Perspectives on Productivity - JLL

Advance Perspectives on Productivity: Corporate Australia April 2014

Executive Summary Productivity is on the agenda of corporate Australia. Why? In an increasingly competitive and global marketplace, productivity is seen as key to profitability. In preparing this paper we conducted in-depth interviews with over 20 C-suite members (CEOs, CFOs, COOs) from a broad range of industries across Australia. This paper examines how corporate Australia views productivity, what initiatives they have in place to drive productivity in their organisation, what are the productivity enables and inhibitors, and how they measure productivity. There are many different levels of productivity, from process improvements to productivity of business units, however, in this paper we keep the focus on productivity at the enterprise level. The C-suite revealed their top four business issues to be improving profitability, driving a growth agenda, developing engaged and motivated people and ensuring loyal customers. The success of these four business issues is underpinned by productivity as shown in Table 1. There is no singular approach to productivity, however we believe there is a framework for approaching how an organisation can achieve productivity gains. Whilst there are a myriad of ways to define and measure productivity the framework below helps in contextualising the multiple factors in four key areas: leadership, systems & processes, the work environment and people.

Leadership, systems & processes and the work environment are the foundational enablers of productivity. Without these in place, an organisation will fail to achieve desired productivity outcomes. Only then should an organisation focus on its people and how they can be engaged and motivated to deliver productivity outcomes. Yet there was a disconnect between the amount of time spent on these foundational productivity enablers by the C-suite. We asked the survey respondents to estimate their time and cost dedicated to the four enablers of productivity – people, leadership, systems & processes and the work environment. The results showed that 62% of the focus is on people, 18% on systems & processes, 10% on leadership and only 9.4% on the work environment. Table 1: The Influence of Productivity of Business Objectives

Key Business Issue

Productivity Relevance

Profitability

Lower inputs, higher outputs contribute to profitability improvements

Growth

Productivity improvements around technology, big data, systems & processes, innovation will foster organisational growth

People

More productive people have higher levels of engagement and retention

Customer

A more productive workforce, with a lower cost of sales and a focus on customer centricity will drive higher levels of customer loyalty

Source: JLL

Given the strong focus on knowledge worker productivity, the workplace is an important catalyst for human performance. Creating the right physical environment will drive the organisational culture, collaboration, innovation and teaming to create productivity improvements. In our experience, a contributing factor to organisational success is the effectiveness of multiple teams working together to deliver business outcomes. In designing a work environment, a company needs to consider how to create space that stimulates the effectiveness of these teams, as well as understand what tasks these teams perform that contribute the most value to the organisation and delivering the appropriate physical environment to support these tasks.

Figure 1: A Productivity Framework

People

Not surprisingly there were no universal productivity metrics named by our C-suite respondents, underscoring the fact that productivity strategies and metrics are specific to individual sectors, organisations and even business units within the same company.

PRODUCTIVITY

Where there was some convergence was around traditional business metrics such as revenue per employee, profit per employee and cost to income ratio. These are just a straight measure of outputs over inputs, yet the respondents were not able to isolate the key inputs that went into creating productivity improvements. The measurement of productivity should be linked back to the productivity framework illustrated in Figure 1. Metrics can be put in place around the foundational enablers of productivity – leadership, systems & processes and work environment. What became clear through the productivity discussion is that productivity gains made by an organisation need to be sustainable. Sustainable for the organisation, sustainable for its people and sustainable for the environment. The human race will continue to look for ways to do things faster, quicker and better, but if it is not sustainable, there is no long-term viability of those productivity gains.

Leadership Vision Purpose Communication Visibility

Work Environment Space Culture Collaboration Teaming

Systems & Processes Efficiency Tools Processes Risk Management

Source: JLL

Perspectives on Productivity: Corporate Australia 3

History of Productivity Productivity has been a common theme of human endeavour over time. In order to understand the foundational enablers of productivity, we have taken a look back in history. The first real focus on productivity in history around the time of the Industrial Revolution was on automation – how to do things quicker, faster, better and cheaper – with an emphasis on reducing human inputs through the introduction

of machinery. In the early 20th century the focus switched to improving processes and systems to be more cost effective as well as achieving speed to market. The technological revolution in the latter part of the 20th century led to the knowledge worker where productivity improvements focused on innovation, with investment in technology innovations to better enable these knowledge workers, also being

The Boston Evening Transcript is the first newspaper to be mass produced and sells for a penny

The first written word

8,000 BCE

3,200 BCE

The first commercial passenger flight flies between St Petersburg and Tampa in Florida

The first aqueduct

2,600-2,200 BCE

312 BCE

21 February 1804

The world’s first electrical digital computer, the Colossus, is developed

The Home Insurance Building in Chicago, Illinois is recognised as the first skyscraper

24 July 1830

1877

1885

1908

1 January 1914

The first paved road

The first lunar calendar

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1945

December 1943

Penicillin is mass produced and distributed

The first steam locomotive embarks on its first journey in the UK

The first phone switchboard is operation in Boston, Massachusetts

The Model T Ford is built and mass produced by Henry Ford

supported by new workplace environments to stimulate collaboration and communication to drive productivity gains. Which brings us to today, where the focus is on people, and how to drive motivation and engagement to achieve productivity improvements.

