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How much HQ space will disappear as hybrid work becomes a retailing thing?
Target last week announced plans to significantly downsize its corporate offices, joining a number of other retailers embracing a flexible, hybrid work model that enables some employees to continue working from home.
The discounter said it will be exiting City Center, effectively reducing its office space in downtown Minneapolis by a third. Under a new “Flex for Your Day” approach, the building’s 3,500 employees will be able to continue to work from home or relocate to other Target locations in downtown Minneapolis or to its northern campus in Brooklyn Park, according to an internal email sent out Thursday attained by the Minneapolis Star Tribune.
“Our headquarters will always play a central role in who we are and how we work at Target,” the memo read. “We believe in the culture, collaboration and competitive advantages of working together at our vibrant headquarters in the Twin Cities and around the world. But the reality is that ‘Flex for Your Day’ will require less office space.”
Target recently disclosed employees won’t be expected to return to downtown Minneapolis until the fall.
In February, Nordstrom, Old Navy and Ralph Lauren all announced plans for reducing office space to adapt to changing work styles. CVS Health said the company would reduce 30 percent of its corporate office space in a cost-savings initiative.
REI last year sold its new headquarters in Bellevue, WA, and in late February opened the first of several planned satellite offices around the Puget Sound area to support mobile work practices.
“We believe the future of work is much more fluid,” said Chris Putur, REI’s EVP of technology and operations, in a statement.
The hybrid model promises the flexibility, office space savings and increased employee satisfaction that comes from remote working while maintaining the benefits of collaboration, networking and culture that comes from regular face-to-face interactions.
Many offices are being reimagined to reduce individual work spaces and support more collaboration. A recent article in the Harvard Business Review warned that under a hybrid model, some employees with better access to resources and higher levels of visibility may be able to wield more power. The article also states that some individuals won’t be as skilled at navigating within a hybrid environment.
- Target to give up one-third of its office space in downtown Minneapolis – Minneapolis Star Tribune
- Target Ending Operations at City Center – Twin Cities Business
- Old Navy to shut San Francisco headquarters, move in with Gap – San Francisco Chronicle
- CVS to reduce office space by 30% – Beckers Hospital Review
- Nordstrom to vacate large block of office space in Seattle tower – Puget Sound Business Journal
- Future of Work: REI Co-op selects first satellite office; expands mobile work practices – REI
- Covid changed how we think of offices. Now companies want their spaces to work as hard as they do – CNBC
- Get back to work: More collaboration spaces considered for post-pandemic offices – Digiday
- Is remote working here for good? – RetailWire
- REI is going remote and selling its corporate headquarters – RetailWire
- Should retailers ask workers to return to their offices? – RetailWire
- Making the Hybrid Workplace Fair – Harvard Business Review
Discussion Questions
DISCUSSION QUESTIONS: What challenges may retailers face trying to optimize the benefits of a hybrid in-person/work-from-home model? What lessons did your company learn about experiments in remote working over the last year?
Poll
BrainTrust
Ken Lonyai
Consultant, Strategist, Tech Innovator, UX Evangelist
Xavier Lederer
Business Growth Coach, Founder & CEO of Ambrose Growth
The good news is no company should feel like they are behind the curve in terms of planning for this – it’s pretty much never been done and nobody knows the long-term implications of the model. We don’t know if the hybrid model is viable – whether just showing up periodically is good for the worker and for the company. Past efforts at flex hours have had mixed results, with more problems than solutions. So the challenge may be to figure out what works for your company and your people.
This has been the focus of many discussions with friends and family; virtually for the most part. It is clear to me that expecting a full staff to commute to come into the office is a thing of the past. If the last year has taught us anything, it is that we can work rather effectively from home. When you consider the time that is wasted in getting to and from the office, that time is better spent on planning your day or getting work done. We have a stand up meeting for 30 minutes every morning to check in with each other and that works very well. I do believe, however, that critical meetings like road map sessions and the like, where the decisions that are made are pretty much set in stone, need to be done in person. In those cases, gathering in a conference room with a white board is still the way to go.
Retailers have always been on the hunt for cost savings, so saving office lease expenses is a simple measure. It’s not a financial game-changer, but everything helps. Moreso, for those employees with the discipline and desire to work remotely all or part-time, the gains in morale can be even more valuable. And if the remote effort includes tying the employee to their local store to “keep an eye on it” and/or observe policies or initiatives in action, then remote working can also be used as a feedback loop and innovation mechanism for more potential dividends.
The challenge will be reaching a balance between in-person and remote work. Another challenge for retailers will be finding the balance between retailer work style needs and associates’ work style wants. I have heard from many retailers and many employees over the last year who have realized working from home can be a success. When talking with retailers and employees, no one wants a 100 percent in-person or work-from-home model. A hybrid approach will be needed and wanted. The trick is finding the balance to meet the needs of all parties. In the end, retailers should welcome this approach. It can save money (downsizing work space) and maintain employee satisfaction (reducing turn-over).
