of individual workplaces to creatingthe collective environments that are moreappropriate for knowledge work

• Use interior design to support andchange organisational culture, exploitingthe expressive potential of design.

Recommendations for developers

• Learn from what we know already todeliver best practice. There is no excusefor providing anything less than excellentperformance in health, safety, and comfort

• Adopt the measures of health, safety,and comfort already used in research to assess environmental services, toevaluate the performance of the shellsand skins of office buildings

• Anticipate greater tenant demand forchoice: a widening variety of uses,shared tenancies and mixed uses

• Anticipate tenant demand for moreflexible leasing terms to accommodatemore rapid change and shortermanagement time horizons

• Establish longer-term relationships with tenants

• Become more involved in helping tenants with fit-out and design services

• Dare to go beyond efficiency. Adoptbuilding forms that are designed tosupport tenant effectiveness – forexample, by promoting internalcommunication, by attracting andretaining staff, by stimulating creativity

• Think more carefully about how buildingsperform over time. Give separateattention to measuring the differentpotential contributions to adding value to tenants’ businesses of buildingelements of different longevities

• Anticipate growing tenant demands for help with expression – for instance,with internal and external identity and branding.

Recommendations

The research suggests a number of key recommendations for thedifferent groups involved in officedevelopment.

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Recommendations for researchers

• Beware of the limitations for business purposes of depending upon conventional research methods

• Avoid conventional assumptions: workand technology are changing fast

• Be prepared to do more interdisciplinaryresearch

• Think as systemically as clients, relating human resource management,information technology and corporatereal estate issues

• Pay much more attention to businesspriorities and especially to how they are changing

• Focus on emerging business issues:image and expression, flexibility andadaptability, the relation between virtual and real spaces, the potential for distributed working

• Involve developers and designprofessionals as well as occupiers and tenants in the research process

• Understand the supply chain better • Adopt a longitudinal approach,

studying buildings in use over time• Study a wider and more ambitious

range of design and use possibilities• Learn from business schools and their

use of the case study method for bothteaching and research.

For occupiers, the research points tocritical decisions that each business must make within the context of its ownobjectives and priorities. These include:

1 Staff productivity and satisfaction versus economic efficiency: achievingappropriate levels of density, daylight,view etc, and balancing this withoccupancy cost

2 New ways of working: choosing theworking pattern that is suited to thebusiness, and recognising the affinitiesbetween working patterns, building types and environmental models

3 Organisational change: workplace as a catalyst for change, with the capacityto demonstrate and foster values throughinternal and external messaging

4 Concentration versus communication:raising issues of acoustic and visualprivacy, work group size, vertical andhorizontal travel distance, building depth

5 Individual versus central control:raising issues of responsiveness of facilities management, the ability to control individual environment,simplicity/manageability and the efficientoperation of the building and its systems

6 Infrastructural flexibility: providingflexible infrastructures that ensureconnectivity and environmental qualitythrough multiple iterations oforganisational change

7 Feedback: using feedback as both a design tool, and as a means ofmonitoring that the workplace isdelivering its full potential in terms of efficiency, effectiveness and intended expression.

Critical decisions

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The context of the study is the changingworld of work, as offices move from being a basis for process, to a system of communication, to places of socialengagement. The factors that are drivingthis trend, and which have revolutionisedthe approach to office design include:

• the impact of information technology, and the personal computer in particular

• increasing competition for staff, and theconsequent need for buildings whichattract, retain and support staff of thenecessary calibre

• competition between businesses, leadingto a downward pressure on costs

• the realisation that office space is oftenhighly under-utilised, and that the use of IT reduces the need for co-location of office workers

• the consequent development of newways of working.

Increasingly intelligent businesses call forincreasingly intelligent buildings, which areaccessible, well located, flexible and withhigh levels of technological provision.

Gartner/MIT estimate that by 2006, about 30 per cent of the world’s topcompanies will adopt a highly mobile work style model, with 35 per cent having a workforce working outside theboundaries of the formal workplace. Thisvirtual work will require both appropriatespace and the reassurance provided bydirect access to the business and theirpeers. Organisations will have to create a new balance between collective andindividual spaces, and acknowledge the increasing importance of the office as a space for social and interactiveengagement.