Activity Based Working is first introduced as a concept in the Netherlands The first laptop is commercially available in Australia

1973

Motorola develops the first fully portable mobile phone

1982

Twitter is created

John Sullivan of CSIRO patents the technology forming the backbone of WiFi

12 March 1989

World Wide Web is proposed and developed by Tim Berners-Lee

1996

Apple releases the first iPad

LinkedIn goes live

2000

Ericsson develops the world’s first smartphone, The R380

5 May 2003

4 February 2004

July 2006

29 June 2007

Facebook is founded

3 April 2010

July 2013

LinkedIn reaches 250 million users

Apple releases the first generation iPhone


Defining Productivity There are a myriad of definitions for productivity, but the one that seems to be most commonly used is the ‘ratio of output to input for a specific production situation’. At one level productivity boils down to the outputs / inputs, however in today’s global digital economy, productivity means different things to different organisations. The way organisations define their outputs and inputs varies enormously and how they measure productivity is certainly not consistent. Indeed different departments within the same organisations have different definitions and metrics for productivity. Productivity measures are also subject to change depending on the business environment and competitive pressures businesses are facing. For example during the GFC, productivity metrics and enhancements were only focussed on cost cutting. Considering a range of industry sectors highlights the difference in measures for achieving productivity improvements. Some examples are shown in table 2 below.

Table 2: Industry Specific Productivity Metrics

Industry

Productivity Measures

Aviation

• Aircraft utilisation • On-time departures • Passenger yield • Seat yield • Km travelled per seat • Passenger revenue per available seat mile • Employees per plane

Banking

• Cost to income ratio • ROA • Net interest margin • Table rankings

Technology

• Network productivity • Network uptime • Network bandwidth • Performance per Watt • Disk storage capacity

Education

• # of EFTSL (equivalent full-time student load) • Commencing student numbers • # of university alumni • maximise research funding • % of graduates gaining full-time employment • # of research publications

FMCG

• Cost of goods sold • Supplier on time percentage • C ost of purchasing as a % of gross sales • Stock turnover • Just in time management • Efficiency of supply chain

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CEO Survey JLL conducted in-depth interviews with over 20 C-suite members to understand where productivity fits in their organisational strategy, how they define productivity, enable productivity and measure productivity.

Business Operating Environment The first questions asked of C-suite members was what are the key business issues they faced today as well as the most important focus areas that need constant attention to understand where their business focus lay. Essentially the responses fell into four key areas – profitability, growth, people and customers. Clearly there needs to be a profit objective, growth agenda, motivated people and happy customers for an organisation to be successful and management put in place measures to get a sense of whether they are doing well or not, being productive or not. The success of these four business priorities is underpinned by productivity. Taking firstly profitability, a number of organisations pointed to the challenging business conditions which had led to declining demand, in turn flat revenue growth and margin erosion, impacting negatively on profitability. In professional services organisations, the number of

billable hours was a key focus for the C-suite and how to maximise this and remove administrative burden from their sales professionals. The competitive environment posed another threat to profitability with new entrants, disruptive technologies and commoditisation. Cost management was also a threat to profitability and most organisations remained vigilant on managing their cost base in the current business environment. Growth was on the agenda of all C-suite members interviewed. Growth in terms of new markets, new sectors, new services and new customers. The C-suite were concerned with how to grow market share, share of wallet, grow into new markets either organically or through M&A activity. One organisation stated that they expected 25% of their revenue to come from new services each year and had an unwavering focus on hiring new talent to be able to foster innovation and new market offerings. A number of organisations highlighted being able to differentiate in the market as a critical success factor to achieving growth. Linked to differentiation, was positive brand perception which also had the potential to positively impact growth. Technology and harnessing this to facilitate growth was seen as important, as was fostering innovation to help differentiate and stay ahead of competitors.


