Podcast transcript: Where to focus your post-pandemic workplace reimagination

22 min approx | 8 April 2021

Winna Brown

Well, the pandemic has certainly been tough economically, socially, and from a health and safety perspective, one consequence of more people working from home is the acceleration of the evolution of the office. I’m really excited today to be joined by my colleague, DeJeana Chappell, EY’s National Workplace Leader and a senior manager within EY’s Corporate Real Estate practice. DeJeana specializes in working with PE-backed companies as they reimagine their office purpose and footprint. DeJeana, thanks so much for joining us today.

DeJeana Chappell

So glad to be here. Thanks, Winna.

Brown

You’ve been working on the future of work and the purpose of the office well before COVID-19 hit. Can you maybe explain how the workplace was both perceived and used pre-pandemic?

Chappell

Yeah, you know, obviously the pandemic has accelerated a lot of these conversations, but these were conversations that we were having way before COVID-19 existed. But the interesting thing is that a lot of even thinking about the office occupancy — so meaning that how many people come into the office every day, how many seats do you have for every person — you know, it was the utilization levels are pretty low, actually averaging around 40% sort of, you know, across the board, across sectors, across industries, and I think that’s a really surprising fact, because I think a lot of the clients that I work with think that, oh, our people are here every day — or at least they were pre-pandemic — they’re here every day, we need this space, we need all of this square footage. But when you look at the data and sort of peel back the veil, you see that actually not even half of your people are there on a day-to-day average over the course of a year or multiyear. And so that’s really been something that before COVID was, you know, we were helping clients really understand that. There are some industries that might have on average higher utilizations, so maybe like insurance or, you know, heavily engineering-based companies that you really do need to be on-site for that work and for it to be productive, but a lot of the clients pre-pandemic were more traditional — you know, one seat for every person: you come into the office every day — and that was sort of the expectation of the role, and you have a seat and it’s assigned to you. And so, some although were thinking flexibly before, so thinking about the value of flexibility for their workers; but you did have a lot of, sort of drastic opinions, sort of on both sides of the coin, that we need people here every day; or the other side of the coin is we really want to put flexibility and sort of the control into the hands of our employees. So there are some like, you know, professional services, like EY as an example, you know, we, before the pandemic we were very flexible, you know, depending on the level in the organization, you may or may not have had an assigned seat, you may not have had an assigned office, you may not have had a seat at all. So there are, you know, professional services and some industries that were a little bit more progressive before the pandemic. And the last thing I’d say is just sort of the historical perception, which has been completely turned on its head now because of the pandemic, but the historical perception was, you have to be seen to be perceived as working, or you have to be seen to be perceived as productive. And obviously, you know, the pandemic has really, really pushed the envelope on a lot of people’s perceptions around that and I think for the better.

Brown

Now that we’re in the, you know, almost post-pandemic world, based on the discussions you’ve been having with PE-backed companies and companies broadly, what are some of the top concerns or considerations that leaders are having to think about or they’re worried about as they think about their strategy of bringing their employees back to the workplace.

Chappell

Health and safety is still a concern and not, I think only — as of what I heard maybe this week — maybe 20% of the population, US population, has been vaccinated, so there’s still a long way to go. And so in thinking about, you know, the cleaning protocols in the office and air filtration and even circulation and how you move through space, how many people do you pass to get to the restroom as an example, how many people do you pass to get out through the exits and then elevators. So for those who are in buildings, you know, multi-floor buildings then how, what’s the elevator protocol and, you know, how many people in the elevator and sort of are there shifts to get in and get out. So a lot of our clients are thinking through that process and from a health and safety perspective, but, you know, hopefully as clients decide to come back to the office, you know, some are waiting for a little bit more progression and with the vaccine and sort of that, for that to sort of move faster and quicker before they bring people back. But a lot of the clients I’m working with are — and this is a shifting timetable — but they’re sort of targeting summer of 2021, some are fall 2021 and some are just sort of wait-and-see still. So that’s one concern.

