NEXT-DECADE OFFICE DESIGN: A DISCUSSION WITH HGA ARCHITECTS ON FORM, FUNCTION AND THE FUTURE - Audio transcript

Joe Kornik: Welcome to the VISION by Protiviti podcast. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, where we look into the future to examine big topics that will impact businesses worldwide over the next decade and beyond. Today, we’ll focus on the future of work and, specifically, the future of the office and its design and overall functionality in 2030 and beyond, as we welcome HGA, a Minneapolis-based national interdisciplinary design firm rooted in architecture, interior design and engineering. Today, I’m excited to be able to welcome HGA’s Melissa Pesci and Haley Nelson to the program. Melissa and Haley both specialize in workplace design, supporting clients nationally. Haley and Melissa, welcome to the program.

Haley Nelson: Thanks, Joe. Excited to be here.

Melissa Pesci: Yes. Happy for our conversation.

Kornik: I’m excited for our conversation today because this is such a fascinating part of this topic, the future of work, that we’ve been exploring for the last several weeks. Offices in 2030 and beyond will be very different spaces in what they look like, and how they function will go a long way to determining how we function as workers.

We certainly want to keep this focused on the future, in a decade or even more out — that’s what this program is all about. But I am going to start a little more near-term, and what the last two years have been and their impact on what it means for the future. So, let’s start with the pandemic, even though I don’t want to, but let’s start there. As much as I’d like to be past it, can you put the pandemic in context? Are we where we can start to realize its overall impact on the future of the office, and when we look back, let’s say, 10 or even 20 years from now, when we look back on COVID-19, would we view that as a turning point for the corporate office? What are your thoughts on that?

Nelson: Yes. It’s undeniably been a turning point for the corporate office, and we, for sure, can start to get that perspective even in the near term. This experience has given most office workers a completely new perspective on pretty much everything associated with working in an office, which is a pretty radical moment. People are able to assess what it means to have to commute, the way we connect with each other, our access to information, even the travel time between meetings. People were able to experience freedom from how, when and where their organization expected things to get done. That was starting to happen before, but we were all in this global experiment.

Our original research shows that people enjoyed having that license, that freedom to choose. We learned that there were pros and cons to working from home, and that there were things that the office could learn from these experiments. But I know we’ll get into it deeper, especially as we forecast into the future. But this moment amplified a lot of things that we were already designing to with our clients — spaces for activity-based working, and choice to work in alternative spaces in the office, not just at a desk, and designing for the health and wellbeing of people.

Pesci: Yes. Those are great points, Haley. The office has always been a tool, just like a computer is a tool. But historically, it’s been hard to measure the ROI of an office, because as office workers, we’re conditioned to amplify the efficiencies of being in an office, thinking about any ambient learning that’s happening. Often, we call that mentorship, but that’s a more active approach to learning, whereas ambient is learning from the people around you. So, we’re calling that, more and more, apprenticeship, because you’re learning while you’re doing your job, and you’re not having to take that extra step. Then, typically, managers are used to walking around seeing their employees that they’re working with and understanding what’s happening, as opposed to directly reaching out and finding out what’s going on. So, it’s those efficiencies that we’ve been conditioned to in our work life because we are all together in an office.

Kornik: We started with the pandemic. Let’s move a little forward, if we could — maybe a year or even three to five years out. What does business look like now, let’s say, over the next 12 months, and then, if we push that out to, say, three to five years, what’s your outlook right now?

Pesci: I’m going to back up for a second, because it was amazing to us how quickly our business pivoted in March. It was instant. All of our clients reached out, and they wanted to understand how they were going to keep going and how their employees were working. It was great, because we were able to see how things were working and then dial into how people were working from home.

We did a ton of research — we did surveys, user group meetings, observations — and then we tested a lot to see how people were working and if we planned for something, did that work? In that way, we were able to help companies plan for things that they could try as things started to open up so that they were ready to hit the ground running.

Now, in the last two years, many companies gave up their office space rather than just have it sit empty. As I said earlier, it is a tool. It has a huge expense, and many are now wanting office space again but don’t know what that looks like, and so we’re helping a lot of companies right now “right-size.” I like to do air quotes around “right-size” because we don’t know what that right size is, but we’re still testing, and still trying to help our clients understand how they best use their office and why they have that space, and help them understand that we want to bring flexibility to the design that will allow them to pivot and change, because we know that change is going to continue to be inevitable.