In parallel, as businesses increasingly seek to differentiate themselves from their competitors, the use of premises as an internal and external expression of corporate values and culture grows.

In this new environment office design hasbeen argued to influence a range of factorscritical to business performance, including:

• optimisation of total occupancy costs• responsiveness to business and

technological change• staff attraction, motivation and retention• staff satisfaction• knowledge and skills of staff• innovation and creativity in the workplace• catalysing cultural shift• customer attraction and retention.

Establishing the extent to which theseclaims, often anecdotal, are supported by research and evidence is one keypurpose of this report.

The changing world of work

Aim of this study

This report investigates the existing literature that addresses the relationship between the designof the workplace and businessperformance. Businesses exist to return measurable value tostakeholders and the aim has beento identify, where possible, thosedesigns factors that might makeoffice environments more productive,serving strategic purposes of the business.

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The challenge of measurement

There are, however, significant challengesboth in analysing the research and inregarding it as an authoritative source forguidance. These challenges lie in thevolatility of the business climate withinwhich all performance needs to bemeasured; the complex interaction offorces that lead to improved businessperformance, and the difficulty ofseparating the impact of any one change;the difficulty of designing effectivemeasures of productivity (and indeed, inthe context of office life, how productivityitself might be defined); the skewed natureof the research that has been conductedwhich, notwithstanding its volume, tendsto approach the question of connectionsbetween office design and businessperformance from the point of view of theoffice, rather than the business; and thelack of rigour in much of the publishedresearch.

The need forframeworks

There is consequently a need for aframework, or series of frameworks, within which the connections betweenbusiness strategy, office design andbusiness performance can be examined,the research can be organised, andrecommendations can be made toindividual businesses. There is, in addition,a need for a more settled language, bothto aid communication between the manyparties involved in office development, and to produce more consistency inresearch methodologies and thepublication of case studies.

Fundamental to such a framework is theprinciple that the point of view of businessshould be the starting point from which to consider the relationship betweenbusiness strategy and businessperformance and the intermediary role that office design can play.

Office design variables include thebuildings themselves and their internal and external environments. Together, these can be looked at as a series oflayers defined by building life cycles, witheach component of the building having a

different longevity, from the infinite life of the site to the day-to-day variability of setting.

The way that these variables affect abusiness can in turn be organised under a framework that embraces threeobjectives, any combination of which might define a business’s priorities:

• efficiency: making economic use of real estate and drivingdown occupancy costs (gettingthe most from the money)

• effectiveness: using space to support the way that peoplework, improving output andquality (getting the most from the people)

• expression: communicatingmessages both to the inhabitantsof the building and to those who visit it, to influence the waythey think about the organisation(getting the most from the brand).

BusinessstrategyBusinessstrategy Business

prioritiesBusinesspriorities Office design

variablesOffice design

variables

Businessperformance

factors

Businessperformance

factors

Businessperformance

measures

Businessperformance

measures

BUSINESS LEVERS

A framework for business: theintermediary role played by design inthe relationship between businessstrategy and business performance

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A third framework, represented in thediagram below, provides a means ofcategorising the existing body of researchand considering the need for additionalresearch. This looks at degrees ofknowledge: what is and isn’t known; and the extent to which decisions aregeneric, applying to almost all office users (and therefore representative of best practice), and at the extent to which they are user specific (and therefore necessarily the subject ofdialogue between an individual business and its advisers).

This diagram also represents a frameworkfor research priorities. The bottom left-handquadrant (general application, proven bydata) can stand as a definition of goodpractice – conditions that building usersshould be able to take for granted. This isthe raw material of the BCO SpecificationGuide. The bottom right hand quadrant(general application, unproven by data)points to an area for additional, valuable research.

The top left-hand quadrant (tenant specific,proven by data) provides advisers with theinformation they need to guide their clients.As for the final, top right quadrant (tenantspecific, unproven), this really just points to an area of topics that can only be thesubject of informed dialogue betweenusers and their advisers, to find thesolution that suits them.

Turning to the research itself, the literatureexamined has included two majordatabases 2, four key literature reviews 3,and a wide range of other primaryinformation sources.

