What do business leaders need to consider before re-renting office space?

Over the next twelve months, business leaders will need to evaluate the merit in keeping physical office spaces as they face upcoming lease renewals. But following the rise of hybrid working, the choice to keep a physical working space or to embrace remote work fully has become an even harder decision.

Businesses are looking to quantify productivity levels and the return they receive when employees work from home, compared to a physical office space. Given the costs associated with office leases, a core challenge organisations face is deciding whether to dial back flexible and anywhere working policies. Companies are weighing up whether to revive the traditional in-office mandate, in a bid to improve innovation, collaboration and, some may argue, productivity. However, they could be increasing the risk of employee disaffection.

Flexible working has proven popular with employees. Reflecting this popularity, the UK government codified flexible working rights in newly introduced legislation, in an effort to protect a ‘diverse workforce’. Mobile phone data suggests that Tuesday to Thursday are the new ‘in-office’ days, with employees opting to book-end the weekend by working from home. However, recent announcements of strict return-to-office mandates from major employers, including Twitter and Starbucks, and new hybrid work conflicts like workplace innovation and remote surveillance are hampering the hybrid work movement.

Employees have made their decision – choosing hybrid and flexible work, even with salaries and benefits less than those working for companies with office-only policies. With office spaces in London doubling in the last three years, business leaders find themselves at a major junction – whether to renew or terminate their big city leases.

Since the pandemic, as many as a tenth of businesses in EMEA have ditched physical office spaces, and over 50% have reduced the amount of office space they have – according to VMware’s recent study, ‘The Distributed Work Dilemma’. But what will the remaining 90% choose. As leaders consider lease renewal decisions, what are the most salient factors they should be assessing?

An office-first solution

A hybrid model, whereby employees still have a physical office space, complimented by the option of home working, was designed as a compromise to support the distributed workforce and has proved immensely popular with employees. This approach, in recognising both the value of face-to-face interactions and a work life balance, has become second nature to employees. Although, this model is not without its drawbacks.

Flexible working is found to have a limiting effect on an organisation’s aptitude to effectively innovate. In fact, almost two-thirds of employees believe their work is more creative when based in the office, according to VMware’s research.

Without the ability to innovate, business competitiveness and growth will suffer. If teams cannot innovate virtually to an effective standard, the longevity of the business is at stake. The innovation conundrum is a serious business reality, for which organisations must remedy by putting adequate processes in place to offer remote workers the freedom and ability to innovate and generate new ideas.

Aiming for balance

Despite the barriers to innovation, flexible working policies have been far from a failure, owing to the transformation effect they have had on employee engagement. Distributed workforces have become a new reality post-pandemic, and the vast majority of EMEA employees (81%) report a better level of job satisfaction, depending on the job function.

Additionally, anywhere working policies have helped to lessen the culture of presenteeism and micromanagement, with half of EMEA employees reporting higher collaboration, morale and manager communication. Of the third of employees that are now working in an office full-time across the UK, France and Germany, more than half aren’t there on their own accord and would prefer to have more flexible options.

Mandating employees back into the office, when flexible working alternatives could be available, is sure to create some level of resentment and backlash, as we witnessed with Elon Musk and Tesla. As flexible working continues to be adopted, business leaders should seriously consider the reputational impact of return to office mandates, including how they might negatively impact current employee engagement and future recruitment efforts.

Ultimately, it’s preferential to develop a hybrid solution, supporting employees with digital solutions that allow them to work in a way that best suits them from any location. Organisations can facilitate innovation and productivity from anywhere if they equip their employees to do so. As such, the question becomes what is the best way to achieve this balance?

Driving employee innovation

Technology has had an impact on most aspects of our daily lives, and this should be no exception when it comes to the workplace. Creativity and technology are not mutually exclusive, however, so the right level of investment, focus and support is needed for digital creativity to thrive.

Building a cohesive culture of collaboration and innovation requires organisations to fully embrace technology. A workplace ‘refresh’ should be focused on recognising the value that technology can bring to businesses, and reframing workplace tech as the centre of business operations; powering upskilling programmes, remote work security and providing access to corporate information for all employees. For the dispersed workforce to truly benefit from the power of digital tools, they must first have this foundation.

Enhancing outcomes through digital transformation

When implemented correctly, remote work doesn’t need to have a limiting effect on innovation or productivity. Given the immense popularity of flexible working, an enforced in-office mandate would be a doomed approach to solving the innovation conundrum. The most successful organisations will be those who embrace a ‘remote-first’ approach, with a consistent experience whether working from home or from the office. As such, reducing physical office space might be necessary to facilitate an inevitable switch to a digital-first future, given the stronghold the policy has on modern corporate culture. Instead, business leaders need to focus investment in areas that are going to generate the highest levels of innovation and guarantee the longevity of their business.