The WFH COVID-19 Paradigm Shift

A good friend of mine Jason recently wrote an article titled "Winners and Losers from COVID-19" that made some very good points. He spoke about changes from the Coronavirus Pandemic that will help some businesses and hurt others. His article got me thinking about Working from Home (WFH) and the evolution of office configurations. I thought I would jot down some of my thoughts and share them with you.

Generation 1: Everyone has an office

When I was the Executive Director of Customer Experience Technologies @Walgreens I had to reverse commute from my home downtown Chicago to the Northwest Suburbs every day. My commute was 36.6 miles each way (73.2 miles/day). I averaged 3 hours on the road every day round trip thanks to the heavy Chicagoland traffic. In addition to the daily commute I was required to travel to different campus locations to attend meetings. The Walgreens leadership team did not want people calling into meetings. When I was at WAG we had four office campuses in Chicago Northwest suburbs: Northbook IL, Deerfield IL, Bannockburn IL, and Lincolnshire IL with other smaller locations scattered throughout the area. We also had two offices in the Chicago Loop. There were days when I would drive to Lincolnshire in the morning, downtown for an afternoon meeting, back to Deerfield for another meeting and then home at the end of the day. There were days I was spending over 6 hours commuting only to attend meetings.

The ironic twist at Walgreens was nearly every conference room had a Cisco Teleconferencing system in it, yet no one used them because it was expected that people are physically in the meeting room. Occasionally people would conference call into a meeting. When they did they would get the cold shoulder from in-person attendees, people in the room would ignore people on the phone, and dial-in people could not hear the presenter because they were too far from the conference phone.

Suffice of to say, the WAG business model of mandating physical attendance is impractical for people that do not live within close proximity of the office. Suburb businesses that have this mindset have always struggled to find quality workers, which is why many businesses have been moving out of the Suburbs to the City. McDonald's, United Airlines, and Caterpillar are a few examples of old-established Chicagoland businesses giving up on the burbs. The challenge they face, however, isn't only their office location. The old-school mentality of mandating people report to work every day is the underlying issue.

The JP Morgan Chase Catastrophe

Some may say after reading my opening, "Jim that was years ago...technology has evolved...it is different now...right?" For some businesses they can work from alternate locations, but to this day there are many critical businesses that are built around the old-school concept of everyone must be physically in an office to do their jobs. Financial and trading institutions such as JP Morgan Chase (JPMC) are good examples of traditional thinking. The in-office business model, however, hit JPMC hard on March 9, 2020.

Excerpt form 4/8/2020 WSJ Article, Anatomy of an Outbreak: "March 9 was supposed to be the start of a new routine for JPMorgan Chase & Co. employees. With coronavirus spreading, the bank had told the staff in its stock-trading operation to head to three separate sites around New York City.

Hours before the workday began, with global markets plunging, technology at the sites wasn’t ready. JPMorgan top brass reversed the order and told many traders to report for duty, as usual, to the firm’s Manhattan headquarters, employees said.

An employee who wasn’t feeling well came to the office. JPMorgan traded more shares that Monday than any day in the bank’s history. The sick employee turned out to have Covid-19, and over the past three weeks, about 20 employees on a single floor at the bank’s headquarters have tested positive for the virus, with another 65 quarantined as a result."

JP Morgan Chase manages billions in assets and their disaster recovery (DR) sites did not function as planned. Those sites were built after 9/11 to protect the Company from localized problems in one part of NYC from impacting their operations, yet their DR strategy failed. The DR failure alone should be concerning to anyone who watched the value of their 401K's plummet over the last few weeks. That will be a story for another time...

What does the JPMC issue tell us? The WSJ article sums it up, "JPMorgan traded more shares that Monday than any day in the bank’s history." Their employees were understandably more concerned for their personal safety than taking the time to analyze the market. They reported to work because they knew their jobs were on the line if they didn't. The easiest way to deal with the crisis was to kick the ball down the road and worry about it later (e.g. exit their portfolios and convert to cash).

Of course, JPMC isn't alone. Virtually every trading business was doing the same thing. The smaller e-traders also saw the big boy's selling causing them to do the same. The JPMC issue was one of, if not the, epicenter triggering the run on the market. I am convinced that the market runs would not have happened if traders around the world were able to do their jobs from home. Clearly not every publicly traded business would be negatively impacted by a stay-at-home Pandemic. Amazon, Apple, Google, Facebook, HP, Dell, Cisco, Microsoft, Comcast, AT&T, Netflix, etc. greatly benefit from people working from home. If they took the time to analyze they would be buying stock that is positioned to skyrocket.

Generation 2: Hoteling

Although JPMC and others still remain steadfast in the physically in the office business model, there is an alternative working concept called Hoteling that has surfaced over the past several years. The idea behind Hoteling is that employees do not have assigned desks. They either come in and take whatever desk they can find open or they reserve a desk through an online booking tool (e.g. like reserving a conference room).