One inevitable conclusion is that theliterature is highly skewed in both evidenceand scope, and is largely written by and for academics, and to a much lesserextent design practitioners; rather than for business users. As for scope, thelargest topic of research has been onenvironmental and ergonomic issuesrelated to the comfort of individual officeworkers; research on the efficiency withwhich office space is used comes second;adaptability and flexibility has attracted some attention; and the fourth category is research related to supporting workprocesses.

A disproportionate amount of researchenergy has therefore been devoted to theperformance of building services – ratherthan, for example, the accommodation of information technology, the design ofoffice building shells, the performance of office skins etc.

In many ways the research literaturereflects the introverted, supply-side thinkingabout office buildings that is unfortunatelycharacteristic of many designers andresearchers and that tends to be endemicin the construction and property industries.

Notwithstanding its limitations, however,the literature does provide key insights into the value of design for business.

The research evidenceThe need forframeworks continued

The extent of knowledge: while thebottom left quadrant represents provenbest practice there is a clear need forfurther research into generic designvariables (bottom right) and a moreeffective dialogue on user specificvariables (top right)

Internalexpression

Externalexpression

Supporting work

progress

Internalflexibility

Adaptability

Health andcomfort

Efficientaccommodation

OC

CU

PAN

TD

EP

EN

DA

NT

IND

EP

EN

DE

NT

OF

OC

CU

PAN

T

PROVEN UNPROVEN

Aim for alignmentwith organisation

Aim for best practice

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Research findings: the drive for efficiency

The cost of providing accommodation for office workers in terms of both capital(construction) costs and building runningcosts is dwarfed by the costs of theirsalaries and benefits. Looking at thediscounted present value of developing,owning and operating a typical officebuilding over the 25 years of a traditionaloccupational lease, this shows that,excluding land, 6.5 per cent of the totalgoes on the construction cost; 8.5 percent goes on furnishing, maintaining andoperating the facility; and, dramatically, the balance of 85 per cent goes on thesalary costs of the occupiers.

These figures are based on the analysis of a real building and will vary dependingupon the specification of the building, and its location, occupational density etc.However, as a generalisation, for a typicalservice business, construction costs,building running costs and businessoperations may be in the ratio of 1:1.5:15,where 1 represents the amortised cost ofconstruction, 1.5 the cost of running thebuilding and 15 the staff salaries and otherbusiness operating costs. The context forconsidering savings is therefore that factorsthat influence the effectiveness of staff willlead to far greater financial impact thanthose which affect efficiency.

Nonetheless, in Corporate Real Estate‘efficiency’ has principally come to mean spatial efficiency. This has four components:

• Landlord efficiency: the proportion of gross floor area which is rent-earning,after the deduction of structure, coresetc – typically 75 to 85 per cent

• Tenant efficiency: the percentage ofrentable area which is genuinely useable,after the deduction of secondarycirculation – typically 85 per cent

• Density of occupation: the amount ofnet lettable space allocated to each deskspace, which will vary between one deskper 5–7m2 in trading rooms or otherdensely occupied office spaces to onedesk per 15m2 in companies having ahigh degree of cellularisation. There areindications that there is some loss ofeffectiveness, however, when densitiesare squeezed too tight say below onedesk per 5m2

• Utilisation: the number of peopleallocated to each desk space (risingabove one person per desk space ifthere is some home working, desksharing etc), and the proportion of the

working week for which each desk isoccupied (typically 45 per cent where every member of staff is allocated a desk,but much higher where efficiently runprogrammes of desk sharing areimplemented).

Reductions of 30 per cent in occupancycost have been recorded through theefficient design of office layouts. Greatersavings emerge where efficient layout iscombined with ways of working that permit desk sharing.

Efficiency must therefore be consideredholistically, identifying the impact ofsubstitution effects (such as a reduction in the need for physical facilities followinginvestment in IT) and utilisation effects (thebusiness benefits produced by effectiveworkplace strategies).

If thinking is to become systemic, there also needs to be a consistency of languageand methodology, of which one method is ETCO (the Enterprise and Total Cost ofOccupancy) that measures the total cost of convening the workforce.

