The ROI of an Open Office

What is the ROI (return on investment) of an open office? That was a question some while back by a reader on this blog about to take the leap and convert their office to an open format. It went unanswered (apologies) and I was recently reminded of it. There are several ways you can answer this question.
The standard answer to the question of the ROI of an open office is that an open office saves space, improved productivity as more people have access to information and know what needs to be done. It’s knowledge work, after all. There are typically savings in inventory and equipment as office 5S takes a big step forward. The biggest savings may be in quality improvement.
Without doing an assessment of the current condition, setting KPIs and then measuring the after kaizen it’s hard to say exactly what your ROI will be. But this is short-term thinking anyway. If you’re going to go to an open office you have to do it because you believe it’s the right thing to do. It’s the right thing to do because the open office makes problems visible.
Visible problems can be addressed before they get to be bigger problems. This is one good reason to move to an open office. On the other hand, if your management culture is to bury newly exposed problems or punish those who exposed them, the open office can result in temporary pandemonium.
Who, other than crazy Lean consultants and true-believer Lean enterprises, are actually doing open office layouts successfully? Let’s check with Michael Bloomberg, billionaire entrepreneur and founder of the financial news and information company that bears his name. The October 1995 Fast Company article titled The House that Bloomberg Built starts out Michael Bloomberg’s offices are designed to promote pandemonium with a purpose.
Pandemonium is the capital of Hell in John Milton’s Paradise Lost. Pandemonium is a chaotic, lawless place. The word was coined by Milton from the Greek pan for “all” and daimonion meaning “evil spirit” or demon. In an open office all of the demons come out. All of the problems become visible. This is a very good thing.
The Lean office behavior of visual management and immediate action to resolve problems requires preparation and change management since chaos can create stress in people. That is not the goal of the open office, but an unintended consequence that must be designed out of the process of converting to a Lean office.
Here is Bloomberg’s philosophy:
“The best way to get it faster than anyone else is to create an environment of constant creativity. You have to turn up the volume, make people a little uncomfortable.”
Bloomberg’s whole office, from the entrance to the elevator to the spiral staircase tot he food court is designed to promote information transfer. The average space per employee is 4 square feet. Inspiring, if a bit extreme. From the article again:
“I like to see people brimming over with ideas, all over the guy next to them,” Bloomberg says.
The article warns against copying another company’s floor plan or office format. It is important to understand the thinking behind it whenever you copy a Lean idea, so that in the article’s words the office space can embody the “spirit” of your enterprise. In a Lean office this means continuously improving and learning by stopping to solve problems when they are first found.
If the best way to deliver great customer service, develop great products, build great teamwork, and generate superior growth and profit is to build walls around people then that’s what you should do! The whole point of kaizen is to test a new method to see if it helps get rid of waste. If it doesn’t, keep changing it until it does.
A decade later, Michael Bloomberg is the mayor of New York City but the his company still has an open office. From the March 23, 2006 Money.CNN.com article The Corporate Beehive: Use office design to keep the queen in touch with the worker bees (you will need to follow the link, click on Photo Gallery on lower right, hit the HR tab, and then “1” to get to this article):
Modeled after the trading floors where founder Michael Bloomberg got his start, the building is a wide-open expanse of workspaces devoid of private offices and cubicles. Even the conference rooms have glass walls.
CEO Lex Fenwick sits among 125 sales and customer service people. His words from the CNN.com article:
“I know quicker than any piece of damn software when we have a problem. I can see it right in front of me when it happens,” Fenwick says. “I watch the phone calls; I see the stress level on faces. Someone can look at me and say, ‘We’ve got a problem.’ What does it allow me to do? Get on someone to fix it in seconds. The communication this setup affords is staggering.”
In short, the Lean office should be modeled after the qualities that make any process Lean: making problems visible and enabling gemba kaizen by everyone, not just a small team of improvement experts. If what works for your factory is walls between customers and suppliers, functional departments on different floors, individual managers and supervisors in corner offices rather than among the people they are supervising, this might work for your office also. But how would you really know? Just as there is “the hidden factory” within a manufacturing operation, you may be working in, but not see “the hidden office”. Unless it’s an open office.

3 Comments

  1. Kent Blumberg

    November 30, 2006 - 9:10 am

    I was on the senior team of one of New Zealand’s largest industrial companies for five years. We converted all our offices to open plan, hoping it would increase innovation and creativity. I’m sure it did that, but perhaps more importantly, it reduced wasted time. Rather than getting up and wandering down a hall of closed doors, wondering if Bill or Susy was in, we could glance over at their spot and see immediately if an interruption would be welcome. We also, as you note, found and fixed problems much more quickly. And frankly, it was just plain more fun and energizing.

  2. Shawn Chase

    December 1, 2006 - 6:50 am

    There is an article in the November 2006 issue of Business 2.0 that shows how companies like Cisco and Google benefit from open and flexible office plans. Interesting. At my plant nobody has an office in the main building. It may get loud at times but the layout also affords the opportunity to communicate with each other without having to pickup the phone, email or leave your chair.

  3. MinorRipper

    December 5, 2006 - 7:40 am

    Great post, thank you. I’ve written about a possible Bloomberg ’08 candidacy on my blog at http://www.minor-ripper.blogspot.com. I think with his money and smarts–along with the country’s yearning for another alternative to the two party system, it might just work for him.