by C G Petterson
Seen from the European standpoint, British companies appear alarmingly ill-informed about the total cost implications of an office relocation or expansion. The fact that, typically, no single senior member of management exercises complete control over the move means that the personnel and occupational elements are rarely quantified with the same care.
In Britain, responsibility tends to be divided between property or premises and personnel departments, which do not necessarily enjoy parity of status at senior level. The final decision may be taken by a finance or managing director preoccupied with the company’s operational priorities and relying on agents whose brief is restricted to the traditional considerations of space costs — rents, rates and service charges.
Lack of clear responsibility can mean unsatisfactory and, in the long run, expensive options. The personnel director or manager, for example, should play a central role as the eventual recipient of complaints about staff comfort, morale or — at worst — actual sickness if the new building is unhealthy. Yet he or she is rarely involved early enough to influence the decision. Instead, the instruction typically comes to take delivery of a quantum of space and allocate it as well as possible to staff who have been told at the last possible moment because of management’s obsession with secrecy.
Business organisations are beginning to question this obsession. It is encouraging, for example, to hear CBI London Region chairman Stephen Hayklan complain that “it is highly unusual for British companies, unlike their European counterparts, to consult staff fully in the early stages of a relocation or development — when it matters most”.
The Institute of Personnel Management is also keen to narrow the gap between property and personnel factors. A relevant contribution to one of its recent national conferences came from Len Brooks, now deputy chairman of P-E International — Britain’s second largest independent management consultancy.
He summed the whole issue up when he told delegates that: “Buildings and offices are important, but the people inside them are the most important assets in nearly every organisation. Get the people side right and you are on the winning track. Get the people and the buildings right and you are as good as there.”
In an age of increasing concern over environmental health, this advice is particularly relevant. By discounting in advance the effect on their staff of working conditions, employers are risking huge losses from absenteeism, impaired performance and continuous recruitment which can outweigh apparent savings on space costs.
The study of sick buildings is still in its early days. But the scale of the problem is underlined by a Harris Poll carried out in the summer of 1990 for agents Moss & Partners. This showed that 11% of London’s population suffers from symptoms consistent with those produced by indoor pollution of the kind generated by the office environment, which is probably directly responsible at least half the time. Yet too many companies still overlook the fact that, even in the most expensive locations in London, staff cost a good deal more than the space they occupy.
The sums are quite straightforward. Given prime central London office rents of £60 per sq ft, it will cost £6,000 a year to accommodate an employee occupying 100 sq ft of space, plus perhaps 50% more in rates and service charges — say £10,000 a year in round figures.
Average London salaries are around £17,500 — to which must be added national insurance and pension contributions plus the value of benefits such as a subsidised restaurant and private health care. Briefly, people are worth at least twice as much as the space they occupy — or more than three times the rent alone.
Rent, in other words, is far from being the most significant element in the total operational cost profile. Seen from this aspect, a 10% differential is not all that critical if the higher quality of accommodation secured pays for itself in reduced staff sickness or higher productivity and loyalty.
In Scandinavia, assessment of total operational costs is routine. This is not necessarily because employers are more farsighted than their British counterparts but because they are statutorily obliged to respond to the demands of their employees.
In Sweden, pressure for a higher quality of working environment comes from the whitecollar trade unions, which are much more widely representative than in the UK. Before an employer of any size signs an occupational lease, for example, he has to have this vetted by the union, which also has the right to approve space planning and layouts in advance of occupation.
The Swedish Confederation of Professional Employees (TCO) has taken the issue a great deal further. Since 1989 it has been working closely with property and construction companies on the need for healthier conditions in the office.
In an exercise of a sophistication difficult to imagine on this side of the North Sea, the programme has already produced publications including: an information manual on “Fresh air at your workplace — measures against sick building”; a specialist journal, Huskuren; and an English-language supplement in Dagens Industri, the country’s equivalent of the Financial Times.
The supplement features Alviks Strand, in Stockholm’s Dockland, on which my company acted as project manager to the publicly quoted Swedish developer Anders Nisses. Completed in 1989, this 450,000-sq ft development is regarded as a prototype of the new-style healthy building, using a flexible and easily accessed underfloor ventilation system.
In spring 1990, TCO convened a conference for employers, developers, contractors, local authorities and other trade unions. The union’s policy according to its chairman, Bjorn Rosengren, is that “projects must be planned in such a way that there will be no more sick buildings”.
Mindful of the EC’s Social Charter, other countries such as Denmark and Germany have already taken steps towards the introduction of internal pollution control. In Britain, however, progress is noticeably slower.
One reason quite clearly is that the weakness of British salaried trade unionism leaves employees without an effective mechanism through which to express their views or initiate changes. Pressure does potentially exist, but it will be manifested informally through market forces, as office workers become more and more choosy about where they are prepared to work.
Demography is on their side. Official figures from the Department of Employment show that the nation’s workforce will grow by only 60,000 a year between now and the end of the century, compared with 300,000 annually during the late 1980s; and there will be a million fewer 16- to 19-year-olds in 1994 than there were in 1984.
In the short term, of course, the recession will mask this looming crisis, with white-collar unemployment creating a buyer’s market for labour and many people in service industries happy to have jobs at all. But the end of the recession will coincide neatly with the stark reality of the demographic time bomb.
As the decade wears on, employers will find themselves competing for increasingly scarce human resources. Working conditions will become as important as salary, or a company car, in the total benefits package being offered to new staff. Even discounting the effects of the Social Charter, therefore, British companies will be forced to think much more deeply about space procurement and relocation policies and their implementation. Developers, in turn, need to acquire the confidence to provide a higher, healthier standard of office accommodation.
The problem is similar to the one which arose when it became clear that cheap energy was a thing of the past. Both suppliers and occupiers of space had to take on board the idea of increased capital expenditure amortising itself in lower running costs.
But today’s issue is more sensitive, because it involves people rather than physical considerations and is therefore highly subjective. There is a gap in perception to be bridged.
What we need, perhaps, is a new breed of professional. The solution might be a chartered surveyor or valuer with the necessary property background and experience reinforced by training in the evaluation of human resources within the occupational context.
It is interesting to note that this appears to be precisely what the College of Estate Management has in mind in its current review of the syllabus for its diploma in surveying. There will be increased emphasis on management subjects, which will now account for 20% of the study material for Part II.
Out of this time, a quarter will be devoted to people-related issues such as personnel management, industrial relations, employment law, health and safety and operational research. The prime aim, of course, is to improve the surveyor’s own management skills, but the resulting ability to advise on the personnel aspects of clients’ concerns will be of immense benefit.
This initiative stems from the college’s experience with its highly successful advanced diploma courses, which are all heavily management related. Its principal, Peter Huntsman, has pointed out that “students realised that to succeed in their careers they needed to know how to manage people, and they can blend this knowledge with their professional skills when acting for a client”.
It is also encouraging to learn that the college has recently established, and is providing the secretariat for, the British Council of Offices, along the lines of the now flourishing British Council of Shopping Centres. As a practically based think tank, this will provide the perfect forum for further work on such issues as the total costs of office moves and developments for the benefit of industry professionals, their clients and the office population in general.