Salaries of occupants 85%

Building – construction cost 6.5%

M&E services – running and maintenance 4%

Furninshings and furniture – capital cost 1.25%

Building – maintenance 1%

Cleaning, security etc 1%

M&E services – depreciation 0.75%

Furnishings and furniture – maintenance and depreciation 0.5%

A breakdown of business costs

The new (or knowledge) economy ischaracterised by a shift from value residingin tangible assets (bricks and mortar) to intangible assets such as intellectualproperty and knowledge. This significanttransformation increasingly means that theownership of physical capital, once themainstay of capitalism, could now becomea liability. Fixed physical assets cannot bereconfigured to meet changing businessneeds as quickly as organisationalprocesses and structures. They may actmore as a brake than as a springboard for change, given the significant shiftbetween past and future patterns ofaccommodation need.

Investing in flexibility is consequently ameans of offsetting risk, an insurancepolicy against the vicissitudes of thebusiness cycle.

Flexibility needs to be considered in thecontext of both different stakeholders anddifferent time horizons. Users and facilitiesmanagers may be more concerned withthe longer-term issues of a building’sresponsiveness to changing requirements,whilst corporate managers are concernedwith more short-term matters such as theutility of the building as a physical assetand its tradability once requirements

change. There is also a distinction betweenshort-term flexibility (such as redundancybuilt into air-conditioning systems to handlechanging occupancy rates) and longer-term adaptability. Both supply and demandsides should focus primarily on long term,robust decisions relating to site, shell, skinand services, whilst recognising thatscenery, systems and settings areinherently more changeable.

Strategic decisions relate to the choicebetween owning and leasing the property,which will have an impact on anorganisation’s ability to handle long-termchange; and the selection of the site by reference to its accessibility, localamenities, aspect, parking provision and fitness for multiple tenancies.

As a generalisation, medium-depthbuildings with atria are more adaptable,and therefore more suited to businesseswith a need for staff interaction andintermittent patterns of occupancy.Adaptability and flexibility is therefore afunction of depth (with narrower floorplates struggling to accommodate a mix of cellular and open plan working, whilstfloors over 21m in depth can havedisadvantages in terms of comfort, aspectand environment); ceiling height (which,

with spare capacity in risers and machinerooms, provides flexibility inaccommodating changing IT and servicesrequirements); and regular structural andplanning grids permitting relocation ofpartitions without interrupting services or blocking windows.

The flexibility required to accommodateshorter term changes is conditioned byadequate (but not excessive) redundancyin the design of air conditioning, lightingand related building services; the matchingof environmental control systems to thespecific nature of the working environment;the provision of local control for services;and provision in the services design for sub-division of the space into separate tenancies.

Particular forethought also needs to begiven to the cost of moving staff within thebuilding (‘churn’), with many businesseshaving an annual churn rate of 50 per cent or more. A key decision is whether to regard churn as rearrangement of theoffice space, or rearrangement of thepeople within the space, ‘the movement of people, not walls’. Separate studieshave identified a 79 per cent annualreduction in churn cost in a building with a raised access floor and modular wiring,

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Research findings: the importance ofadaptability and flexibility

PAST FUTURE

• Location specific • Network of locations

• Owning space or long-term lease • Short-term lease, pay-as-you-go

• Highly territorial space • Alliance/shared/hired space

• Strong physical branding • Varied internal and temporary brand expression

• Formal structured interaction • Flexibility, connections, implementation speed

• Physical space and mobile technology • Operating across virtual and physical space

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compared with a conventional northAmerican office building with ‘poke-through’ wiring carried into the furnituresystem; and a 90 per cent reduction inchurn cost in a building with underfloor air-conditioning, power and telecoms systemsby comparison with a ceiling-based design.

Allied to adaptability and flexibility is the concept of manageability. The bestperforming buildings are those that have a consistent link between buildingtechnology and manageability, but theevidence is that most buildings display the worst combination of technologicalcomplexity and inadequate managementresources to operate them effectively.

The challenge for the 21st century is toenhance knowledge worker productivity,analogous to dramatic manual labourproductivity increases over the last century.A primary driver for this is to strive toincrease levels of staff satisfaction.