The biggest challenge I see to this is balance. Employee A and Employee B decide they need to meet in person and both want to be in the office, but only 12 hours during the week. Employee A wants to do a long day one day and be done. Employee B wants to show up 3 afternoons for 4 hours but not on the day Employee A is there. This is the sort of logistical challenge that then causes management to say see this is why work from home doesn’t work.
If employees want to keep working from home they need to be strategic about making it work.
“Optimize” may be too optimistic a term for what is going to happen. One challenge will be to determine how many employees will want to return to work in a corporate office and how many days per week. Similarly, corporations are going to be challenged to decide if some personal, on-premises interaction is required in order to maintain a desirable corporate culture. Companies will have to create, acquire or augment enterprise-wide scheduling software so that not only will everyone know who is working which days at what hours, but “where” employees will be during those working hours. The norm has changed. Now it is a question of degree.
Leaders will have to work harder to ensure communication lines flow both ways, and that the voices of remote workers are given equal weight to those sitting together in one office. But the benefits are enormous – spreading a retailer’s management structure across the same geography as their store staff and – most importantly — their customer base will give them insights and awareness like never before.
COVID-19 was/is an accelerator, but working from home is a disruptor, not only for offices but now for retail as well. What’s going to have to happen is that retailers will need to get back into neighborhoods, something Nordstrom and Target wisely foresaw. Look for smaller stores, mobile units, showroom stores, dark stores and in-home services that relate to a large portion of high-performing consumers (not all obviously) that have been at home and will be, and who have started to realize the potential of their own neighborhoods.
The answer will vary considerably I suspect both by geography (given rent costs, urban density and commuting dynamics) and whether the business is in growth mode or not, but overall I would expect to see a 25 percent to 40 percent retrenchment over time for most retailers. I do think as we move toward a largely post-COVID-19 world the value of face-to-face interaction will become more appreciated as will the realization that we are wired for connection. Nevertheless this can be accomplished by periodic group meetings and occasional office days throughout the month. Both a significant downsizing and a move toward more flexible space seems inevitable.
I think some of the issue will be how many of the current remote working employees will want to come back in a hybrid model (office/remote) or won’t want to come back at all. I think the most difficult was issue was balancing work with online school for kids and being able to devote the time needed to each. I believe that will continue to be an issue as long as remote learning will still be in effect in some school districts.
As much as the rural press in MN took hold of this story and played the “Minneapolis is dying” angle, the truth is City Center needed significant upgrades to remain competitive and was going to have to increase rents, especially with the amazing Dayton’s building rehab coming on stream across the street. And most of the staff who worked there will likely relocate to Brooklyn Park (a light rail line will link that Target campus with downtown several years from now, as well). Target and the companies that sell to/service them occupy collectively about six blocks downtown and aren’t going anywhere.
Lots of cranes in Downtown and the North Loop as the residential boom and riverfront redevelopment continues, and Deluxe Check relocating from the suburbs to the core. “Work from home” here increasingly means you can live downtown with all its amenities and walk to the office if you have to (as a friend of ours who works for Wells Fargo does).
We have been a virtual company for 13 years. Establishing a corporate culture was easier than I expected.
The larger challenge I see for retailers is technology and process related. Unless applications are in the cloud, and easy to learn and use, upgrades can be really problematic.
Beyond that, (until we run our benchmark survey on this very topic, ready to roll!) I think it’s a win/win/win. Some employees will want to leave the house. Some may start out in offices and then decide — eh, working from home was pretty efficient. Others will never even question it.
This, along with the “forcing” of retailers to create efficient contactless selling, are the only positives to come out of the pandemic, I think.
In my experience, everything about shifting to “work from home” has been far easier than expected beyond the initial couple weeks. The challenge is getting 100% commitment from all parties to make it work. One spoiler who wants to get everyone back into the office can change the tone real quick.
The challenges retailers may face include transitioning people to a new model and determining what works best across team dynamics, personality types, and team collaboration needs. While I do believe a hybrid model can work, I am curious how the serendipitous meeting of new co-workers from different teams that sparks new ideas happens. Some banter or networking time, cross team collaboration with new people should be created otherwise you’ll likely spend time with the same people who are on your calls and be too busy with zoom calls to have time for quick introductory chats. This isn’t just for retailers, it’s for any company.
I agree with Ken on the potential for staff to see initiatives in action at their stores; and would take it further that retailers could open mini-office/co-working in stores to give employees the chance to get closer to customers and realities on the ground every so often.
