Firms Must Think of Real Estate Needs in New Ways.

DESPITE the recent dot-com slowdown, companies will continue to move from bricks and mortar to Internet commerce in coming years.

There is a misconception among companies going from actual to virtual storefronts that they will require fewer employees, but this is often not the case. Retail salespeople will have to be replaced with online customer service personnel.

A frequent challenge companies face is recruiting an e-commerce workforce fast enough to meet their needs. But a serious and often unexpected problem is finding a place for these New Economy employees to work.

A possible solution to this workplace transition is for companies to consider their real estate needs in new ways. When a company expands faster than the walls that bound it, there needs to be flexibility in the bricks and mortar in order to accommodate their needs. Obviously, moving the bricks is much more difficult than moving the company. So instead, the question should be asked: How do we (the company) create flexibility without losing consistency?

The answer may lie in a term called object-oriented management (OOM), which has been coined by Fred Lins, CEO of a small technology firm located in Honolulu. The premise behind OOM is that a hierarchical company as a whole moves much slower than the sum of its parts. If companies can elevate from the staid functions and create a flatter design, then there is a possibility for growth unfettered by structural constraints.

"If you think of parts of the company as entrepreneurial entities and separate them as standalone function-based entities - such as sales, human resources, production, etc. - then you will enable quicker response to problematic situations since the relevant parts of an organization are closer to their respective customers, which may be internal or external." Lins said.

The idea is to keep functions apart from the hierarchy and the physical organization and either outsource them to companies that specialize in certain areas, such as real estate, or change the organization into semi-autonomous centers. Either action may enable greater efficiency through local control and result in more time for employees and managers to do their jobs.

Separating functions

The idea is to separate organizational functions into two groups: high-growth divisions and low-growth divisions. The high-growth divisions can be put into space that allows for greater expansion without being tied to cumbersome, slower-growth units.

With today's technology, connecting divisions in separate buildings makes as much sense as connecting divisions in the same building.

The way to look at this is that it is no different than connecting PCs to your cable network. The servers are co-located with their fractional divisions, such as the executive branch, upper management, distribution, human resources and sales. These are typically the slower-growth division that can be highly to moderately predictable when it comes to expansion needs. Placing this group in one building allows for the company to pay only for what it requires today and up to five years out. The terminal ends of the organizational network represent the programmers, customer service, software engineers, technical support, etc. These areas are constantly changing and shifting and require the most flexibility.

Placing these people in buildings with relatively short-term leases allows for more flexibility by leaving greater room for expansion. They are not tied into longer terms, thereby making a move possible. Also, there are more options because not as much space is required when the slower-growth division is removed.

The arrival of modern network technologies - including Storage Area Networks, Wide Area Networks based on broadband components such as Road Runner cable, Integrated Data Services Networks, Asymetric Digital Subscriber Lines and the like - enable the organization to distribute its servers and databases with little regard to location.

Beyond telecommuting 

This moves beyond the idea of telecommuting. In a sense, it is somewhat in-between telecommuting and "whole" housing. A programming division can be placed closer to where the pools of employees live, which in many cases is not where the executive division lives.

It also allows collaboration within divisions, something that companies like.

There's also better productivity since driving in traffic is reduced, constant moving isn't taking place for the company, as a whole and old leases are not being paid for. In addition, the high-growth divisions can be designed more creatively than those for the slow growth, allowing for higher enjoyment of the workplace and better employee retention.

If all of this seems too unbelievable, heed the words of James O'Donnell, vice provost of IS and computing at the University of Pennsylvania in Philadelphia: "When India is zero distance away in terms of data, there are a lot of things you can do, like hiring the experts you need without knowing or caring where in the world they're located."

After all, call centers already are becoming location-independent.

Understandably, for any new idea to be adopted, there must be a change in the thinking of the top personnel. Giving up tight control, having to travel between locations and creating a new model of protocol are some of the new ways of thinking that must be realized.

For those "rising stars" that are just beginning, this may be easier to instill than for those companies whose protocol is already in place. But what matters most is how a company can consistently increase its stakeholder value.

Employees and real estate are typically looked at as a cost, so adding greater value to them can directly benefit the bottom line.

David Wise is a real estate consultant/broker for the Equis Corp.