office design for innovation

8/7/2019 OFFICE DESIGN FOR INNOVATION

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OFFICE DESIGNOctober 15, 2007, 11:32AM EST

Enabling Innovation Through Office DesignWork has become more mobile and team-based, but most organizations have been slow in changing their workplaces to reflect the new

reality

by Peter Lawrence

There is a growing corporate understanding of design's role in achieving innovation, not only for products but also for services. In contrast, there is still almost no

recognition of the role of workplace design in enabling innovation.

Open-plan, or landscaped, offices were introduced in the 1950s, originating in Germany with work by the Quickbourner consulting firm. The objective was to facilitate

communication and workflow by locating a supervisor together with his group in an open, irregular arrangement of desks and other furniture. A few companies, including

Herman Miller (MLHR) in the U.S. began manufacturing "systems furniture" that allowed these more open offices to be created without building interior walls, and

providing flexibility to change.

From the 1970s through the 1990s, as the corporate use of systems furniture grew, responsibility for the design and maintenance of office space usually fell to the

corporate facilities manager, who was generally rewarded on how many people could be put into the least amount of space. "Office performance" was more about

effectiveness of HVAC (heating, ventilation, and air conditioning) than the people who had to work there. And "knowledge management" (how a company identifies,

creates, and distributes knowledge that is important to its success) became the province of the IT department. The most efficient application of systems furniture became

straight lines of cubes wired together (now neighbors could communicate by phone or e-mail rather than in person).

IGNORING THE BENEFITS OF HUMAN I NTERACTION

Seemingly practical, all of this ignored the importance of tacit knowledge³information that is in the heads of employees but not written down³as well as the business

value of chance encounters, which a growing number of CEOs trumpet as the source of much innovation.

Today, of course, the nature of work i s changing. Among other things, it's more mobile, cognitively complex, team-based, and collaborative, and new generations are

entering the workplace. And yet with all of this, most organizations have not changed the place where their people work. The California Management Review recently

reported that "less than 5% of U.S. corporations tie the workplace to corporate strategy or see it as a tool for improving organizational performance."

In a 1999 Harvard Business Review article entitled "The Human Moment at Work," psychiatrist Edward Hallowell points out that the anxiety many people f eel at work has a

simple antidote: a personal moment between two individuals in the same place at the same time. This encounter might take only a few minutes, but "the positive effects of

a human moment can last long after people«have walked away," wrote Hallowell. "People begin to think in new and creative ways; mental activity is stimulated." But, he

warns: "I can tell you without a doubt that virtually everyone I see is experiencing some deficiency of human contact«People feel lonely, isolated, or confused at work."

Eight years later, with our overreliance on e-mail and technology, the situation has not improved.

Over the past 12 years, a small but growing number of chief executives have been involved in long-term efforts to change their companies' cultures toward being more

open, collaborative, and innovative. Usually toward the end of this process, these CEOs have led an effort to change the design of the workplace to facilitate this new

culture. The results have been very open workplaces with the same workstations for everyone in the company, with spaces enabling people to see each other and connect

easily during the day.



OVERCOMING RIGIDITY AT ALCOA

One of the classic examples of office design having an impact on every part of a business is Alcoa (AA). When Paul O'Neill became CEO in 1987, the company was

struggling. Aluminum prices and profits were falling. O'Neill did some reorganizing, but still felt that something was wrong. There was rigidity in the way people worked;

the existing headquarters building in Pittsburgh was too large and the configuration of the space was wrong. There were small floor plates with 8-foot ceilings and small

windows with a very limited amount of light.

O'Neill worked closely with Marty Powell, principal of architecture firm the Design Alliance in Pittsburgh to design a new six-floor HQ. "The most important thing was for

people to be able to associate with each other in an open way, almost because the space demands it," O'Neill says. Even before the new building was started he moved the

nine most senior executives, with their assistants, from large, private offices to a completely open-plan environment. It was a clear signal to the rest of the firm of what the

future held.