Nelson: Melissa, if I can tack on to what you were talking about, shining a light on the iniquities of the rules, professions, tied to the office, a lot of what we’ve seen grow in our business that we expect to grow, especially in Los Angeles, where I focus my practice, it’s very much about the entertainment industry, and that, for sure, didn’t stop. There is exponential growth. Entertainment and streaming exploded as we all transitioned from our home workspaces to our sofas during lockdown. So, we’ve been designing those spaces where people are creating the content that we love to binge, which has been exciting, but a huge growth opportunity as well for us. So, as we look to the future, it’s also identifying, what are the types of work that still depend on space, and having a physical space, something that you can’t easily replicate at home?

Kornik: Right. I know business leaders right now are pretty confused about specifics and what this is going to look like, in trying to weigh the pros and cons of having a larger footprint versus a smaller footprint, or what that space might look like or how it will function. As you’re talking to clients about the future of the office from a strategic perspective, and as they look ahead, what are they most concerned about, and how can design help overcome some of those issues and concerns? What advice are you giving business leaders these days?

Pesci: We are in a very fortunate position of seeing this happen multiple times a day, as opposed to, most companies have their own experience that they can bounce things off of, and we get to collect all of those experiences in order to help guide other businesses. The biggest thing that we have to continue to reinforce is that it’s not a one-size-fits-all solution.

At first, every single business leader that we spoke to wanted to know what everyone else was doing, and so we were quick to realize that what works for one person or one company doesn’t work for everyone. So, the first question we always ask today is, “What does your office space mean to your company?” and we can use that answer to develop criteria and amplify the results that they want to achieve at the office space.

I’ve talked earlier a little bit about how it’s hard to measure that ROI, but we can certainly set criteria so that we can design the space for the experiences that those companies and individuals are wanting to have. I’m in the Bay Area, and it’s probably popular knowledge that office space has always been a huge recruiting and retention tool. So, for us, we spend a lot of time connecting the space to the mission of the organization so that people feel a part of that culture and a part of that shared mission.

The second thing that we try to reinforce is, evaluate what’s working better now than it did before and what’s not working better now than it did before so that we can rethink the office space to eliminate the cons. And then, be ready to change things as we test it, and people change how they live, because as much as people changed how they live when they worked from home, as people reenter, going back into the office space, they’re going to change again, and it’s not going to necessarily be going back to what they did before.

I have a lot of points, because I’m constantly talking to business leaders about this. The next one is that data is amazing, but be careful, because people don’t know what they don’t know. One of our clients had a ton of survey data for us, and almost all of it said that their employees wanted to come in two days a week. They’re, like, “Wait — everyone wants to come in two days a week.”

So then, we start doing user group meetings, and as that process carried on, we heard overwhelmingly that almost no one planned on coming in two days a week. Some people wanted to come in one day a month; some people wanted to come in four days a week. And so, if we had taken that data for what it was, we would have planned everyone to be there two days a week, and we would have been way off the mark. So, be careful with that, and realize that as people start to learn more and change, the data is going change, and it’s like that moment in time where the data is relevant.

Another thing that we realized is the decision-makers are typically senior business leaders, since that’s what this question is aimed at as well, and that those people typically can work remotely with no problems. They can have a little bit harder time realizing what it might be to be new to the workforce. So, recognize that everyone has their own personal biases on how they work versus how the organization works.

Another one is that managers have been trained to be around people, and so it can be hard for them to imagine what remote work looks like, because they weren’t trained to do that. So, while people are setting these decisions, they should get feedback from people throughout the organization, and keep in mind that they don’t know what they don’t know. I tell people to be cognizant of proximity bias, because if the leaders are in the office, people will come in to the office. If the leaders are not in the office, people will not come into the office. Be cognizant of the decisions that they’re making and the impact that it will have across the company just from seeing their behavior that’s happening.

Kornik: Some interesting points there, Melissa. People might want to drive by the office two days a week. I’m not sure they’d want to stop and go in the office two days a week.

Pesci: Maybe stop for a free snack.

Kornik: Talk to me a little bit about trends. What trends are you seeing right now in terms of strategic planning and design when it comes to the office of 2030 and beyond, both in terms of architecture and functionality, and what do those trends tell you about how we’ll work in the future?