People and talent as expected was consistently amongst the top three focus areas for the C-suite members. Driving staff engagement was seen as a priority and a feeder into achieving growth, customer centricity and improved profitability. Aspects of talent management highlighted were the need to attract high performing individuals (quality aspect of people) as well as being able to readily tap into a qualified workforce pool (quantity aspect). Diversity was also a priority as was instilling a culture and tied back to the company’s brand values. The C-suite were focused on creating a culture where people took pride in the organisation, were able to innovate and contribute to organisational objectives. The focus on customers was defined in terms of service improvements to enhance the customer experience, ensuring the organisation and its people had an emphasis on customer centricity. One part of this was having an understanding of customer needs, expectations and buying habits to be able to drive customer loyalty. There was a recognition that the organisation’s culture was key to achieving customer centricity and have it embedded as part of the company’s DNA. Three key components of this drive to develop brand loyalty and an unwavering customer focus are empowering the front-office or sales staff to have more client facing time, streamlining and engaging the back-office and always seeking feedback to drive continuous improvement. One CFO interviewed said to be able to move the amount of client facing time of his relationship managers from 50% to 60% would deliver significant productivity gains. In order to be able to do this, processes need to be streamlined so that administrative tasks are not an inhibitor for these sales teams. A focus on the customer had an objective to drive loyalty, repeat business and reduce the organisation’s cost of sales.

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Figure 2 on the adjacent page shows the key focus areas of the C-suite today and how they measures success in each of these areas, as well as the influence of the operating environment. Productivity itself was called out by a number of survey participants as a key business focus. We see it as permeating all four areas of profitability, growth, people and customers. Later in the paper, we will get into more detail on the views of the C-suite around productivity specifically, but the table below highlights how productivity drives the key business issues facing corporate Australia today. Table 3: The Influence of Productivity on Business Objectives

Key Business Issue

Productivity Relevance

Profitability

Lower inputs, higher outputs contribute to profitability improvements

Growth

Productivity improvements around technology, big data, systems & processes, innovation will foster organisational growth

People

More productive people have higher levels of engagement and retention

Customer

A more productive workforce, with a lower cost of sales and a focus on customer centricity will drive higher levels of customer loyalty

Source: JLL

Figure 2: Key Business Focus Areas

GROWTH • Keeping up with disruptive technology • New sectors / new services • How to differentiate • New growth • Technology • Innovation • Brand perception • Commoditisation

PEOPLE • Diversity • People and culture • Talent • Employee engagement • Culture

PROFITABILITY • Declining demand • Flat revenue growth • Fee erosion • New entrants / competition • Cost management • Operating environment

CUSTOMER • Customer centricity • Customer experience • Brand loyalty • Repeat business

Governance, Risk, Regulation, Government Relations Source: JLL


The C-Suite’s View on Productivity

Other definitions of productivity that were highlighted included:

All C-suite members interviewed felt productivity improvements were fundamental to their organisation’s success. There were a range of different interpretations of productivity depending on the industry sector, but as stated at the opening of the paper, the most common definition was:

• Revenue per dollar of cost • Cost efficiency • Improved delivery time • Profitable growth • Business uptime

Outputs Inputs

• Continuous improvement programs • High staff engagement • Improved staff retention • Billable hours • Off-shore hours A number of C-suite members interviewed highlighted that productivity gains should not just be thought of in the context of cost savings. Whilst doing more with less was an overriding theme, there was concern that an exclusive focus on generating cost savings would be detrimental on the long-term sustainability of the organisation. Instead, a productivity strategy should be focused on ensuring revenue growth is accelerating at a faster rate than costs.

“Our target is to be 3% more productive every year across the board” Colin Dyer, CEO, JLL

“Productivity is very important, it dictates financial improvement and flows through to all other areas such as safety, our brand and operations” John Borghetti, CEO, Virgin Australia

“Productivity is the single most important thing to our business, given we are a services and people organisation” Mat Baxter, CEO Universal McCann

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Productivity Enablers When asked their views on productivity enablers or enhancers, the C-suite were unanimous in pointing to clear vision and leadership from the highest levels within the organisation. Many felt that not having a clear vision, mission or core values meant it was difficult to develop a strategy with clear goals and objectives that productivity improvements can be measured against. Without a clear vision there is a lack of direction for staff, no meaningful collaboration or innovation towards a common goal and as result, there is disengagement with people just doing a job. The next step was alignment of the organisation’s internal architecture to this vision, ensuring business processes, HR, IT, marketing and sales strategies were all aligned to the vision and therefore it will become an embedded part of the culture. A number of respondents referred to a productivity strategy at the highest levels of the organisation. They stated that the C-suite have direct oversight of major transformational initiatives to improve productivity. This ensures that productivity is inherently linked with the overall vision and business objectives of an organisation and has attention at the highest level. Culture and talent were seen as critical success factors to enabling productivity within an organisation. An engaged employee population was seen as a key driver of productivity, with many C-suite members saying they invested a significant amount of their own personal time in talent management and engagement. The ways to achieve an engaged employee base included having programs in place around values, management, leadership and innovation. Training needed to come harder and faster to accelerate the development of top talent within the organisation who could help shape the productivity agenda. A number of respondents referred to strategies allowing their people to have more time ‘on the tools’ or client facing time rather than being tied up with administrative burdens. Digital tools were highlighted as

