What should business leaders consider before renewing their office lease?

What should business leaders consider before renewing their office lease?

Businesses are finding themselves at a crossroads as they decide whether to keep or pass up on office lease renewals. Companies need to choose between reviving the ‘in-office’ mandate and justifying the expense of an office or continuing to pursue anywhere working policies and maybe affect collaboration, innovation and even productivity. Spencer Pitts, Digital Workspace Chief Technologist, VMware, explores the ‘innovation conundrum’ and some harsh truths businesses must address with where their employees are most innovative.

Business owners across the UK are facing lease renewals this year and weighing up the value of their current office space. However, the choice to either keep or give up a working location has become much harder to make in recent years, with hybrid working forcing business leaders to make a tough decision.
Businesses are trying to surmise the total return on having employees at home or in the office. The dilemma they face is whether to revive the in-office mandate. By abandoning flexible and anywhere-working policies, organisations can better justify the expense of their real estate and leases but run the risk of employee dissatisfaction. The other option is to keep pursuing hybrid or anywhere-work policies and reducing office space but possibly compromising on collaboration, innovation and, controversially, productivity.

The UK government’s new legislation to protect a ‘diverse workforce’, complemented with new data indicating that a four-day work week may become the new norm, demonstrates how flexible working is found to be beneficial. However, the hybrid working movement is being hampered by announcements of strict return-to-office mandates enforced by the likes of Twitter and Starbucks, compounded by new hybrid work conflicts like remote surveillance and workplace innovation.

Even with salaries and benefits comparable to those working for companies without office-only policies, employees are not willing to budge. With empty office space in London doubling in the last three years, executives find themselves at a crossroad: to renew or terminate their big city leases.

Many organisations have already begun to commit, with their support for hybrid working at the centre of their decision. According to VMWare’s recent study, The Distributed Work Dilemma, one in ten businesses in EMEA have totally abandoned their physical offices since the pandemic, and more than half have reduced office space. But what about the rest? What should business leaders consider before making their lease renewal decision?

An office or physical workplace-based solution

Designed as a compromise to support the distributed workforce, the hybrid model still recognises the value of face-to-face interactions. Hybrid working has proved immensely popular with employees, who now expect – or even demand – a freeing work/life balance. However, this doesn’t come without its shortfalls.

VMware’s research suggests that flexible working arrangements have a detrimental effect on an organisation’s capacity for effective innovation. Nearly two-thirds of employees surveyed state that their work is more creative if they are in their employer’s office, supporting the motion to renew real estate leases.

Although home workers may not want to hear it, these results point out a harsh reality that companies must deal with. Innovation is crucial for business growth; teams that are having trouble innovating virtually threaten the longevity of their organisation. The successful rise of remote work will not materialise if workers are not given the freedom to be innovative and generate ideas.

A balancing act

It would be wrong to label flexible working a failure in relation to the decline in innovation. Distributed teams are the new reality, with the majority of the EMEA workforce (81%) reporting a better level of job satisfaction if they can work from anywhere. Naturally, this depends on the employee’s job function.
Post-pandemic anywhere work policies have indeed had a good overall effect, with half of EMEA experiencing improvements in collaboration, morale and manager communication. The days when employees would tolerate gruelling long days at their desks or expect to be under the watchful eye of their manager as ‘part of the job’ are long gone. In fact, while over a third of employees in the UK, France and Germany are now back at work in the office full-time, more than half of those employees aren’t there on their own accord and would prefer more flexible plans.

Business leaders cannot afford to doubt the importance of flexible working because doing so will hamper employee engagement and impact recruitment efforts. We all witnessed the backlash when Elon Musk ordered Tesla employees back to the office.

Having said that, open plan spaces should be scrapped in favour of hybrid alternatives. The solution lies in striking a balanced culture, supported by the benefits of digital solutions. People should be allowed to do parts of their role in the best place that works for them, whether that’s at home or at the physical workspace. And organisations should play their part in enabling them to do so. The question then is how to equip the organisation to achieve that balance?

Facilitating innovation for all

Creativity and technology are not mutually exclusive assets. Technology has had an impact on every channel in business and every aspect of daily life. If given the right foundation, digital creativity can thrive.
Organisations need to recognise the value of the tools designed to facilitate innovation. Accelerating secure access to corporate information for all employees, regardless of location, will be instrumental to enabling digital creativity. A workplace ‘refresh’ should be founded in technology while also taking upskilling programmes, remote work security and corporate purpose to the next level. This will spearhead a cohesive culture of authenticity and collaboration. For the workforce to truly benefit from the power of digital tools, they must first have this foundation.

Enhancing outcomes through Digital Transformation

Mandating in-person ideation sessions would be a doomed approach to solving the innovation conundrum. Remote working shouldn’t have an adverse effect on innovation and productivity. The organisations that are successful are the ones setting up as ‘remote-first’, treating employees equally at work and at home. Cutting back on physical space might be what is required to make way for the inevitable digital-first future, since working from anywhere is now firmly ingrained in today’s corporate DNA. What leaders need to focus on is the investment that is right for the longevity of their business.

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