Nelson: This is the million-dollar question. What are these trends? A little bit of reflection is needed to set the stage, because in the past, we know that the types of spaces that were more often on the chopping block for value engineering and projects in office spaces were the very things that employees attach the greatest added value to — the social spaces, the collaborative spaces, those spaces where they could gather and have their moments of respite between deep, focused work. And we know we need to create better versions of these spaces in the next evolution of the office, ones that people value. And you run the risk of them becoming almost empty tokens of what, to use Melissa’s air quotes, “office fun” should look like.

We see a focus on better high-value experiences and amenities. And it’s like going to a restaurant — sure, you can cook at home, but going to a restaurant elevates that basic task to an experience that is multisensory and has this delight, and you feel different after going out for that experience. So, in the future, we see that the human-centered approaches are going to be the ones that win. I mentioned that we’ve already been designing in this way for a long time, and honestly, it’s at the heart of what we do as interior designers. We design for the human scale and the human experience first, and companies that perhaps didn’t see the value in that or weren’t recognizing the ROIs Melissa was mentioning, they have to now.

The other trend we see is around digging into the pros and cons of when you bring people together in a hybrid way in that next evolution. Melissa mentioned proximity bias, which is something the office is going to have to try to combat, but also understanding the experience that they might be missing out if there’s this shift of a larger group being in person — having ways that people can also connect and contribute. There’s this physical anchor point that we know is going to be very important, but then, also having those opportunities for those that may be experiencing a little bit more flexibility, or having that choice to be able to engage in different ways. It’s policy, technology and space all together.

Pesci: Haley, I couldn’t agree more. We see a lot of our clients talking about solving everything through hybrid meetings, but we know that, practically, we’re not quite there yet with protocols, human behavior and technology. I recently joined an organization during COVID-19, and all of our meetings were completely virtual, and it was fine. I didn’t have anything to measure that against, but it was fine. Then, last month, we had our first hybrid meeting, where we had a few people in each room, and I was physically exhausted after the meeting in a way that I’ve never been before. Then, just this week, we had our first all in-person meeting, and it was so much faster, so much more productive. We were all there connecting with each other. Everyone spoke up when they have something to say, and it almost felt to me like a little bit of an experiment of how we’re doing with hybrid meetings and how we can start to think about how we change our behaviors to do better going forward.

As a result of that, we’re seeing, pretty much across the board, everyone wanting to incorporate more small spaces equipped with technology. We’re going to be going in and out of remote depending on what happens with human health going forward. And because protocols change depending on the company and most companies have decided that they value the ability for distributed teams across offices, across countries, people are going to be having remote meetings even if there isn’t any human health crisis. So, knowing that we need those types of spaces is something we’ve seen a huge increase of.

Then, the other huge increase we’ve seen is building more outdoor space for meeting, for eating, for relaxing. There’s the obvious added safety of fresh air, but the more important thing is, people realized how much they like being outside for fresh air, access to daylight, biophilia, birds tweeting, whatever it maybe. I’ve definitely seen a huge shift to creating more productive spaces outside that may have AV, access to power, light, heat, things like that, and that goes to Haley’s point about amplifying wellness of space and creating high-value areas that people want to be in.

Kornik: Yes, that’s interesting, and as soon as you said that, I thought back to that cool professor in college who, when you got a nice day, said, “Let’s go out on the quad, and let’s sit on the grass.” You’d totally remember that class. I forget all the others, of course.

We’ve talked a bit about business leaders so far, and I am curious: I’m fascinated by the disconnect, or if there is a disconnect — maybe there’s not — between how business leaders are viewing offices right now and how employees are viewing offices right now and in the future, of course, and how the difference between those two — essentially, the perceptions of the employees versus the business leaders — influences the design decisions that you make as you look at offices of the future.

Pesci: There’s 100% the disconnect oftentimes, and not in a bad way, but business leaders are focused to make sure that their business continues, and so the office space is an overhead cost. Again, I know I’ve said ROI fifteen times, but the reason we have office space is because it adds value and makes the business more successful. It’s the second-highest cost to an organization after the cost of the employees, so it needs to be meaningful and it needs to return on the investment that the company is spending on it.

So, what we’re seeing is, many business leaders want to preserve the office but they want to see it shrink if they’re going to strategically have employees working from home. There’s a cost to employees working from home as well, with additional technology needs, and many are funding furniture and equipment for the home as well. I recently saw a fact that pre-COVID-19, 64% of office work was heads-down focus work, and a lot of leaders are looking at that and trying to understand how they can make their employees happier by giving them the possibility to work from home but then also managing those costs.