As part of the great acceleration sparked by the global pandemic we have witnessed how companies have shifted their operating models, with the majority of their corporate workforce working remotely for the majority of the past year. While we have seen work from home, hybrid, and shared office space models emerging, the corporate headquarters before the pandemic remained the center of the universe for major corporations.
As things stabilize with the pandemic and we return to the corporate offices, things will not necessarily resemble the life we had before last March. Our society has proven that we could be productive in a remote operating model. We should expect that there will be a hybrid blend of in-office and remote work to come in our future. With the mass exodus from larger cities, we should expect smaller, flexible satellite offices to emerge in the local communities.
Last March, everyone was forced to go to a work-from-home (WFH) model. Some companies got used to it. For some it worked, and for some it was a struggle. About 15 percent of the workforce prior to the pandemic was already WFH. As we come out of the pandemic, it looks like that number will double, if not go even a little higher. The point is that not everyone is going to stay away from the office. REI recognizes the value of having small offices for face-to-face meetings. They swapped a major HQ for the satellite locations. Target’s plan is for “less office space,” not “no office space.” The synergy that happens when people are in the same room is too important to lose. The big lesson learned in the last year was that WFH can work if needed and that a hybrid model (remote and office) is more preferable than 100 percent remote. Companies will find the balance. There are a lot of successful companies to learn from.
The accelerated use of technology that ties the entire shopping journey into a single seamless experience will no longer be a process we all pontificate on but rather a necessity to remain relevant and in business. From ZMOT (Google) to purchase and beyond – retail can no longer be segmented into online, mobile, in-store, BOPIS, BORIS, delivery, etc. – it is all simply retailing and creating applications and solutions can no longer be done in silos. The entire journey must be addressed – regardless of why or which path to purchase the shopper chooses.
Retail has always been a high touch sport. Building relationships. Sharing new offerings face-to-face. I’ve had success doing business remotely. But it’s just not as full an experience. If you’ve ever worked only remotely with someone then finally met them in person, the relationship changes. There’s a stronger connection once you meet face-to-face. More informal. More human. You cover more than the topic of the scheduled call. Definitely more information shared. In my experience, efforts should be made to safely increase face time rather than reduce it. It will be interesting to learn how this turns out at Target and elsewhere.
I am shuddering as I think of the time I spent on the freeway when I lived and worked in greater Los Angeles and then the train time I experienced living in CT and working in NYC. All without a mobile phone or tablet to fill the unproductive hours. Ah, the good old days. In the light of that horse and buggy era, the flexibility and productivity now available is mind boggling. It’s unfortunate that it took a pandemic to shake us out of our momentum, but just look at the possibilities we are now exploring. Our professional and personal lives both just experienced a boost.
The pandemic has forced us to work from home; it wasn’t a choice. This opened up the door to businesses being able to successfully downsize their office space. In most cases it worked, maybe because that’s all we had. But working from home and having to meet with co-workers on Zoom all day is exhausting. I wonder if the race to close offices is premature.
Target has the right idea in allowing its people to work from home or choose which facility they want to work from. The article doesn’t say that the downtown headquarters is closing, just that people won’t be required to report back to work until fall. People who work at a retail headquarters need a designated office space to call home, not just a shared, once a week cubicle. Buyers, for example, need space to see vendors and spread out lines. Having held that position at a department store I cannot imagine what it would be like to do that job at home or in an office, choosing a random space each time I came in. I agree with Steve Dennis who expects we’ll see a 25 percent to 40 percent retrenchment over time for most retailers. The in-person, face-to-face is still incredibly important.
Remote work is a great idea, but it also comes with some issues. Staff generally work at least as many hours as in they did in corporate environments and many, more hours. The challenge is that workers can at times experience feelings of disconnection. Corporate’s responsibility is to keep them involved. The strategy is to create a location where local workers can come and meet up with other staff members perhaps quarterly, and where corporate officers can review strategies to come and celebrate victories.
Hybrid is going to be the key word here — very few retailers will go to zero office space. This past year has shown that WFH can be much more productive than many thought. I do think there is great value for in person meetings, especially when it comes to things like strategic planning sessions, product development reviews, etc. Hopefully the retailers who decide to reduce their corporate footprint put those savings into customer-facing innovation, rather than simply towards the bottom line.
The greatest challenges facing retailers from the hybrid work model will be more in the mindset of senior management than actual results. What we have discovered over the past year is that our employees are just as engaged and just as productive working from home as they ever would’ve been working in the office. The key pieces to make hybrid models work involve extra efforts at communication and employee engagement, as well as a successful implementation of a series of tools designed to promote collaboration in design activities as well as planning and execution.
One size doesn’t fit all! Some people are going to want to come back and work in an office, some won’t. Some people will be attracted to businesses that let them work remotely. Some won’t. It’ll all settle out in time. I’ve worked out of my house, and run a staff from all over the country, for a little over 20 years. Staff gathers at conventions and occasional in-person meetings. Working remotely is easier than ever and I wouldn’t be surprised to see 30 percent less office space in three to five years. As companies evolve to this newish normal, some will succeed and some will fail. Just like always.