I’d say another concern, obviously, is cost savings. So in thinking about the different levers when it comes to real estate — so more of the cost savings on the space. So a lot of our clients were sitting with empty buildings, at least those who had a heavy corporate office footprint — definitely those industries that have, you know, more of an essential service or essential staff need, or you know, manufacturing, industrial, retail, some of those — they weren’t impacted as much around this, or they won’t really have as much of an opportunity from a real estate perspective in reducing, at least, that footprint. But on the corporate office side, our clients are saying, hey, you know, our buildings have been sitting primarily empty or at least, you know, 20% capacity over that last 12 months, so we can really, you know, push the envelope on this, but, you know, there is still concern about which levers to pull when it comes to the cost savings piece on the real estate: is it do we optimize our portfolio and maybe release some of the leases we have that are coming up for expiration, or do we consider a virtual, you know, flexibility programs that will allow us to give up more space, maybe reduce some of our square footage even if they don’t fully exit? And then sort of thinking about the need for capital expenditures moving forward and so, you know, what’s sort of the road map and they can they reduce the spend in some of those buildings that may or may not stay in. So those are sort of all the factors lumping into the cost savings piece.

I think one other concern I’ll just touch on is the culture piece. So I’ve spoken to a lot of clients and sort of saying like what’s been the impact on your culture? I do want to say, you know, just this week, EY’s People Advisory Services team, they commissioned a survey called the Work Reimagined Employee Survey, so it was just released this month, and it was like 16,000 employees who responded to the survey across 16 countries, even had like 24 demographic cuts, so it was a really robust survey that our PAS team did. And some of the interesting stats — I’ll just sort of say three — one was that 48% of employees believe their company culture has changed for the better since the pandemic, which is nearly half of those 16,000 respondents that it’s actually changed for the better. Another stat was that 66% agree that productivity for their job can be accurately measured. A lot of clients say like, hey, you know, we can’t measure productivity in a remote working environment. Well, hey, we’ve had 12 months for you to try it out and see, and 66 of those respondents say that actually my job can be measured pretty effectively irrelevant of, you know, not, I guess, not impacted by where I am. And then the last one is 54% of employees said that they are likely to quit if they’re not offered flexibility. So that’s over half of employees say if I don’t have the option of flexibility, then I’m ready to walk, and the interesting factor to that is that [it’s] two times more likely for millennials than for baby boomers to quit. So even for our clients with younger populations, there’s more likeliness to quit if they don’t offer that long-term flexibility. So those are definitely a lot of the big concerns, Winna, to your point.

Brown

Wow, there’s a lot to unpack there. So a couple of things that struck me. So one thing that you mentioned was as companies think about bringing the employees back into the office space, the 20% of the country is vaccinated, you know, at what point and time is it safe for people to come in. Curious, when you’re having these conversations with companies, are they thinking of the vaccine as the point where once everyone is vaccinated or good proportion, you know, we can bring people back in and we don’t have to change anything in the workplace, or are they saying, we have to change everything in the workplace, because even if people are vaccinated, we need to make the workplace safe no matter what and for whoever comes back. I’m curious as to how they’re approaching it.

Chappell

Yeah, you know, I’ve heard a lot of differing opinions. You know, one client I worked with starting in June of 2020 through December of 2020 — so a pretty long-term engagement — where they were really wrestling with this question, you know. If this is a post-pandemic return-to-work and work-reimagined sort of initiative, then how much will the vaccine play a part in this? And for them, their concern was more that we want to go back to normal, we want everyone to come back in, we don’t want to really provide flexibility in a real sort of tangible way, we really want everyone back in the office. Not in a bad way, but more of like, this is our culture, we’re like a family culture, you know, they used to say we’re a hugging culture; so they really wanted to sort of go back to the way things were in the fact that I just want everyone here — the CEO just really wanted everyone in the office. So that’s sort of one, sort of one direction and sentiment I hear. The other sentiment is, yeah, let’s use this pandemic and all the learnings around remote work and all the learnings around like technology and how we’ve been able to use video and all these other tools to really elevate our employee experience and let’s keep going. Let’s keep investing in those areas, let’s rethink our office, because we don’t really need everyone here. We probably won’t bring everyone back because we don’t need to; or, you know, we’ll give flexibility in a way that’s different than what we had before, so let’s, like, keep that sort of ball moving if there’s already momentum that’s been built, so let’s keep it going. So I don’t know if I answered your question, Winna, but I feel like it’s the culture impact here is really so important, you know. It’s just some companies feel like, hey, we can keep this going; others say no, we want to try to sort of somehow hold on to the past because it worked well for us as a culture.