In assessing staff satisfaction,organisational factors (hierarchy, culture,reward systems, leadership) have thelargest influence, followed by individualfactors (such as aspiration, reward, loyalty,self-motivation, aptitude, experience andtraining). The extent to which officeinfrastructure contributes to these factors is difficult to quantify, but claims have beenmade that the workplace is responsible for24 per cent of job satisfaction and that thiscan affect staff performance by 5 per centfor individuals and (because of the benefitsof improved interaction) by 11 per cent forteams. To put this in context, it has alsobeen estimated that a 2–5 per centincrease in staff performance can cover the total cost of providing theiraccommodation.

A few companies that have trackedturnover levels have made an explicit link to changes in the workplace, withmeasurable reductions in staff turnover and absenteeism, and measurableimprovements in output.

“Staff turnover is costly. Replacingmid-level managers costs anestimated 50 per cent of salary, and there is a business benefit in investing to retain staff.”

At a financial services firm in Sydney, staffturnover was reported to be down from 25per cent to 11 per cent following an officerefurbishment , although separating out theextent to which this was due to operationalor design improvements requires validation.

Similarly, in a major UK company, staffturnover in a call centre operation reducedby 11 per cent after a move to newpremises (where the company estimatedtraining costs at £13,000 per employee);whilst output more than doubled (from 35calls per employee handled pre-move to74 calls post move) over the same period.

Staff turnover is costly. Replacing mid-levelmanagers costs an estimated 50 per centof salary, and there is a business benefit ininvesting to retain staff. Studies also showthat high performers have 40–80 per centgreater impact on firm performance thando average employees, so satisfactionmeasures for these staff are vital fororganisational success. Increasingly, theknowledge of an organisation is tacit, itsnature hard to codify. But this firm-specifictacit knowledge is increasingly the sourceof competitive advantage, and companiesare increasingly vulnerable to the loss ofkey knowledge workers.

Research findings: staff satisfaction and performance

The effect of workplace design on staff satisfaction and performance

Job satisfaction

24%

76%

5%

95%

Individual performance

EFFECTS OFTechnologyPay/incentivesAdvancement opportunitySkill-to-task matchingDirection by managersWork/life balance

EFFECTS OFWorkplace

11%

89%

Team performance

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A study that considered absenteeism,showed a clear effect in reduced absencefrom work in a group that had moved tonew premises, by comparison with staffcontinuing at five other company locations.

In striving for staff satisfaction, there is a need to achieve best practice in thebasics, specifically including health andcomfort. A research study has shown that14 million days are lost each year in the UK through absenteeism from work, atleast 70 per cent of which is related tohealth issues, a small component of whichmay be attributed to comfort in offices. The most important factors in achievingcomfort are a rapid response to reportedproblems, manageability, and theintegration of air conditioning, lighting andrelated building systems. Post-occupancyfeedback regularly shows, however, thatthese basic requirements of humancomfort are not being delivered.

ComfortDifferences in productivity as high as 25per cent have been reported betweencomfortable and uncomfortable staff.People cannot work at their best if they are distracted by not being able to breathe,hear and see properly. Individuals reactdifferently to different stimuli (some being

extremely sensitive to sound, others moresensitive to temperature), but the mostimportant factors in achieving health and comfort are air quality, temperature,overall comfort, noise and lighting.

• Air quality The focus is on a decrease in reported symptoms attributed to sickbuilding syndrome as a result of theimproved delivery of fresh air. In onestudy 3 per cent of workers surveyed leftearly or stayed at home, and 8 per centhad reduced ability to work, due tosymptoms attributable to insufficientfresh air in the workplace, and it wasestimated that this lost time could bereduced by 20 per cent by improving the delivery of outdoor air

• Temperature Decreases in productivityof the order of 30 per cent have beenfound in offices experiencing extremetemperature conditions. In a researchstudy, 23.5 oC was reported as thepreferred temperature, but 30 per cent of individuals prefer spaces warmer orcooler than this level. Anecdotal reportsindicate that individuals perceive airquality (and self-assessed productivity) tobe better when the temperature is cooler.An early 20th century controlledexperiment reported a 46 per cent

reduction in typing speed and accuracyat temperatures warmer than 24oC

• Overall comfort Increases in output, areduction of repetitive strain injuries and aconsequent reduction in insurance costshave all been reported as a consequenceof proper attention to ergonomics

• Noise Workplaces are often perceived as either too noisy or too quiet, butsignificant improvements have beenreported in the performance of bothsimple and complex tasks (38 per centand 27 per cent respectively) whenacoustic conditions have been optimised

• Lighting Good lighting design andadequate daylight in particular have been linked to 15 per cent reductions inabsenteeism and increases of between 3 per cent and 20 per cent in productivity.To this can be added significant savings in energy costs achieved by an integratedapproach to lighting design.