a critical success factor driving a more productive talent pool, through portals, social media to access real time information. One organisation felt that creating a culture of growth would help achieve its productivity objectives. They said growth is a selfenergising phenomenon that drives energy, creativity and excitement within the organisational culture which in turn creates opportunities for people and higher levels of business success. Another CEO gave an example of being able to reduce their employee attrition rate from 36% to 4% over three years which had resulted in a $10 million benefit to their bottom line. A strong change management program was seen as a key enabler of any productivity strategy. There was recognition of potential internal resistance and confusion around productivity. Even with the best intentions, at least two thirds of change initiatives fail globally. Change management around productivity is no exception. Productivity initiatives prove difficult to implement because of a series of barriers, such as a lack of a clear vision around productivity, the lack of senior management support, resistance of the ‘rain makers’ to address their cost base and a perception that it is just about stripping cost out of the business. An effective workplace was cited on a number of occasions as being an enabler of productivity, to not only deliver an improved employee experience and therefore engagement, but to also foster those business processes and activities that drive productivity gains for an organisation. The role of workplace will be discussed in more detail later in this paper. Two organisations said they had appointed a dedicated senior resource to focus on productivity gains within the organisation in addition to the C-suite focus. They felt continuous business and productivity improvements were a full time job and that it should not just be added to someone’s ‘day job’, rather warranted a strategic and dedicated focus.


Productivity Inhibitors

was nominated the second most important issue for the Federal Government to address1. Unions were felt to have an adverse impact on many work practices, slowing down projects and therefore inhibiting productivity. Whilst the role of unions in business performance is a whole other area of debate, what is clear is that irrespective of union participation, an engaged and connected workforce that has pride in the organisation will be more productive.

Conversely the most commonly cited inhibitors to productivity were a lack of clear vision and leadership from within the organisation, internal resistance and a lack of clear metrics. Measurement of productivity was seen to be one of the greatest challenges, particularly if the organisation’s goals and objectives were not clearly articulated. We will discuss productivity metrics in more detail later in the paper.

One CEO highlighted the fact that productivity doesn’t happen overnight, organisations need to invest to achieve productivity gains and it is a mid-long-term pay off. Yet this is at odds with the financial management of many companies in today’s operating environment where performance is measured on a quarterly basis and shareholders are hungry for growth. It takes a brave organisation to invest in long-term perhaps ‘intangibles’ such as culture and the work environment, which were seen unanimously as drivers of productivity.

Legacy business practices were also nominated as productivity barriers, with organisations recognising the need to align these with the overarching productivity strategy. Examples of these legacy business practises included time sheets, antiquated IT systems and historic processes that have become embedded as part of culture. A number of respondents mentioned the challenges that came with balancing productivity and growth, particularly in strong growth markets. In addition, competing funding choices made it harder for businesses to direct effort towards productivity objectives. This is due to businesses being measured on short-term performance, yet productivity initiatives generally have medium to long-term payback periods.

Productivity Metrics Not surprisingly there were no universal productivity metrics named by our C-suite respondents, underscoring the fact that productivity strategies and metrics are specific to individual sectors, organisations and even business units within the same company.

Government regulations and unions were called out by quite a number of respondents as productivity barriers. This was particularly prominent in industries that were highly regulated such as aviation and resources, with C-suite sentiment that some of these government regulations were inhibiting productivity and growth. This was similar to the results of the Australian Institute of Company Directors (AICD) ‘Director Sentiment Index’ which showed that productivity growth

Where there was some convergence was around traditional business metrics such as revenue per employee, profit per employee and cost to income ratio (Figure 4). These are just a straight measure of outputs over inputs, yet the respondents were not able to isolate they key inputs that went into creating productivity improvements.