Definitely one to watch. I am aware of retail organizations in the U.K. who are moving all staff to home-working contracts – the opportunity to reduce office space being a big driver. There are also some employees asking about how far away from HQ they can live.
Some people will still want to come into offices – even if just a limited amount of time per month. Offices and employees need to be equipped with the right technology (things like MS Teams and MS Teams screens in offices) in order to allow hybrid working. One thing that has surprised me is that no one has yet latched on to the idea that home working can reduce the carbon footprint of an employer by avoiding staff needing to travel.
I’m sure we’ll end up with hybrid. One critical factor I’ve been noticing is the challenge virtual has for bringing new employees on board. For those who have not built relationships, and found the informal means of learning their way around, it’s really tough.
No matter what the business, it always boils down to operating by two principles. Economics and convenience — which are fundamentals that sometimes oppose, but often complement each other. However, neither can accurately measure whether they are truly good for a company, its workforce, and ultimately, its customers. That’s because once certain aspects are in place, like cheaper goods (or lowered salaries) and easier ways to get them, and we all become used to things being this way. They overshadow any sense that what came before may have worked. At all. Or worked better. Consequently, we live in a world of mass consumption created through mostly poorly paid labor, waste as not yet enough of a worry, and are on the verge of believing that “virtual” being is actually as virtuous as being there.
Should I also mention we live in a time where some feel that “trying” is the same as “succeeding”? Last time, I looked, it was not. But that was so “last time.”
Speaking as one who transitioned to a home office in 1998, I see a strong future for smaller headquarters and a blend of remote and in-person interactions. Retail in particular has reason to move decision makers closer to where the shoppers are. That doesn’t necessarily mean in home offices, but there is certainly an argument for countering the insular mentality that puts all the “smart people” inside a headquarters that is distant from where the real action happens — stores.
The hybrid arrangement has both benefits and perils. Lower office overhead is certainly a plus for employers. Staff could recapture a good part of their commuting hours and costs. A default to flexible work times may improve quality of life.
Onboarding and training of new employees will need to evolve. It may become harder to establish a company “culture” and camaraderie when folks have fewer in-person interactions. Certain amenities like in-office child care may become impractical.
I have an intuition that retailers who adopt the hybrid model (probably most of them) will need to create balance by conducting periodic gatherings — quarterly mini-conventions or “boot camps” where team bonding, training, education and real work can take place. Business idea: Perhaps some empty office spaces could be repurposed into facilities designed for this purpose?
Cue panicky reaction from brokers: 3, 2, 1….
I would hasten to point out that reduced TIME in the office by no means guarantees reduced SPACE in the office: many people — I would think almost any exec — require a private office, and that’s true whether they’re in it thirty days a month or one and of course there are many positions — outside sales being an obvious example — that were never “office jobs” anyway.
But we don’t really know what’s going to happen: hybrid working may end up having much less impact than people expect — it will almost certainly be less than the extreme predictions — and it seems too early to make many plans beyond simply getting people back to work.
Retailers can be very productive by offering options: (a smaller) headquarters as a central hub, supporting satellite locations and working remotely. These options will be more cost-effective, convenient and ultimately reduce cost, congestion and stress.
I would like to see work from home really become a thing long term, but I am just not sure. I get the feeling there are a lot of forces working against it. Not just old line bosses who want to see everyone seated at a desk from 8-5 but also the commercial real estate folks who own the office space and various other businesses who benefit from the “have everyone at the office” model (restaurants/catering businesses, cleaning services, hotels, parking services, security services … the list goes on and on).
I am finding interestingly that younger staff who have no kids and often room with multiple “friends” seem to want back into the office environment as it was a social outlet for them.
For retailers, if this model continues and 5-10 years down the road you end up with corporate employees spread geographically across different parts of the US, I can’t think of a better solution than to have those folks who want to go into work, just find an empty office space in a physical store location and connect into the company’s network there on the days they feel the need to do so.
The REI solution of multiple satellite offices around Seattle seems great as most of the HQ staff remains Seattle-based, but now you have a few location options for people. This reduces commute time and improves lifestyle for staff. Not to mention the environmental impact of less commuting, also less wear on the roads, etc. I would look to see other companies follow that type of model as well.
The shift towards work-from-home may generate an interesting paradigm shift: small and medium-sized businesses may be at an advantage over much larger businesses. So far, larger businesses in most industries had a clear competitive advantage because of economies of scale, but the complexity of organizing work from home increases exponentially with the number of people on staff. Small and mid-sized businesses, with their much shorter communication lines, might have a competitive advantage over larger businesses in this new work-from-home environment.