Variances in individual preference and thegrowing importance of staff autonomy bothpoint to the value of introducing a meansof personal control to the greatest degreeconsistent with efficient operation of the air conditioning, lighting and related

Research findings: staff satisfaction and performance continued

MONTH

Benchmark

• Significant reduction in• attrition rate (staff turnover)• post move

• Training costs average of £13K

• Calls handled per employee• Pre-move = 35• Post-move = 74

• 110% increase

Dec Jan MarFeb Apr May Jun Jul Aug Sep Oct NovNov0

2

4

6

8

10

12

14

16

18

11%

ATTR

ITIO

N R

ATE

The impact of design on reducing staff turnover

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building systems. This particularly relates to temperature and lighting, and toleranceto sub-optimal conditions is also increasedwhere individuals have the ability toinfluence those conditions.

Spatial arrangementThe second major aspect of the way that the workplace aids performance is in supporting work processes through theway that space is arranged. The key factorhere is in the balance between privateoffices and open plan, which itself turns on the balance between concentration/privacy and communication/interaction.Whilst there is a perception that open planwill encourage communication, and whilstit clearly sends a strong message aboutthe presence or absence of organisationalhierarchies, no definitive causal relationshiphas been found between the increased useof open space, increased communicationand improved productivity. The conclusionmust be that there is no general rule, andthat the answer is dependent upon theunique characteristics of individualorganisations. The challenge is in balancingan organisation's requirements for bothcommunication and concentration, anddevising spaces that can respond to andcatalyse the highly complex process ofsocial interaction at work. There is also

aneed to balance a paradox: that the besttransfers of tacit knowledge tend to beserendipitous, personal and private; yet the best insights need periods of intenseand private reflection as well as periods of communal activity.

Even with open plan, there is evidence that the probability of interaction betweenindividuals declines significantly after 50mof separation, and that both horizontalseparation, and separation between floors,are obstacles to interaction. Clear visualcontact improves interaction, as does easyvertical circulation, and the provision ofplaces for informal encounter. In one study,communication between engineers onseparate floors provided with visual contactand easy vertical movement was found tobe 14 times higher than in buildingswithout either.

By contrast, other research shows theimportance of quiet spaces for thoseengaged in tasks that require uninterruptedconcentration. In one study, individualsworking in quiet spaces achieved 16 percent higher performance scores in memorytests and almost 40 per cent higher inmental arithmetic tests by comparison withothers working in open office environmentswith significant levels of background noise.

Other studies show significant levels oflosttime as a result of interruptions causedby general conversation, and the need for 15 minutes of ‘immersion time’ beforereturning to optimum levels of concentrationfollowing an interruption.

Attention should also be paid to whetherpeople work individually or in a team, and to the size of that team and its dynamics sothat the work setting supports group activity.

The key lesson from this research is that avariety of work settings should be available,based on the activity undertaken by eachindividual and team, balancing the need forconcentration and communication.

If this is not done knowingly, though, it isalso possible to produce the worst of bothworlds: a setting in which an individual isseparated from his work colleagues in away the prevents interaction, but does notsecure privacy or quiet – of which the archexample is the office cubicle from the world of Dilbert.

“A study that consideredabsenteeism, showed a clear effect in reduced absence from work in a group that had moved to new premises.”

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• Percentge monthly absenteeism

• Post move to new building

• Compared to 5 other locations

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The impact of design on reducing absenteeism

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A field study to test the BP Blue Chalkprogramme of office design usedquestionnaire analysis to assess threedifferent types of work space: enclosed(high ownership of cellular space),restack (open plan) and ‘Blue Chalk’.