Figure 3: Issues the Federal Government should address in the short-term Total Total 1st Half 2013 2nd Half 2013

(%) Infrastructure

13

Productivity growth

16

International Competitiveness *Improve efficiency of

Ageing Population

3 3 2

4

4 5

most important

6 4

1

6 7

6

7

3 5

6

6 7

6 5

7 3

6

6

6

7

7

3 3

4 5

2

3

4

5 least important

Source: Australia Institute of Company Directors 1 Director Sentiment Index published by the Australian Institute of Company Directors, November 2013

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8 9

7

7

7

7 8

8

8

Abolishing the carbon tax Federal budget deficit

7

13 11

8

7 9

Industrial Relations with Asia Education

9

5

9 10

8

federal bureaucracies Regulation/’red-tape’ ^Engagement

13

8 6

56

56

54

40

39

40

N/A

36

38

36

35

34

33

30

32

27

31

22

15

21

22

21

One organisation did refer to monitoring investment decisions that contribute to productivity gains for the company. They considered the direct cost of the investment as well as time and resource cost to determine the payback period and IRR of that investment.

improvement but the more powerful drivers of productivity comes from unlocking the potential in your people. The thinking around the way to do this was investing in people through training, creating a supportive culture, engaging leadership and a dynamic work environment.

One organisation referenced three levels of productivity metrics they had in place, those market facing definitions of productivity that are in the public arena, business unit productivity metrics that are typically linked to revenue and regularly reported to the C-suite and project level productivity metrics which are more focussed on cost avoidance and efficiency improvements.

The difficulty in measuring productivity appears to result from the intangible nature of some measures and therefore relating this to causation of productivity improvement. What this means is measures such as those associated with cost which are quite tangible in nature and therefore a reduction in a particular cost can be identified, measured and therefore determined as the cause for productivity improvement. However ‘softer’ people measures or measures associated with the workplace are more intangible metrics. It is often difficult to scientificly demonstrate or show conclusively the causation of productivity improvement directly as a result of these intangible measures.

There were consistent references to employee engagement metrics, with one CEO sharing that they have developed a ‘happiness index’ to measure the motivation and engagement levels of not only their own employees, but more broadly across the industry in which they operate to have an understanding of engagement levels at competitor organisations. The overarching sentiment from the survey results was that if companies want their people do more for them and improve productivity, you need to create the right conditions for that to occur. Productivity is about realising the potential of the organisation as well of the individuals working within that structure. Every business has a degree of discretionary effort to it. Productivity is about realising this through client relationships, technology or people. It is about unlocking the hidden potential and most businesses only tap into a small percentage of their overall potential. Some productivity gains will come out of cost savings and avoidance, technology and process

For knowledge workers most approaches to tracking the human contribution to productivity rely on proxy measures such as absenteeism, engagement scores and attrition rates and over time their correlation to business performance and productivity improvement. However it is difficult to directly correlate that improvements in these metrics is the direct result of the workplace, the leadership, or other contributing factor(s). In addition there were also some industry specific productivity measures cited, such as number of research papers published, critical environment uptime, environmental impact of operations, utilisation of aircraft and dollar cost of capital expenditure.

Figure 4: Productivity Metrics

Profitability People Customer Growth

“We believe that happy and engaged staff will deliver us a 35% productivity improvement, which is pure upside for us but also our clients who will get better creative ideas and in turn drive greater growth for our business” Mat Baxter, CEO Universal McCann

• Market share • Level of business development pipeline • Billable hours • Revenue growth

• • • •

Employee engagement Diversity Staff retention Happiness Index

• • • • •

Revenue per employee Cost:income ratio Revenue per $ of cost Profit per employee C&B as a percentage of revenue • Return on equity • Direct cost, plus time and resources

• • • • •

Customer satisfaction Net promoter score Customer loyalty Customer retention Repeat business


A Productivity Framework Considering the productivity enablers and enhancers raised through our survey of C-suite representatives, JLL has developed a framework on how organisations could approach productivity. Whilst there are a myriad of ways to define and measure productivity this framework helps in contextualising the multiple factors in four key areas: leadership, systems & processes, the work environment and people. The components contributing to the four areas will vary depending on the organisation and the business environment it is operating in, but this framework (Figure 5) can be used to establish a productivity agenda in the organisation. We see leadership, systems & processes and the work environment as being the foundational enablers of productivity. Without these in place, an organisation will fail to achieve desired productivity outcomes. Only then should an organisation focus on its people and how they can be engaged and motivated to deliver productivity outcomes. As a number of members of the C-suite stated, having a clear leadership vision, purpose, direction and communication program will foster productivity in the organisation. Clearly stated objectives and productivity programs owned at the highest levels of the organisation will help to mobilise people to achieve productivity gains. Essentially having a clear vision will ensure that people will know their purpose and understand how they contribute to the organisation’s performance, thus ensuring they feel valued and engaged. Having the systems and processes in place to support people to achieve efficiency and productivity gains is another critical success factor. Investing in the right tools and technologies to allow people to become more client-facing, will reduce the administrative burden, drive innovation and growth, ultimately minimising cost of inputs and maximising outputs to achieve productivity improvements. Efficient systems and processes will give people back the time to focus on collaboration and creative thinking two fundamental productivity enablers. Given the strong focus on knowledge worker productivity, we see the workplace is an important catalyst for human performance. Creating the right physical environment will drive the organisational culture, collaboration, innovation and teaming to create productivity improvements. In our experience, a contributing factor to organisational success is the effectiveness of multiple teams working together to deliver business outcomes. In designing a work environment, a company needs to consider how to create space that stimulates the effectiveness of these teams, as well as understand what tasks these teams perform that contribute the most value to the organisation. Only then can they start to design and deliver the most appropriate physical environment to support these tasks. The work

