Office budgets have traditionally assumed that personnel are assigned desks in-office. This raises the question, how does the operations budget need to be altered for hybrid office arrangements?
Here we set out five tips for managing your hybrid office operations budget.
1. Explore Commercial Rent Reductions
A hybrid remote office means employees are operating from work premises less often than they would be if everyone worked in-office full-time. If a business retains its existing physical office arrangements, this would obviously result in under-utilized space and unnecessary facilities costs.
To reduce waste and cut down on costs, companies may be able to use their expectations of reduced occupancy to negotiate/re-negotiate commercial leases. Well-known brands that have slashed their corporate office space in recent months include CVS Health, Ralph Lauren, and Nordstrom.
Businesses may be able to use hybrid office arrangements to save on commercial office space in two distinct ways:
- The company is able to establish precisely how much physical office space it will need in its new hybrid office space, and acquires that specific amount of space;
- Companies seek a more flexible arrangement and consider sharing their physical space with other renters.
In some hybrid office arrangements, the business might not know on any given day how many employees will be physically in the office. Accordingly, the business decides to replace a larger amount of fixed ‘seating’ with something more fluid. This could mean utilizing co-working spaces, for example, or a smaller amount of office space configured for ‘always-on’ flex use. As an example of the latter, ‘office hoteling’ requires that workers ‘book’ a seat when they wish to go into the office for the day.
For more information on possible operating models for your hybrid office space check out 6 Remote Office Models You Should Consider To Attract & Retain Top Talent.
2. Examine Overheads
In addition to saving on real estate costs, a hybrid office may also mean reduced expenditure on office furniture, equipment, and utility bills. This will depend on cost structures — where costs are fixed, reduced occupancy may make less of an impact.
Note, however, that any savings here need to be offset against potentially increased expenses elsewhere. In many companies, employees are receiving remote work allowances/stipends to pay for their increased costs in working from home (e.g., increased use of utilities and home office equipment). In other companies, employees are permitted to claim reimbursement for work-related expenses.
Where allowances or reimbursements are provided to employees, companies also need to account for the increased administration costs of managing those amounts, as well as the subsequent impact on financial reporting.
3. Assess Potential Impact on IT Expenditure
The sudden transition to remote work in 2020 saw many organizations needing to make rapid adjustments to their IT budget. Similarly, in a hybrid office, there is likely to be an impact on IT expenditure.
Some factors which may affect the IT budget include:
- Investment in remote work tools. Businesses with a significant portion of staff outside the office generally need to invest in collaborative tools to connect remote staff with each other, and to connect remote staff with those in-office. This may include the usual apps and cloud services such as Slack, Zoom, Skype and Dropbox, as well as ‘virtual desktop’ environments.
- Investment in cybersecurity. With traffic and files being frequently sent between office staff and remote workers, it is vital to ensure that business activity in-office and in people’s homes is secure. This means considering the use of Virtual Private Networks (VPNs), anti-virus software and password management.
- Increased use of IT support. Employees getting used to new IT systems usually means an increased draw on support. With a hybrid office environment, this issue may be compounded by the need for IT support for the interface between in-office and remote environments.
4. Optimize Productivity Gains from Hybrid Office
There is a convergence of data showing that, in many cases, remote work has resulted in productivity gains for businesses. At the same time, there has been an acknowledgment from staff that there is ‘something missing’ in a 100 percent remote environment, with the majority wanting to spend at least some of their time in office.
This suggests that an appropriately designed hybrid office could strike the right balance for optimizing employee productivity. Why would this be the case?
In “Designing the Hybrid Office” Anne-Laure Fayard, John Weeks, and Mahwesh Khan examine some of the factors that can lead to productivity gain in hybrid, as opposed to fully in-office, environments:
- The Office as Social Anchor. Remote working arrangements can mean that colleague interactions become overly task-focused. Remote employees tend to only contact each other when they have a specific query or task in mind. This may sacrifice the emotional connection or ‘human moments’ from incidental in-office contact. These interactions can, in turn, be a significant contributor to staff wellbeing and productivity.
- The Office as Schoolhouse: In any business, employees need to learn how to perform the task at hand. However, not all this relevant information can be ’codified’ —i.e., written down in detail and distributed to staff in advance. Some of the most important learnings arise from junior colleagues observing senior colleagues at work, in person. In short, productivity suffers when staff are unable to learn in person.
- The Office as a Hub for Unstructured Collaboration. Much productive collaboration in an office is unplanned and arises spontaneously from casual interaction between workmates. It is difficult to replicate these interactions in a purely online environment.
Any business introducing hybrid office needs to consider how its implementation can make the most of these potential productivity gains. Done right, this can mean budget savings all along the production line.
5. Consider the Best Tools for Managing Budget Impact
Given the considerations outlined above, how can businesses best manage the budget impact of remote work? Useful tools may include:
- Adjustments to employee compensation. Many companies have raised the possibility of reducing salaries or wages for staff who do not come into the office. This is intended to reflect the reduced costs (e.g., no commuting costs), as well as the fact that remote workers may be able to live in locations with a lower cost of living. Note, however, that other businesses are considering reimbursing employees for additional expenses or providing remote work allowances. Therefore, the overall impact on employee compensation will depend on the particular company and hybrid office arrangement in place.
- Collecting data on hybrid office use to monitor expenditure. Hybrid office arrangements can make cost accounting more complicated than in a traditional office environment (e.g., tracking the cost of office space per employee). This means that it is essential that companies carefully monitor expenditure associated with hybrid arrangements. For example, if there is significant reimbursement to employees for remote work expenses, businesses may find it more cost-effective to offer employees pre-loaded virtual ‘prepaid cards’.
- Planning. When Covid-19 lockdowns arrived, many businesses were caught short when it came to their business continuity planning: That is, their planning about how to ensure the business continued operations amid major disruption. With staff split between home and in-office environments, it is crucial that the business has a plan in place to ensure there is as little disruption as possible to business in case of a major event.
When moving to a hybrid office environment, it is crucial for companies to consider the impact this could have on their operations budget. Exploring rent and overhead reductions might be the most obvious move in navigating the impact of hybrid office. But companies should also look into IT expenditure and how hybrid office can optimize productivity when setting their hybrid office budget. Finally, businesses need to consider the best tools to implement internally in order to manage their hybrid office budget. This includes considering employee compensation, collecting data on ongoing expenditure and making sure organizational planning has fully accounted for hybrid office.