The questionnaire analysis revealed perceived improvement incommunication, collaboration, creativityand performance in the third type oflayout. Statistically significant benefitswere achieved in all four areas:approximately 13 per cent greaterperformance, 15 per cent greatercommunication, 18 per cent greatercollaboration, and 10 per cent increased creativity.

Sun Microsystems’ director of workplace effectiveness reports that the introduction of a variety of settingsdesigned to enhance the informal spreadof ideas contributed to a perceived 10per cent gain in individual productivityand 7 per cent in team productivity; and added that ‘even if the amounts are half that, it results in millions ofdollars in productivity gains’.

BP Blue Chalk and Sun Microsystems

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Research findings:branding and externalexpression

In addition to its impact on health andcomfort, and the provision of physicalsupport for work processes, the workplacemay also be used as a means ofcommunicating the beliefs and values of an organisation. Such messages arecommunicated by choice of location, bythe way the building and its services aremaintained and operated, and through the visual branding of work settings.

Even if basic physical health and comfortneeds have been met, and operationalperformance has been optimised, aworkplace can still fail dramatically if itconveys messages which contradictorganisational value, with attendantimpacts on job satisfaction, productivity,and job retention.

Just as a business can communicatemessages internally to its employeesthrough the choices it makes aboutworkplace location, design and operation,so it can communicate messagesexternally to its customers and the broader public.

The importance that organisations place on using office space to communicate theirbrand can be expected to increase, as thegeneral public becomes increasingly awareof brands and of the built environment.Currently a belief in the impact that spacecan have on external stakeholders is thesubject of perception and professionalconsensus rather than hard data. There is a challenge in measuring the value ofdesign, as issues such as corporate identityand branding are intangible. Nonetheless,opportunities for broadcasting externalmessages through building design arewidespread. These include:

• Location As for an internal audience, sofor an external one, a company’s choiceof location, the meanings and brand of

the site become interwoven with thepriorities and standing of the business. This might be by area association (theSquare Mile for finance, Harley Street formedical care); or by virtue of choosing tolocate near to competitors or customers

• Building typology By choosing aparticular form, an organisation transmitsmessages about its values or aspirations– for example, by opting for therepresentation of progress, power,aspiration and success associated with a skyscraper; or the more approachable,accessible associations of a corporatecampus. Similarly, a business maychoose deliberately to go into a highprofile, branded, landmark building, or equally deliberately to a lower key,unbranded one

• Building skin The building skin alsoprovides an opportunity to transmit anethos: for example, the progressiveimage and transparency of glass, or the tradition and solidity of stone.Similarly, by the incorporation of visiblemeans of energy efficiency (solar shading or photovoltaic cells, forexample) a business can convey itsenvironmental credentials

• Scenery and setting Interior design isalso an opportunity to tell a story about a company or its brand, with particularattention paid to the most public interioraspects of a building: the lobby, receptionspace and public meeting rooms.

The impact of external messages will alsobe felt by staff and will thus support orcontradict internal messages; and lack ofalignment between internal and externalexpression will create negative effects, with staff potentially feeling that outsiderssecure better treatment than those whowork in the company.

“The importance thatorganisations place on usingoffice space to communicate their brand can be expected toincrease, as the general publicbecomes increasingly aware of brands and of the builtenvironment.”

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More significant than what has beenincluded in the literature are matters that have hardly been touched byresearch. Topics that are vitally important in contemporary management, such asknowledge management, branding, andcorporate culture have rarely beenaddressed. Much of the work has alsofocused on individual performance ratherthan how people work together in groupsand teams. This is a critical oversight that should be addressed through acomprehensive research programmeexploring aspects of business performancein ‘real world’ conditions and inorganisations that are having to workwithin a dynamic and often unpredictableglobal marketplace. This researchprogramme should include practitionersfrom a wide range of disciplines includingdesign, business, information technology,corporate real estate and humanresources; and it should be trulyinternational to capture cultural andregional differences in priorities andapproaches to measurement.

So that this additional work builds to a usable body of knowledge that hasrelevance to a broad audience, there is also a need for the use of settledlanguage and protocols, including:

• an over-arching framework• a framework and language for the

organisation of research, and the analysis of options

• a set of HR metrics for measuring staffperformance in general and productivityin particular

• a consistent approach towards thecalculation of total occupancy costs

• a protocol for case studies.