Brown

Yeah, and I guess there’s the, in that there’s also the balance of, you know, there is an opportunity to save cost and gain efficiencies by reducing your office space. So there are choices, as you say, there’s a balance between maintaining culture and, you know, the other side being the cost savings around reducing office space and also market perception, you know. Are you, how do you convey to your employees that you’re a welcoming environment and, but at the same time, you also trust your employees, if you will, to be productive while they’re not physically present. And so it’s balancing all of these different facts and I guess perception, if you will, and it’s certainly in the race to attract talent that’s going to be really important. So as you advise companies in, you know, helping them make these decisions, are you, how are you helping them balance the cost savings that can be I guess supported by data-driven insights with more intangible kind of human connection that may be harder to measure, although, you know, as you said the PAS survey that recently came out certainly gives indications as to the flexibility that people have come to enjoy over the last year?

Chappell

A lot of the work that I’m doing now alongside People Advisory Services is looking at the workforce piece, and specifically, what are the personas of your employee set. So what are the different work profiles, what are the different job roles and what do those job roles need to be successful and how many of those job roles could really be work-from-anywhere or location-agnostic? And then which of those job roles really need to be tied to a site, and there’s different reasons why. You know, it could be access to equipment, you know, specialty equipment; it could be, you know, these particular job roles really have a heavy amount of collaboration as an example, where they really need to be in the office to have in-person, sort of brainstorming collaboration. Yes, there’s a lot of technology that can sort of supplement that, but still, there’s still some, a lot of, a big case to be made for those roles to be in the office. And so, we’re starting to build out a persona framework for our clients to say these are your employees, these are their different personas, this is the headcount within each of those personas. And then, not only that, but what will drive that persona to the office and what’s the sort of future state on-site need. Is it one to two days a week, is it three to four or is it five days a week? And as you start to build out those different scenarios for our clients and we start to roll up an opportunity for them to say that, you know, looking across your portfolio, looking across your personas, we recommend X production in real estate to support the future state persona needs. Or, you know, maybe it’s heavier in one geography — maybe where the headquarters is — or maybe one of their larger regional offices to say, we think, you know, you should stay in that space. You might need to expand or maybe you can contract, and then these other locations, you could potentially exit depending on what your, you know, people and talent strategy is. And so it’s definitely sort of a cross-functional approach, and it ties in some of those more intangible elements. And I think the other thing I’d say it’s not one-size-fits-all. So what you do even for your US headquarters as an example, may not work in, you know, APAC or EMEIA or some other, you know, geographies for the same company. And, you know, even what you do regionally in the US for, you know, let’s say one site in New York may be very different than what you do for a site in Houston, as an example. So those elements are really important to pull into the analysis and then the last thing I guess I’d say is just employee preference. And so really knowing who you’re employees are and taking the time and the effort to actually survey them and understand, you know, what’s top of mind for your employees and then how to sort of roll that in and even like the leadership insights as well — which is sort of a different sort of constituency — as to how do those insights roll in from the business leader perspective to say, you know, this would work really well for our business, or this won’t work well, you know, for XYZ reasons. And so those are some of the intangible sort of inputs to this process that are really critical and sometimes overlooked, so we always say, you know, that’s where you should start and then start talking about the portfolio impacts of that.

Brown

So this sounds less of a scientific analysis and more like an art form, if you will, in terms of really trying to marry up the data with the human elements, right? And you can’t separate the two, because if you make a decision purely on the numbers, if you will, you’re probably not going to get an answer that resonates with your employees and then you stand to lose touch with or lose them, if you will, in that equation. Is that fair?

Chappell

Absolutely fair.

Brown

Do you think there’ll be a reduction in prime office space for private equity headquarters or global conglomerates in favor of either offices with smaller footprints or maybe an increase in satellite offices outside the more traditional expensive locations, you know, such as the New Yorks and the San Franciscos and Londons? Are you seeing any trends happening in that?

