How Hourly Billing Shapes the Office

Let’s start with the stipulation that if you’re a timekeeper and you’re not charging your time then you are a burden. 

When you're getting a coffee, you’re a burden. Any timekeeper you see in the corridor is a burden too.  Both of you really want to get away from each other and go back to the solitary act of billing. 

In an insidious way, hourly billing effectively drives lawyers out of common areas. So law firms don't build much common area. 

Now, add the condition that your office is likely the only place on the floor that has natural light. Most normal humans will naturally want to spend the whole day there.

Next, add the condition that “internal conference” -- a familiar activity known in other fields as collaboration -- is anathema to clients. An invoice line item referencing multiple lawyers at once is an open invitation to challenge the bill.

To summarize, because of hourly billing:

• A lawyer in a common area is a burden
• Socializing has negative value
• Collaboration is a problem

Furthermore, an attorney’s private office is more appealing than any other working space on the floor, and attractive common space is rare.  

How this affects productivity:

Four factors that contribute most to productivity are (1) natural light, (2) social interaction, (3) physical movement, and (4) personal control/choice. 

Due to hourly billing, the traditional law firm scores close to zero on (2) social interaction and (3) physical movement, which cancels out high scores for natural light and control for lawyers. (Staff space & productivity factors is a subject for a separate post.)

So hourly billing results in environmental and social conditions that actually undermine productivity for lawyers.

What can be done?

It’s simple. Restore the space where lawyers can legitimately work together but not necessarily collaboratively. Not a food lounge, not a place where the whole firm comes together but a shared place just for lawyers to practice law. This used to be called the library. 

Wake up, Corporate America! - what WeWork’s giant funding round means for you…

In December 2014 WeWork raised a fourth funding round to the tune of $355 million, giving the office-rental company a valuation of almost $5 billion. more

image credit: Betamore, The Verve Partnership

WeWork develops and manages “co-working office space” for the creative class. They provide flexible offices space, meeting rooms, and amenities plus food and classes, for a monthly membership fee. It’s like a gym, but for work. Or it’s the love-child of a private club and a coffee shop. 

WeWork currently has 19 locations and leases 1.5 million SF. With annual revenue approaching $150 million my guess they have around 30,000 members @$5k per year per member. And it’s growing. By the time this blog is posted the numbers will be out of date.

While corporate America gradually wraps its head around the radical idea of collaborative space, “co-working” is all grown up.

Fundamentally, co-working is people-oriented, not space-oriented. Because it’s billed by the person instead of the square foot, office accommodation is now an HR issue. Facilities still manages the physical infrastructure and leasing but WeWork proves a modular mix of private and collaborative space can support all kinds of people and functions. With proof that generic build-outs  really work, human-centered issues can take precedence. 

While the shift is subtle, the implications are profound. Productivity (for people) rather than efficiency (for space) is the new office design driver. This makes sense, since payroll is 10x the cost of real estate. See The Efficiency Myth: How to Calculate the Real ROI for Workplace Change.

Real estate initiatives need to start with the people question – what do our people need to be most effective?” rather than the space question – how much square footage do we need?” 

3 TAKE-AWAYS:
1.    Generic office space really works
2.   Office accommodation is an HR issue
3.   Productivity trumps space efficiency 

Now you know what 30,000 happy office workers know. Generic space is here. It’s time to focus on the people.

How mobile workers raise the performance bar for all

Productivity is notoriously hard to measure. As a result, face-time has been the key “measure” to prove value. So when people work off-site or even just away from their desk they give up traditional face-time credit AND they make people wonder about what they’re doing all day.  

In fact, measuring productivity goes hand-in-hand with mobility. The original mobile workers – sales – have always been “measured” with sales targets and rankings. For everyone else the key performance measure was simply showing up – mostly because if you weren’t there you couldn’t get anything done anyway. 

The niggling question about what mobile workers are doing all day cranks up a formerly dim spotlight on service-sector productivity. That light shines on traditional employees’ contributions too.

Now everyone has to ask, what am I actually contributing and how can I prove it?
Here’s a start: a finite list of ways that office employees contribute value, in no particular order. It turns the classification of “Finders, Minders, and Grinders” inside out by looking at specific work-product (output) rather than generic role. 

Employee Output/Value

• Deliverables
• Ideas/insights
• Relationships
• Administrative processing
• Problem solving

While true value comes from holistic combinations of inputs and insights, whether by one person or by a group, it all depends on stuff getting done. You can now ask yourself (or about your co-workers): 
How much time do you allocate to each value-producing area? 
How many of x units are produced in each area, over a specific time period? 
How is quality defined for this unit of work? 
Which activities, if any, require face-to-face interaction with co-workers?