Many are looking for the technology to help create that more seamless experience, whether that’s using Zoom or having better BPM structures, but we’re also seeing many of our clients looking at VR experiences to try to bring people together, or app technology that lets people know when others will be in the office so they can maximize their time and create shared experiences that matter more to employees.

Nelson: You’re so right, Melissa. Hearing you put that context around the business leader’s perspective and the disconnect makes me think of a way that I had heard this phrased: anchor points. Business leaders have the anchor point of what the office was before the pandemic, and this strong desire to want to go back to what that was because it wasn’t broken, so to speak, in their mind. Maybe there were things that weren’t working as well, but there’s this innate human desire against change.

We all want to go back to our comfort zone, so that anchor point for business leaders is backward, in a way. But the anchor point for employees is forward, because like we said, now, everyone has experienced this autonomy and this flexibility — and these have become so cliché, these buzzwords. But that anchor point is pulling the employees forward. So, inherently, you have that disconnect because those anchor points are different.

And employees are pushing back against mandates and being told to do something even if it’s in the best interest for the apprenticeship and the socialization and the connection to the brand and all of those things, and the great points, Melissa, that you have made. It goes back to human nature, this inherent resistance to being told that I must change. And so, because those anchor points are different, the change is inherently different.

All that being said, it comes back from the employee perspective, to experience, like I was saying before. I’ll put my L.A. perspective on, but the commutes are long and stressful, and our staff, particularly when we think about our own office, live sprawled out across the area. So, it’s not surprising that people don’t want to endure that five days a week moving forward. We know that when people are going to want to come in, because there are important moments to have those connections, and for all of the benefits that the office brings, that’s going to take effort and planning, and we want to make that an experience for people. And that’s what people are looking for: They want to know when they do come in that it’s worth it, and so it goes back to those high-value, high-experience-driven spaces.

Kornik: That’s interesting, and what we’re getting down to here is the main function of what the office is becoming. What’s your view? What’s HGA’s view on the main role of the corporate office a decade from now, let’s say?

Nelson: I’m going to build on something that Melissa introduced, but organizations have to fundamentally define the purpose of their office space. It’s no longer looking at who did something cool that I want to copy because that’s a recruiting benefit — I want to hire the talent that they have — it’s about being thoughtful, reflecting on what are the business needs that the office is actually serving for me, and encouraging an organization to decide, what’s the importance that they attach to that place that supports your people? That’s exciting to us, because nobody wants a copy/paste. Nobody wants a benchmark and saying, “Yes, replicate that.” It’s about creating something unique.

I’ve mentioned value experience a few times too, so that’s one of the themes in addition to ROI today, but the work experience, growth, overall satisfaction, choice and control, it’s giving people a sense of pride. The office is about creating all of those things to be able to bring their best selves to work so they can create value for their organization.

One thing that’s been missing in the remote working environment is the sense of community. As long there’s an opportunity for learning with a mentor, we know that that’s not quite as successful. We’ve all been on webinars where you’re trying to multitask and you’re not learning anything new — you’re just trying to spin a bunch of plates.

So, we see the importance of the office to be that place. We ask ourselves, “What would it look like if the office was like a university? What if the office could provide opportunities for learning, for community, in a way that it’s fulfilling when you’re there, and then when you have a more flexible day — maybe you’re working from home — that energy stays with you?” It’s like when you go to a great conference and you get that buzz, and then you go back and you’re energized. So, that’s what’s exciting to us, about the new role of the office and how it can become that hub. The purpose of the office in the future is to be that heart. It’s a little touchy-feely, I guess, but it’s the heart of the company, to bring you together and be that hub.

Kornik: What a great discussion we’ve been having. I have one more question for you, but before I let you go, this is the VISION by Protiviti podcast. What goes along with that is that we like to ask our guests to make bold predictions about the future. Our entire program is focused on a decade out, essentially. So, when you think about 2030 — and I’ll even put you even a little further, if possible, 2035 or even out to 2040, if you want to go that far — what haven’t we thought about? What may surprise us? Is there anything we haven’t discussed that you think will be part of that office of the future? Bold-prediction time, if you have any.

Nelson: We’re not short of ideas, but I do want to tie a little bit back into language. When you mentioned things that we haven’t discussed yet, what has come up so much, and what many organizations are leaving the door open to in the way that they’re talking about this, is about a “return” to something that was before — the tone and the messaging suggesting this transition back to something. The future of work in 2030 and beyond will have to look different. We can’t go back to the status quo that worked well for a time in the past — that’s just not how human innovation works. So, whether they realize it or not, with that language, they have an opportunity now to acknowledge that the future is different, and like I said, the only constant is change. One of the big things prompted by the pandemic and this rapid shift to remote working and how we’ve been working for the past two years is our relationship to time.