Although Hoteling sounds good on paper it is a hassle for the staff who are still expected to come into the office. Everyone wants to sit at the "best" desk, teams do not sit with each other, it is very difficult to find someone when they could be anywhere in the building(s), conference rooms are impossible to reserve since there are no private places to hold a conversation, etc.

The Hoteling concept works well for flex-space, but it is not well suited for employees that are expected to physically be in the office most of the time. Hoteling is losing its interest. Most businesses that have tried it have had a significant productivity impact.

Generation 3: High-Density Floor Plans

Business that have seen the problems with Hoteling and have looked for alternative solutions that save money while continuing to have people report to work daily. The next evolution in office space is designing the office layout with High-Density Floor Plans. Similar to the Hoteling concept, HD Floor Plans are designed with cubicle desks without walls that are tightly packed together.

On paper HD Floor Plans work well. A business can seat more people in a small square foot area. Accordingly, the companies who were experimenting with Hoteling can easily convert their space to dedicated seating. Some of the disadvantages of Hoteling are eliminated when seats are assigned. Teams can sit together, it creates floorpans that makes it easier to find people (e.g. mail delivery), and it is easy for management to see if someone is in the office or not.

The challenge with HD Floor Plans, however, is there is no privacy. Every word someone says on the phone can be heard by everyone around them. It creates a call center like environment making it difficult to hold any conversation at ones desk. Open seating also creates distractions. People moving from one area to another walk by the close proximity desks disrupting productivity of others. Further, staff that is working on confidential information have computer monitors displaying what they are doing to everyone that walks by.

The square foot cost for the office space goes down in a HD Floor Pan environment, but the overall cost for construction goes up because they have to configure every desk with phones, headsets, monitors, chairs, etc. that are exactly alike and expensive. A Herman Miller Aeron chair that many businesses use, for example, retails for over $1,000. It is not uncommon to for businesses to spend over $2K each for high-quality chairs. Accordingly, the primary components of every desk need to be exactly the same or it will create an inconstant look and feel for the office as well as create a "Haves" and "Have Not" workplace environment. The second someone gets a new and better monitor, for example, everyone in the office wants one.

Generation 4: Alternate Working Environments

Many businesses are using HD Floor Plans today including the Who's Who of the tech businesses such as Google, Facebook, and Amazon. They have invested millions of dollars into furniture, architecture, real estate, etc. to house their employees. It is difficult for these companies to shift away from their investments and management philosophies. However, I personally believe COVID-19 is the starting point for a paradigm shift away from building organizations that require people to physically bet in the office to work.

California was one of the first states to issue quarantine orders. Tech giants like Google and Facebook closed their offices and told employees to work form home. At a virtual drop of a hat tens-of-thousands of workers were remote. The nimble fast response in California and the West Coast in general has certainly saved them from the high number of COVID-19 cases and deaths that we are seeing in New York and the East Coast.

How was the West Coast able to react so fast? The short answer is tech businesses employ the vast majority of people out West. Tech businesses not only build tech, they also rely on tech form each other. Combined the tech sector has created a network of global high-availability cloud infrastructures that seamlessly tie everyone using them together. Most tech businesses rely on cloud computing systems such as Azure, AWS, Office365, and Google Suite that enable their staff to securely access their workplace systems from virtually anywhere. Unlike JP Morgan Chase who's DR plan didn't work, the tech sector and forward-thinking organizations were able to shift people out of the office with minimal impact to their business.

Conclusion

There will certainly be businesses that will never recover from the COVID-19 Pandemic. Organizations that are built around physically present customers and employees will be the hardest hit. For example, AirBNB is suffering. People worldwide are expressing concerns about how clean the houses they are renting from AirBNB are. They certainly would not be cleaned to the same standards as a hotel that employs a full-time cleaning staff. AirBNB is going to have to address the cleanliness issue head-on to get their business back on track.

COVID-19 is not going to be the only pandemic we have. Seasonal flue alone takes out thousands of workers every year. This is the opportunity for all of us to take a hard look at our workforce and the impact quarantining has had on our businesses. There are ways to mitigate these issues even in businesses that require physical staff such as grocery stores, warehousing and delivery drivers. Cloud Computing, RFID technology, automation, robotics, etc. can be deployed to keep businesses operating with a minimal staff.

I personally believe that work from home will eventually become the standard for many businesses. Productivity will increase and operating costs will decrease. As the West Coast businesses have shown us, WFH is doable with the technologies that exists today. We don't need big data centers. We don't need big office buildings. We can easily verify people are logged in and doing work without having to physically see the person in an office. Times have changed.

Jim