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Figure 5: A Productivity Framework

People

PRODUCTIVITY

Leadership Vision Purpose Communication Visibility

Work Environment Space Culture Collaboration Teaming

Systems & Processes Efficiency Tools Processes Risk Management

Source: JLL

environment as a driver of productivity will be considered in more detail later in the paper. Fundamental to the achievement of productivity gains is clearly people, yet many organisations fall into the trap of putting all their focus on people first, without addressing the other key elements. In the knowledge age, people are largely the deliverers of productivity, however it is hardest to draw the direct causal link between people and productivity gains. People motivation and performance is a subjective, intangible measure which differs not only from organisation to organisation, but between departments and indeed between business leaders. We believe that if you have the three foundational enablers in place, this will give an organisation the right culture and build engagement with employees which will foster productivity success.

The Potential of Workplace to Influence Productivity More than half of the C-suite members interviewed referred to the physical environment or workplace as being an enabler of business productivity. Some placed a significant amount of emphasis on the workplace, with one CEO stating ‘the single biggest influence of productivity is the workplace’. Another stated having transitioned from a traditional to a dynamic workplace had provided leadership and empowerment to their people. In the organisations that we interviewed there was consensus on the importance of the work environment to support their people and one CEO stated ‘environment and culture is as important as business performance’. Yet when asked, C-suite members focused very little of their time on the work environment. We asked the survey respondents to estimate their time dedicated and cost allocated to the four enablers of productivity – people, leadership, systems & processes and the work environment. The results shown in Figure 6 below demonstrate that 62% of time and cost is focused on people, 18% on systems & processes, 10% on leadership and only 9.4% on the work environment. It seemed that when there was a significant real estate event such as a lease renewal or relocation or change in workplace environment, the C-suite was very engaged and it did get a lot of visibility at that particular time but not on an ongoing basis. Following the GFC, the role and relevance of a corporate real estate strategy was elevated given the drive to create cost efficiency and occupancy costs typically being amongst the top three expenditure items for most organisations. There has been an increased realisation from the C-suite that engagement is needed with the corporate real estate team to deliver productivity improvements, talent attraction and retention and mobility. But the majority of engagement is on an ad-hoc basis rather than on a strategic basis. If proactively managed, Corporate Real Estate (CRE) can deliver real value to the business but it requires the CRE strategy to be well aligned with the overall business strategy. CRE planning needs to be institutionalised as an ongoing activity along with the routine planning of other aspects of the business. A CRE strategy also needs to be agile and adaptable to changing business conditions, so as not to hinder innovation, growth and productivity. CRE models for the future are going to be more sophisticated with highly empowered mobile workforces so tradition methods of planning and managing CRE may not be effective in the future. CRE will have to be more integrated into HR and IT to deliver the overall employee proposition for innovation and productivity. It is no secret that companies are turning to the workplace to find the answer to improving employee productivity. Many firms are

Figure 6: C-Suite Key Focus Areas and Costs 70% 60% 50% 40% 30% 20% 10% 0%

People

Systems & Processes

Leadership

Work Environment

Source: JLL

investing heavily in the implementation of workplace strategies that are designed to better support the work that their people do, foster collaboration, communication and engagement innovation to drive productivity gains. However, what most companies are failing to consider is whether or not the work employees are doing is actually the work that creates the most value for the organisation. What this means is that the success of workplace strategies all too often boils down to cost. In the absence of a clear link between workplace strategy and organisational value, it is no wonder so many companies struggle to measure the ‘holy grail’ of productivity improvements. Highest value activities: Creative collaboration: typically in smaller groups and usually focused around generating ideas or solutions. This is not focused around review meetings or presentations, but targets actually working together for outcomes. Concentrated work: focussed work, where people can actually think without being distracted and optimally focus on a specific task that is important to them, adds value and is central to their job. Face-to-face interactions: facilitating information flow across the organisation is crucial. This does not necessarily refer to general conversations in a break-out area, but focuses on actual information exchange. This could be at a desk, at the water cooler or even virtually. Being able to look someone in the eye is crucial.