The final element of the frameworkproposed in this report is a call for casestudies prepared on a basis consistentwith the over-arching framework. Fewempirical studies identify how the designand management of the office environmentcontributes to business performance in the face of competition bearing on post-industrial firms, and this level of experiencewould be more effectively explored throughcase studies conducted in accordancewith a consistent protocol.

As the majority of work done inorganisations moves towards knowledgetransaction, we are witnessing a shift offocus from tangible assets to humancapital and intangible assets such asresearch and development, marketing,human resource management, innovationmanagement and branding. This hasimplications for the workplace. Workenvironments designed for lineartransaction processes are less appropriatethan those that support knowledge transferand connect communities of people andautonomous workers. As work becomesmore distributed, technology will play aneven greater role, supporting mobility andvirtual working, while the individual officebuilding becomes just one part of anorganisation’s workscape.

The repercussions of this on the subject of ‘workplace performance’ are potentiallyprofound. If what is presently perceived asthe ‘workplace’ provides accommodationfor only half of a person’s working week,does this undermine research predicatedon the idea of a 9 to 5 day, sat at a fixed,‘owned’ workstation?

Such new directions emphasise the need for further research on issues such asworkplace connectivity and social networkanalysis. More understanding is alsorequired of workplace culture, to comparedifferent organisations’ cultures throughanalysis of their unwritten rules, stories andmetaphors, and the messages conveyedthrough their buildings. In particular, there is a need for case studies that analyse thecomplex decisions and systemically linkeddata that go into the design andprocurement of the modern workenvironment.

In the rapidly changing world of work, the implications of linking office design withbusiness performance are so profound thatinnovation is as important in the conduct of research as in the ways that offices aredeveloped, designed and managed.

ConclusionWhat remainsto be done

AcknowledgementsFootnotes

1 Working without walls: An insight into the transforming government workplace(DEGW and OGC, 2004)

2 Building Investment and DecisionSupport and Occupier.org

3 Does Property Benefit Occupiers(Haynes et all, 2000); To what extent does workplace design and managementaffect productivity? (Oseland, 1999);What’s working: Briefing and evaluatingworkplace performance (Bradley, 2002);and Creating the productive workplace(Clement-Croome, 2000)

Published by the Commission forArchitecture & the Built Environment andthe British Council for Offices, May 2005.

Based on original research by DEGW, theCentre for Building Performance andDiagnostics at Carnegie Mellon Universityand Arup. The full report of The Impact ofOffice Design on Business Performance isavailable to download from:www.cabe.org.uk and www.bco.org.uk

CABE, BCO and the project team aregrateful for the support shown by themembers of the CABE/BCO steeringcommittee, namely:

Paul Morrell (Chair), Davis Langdon LLPRon German, Stanhope PLCAlexi Marmot, Alexi Marmot AssociatesJames Steevens, CB Richard EllisBruce McVean, CABEIan Selby, BCO

We are also grateful to the otherprofessional and interested parties whohave lent their time and expertise, directlyand indirectly: Paul Bartlett, MatthewCarmona, Ben Castell, Robert Dalziel, JohnDee, Geoff Edmunson, Richard Eisermann,Mindy Hadi, Bridget Hardy, Rob Harris,Barry Haynes, Ken Hope, Chris Kane,Palmyra Kownack, Kevin Leek, PeterMcLennan, Jeremy Myerson, NigelOseland, Paul Pegler, If Price, AndrewProctor, Niels Rasmussen, Philip Ross,Ziona Strelitz, Tim Whitley, Lynn Wickins,Robin Worthington

Endorsed by the British Property Federation

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The Commission for Architecture & the Built EnvironmentCABE champions the creation of great buildings and public spaces

The Tower Building11 York RoadLondon SE1 7NX

T 020 7960 2427F 020 7960 2444E enquiries@cabe.org.ukW www.cabe.org.uk

British Council for OfficesBCO is Britain's leading forum for the discussion and debate of issues affecting the office sector

38 Lombard StreetLondon EC3V 9BS

T 020 7283 4588F 020 7626 2223E mail@bco.org.ukW www.bco.org.uk