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Aug 28, 2020


Craig discusses the Hawthorne Effect and the changing business office.

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Craig Peterson: [00:00:00] Hey, is this the great reset or maybe it's the inevitable reincarnation of the corporate office. That's what we're going to talk about right now. What is happening? What's happening at the corporate real estate? How are we using technology to cope?

Craig Peterson: [00:00:18] You're listening to Craig Peterson thanks for joining us.

This is a very interesting problem. We are looking at the corporate offices and we're seeing some major changes. I remember back when I was a professor out at Pepperdine university teaching management information systems 422, MIS 422, right now it's called more of IT, It's more information technology than management information. I remember being a professor there and teaching all of these young minds full of mush. Actually, it was mostly people who already had jobs about the Hawthorne effect. This was absolutely fascinating to me. I think it was Western electric, had a plant out in Illinois and there were just all kinds of workers. They're thinking about it. And I'm looking at a picture of it right now that I pulled up over on Wikipedia and the Hawthorne Works. It's an aerial view drawn by hand, a beautiful pencil work circa 1925. Huge buildings, six stories tall, if you can believe that.

It covered acres and acres, just looking at this picture. Absolutely astounding. There was a study of the Hawthorne studies conducted between 1924 and 1932. In this factory, just outside of Chicago and it was deemed the Hawthorne effect, and here's what they wanted to figure out.

You might've seen something like this in, in some movies in the past here, Schindler's list is one of them, right? How many hinges can you make in a certain amount of time? The Hawthorne Works commissioned a study, do to try and figure out if its workers would become more productive in higher or lower levels of light.

That obviously was just trying to make things a little less expensive for manufacturing. But also because Western electric to justify, you need more light, right? You got to buy lights from us. They found that the worker's productivity seemed to improve where changes were made, but here's what happened. Productivity dropped when the study ended.

What they actually ended up figuring out is that just being observed, changed the way these workers worked. That's the bottom line on this whole thing. There are other basises, if you will, of the Hawthorne, right fact, besides the workplace lighting. It had to do with maintaining these clean workstations, clearing the floors, relocating workstations. They all resulted in increased productivity, but only for short periods. So the Hawthorne effect, that term is used nowadays to identify any type of short-lived increase in productivity.

The big question I have right now is we are working from home more and more of us. We've got major companies out there, including Microsoft, Facebook, and Google. All of those guys, of course, are tech companies, who have closed their physical offices until well into next year. Twitter is told many of its employees. I have don't have an exact number, but Twitter is saying you can work from home permanently to those employees.

Now we have nearly six months. If you can believe it's been six months of forced work from home behind us now. Other organizations are reconsidering the value of office space. Of course, it comes right to mind too, that weSpace guy. If you know who he is, who started this company, where it was shared office space, and the guy turned out to be a real crook, maybe is a good way to put it, but, not a nice guy, not a good guy and he got forced out of that company. But there are others. There's like Regis and others.

But in April of this year, Gallup did a poll and Gallup says that in April 62% of the workforce force was working from home. Now, I think we've got to, as a business, people have to pull back and look at this. Why do we even have these offices in the first place? Is there a real justification for it?  I brought up that Hawthorne effect because of the industrial revolution. Instead of having a blacksmith down on the corner and another blacksmith across town and another blacksmith, two towns over. What the industrial revolution did was pull all of the blacksmithing into one factory where we could do it more efficiently. We could do it faster, and we could even come up with a better product because we had better quality control by having it all in one place. I'm postulating and there are some studies that really agree that looked at this, but. We took that model from the industrial revolution that worked great for the physical side of working and we just pushed all of our intellectual workers into that same mold. It's gotta be more efficient, having everyone in one, one workspace where we can monitor and control better. I suspect that this Hawthorne effect we were talking about had something to do with that all, ultimately. That's a very big deal.

Very big deal. So in June this year, Stanford showed that only 42% of the workforce was working from home full time, down about 20%. But that's still almost half of the people. And I really want us all to consider this very seriously. There are some advantages to having people chatting over the water cooler.

So what some businesses have done is they have their employees get together, WebEx teams, and eat lunch together. And they chat about things, right? You don't always have to chat about business. Yeah. It's entrepreneurs, that's all we ever do. That's all we ever think of, right is business, but they're talking about their dog and their kid and just had the had fixed.

And, my bees are doing this week and you have that watercooler chat you still have it, but we have it remotely. Fascinating questions. Management seems to be coming to some conclusions here because, in April, the Gartner Group surveyed and found that 74% of chief financial officers are planning to remove office space, get rid of it.

We know some businesses are selling off buildings.  If you're in commercial real estate, of course, I don't give investment advice, but I would be very concerned. The commercial real estate market has been in a bubble for many years, according to a number of people that I follow, who are financial advisors.

So the question really is to what degree should you transform your definition of the office? To what degree should you be transforming your meetings? Your communications channels. Many of us have moved to a team's app or Slack, which is a dangerous thing to use, Slack, but they have found that all of a sudden now people aren't working eight hours a day. They're working 10, 12, 13, 14 hours a day because there's no separation between work and home because people are putting things into these team channels that just don't need to be there.

So there's no question here that there's going to be some sort of a reincarnation of the office. It's bound to change. We're seeing numbers that are proving that right now. It's a very big deal. So I have seen a number of businesses, a lot of them, including big businesses that had projects underway. To redo their offices to build more offices that are now cutting way back. Even one of my kids has just such a job.

She's been working from home ever since March, and will probably permanently work from home. Now as a business person, you also have to consider. Can you compensate these people because it's way cheaper to have them work from home? Maybe you should be chipping in to help with their electric bill. Maybe you should be chipping in to help them get that second screen. Maybe you should not be requiring them to use their own cell phone smartphone to take phone calls on. Okay. So think about all of that stuff.

There will be a multi-year management consulting engagement available for thousands of managers, consultants out there. I've been working at home now for over 20 years. And I owned an office building. I owned a while. I rented office space from other local places that had a business office space. it worked out pretty well for us. But looking back at it, I think almost all of it could have been done and probably would have been done better if they'd been working from home.

 If your managers can resist that urge to micromanage where we're installing spyware on people's computers, which I think is going a little too far, then you could get some incredible productivity out of employees. We've seen that happen, as well. Some organizations like consulting, firms, like my business, where we do security, we have people monitoring systems.

We have people designing networks and integrating with existing networks. those types of businesses can function pretty well without any sort of an office, but that means other businesses are going to have to change.

Banks. Want to see that you have a physical office in order to be a business? That's not true anymore. A physical office can be almost anything anywhere. We've got to rethink everything. We have to, as workers are conscientious about this, and as business people, business owners, we've gotta be very careful and very conscientious about this. Of course, earlier in today's show if you missed it, I did talk about working from home and some of the problems we're having right now with security because of the home computers, the home networks, the internet of things, All of that sort of stuff.

If we want to make this post COVID office work best. You've got to make it focus on a place that people want to be, at least occasionally. And that might mean I can tell the place that it's easy to drop in on, and just as easy as it is to work from home. So keep that in mind.

Hey, thanks for joining me today. I am dropping off here on some of the stations, other stations.

We will be back after the break here for another hour, and we're going to be talking about smart lock hacks, Cops in Miami and New York City, and of course, a whole lot more.

So stick around. We'll be right back.


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