Defining what creates real value for your organisation is the first crucial step in developing meaningful workplace strategies that will boost productivity. In the current economic environment it’s unrealistic to say that cost is not important. However, focusing purely on cost in a highly competitive corporate environment can easily lead to missed opportunities, as the workplace should enable core business tasks such as the development of more innovative and differentiated products/ services that are better suited to your clients and delivered faster. There is no one solution or benchmark for defining productivity across sectors, organisations or geographies. The key is to understand the nature of productivity in each component part of your business, which should be articulated clearly by leadership. In order to design for maximum productivity, you need have a deep understanding of the work processes that are primary to what creates value for your organisation. JLL polls reveal that there is a staggering disconnect between the work that people spend their time doing and those activities that create value for their organisations (Figure 7). According to a review of workplace initiatives within multinational companies in Asia Pacific, employees spend most of their time with emails, phone calls and formal meetings - all of which are facilitated by the traditional workplace, with its focus on fixed desks, meeting rooms and in some cases phone/quiet rooms. However, our poll identified creative collaboration, concentrated work and face to face interactions as the activities that create the most value for an organisation. Consistent with the product development process, these are the activities that generate insights, enable solutions and facilitate flows of information and ideas. Yet, many offices are not equipped to facilitate the required balance of focused and collaborative work.

Many workplace productivity programs focus on enhancing collaboration, at the expense of concentrated work, which can be equally important. Getting this delicate balance wrong can significantly impede your ability to develop new products and services and deliver them to your customers. Another consideration around people for a productivity strategy is the generational make-up of the workforce. We are fast approaching a workplace that will be shared by four generations with very different work experiences, work styles and motivations and expectations. Those organisations who have been through a workplace transformation process, have witnessed firsthand many of the benefits that contribute to productivity improvements as highlighted below: Professional Services Sector Firm 1: • 71% of employees stated their new workplace improved their overall productivity compared to just 24% in the former, traditional office environment • Employee engagement increased by 11 percentage points to 71% following the move to a dynamic workplace Professional Services Sector Firm 2: • Employee engagement went up between 8-10 percentage points following the move to a new workplace Professional Services Sector Firm 3: • 90% of employees stated they were more productive in their new work environment than their old workplace which was a traditional office setting

Figure 7: How are your staff spending their time? What do you spend the most time doing at work? Brainstorming

What activity creates the most value at work?

7% 46%

Email Reading/Writing 4% Formal Meetings

20%

Phone Calls 9%

25% 4% 26%

Thinking

Waiting 4%

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7%

Talking

Phone Calls 4%

Source: JLL

4%

Formal Meetings

Talking

0%

11%

Email Reading/Writing

7%

Thinking

23%

Brainstorming

Waiting 2% 9%

18%

27%

37%

46%

0%

5%

11%

16%

21%

26%

Any people strategy needs to be mindful of these variations and the near 50-year age gap that is becoming more commonplace within the workforce.

• Flexibility of work settings for a variety of different work styles

An innovative workplace approach gives organisations the luxury of better mixing the different generations in the workplace to encourage collaboration and knowledge transfer. In a traditional office environment there were physical barriers between the generations – with Baby Boomers housed in offices around the perimeter of the building with younger generations located in small workstations in the centre. A new workplace approach removes that physical and hierarchal barrier.

• Homezones – allowing Baby Boomers (who are not as self sufficient as other generations) access to support staff and team resources. Also allowing Gen Y access to mentoring and learning experiences from their more senior team members

In fact, a progressive workplace strategy helps organisations address the generational gap by providing:

• More collaboration space vs personal space – which is what Gen X & Y are looking for

• Trust-based leadership that is focused on outcomes –while this is a stretch for some Boomers, it is what Gen X and Y are looking for and is part-and-parcel of ABW • Improved technology tools – support the way in which Gen Y and Gen Z are accustomed to communicating and working.