As mobile work shines a light on productivity we can all use the reflection to better understand the actual value produced in a day of work. 

Brush or Roller: Open Communication Improves Productivity

Last week I was working with a fine carpenter replacing some double-hung windows in my 1870’s townhouse. In preparation, I painted all the window frames and sashes before the job started.  It took about a week to get it all done between brush painting, drying time, cutting in at the glass line and sanding between coats.  I thought they looked pretty good with three carefully applied coats of exterior semi-gloss over the factory prime coat.

But Rene’s first comment was “Why didn’t you use a roller?” Well, …because… I didn’t think of it.

I grew up painting with a brush. But a small foam roller would have left a smoother finish, faster application, faster drying time, and less sanding between coats. It took a younger person with different experience to remind me of a better way. And it took open communication for him to feel comfortable critiquing the boss. Our trusting relationship and Rene’s high level of skill certainly helped. I shudder to think of all the other things I’m doing the hard way, and don’t even know about.

In addition to painting I also have a pretty well-equipped shop and do a bit of wood-working. So I took on the job of milling and painting custom exterior trim to match the original. Unlike the first painting job, this all got done in one night. I used a roller. 

Latitudes of Acceptance: Persuasion, bubbles and beliefs

The website Edge.org is a great place to find stimulating ideas. The project brings together great minds to ponder deep questions. A recent interview with Matthew D. Lieberman, UCLA professor of psychology, caught my eye. Lieberman is the author of Social: Why Our Brains are Wired to Connect.

In the Edge interview Lieberman explains the social psychology of persuasion. The basic premise is that, If I want to persuade you, what I need to do is pitch my arguments so that they're in the range of a bubble around your current belief.

Leiberman has found that brain regions involved in successful persuasion are those connected to social thinking, which is more about identity than rational analysis. For an idea to stick you need to be able to “try on” the identity that it suggests. For example, if you want people to quit smoking, they need to be able to see themselves as a non-smoker.

It's no different in workplace transformation: People need to be able to see themselves in the new space. If the notion of mobile- or collaborative-worker falls outside the bubble of decision-makers' self-image, then they won't be able to see those workplace options at all.  

As a consultant, I’m sometimes surprised by short-sighted decisions clients make about workplace opportunities. Occasionally, it even seems like decision-makers dismiss rational arguments in order to protect the status quo or even their own narrow interests. It never occurred to me that rich possibilities might be truly incomprehensible because they fall outside a social self-image, on the other side of the “latitude of acceptance.” To help promote positive transitions that make the workplace more productive, we need to start within the bubble of current beliefs. 

How Beauty Works and Why It Matters in the Workplace

Beauty is a characteristic of a person, animal, place, object, or idea that provides a perceptual experience of pleasure or satisfaction. (Wikipedia)

photo: Nick West

Beauty makes people feel good. That’s a great thing. Even if we don't agree on a specific features or characteristics we can still talk about the effect. 

Here’s my theory: Beauty is a state in which there are no evident distractions or problems, combined with some elevating quality. It’s a harmonious balance in which nothing stands out to be removed, added, or changed. A state of beauty allows me to relax and focus. It’s the perfect backdrop for productivity; non-intrusive but stimulating.

Compare that with Familiarity, which can yield some of the same benefits; it’s relaxing, safe, and non-distracting. But it misses the best effects – the stimulation and psychological lift. If the workplace doesn’t deliver that special benefit, there’s one more reason for your best employees to find other places to work.

The Efficiency Myth: How to Calculate the Real ROI for Workplace Change

Over the last generation of office design, technology has made everything smaller; equipment, desk surface area, filing, storage, mail and copy rooms, and so on. It seems like a no-brainer to reduce total office square footage.

But resistance to change in office design remains powerful. Many employees like the familiarity and symbolism of traditional layouts, even if it's inefficient. The battle between rational arguments for space reduction and emotional arguments to protect the status quo can be fraught.

Still, it's easy to make a compelling financial case. And its pretty obvious that 20% of office space is not needed for its former use. Wouldn’t you want to be the hero who takes those savings into the C-suite?

Not so fast. 

The cost of payroll is about 10x the cost of real estate. (Office space costs around $6000 per person per year for a company with average salary and benefits of $60K.) If disruption or disgruntlement cause a drop in productivity of just 2%, ALL the real estate savings are wiped out, and then some! Do the math. The table below shows the details for a proposed 20% reduction in real estate and corresponding 2% reduction in realized annual revenue. The result is a $112,500 net loss rather than a $187,500 gain from real estate cost savings.

So be careful in how you approach efficiency initiatives. Productivity losses can offset gains from real estate savings. We’ll talk in a future blog about promoting productivity rather than efficiency as a way to move this conversation forward.