Chappell

Oh, yeah, a lot. And it’s always changing. Every week there’s a new announcement. But, you know, a lot of the clients and companies that I’m working with are rethinking their sort of network or fabric of locations. So maybe if they were in a, you know, a sort of a high-cost market but had a lot of access to talent, that was where, that was their strategy pre-pandemic; but now, particularly let’s say a technology sector as an example, where you’re seeing a lot of movement, you know, out of Silicon Valley, you know, movement to Austin, movement to Houston, you know, movement to even like Las Vegas and Denver and sort of movement outside of Silicon Valley — which was like, you know, for the most part, a lot of technology companies were centered there, just as an example — not to say every company is moving out, but we have seen a lot of fluctuation and a lot of movement outside of those like, sort of high-cost areas, particularly for those companies that are saying, hey, we’re gonna make a bet on our talent and say let’s recruit talent from everywhere and anywhere and, let’s just find the right people. They don’t necessarily have to be in the right location. And so if they’re making those decisions on the workforce side of the house, then when it comes to the real estate, then they’re definitely saying, well we could, we have the flexibility to make some moves and sort of consolidate. I’m working with one client now that they’re giving, they’re planning to give employees the option to relocate to Austin out of Santa Clara, and so they’re sort of working through that process now, and it’s an opt-in. They don’t know how many people will raise their hand. But, you know, as a downstream impact of that, they are planning to consolidate some of their real estate in the Santa Clara area. So this is exact sort of specific example of that. But we’re seeing it across the board. And also, you know, the network or fabric that I spoke to, you know, they’re thinking about how big does a headquarters need to be, or can we have sort of different multiple headquarters, smaller headquarters or centers of, you know, excellence across our portfolio where it’s not sort of like one now big hub, but now we have small little spokes that are coming off that are becoming their own sort of ecosystem within our fabric or within our portfolio. And not just that, but they’re also considering pulling in, you know, co-working sites as an option, you know, or even client sites for, you know, heavily sales-focused organizations where a lot of their employees were out at client sites anyway, or maybe out at hospitals as an example, a MedTech or any other industry where, you know, they don’t really need dedicated space for those employees that are always on the road. And so they’re rethinking, you know, those options as well. And then home, of course now, is, following the pandemic, is even more of a viable option. So your home could be your home base, and then you only go to the office for a few times a week or maybe a couple times a month. And so they’re rethinking sort of the fabric and the movement across their portfolio and pulling in talent strategy to support some of those decisions.

Brown

We’re going to see, and what I’m hearing from you, is that we’re going to see offices of the future developing that are very different to what we would have imagined the norm to be even 12 months ago.

Chappell

Yeah, you know, and something we haven’t spoken much about is, you know, what’s happening with families, right? And obviously, you know, schools we’re hoping will be back in session this fall, but who knows? None of us really know exactly what the timeline will be, but what we do know — what some of the research has shown — is that women have been disproportionately impacted by all of this. And so, you know, either in, you know, trying to move jobs and sort of relocate or, you know, with some of the heavier child care needs that they have within the household. And so, you know, that’s something also, as our clients are thinking about, you know, talent strategy and sort of opening up flexibility, it’s also going to, I think, open up opportunities for those who might have been disproportionately impacted during the pandemic, because they didn’t have sort of the support and structure in place because a lot of the clients are sort of scrambling to sort of create that. But with sort of, you know, hopefully post-vaccine — which will hopefully be soon — I’m hoping that we’ll start to see these opportunities open up for long-term flexibility and support and sort of wellness, you know, programs that will be enabled across our organizations, our client organizations, and we’re seeing a whole lot of movement in, you know, stipends and reimbursement opportunities. Even at EY, you know, we now have what we call like a wellness stipend, right? And so there’s a lot of things that could sort of fall into those categories, whether it’s you want a new Peloton or you want, you know, some, you know, delivery service for meals, you know, it’s great. Like so, we’re seeing companies rethink those programs and I think to your earlier question like what’s here to stay — I really think that will be here to stay even in a post-vaccine world.

Brown

Yeah I think there’s been a lot of focus on, you know, the negative impacts of COVID — and there clearly have been so many — but coming out the other side of it, you know, there are some positives; you know, there are outcomes and influences where we’re more focused on the individual and the flexibility that’s opening up for people and the opportunities. I mean, clearly, it’s been a very difficult period and there are still difficult times to come, but hopefully there are some learnings and there’ll be opportunity for all of us to have a better workplace experience, if you will, going forward. So it will be very interesting to see how it evolves both here at EY and with our private equity companies and, more broadly, in the ecosystem. So yeah, DeJeana, thank you so much for sharing your insights with us today. Very, very interesting and very much looking forward to seeing how the office of the future evolves over the coming months and years.

Chappell

Thanks for having me and I’m excited about it too. I’ll be in the front row and following as well. Thank you, Winna.

Brown

Thank you so much.