Table 4: Different Generational Work Habits

Baby Boomers

Generation X

Generation Y

Generation Z

Born 1946 -1962

Born 1963 - 1978

Born 1979 - 1994

Born 1995 - 2009

• currently make up 25% of the Australian workforce

• currently make up 50% of the Australian workforce

• are extending their retirement age, opting for part-time or consultative roles

• are characterised by an ethos of ‘work to live’ rather than ‘live to work’ like their Boomer elders

• currently make up 20% of the Australian workforce, but this is predicted to move to almost 50% by 2020

• despite their longevity in a traditional work environment, they are open to change due to a more flexible approach to their traditional employment terms

• many have their sights set on senior leadership roles soon to be vacated by Baby Boomers • were brought up on technology and more open to change than Baby Boomers • a flexible workplace is a must for Gen X who are balancing their career ambitions with the needs of a young family • there is a strong representation of females (many of whom are working on a part-time basis)

• not bound by the shackles of the traditional office environment, this generations is willing to work anywhere, anytime • they are connected 24/7 and have a thirst for information and an impatience for fulfilment • a dynamic work environment becomes all the more important for this generation who have an average tenure of less than two years in a role

• currently make up less than 5% of the Australian working population • they have never known a world without computers, the internet, mobile phones, email and instant messaging and the way they consume information is very different to generations that have gone before them • they have grown up in a fast-paced environment and are accustomed to a flexible schedule and balancing work with their personal lives • they don’t understand the rationale behind the traditional work day of 9am to 5pm

• they are hungry for knowledge and in a dynamic work environment can seek out a range of mentors outside their own team to build their own professional knowledge base and accelerate their progression through the organisation


Conclusion

Through this paper we have demonstrated that there is no singular approach to productivity, however there is a framework for considering how an organisation can approach productivity gains. There is one final important point to make, and that is that productivity needs to be sustainable. Sustainable for the organisation, sustainable for its people and sustainable for the environment. The human race will continue to look for ways to do things faster, quicker and better, but if it is not sustainable, there is no long-term viability of those productivity gains.

18 Advance

One organisation we surveyed highlighted the linkage between productivity and sustainability. Part of their productivity strategy was to take advantage of labour arbitrages in low cost markets to drive down their cost base. Yet at the same time they recognise the need to ensure the sustainability of that community and population, and they invest back a certain percentage of their productivity gains into local health, education and community programs. At the end of the day we only have one planet with finite resources, any productivity strategy needs to be able to utilise those resources in a sustainable manner.

About JLL

JLL is a professional services and investment management firm offering specialised real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $4 billion, JLL operates in 75 countries worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3 billion square feet and completed $99 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $47.6 billion of real estate assets under management. JLL has over 50 years of experience in Asia Pacific, with over 27,500 employees operating in 80 offices in 15 countries across the region. We were the first global commercial property firm to establish an Australian presence in 1958 and currently employ over 1,800 employees throughout our 10 offices across the country. The firm was named ‘Best Property Consultancy’ in three Asia Pacific countries at the International Property Awards Asia Pacific 2013, and won nine Asia Pacific awards in the Euromoney Real Estate Awards 2013.

About Corporate Solutions A leader in the real estate outsourcing field, JLL’s Corporate Solutions business helps corporations improve productivity in the cost, efficiency and performance of their national, regional or global real estate portfolios by creating outsourcing partnerships to manage and execute a range of corporate real estate services. Our platform of transactions, lease administration, project and facility management services is backed by our expertise in consulting, workplace and portfolio strategy to provide an end-to-end service offering. This service delivery capability helps corporations improve business performance, particularly as companies turn to the outsourcing of their real estate activity as a way to manage expenses and enhance profitability.

About the Authors Tony Wyllie National Head of Integrated Portfolio Services Corporate Solutions [email protected] 61 2 9220 8729 Tony Wyllie is Head of Integrated Portfolio Services, Corporate Solutions at JLL. Tony works with real estate and facilities teams to drive real estate performance and align the property strategy to that of the business. Tony has more than 25 years experience in the corporate property services industry, delivering and implementing solutions around work place strategy, portfolio strategy, strategic sourcing, transactions and valuations and due diligence. Rajiv Nagrath Head of Corporate Account Management – Australia Corporate Solutions [email protected] 61 2 9220 8321 Rajiv is the head of Corporate Account Management in Australia, supporting JLL corporate clients in driving productivity and efficiency gains to get the best business outcomes from their property commitments. Rajiv has more than 25 years of experience in corporate real estate strategic planning and management. Rajiv coordinates multi-disciplinary professional teams to deliver integrated real estate strategies for clients. The key focus is to align real estate decisions to business objectives and optimise facility assets performance.

www.jll.com.au Anna Town Director, Strategic Sales Services, Corporate Solutions [email protected] 61 2 9220 8445 Anna has more than 15 years experience in marketing, communications and research in the commercial and hotel property sectors. Anna has extensive experience in researching and reporting on corporate trends across the globe.


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