What does organizational culture have to do with lease negotiation?
There is, naturally, a high focus on cost factors associated with real estate decisions. Minimizing lease costs and maximizing tenant improvement allowances benefits the occupier in both the short and long terms by assuring that capital stays in the company in the places where it can benefit its people and its performance.
But are there other factors, perhaps less apparently tangible or more speculative that, if overlooked, may mean that the occupier organization loses significant site benefit as well as longer-term revenue and performance benefit many times the value of what is saved through conventional site selection and lease negotiation terms?
A large regional company in the healthcare industry is seeking new space. It has outlived its current headquarters, is expanding, needs to refresh its workforce, and is repositioning itself for the emerging changes in the healthcare marketplace.
They've now redefined their brand, shaping it around the differentiated behaviors of its staff that also characterize its organizational culture. We've developed design principles based on those behaviors. We expect those principles to guide the design of a working environment that will make those behaviors visible and nurture the culture that supports them.
The leading sites for their new headquarters are large suburban office complexes. One is a cluster of highrise buildings linked by a meandering atrium enclosing retail shops and restaurants, an indoor garden, and other amenities. The other site is a cluster of low-rise buildings, similarly connected to each other.
In the ongoing explorations and negotiations, the lease cost and the tenant improvement allowance are the primary focus and will, most likely, be the primary determinant of which site is selected. We are preparing materials to try to broaden that focus, to include certain considerations that we believe will have significant influence on their image, their ability to attract top talent and the performance of their business.
Our suggestions are derived from the design principles. That is, if their culture and their differentiating behaviors are the key to the success of their mission and the performance of their business, and if the design principles are accepted as the drivers of the concepts that will nurture that culture in their office space, could those principles extend to influence the lease?
Here's a quick look at those principles (abstracted and reduced to protect the client identity) and what impacts they may have on the lease and beyond the borders of their office space –
Healthy – To have a healthy workspace and to be authentic in its role as a healthcare company, shouldn't the highest level of LEED certification be an important criterion for selection of property and design potential? How can this organization influence the landlord to be partner in the certification process, both supporting the application but also extending attention to the site and other buildings and systems in the complex? Can this tenant influence the offerings in vending machines, restaurants, and snack shops? Can this tenant "brand" and enhance fitness walking paths?
Peaceful – A peaceful workspace may begin long before arriving in the workspace itself. Consider how site-wide wayfinding systems can help in the comprehension of place and assuring staff and customers that they are in the right place and can get to the places they seek. Think beyond building identity signage to site entries, entry signage, internal wayfinding, etc. Consider internal and external landscaping and its role in shaping settings for individual reflection or informal socializing. Consider a friendly but distinctly sensible approach to site security including considerations of visibility, lighting, winter maintenance and other factors
Social – Among the characteristics of the modern workplace that is yet to be fully realized by developers and landlords is the fact that work is everywhere, now. That is, the work of organizations takes place throughout the city and in may different settings. For major properties, their effectiveness in providing thoughtful alternative settings for work may become a property differentiation. Consider the landlord’s willingness to develop informed settings to support the spontaneous, informal and serendipitous encounters that generate interests in working together, wherever. Consider the landlord’s interest in the kinds of amenities that support breakouts and networking.
Learning – The more effective learning spaces for this company will most likely be those that are contextual and personal in character. More formal training and development may have lower demand. Test the landlord’s willingness to provide appropriately featured conferencing and training facilities that can be "branded" for the company's purposes and that reflect state-of-the-art philosophies about the more effective learning environments.
Agile – There may be no more dynamic industry, and one needing to move more quickly, than the healthcare industry. Test the landlord’s understanding of this context and his willingness to give the company elbow room and flexibility in the way it acquires, develops and deploys space. Test the landlord’s willingness to provide supportive spaces while this company's business context becomes more defined.
For the Chief Financial Officer, the tangible terms and quantities in the lease make real estate decisions clear and clean – over the next ten years, this site is the least expensive to the company.
But for the Chief Operating Office, the head of Human Resources, business unit chiefs, and the staff overall, these other, apparently less tangible considerations will affect the quality of their worklife, the achievement of their mission, and the performance of their work over the life of the lease. We think that many of these considerations can be quantified, both in the cost of their provision and in the comparative performance benefit to the company, and even to the value of the landlord's property.
Regardless of the quantification, however, we think it is clear that making site selection decisions and lease negotiations solely in conventional financial terms is risky. Making clear connections from the organizations culture and defining characteristics, through the design of its spaces, and into the selection of the places where its people will work can have significant impact on the success of its mission and on the top and bottom lines of it financial reports.
Not many organizations have the power and influence of Goldman Sachs. Nonetheless, this article on broader neighborhood and business benefits developed both from direct negotiation as well as influence illustrates the potential of the concepts we've suggested in this post.
It's a Goldman World, New York Times (link here: https://www.nytimes.com/2012/07/01/nyregion/its-a-goldman-world-in-battery-park-city.html?_r=1&pagewanted=all)