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Monday, June 02, 2008

The Hidden Cost of Traditional Offices

The tried and true method of performing communal office work is for people to commute into an office, work for a set number of hours, and commute home. While there's nothing new that I can write about telecommuting that hasn't already been written, I've not seen much written about the cost to the local economy of continuing what is increasingly an arcane work style. Here's food for thought...

I was surprised to learn from our Facilities department that the gold standard calculation for space needed per employee is about 200 ft. Now you may look at your 8 x 8 cube or 10 x 15 office and think, "where's my 200 ft.?" The difference is that Facilities professionals like ours know to allocate hallway, restroom, break room, and lobby space into their needs. So for the sake of calculation, let's go with 200 sq. ft. per person.

With that established, we now have to rent that amount of space. For a typical office outside of the downtown Nashville area, you can expect to pay about $20 per square foot. We negotiate for large spaces and don't pay that much always, but most smaller renters would certainly experience at least this amount. This puts, conservatively, the average annual rent for one employee, before any utilities, maintenance, security, or equipment at $4,000. This means that, for every 100 employees, an employer will spend $400,000 per year just on providing space before any additional costs are incurred. For a company with 500 Nashville employees, like Nelson, that's $2m per year in overhead before a single product is produced. The theory, of course, is that the sum total of the work accomplished more than covers expenses; but what if that work could be done without this expense?

That's on the company side. How about employees? In this era of the super commuter, the typical commuting length is 45 minutes with some lucky souls commuting only 10 or 15 (like I do now) while others commute up to 90 minutes (like I used to do). Assuming an average commuting speed of 30 mph, that's 22 1/2 miles each way, or 45 miles per day, or 225 miles per week. If you're lucky enough to average 20 mpg and have two weeks vacation, you're paying $43.30 per week at $3.85/gallon like I paid today in Nashville, or $2,165 per year just for fuel. Add tires, maintenance, oil changes, and insurance and you're easily around $4,000 per year to drive to work. Consider your time on the road as lost work time, and that number at least doubles. So add $8,000 per employee in commuting expense and lost work time to the $4,000 employers pay for the space in which to perform the work, and the local economy is spending $12,000 per person, or $6,000,000 for every 500 employee workplace such as ours.

As we search for flex schedule solutions and a new way to define the workplace and workday, there will be false starts and bumps and some will say its not worth it. While $6m isn't what shows up on the balance sheets, it does show up in expended energy and the toll on working people as they struggle to balance work, family, and personal time. I will say here and repeatedly as we go forward that the rewards are worth the problems if we can find a way to return value to our authors, vendors, customers, and shareholders from home offices.

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