Telework-induced Reductions in Overhead

Yesterday, we cited the connection between teleworking, security and business continuity management. Assuming we agree, let’s now see how the deployment of teleworking will have an impact on things such as overhead – specifically, the demand for office space.

Ken Robertson of KLR Consulting Inc. of Burnaby, British Columbia (Canada) does a very nice job in describing the actual nature of duties performed by office workers and remote workers, but more importantly pulls out some very interesting numbers.

The bottom-line return can be substantial. Consider an organization of 200 employees with 10% of the employees working as mobile workers and 10% teleworking. The organization currently uses 40,000 square feet to accommodate its employees (200 workstations). Under the guidelines presented above, the organization could reduce its space by at least 4,600 square feet. At approximately $25 per square foot for annual operating costs this minor change saves $115,000 annually.

This article that appeared last spring on CFO.com talks specifically about productivity gains associated with teleworking, as well as the overall reduction in overhead. The most interesting aspect of this article (especially if you are a real estate person) is the impact teleworking has on workspace configuration:

...the biggest savings come in real-estate costs and related office expenses. "It's enabled us to gradually shrink the footprint of our work space," says Debby McIsaac, director of work-life programs at HP…

...for years, companies with telecommuters have moved toward so-called hoteling—providing employees with access to offices and meeting rooms that can be used as the need arises but are not occupied full-time. Offices tend to be underutilized at least two-thirds of the time. "With lunch hours, sick days, nights, weekends, and travel, the actual office-space usage for most offices is about 30 to 35 percent of the time, and office-space sharing enables companies to increase their usage of one of their most costly assets," says Gil Gordon, president of Gil Gordon Associates, a telecommuting consultancy in Monmouth Junction, New Jersey.

Although the statistics on increased productivity and decreased expenses associated with teleworking seem irrefutable (including, at least $8,000 in office space savings per worker can be realized yearly by firms whose employees telework, according to the Institute of Distributed Work), there is still a fair deal of resistance, and much of the time this resistance is put up by managers, who somehow see telecommuting as a threat to their ability to control the work environment. It also points out that such arrangements might lead to petty jealousies and rivalries within the workplace. This article from New Zealand highlights these stumbling blocks. According to Bevis England, the managing director of Telework New Zealand:

ad hoc teleworking arrangements often lead to workplace jealousies forming and workers skiving off. Formal arrangements give employers a legal framework, especially for occupational safety and health and performance management issues.

The factors cited in this article should be put into their proper context – this comes from New Zealand where the concept of teleworking is in its infancy, and may not receive the type of support required to really push the concept ahead. The United States, on the other hand seems far ahead in its deployment of teleworking. With this comes the amount of clout required to really move things in the right direction, and this usually begins with government support that has the potential to ignite the concept. An example of government as accelerant is provided in the following piece that shows how the State of Georgia has A pair of bills now before the state House of Representatives that would reward employers with annual tax credits of up to $1,500 for each employee who works a certain amount of time from home rather than the office.

The bill would give employers an annual tax credit of $1,125 for each employee who begins working from home at least 12 days a month, or $375 for each employee who starts working from home at least five days a month. If the employer's office is in an area where air quality does not meet standards set by the federal Clean Air Act, the credit tops out at $1,500.

Employers could also get up to $40,000 to implement teleworking programs. The total payout by the state would be capped at $2 million in 2006, $5 million in 2007 and $7 million in 2008, at which point the credits would tentatively sunset.

Whether it happens today, or it takes ten years, one fact seems undeniable: the concepts of workplace continuity are taking hold, and change seems inevitable.