In the new building everyone, including O'Neill, got a 9-ft.-by-9-ft. open area. No one was too far f rom the new 11-ft.-high windows through which natural light streamed. At

the entrance way of each floor is an open kitchen area to encourage informal encounters. And O'Neill and his design team factored in enough meeting space so that every

employee in the building could be in a meeting, out of their assigned work space, at the same time. Escalators were designed to be faster than the elevators to encourage

workers to see and be seen.

IMPROVED PERFORMANCE

When I asked if the redesign had been effective, O'Neill turned the screen of his computer around to show the growth of Alcoa's stock price. The company's revenues grew

from $1.5 billion in 1987, when O'Neill became CEO, to $23 billion in 2000. (He left the company in 1999.) And while it's clear that office design was only one factor in

Alcoa's growth, O'Neill was adamant that it had a significant impact on the business.

SEI Investments (SEIC), based in Oaks, Pa. is a leading provider of investment accounting and administrative services and provides another good office design case

study. The firm processes more than $50 trillion of investment transactions annually. In the late 1980s the company, in the words of CEO and founder Al West, was "doing

O.K." Growth was 15%, but West was frustrated with the silo mentality of the three internal divisions (technology, asset management, and pension consulting) that neither

collaborated nor cross-sold services. Perhaps surprisingly, he also felt that it was "not a fun environment." With these thoughts in mind, West began a seven-year

reinvention process to shake up the business. He wanted his people to "get out of their box, to think differently."

The reinvention involved a radical organizational shake-up. But during the process, West and his management team realized that the firm's existing facilities, which they

had tried to retrofit, simply could not support their new culture. In choosing an architect, Meyer, Scherer & Rockcastle, West said: "We didn't have a design run-off, we had

a cultural run-off." To West, the challenge was no less than to create a space to enable the new culture to function.

FURNITURE ON WHEELS AT SEI INVESTMENTS

The resulting workplace is a series of two-story buildings in an irregular arrangement next to a wi lderness area. Everyone in the company works at a completely open desk

area. All the furniture is on wheels, as West wanted people to be able to move when they wanted to, with "no barriers to change." In addition, there was no need for an

electrician or tech support when an employee had to move a desk: As a result, the cost of moving one person dropped from $1,400 to 0.

In 1996, after it moved into its new campus, one of SEI's d ivisions had a 90% close rate³double what it was previously³if a potential client was brought to its campus.

The new SEI space was not intended to be a showplace, but it became one. Earnings grew 40% each year between 1996 and 2001, with no increase in workforce. The

average rate of return since the move has been 28%.



"Most people have to work in space that's too small for their spirits," says Jeff Scherer, who was principal architect on the project. "The design of the workplace can really

unlock the spiritual side of the individual and their contributions manifestly increase."

Other executives, including Larry Page and Sergey Brin of Google (GOOG), Barry Griswell, CEO of Principal Financial Group (PFG), and Jon Fredrik Baksaas , CEO of

Telenor (TELNY.PK), understand that the design of the workplace is essential to enable a company's most important asset, its people. The objective for all of these leaders

is to create an open culture of collaboration and shared purpose.

UNCOUPLING SPACE FROM COMPENSATION

Of course, simply redesigning an office will not ensure business success. But innovation is about the development and implementation of new ideas. This requires

different people from different backgrounds and disciplines connecting and thinking about opportunities differently. This will not happen in a space that separates people

from each other and prevents easy contact. The CEO must uncouple space from compensation: An offi ce is not an entitlement, but can be a resource to enable an

organization to reach its full potential.

As Winston Churchill said in 1943: "We shape our buildings, and afterwards our buildings shape us."

Peter Lawrence is chairman and founder of Corporate Design Foundation and consults with companies about the use of design. Together with Sara Beckman, Lawrence edited the

Winter 2007 Special Edition on Workplace Design of California Management Review.

office design for innovation

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