TechWatch: Do We Still Need New Office Buildings?

The construction cranes dot the skyline of Bellevue, our once sleepy suburb of Seattle. And, of course, it is not just here. Traveling overseas, I have been told more than once that the construction crane is the national bird. Yet here we are in an age of technology featuring discussions about the “death of distance,” telecommuting, and shared office space through something called “hotelling.” Did no one tell the construction crews that we don’t need any more buildings? Or might there be a reason for all of this construction in our technological age?

I have concluded there are some legitimate needs for office buildings today. Some things can be accomplished through a sense of place that just don’t seem to happen in a chat room or with instant messaging. But I have also concluded that a building by itself is not enough to gain these advantages. Buildings, technology, and culture need to be combined in a careful brew to create the business benefits being sought today.

Here are four areas where buildings can offer an advantage for a business, and some suggestions for the care that needs to be exercised in each area. While there is obvious overlap between these four categories, it may be useful to look at them separately as a first step, and then bring them back together.

1. Economy of Scale

Facilities or plant management can be a costly endeavor. Having many smaller facilities means managing multiple leases, dealing with different systems (e.g., telephone, key badge, computer network security) and duplicate staffing for support functions. Purchasing office furniture, for example, may produce volume discounts. Bringing people together in a single office space can reduce these costs through the classic economy of scale.

Anyone looking for this gain from a new office building must look carefully at the diseconomy of scale, however. A facility that can hold 2,000 employees would be less cost effective with only 1,500 people, due to workforce shrinkage. Another challenge deals with employment growth to 2,500 employees. Companies also have to look carefully at the perceived loss of status when the leader of a 300-person organization in its own facility becomes a small part of a much bigger facility. Further, in these days of cost cutting, many companies have eliminated much of the support staffing. Certainly those people who work from home become their own systems administrator, document copier, travel agent, and many other things formerly done by support staff. Eliminating these positions reduces the benefits of consolidation. While it may look like cost cutting to eliminate these positions, it more likely reduces actual productivity and subtly leads to unmeasureable cost increases.

Economies of scale may be there, but they can get lost in a myriad of side issues.

2. Attracting and Retaining Talent

A new office building may be a way to attract and retain good people. This happens in several ways. Many people want to be a part of something bigger than themselves. It is hard to feel the same energy from a team working together electronically. An attractive facility may also be a good recruiting tool. A new facility with a modern network, new equipment, and an attractive layout can be a draw for talent. Once people are there, they may be interested in seeing paths to promotion. A single, larger facility can house multiple parts of the company, offering a greater set of possible promotion opportunities without the requirement to move.

The downside of this same argument is that a larger facility creates a greater opportunity for bureaucracy. Common rules and processes offer benefits but also restrict people in trying to “get something done.” The person in the small office or working from home can often just “do something,” whereas the person in the larger facility may need to get approval from the designated person in charge of that particular area. Of course, just because an organization occupies a large building doesn’t mean it must be bureaucratic. But a company would have to work very deliberately to avoid this natural tendency.

3. Gaining Common Systems

Some companies use facilities consolidation as a way to force the issue and gain common computer systems. Different finance systems, human resource systems, or analysis systems make it extremely difficult to compare data, produce common reports, or effectively manage the company. Different computer systems, data networks, and software versions increase the costs of computer systems management. Having common systems brings value to the company and reduces costs. Having common systems that “talk to each other” offers additional benefits. But creating such systems as a part of the new building infrastructure effectively uses the new facility as a “club” to move everyone to the same system.

However, while we have outlined very good reasons to create common systems, moving to a new facility doesn’t make it so. This transition is difficult for many reasons. On the Ethix Web site ( I have outlined seven factors in the failure of many large-scale system implementations. Most of these reasons have nothing to do with proximity in a building. Further, those who would have a perceived loss of stature by moving to a new facility might see common systems as a double loss — they not only are not the top person in their location, but now are not able to dictate the information they get to do their job. Resistance to such changes may be passive, but it can be intense at the same time. I don’t think moving to a new facility is a good enough reason to gain common systems.

4. Creating New Ideas

The fourth reason, in my opinion, offers more promise than any of the other three. A new facility with a place to interact can help create new ideas for the company. People will get into conversation in the lunch room, at the coffee station, out in the corridor, and they will realize they could create something new and of value that is greater than either could do separately. The “synergy” (to use an overworked term) is very real leading to new product, processes, and insight that just doesn’t happen with people in isolation.

Technologists have worked hard at creating electronic collaboration tools, and certainly these provide some opportunity. But this doesn’t mean that electronic collaboration can replace physical proximity. Here are the comments from two recent research reports suggested to me by Steve Poltrock from The Boeing Company:

“An abundance of new communication technologies have been developed to mediate remote collaboration: email, bulletin boards, instant messaging, document sharing, videoconferencing, awareness services, and others. Yet collaboration at a distance remains substantially harder to accomplish than collaboration when members of a work group are collocated,” according to Robert Kraut and others in their article “Understanding Effects of Proximity on Collaboration: Implications for Technologies to Support Remote Collaborative Work.”

Judy and Gary Olson (University of Michigan) recently reported in the Journal Human Computer Interaction, “Giant strides in information technology at the turn of the century may have unleashed unreachable goals. With the invention of groupware, people expect to communicate easily with each other and accomplish difficult work even though they are remotely located or rarely overlap in time … Groups with high common ground and loosely coupled work, with readiness both for collaboration and collaboration technology, have a chance at succeeding with remote work … Deviations from each of these create strain on the relationships among teammates and require changes in the work or processes of collaboration to succeed. Often they do not succeed because distance still matters.”

What Kind of Proximity?

But proximity isn’t all that matters. Some studies have shown that collaboration drops rapidly based on the distance apart, event on the same corridor. And it drops more dramatically when people are separated on different floors. It is not possible to put 2,000 people within 25 feet of each other on the same floor! Collaboration is supported by at least four things in addition to proximity: a supportive architecture, the right physical environment, technology tools, and the organizational culture.

Duncan Hall, on the campus of Rice University in Houston, Texas, provides a good example of what architecture can do. According to one description of the building, “Interaction was a primary functional consideration for the architectural and interior design of this building. Formal and casual spaces for working together are found throughout the building as meeting rooms, hallway sitting areas, and common coffee rooms. Additionally, the wings are divided into “clusters” of offices lining hallways, which research groups can call home. The “clusters” offer a sense of territory to those using them while strongly encouraging interaction by having groups share nearby common areas such as laboratories, conference areas, and balconies.”

Inside the space of an office, glass walls and open environments can create a sense of transparency that private offices tucked away in corners cannot. Mike Volkema, chairman of Herman Miller Inc., discussed this in the Ethix conversation in issue 45. The technology tools can then further aide this collaboration.

But a culture of trust and openness, with supportive performance systems that value collaboration, remain a vital part of what is needed for ideas to be shared. So is the modeling from management that shows divisions of the company working together.

All of these can support collaboration, but building a culture of trust and openness is the place to start.


Technology has not swept away the need for new office buildings. Distance still matters. There are several valid reasons to consider a new office building in this technological age. But companies that believe they can start the flow of ideas between people by simply locating them in one building are kidding themselves. Considering the other factors may be difficult, but I believe is necessary to truly accomplish this desirable end goal.


Al Erisman is executive editor of Ethix, which he co-founded in 1998. He spent 32 years at The Boeing Company, the last 11 as director of technology. He was selected as a senior technical fellow of The Boeing Company in 1990, and received his Ph.D. in applied mathematics from Iowa State University.