So, if I call this a bold prediction, we’ll see a rise in things that are automated, in automation. Automating the things that are routine allows for more time to focus on the things in people’s work that require the expertise, the creativity, the nuance and that human element. The overproductivity that was gauged during lockdown, when people were working more and producing more — which isn’t a gain, is it? It isn’t sustainable. So, we like to throw that productivity piece into this, but that’s not sustainable, that overproductivity that we know everyone was experiencing.

Businesses, of course, want to recognize those gains, so they’re going to have to rely more on the human capital to get to a sustainable future. That’s going to be prompted by that relationship to time. People and organizations recognize the disruption prompted by the pandemic, and the self-reflection that that change offered. Companies and people will further question where their time is most impactful, the time spent to maximize output for profit and the time people are willing to invest in their work to get the balance of productivity and satisfaction.

Pesci: Haley, I could not agree more. And to build on your idea of productivity, my very bold prediction is, we see America divorce from the 40-hour workweek. It’s a dated concept that’s not relevant to the way that we work. Back in 2014, Stanford did a huge research effort that showed that productivity drastically tanks after 50 hours in a week. When you break it down, for an eight-hour workday, people typically take two and a half hours of unproductive time during that eight-hour workday because of how much your brain is lagging, and burnout. Back in 2014, we used to call it presenteeism, because it was, you were in the office, but you weren’t productive.

We’re starting to realize, especially with the work-from-home, and we hear so much about lack of work-life balance, that we’re starting to try to figure out, “Are we productive for an hour and then need a 15-minute break, or two hours, so that we can get more done in less time?” Coupled with that, you see the death of the nine-to-five workday. Frankly, the nine-to-five has been dead for a while.

Technology has enabled us to work asynchronously, and traffic makes us not want to work from nine-to-five because then everyone is on the road at the same time. It’s worse for the planet. And so, because of our ability to do all of those things, coupled with Haley’s thoughts on the desire to increase productivity, breaks, work-life balance, the office becomes a zone for people who want to work there because it’s better for them to work there, but it’s more a place for teams to come together for predetermined periods of time, whether they are set locally or they are set globally — those moments that matter to get together as a team, innovate, be productive. And again, I hate to say it again, but maximize the ROI of that space.

Kornik: It’s a welcome change, and you’re right — we’re already moving in that direction.<>I’d like to thank you both for spending some time with me today. Melissa and Haley, thank you so much for joining the program today.

Pesci: Thank you for having us.

Nelson: Yes. Thanks so much, Joe. This was a great conversation.

Kornik: Yes, I enjoyed it. And thank you at home for listening to the VISION by Protiviti podcast. Please rate and subscribe wherever you listen to podcasts. And please be sure to check out vision.protiviti.com, where we have all of the content around our Future of Work series. Please subscribe to join VISION by Protiviti to sharpen your vision and make sure your business stays future-ready. For Melissa and for Haley, I’m Joe Kornik. Have a great day.

EMPLOYEES AND CUSTOMERS 2030: WHAT’S IN STORE WITH JOHN HARTMANN, COO OF BED BATH & BEYOND — VIDEO TRANSCRIPT

Joe Kornik: Welcome to the VISION by Protiviti interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our strategic initiative where we look at big topics that will impact businesses worldwide over the next day and beyond. Today, we’re focused on the future of work. And we’re coming to you from the corporate headquarters of Bed Bath & Beyond in Union, New Jersey. The retailer operates for banners: its namesake Bed Bath & Beyond, Buybuy BABY, Harmon Face Values and Decorist. I’m thrilled to be able to welcome John Hartmann, chief operating officer of Bed Bath & Beyond and president of Buybuy BABY, to the VISION by Protiviti interview. Welcome, John. Thanks so much for joining us today.

John Hartmann: Thanks very much for having me.

Kornik: I’m also joined by my Protiviti colleague Managing Director Tom Andreesen, who leads our firm’s Chicago office. Tom and I will both be handling the interviewing today. So, Tom, I’ll turn it over to you to begin. Welcome to New Jersey!

Tom Andreesen: Thanks a lot, Joe. Great to see you, John.

Hartmann: Great to see you too.

Andreesen: Thanks for hosting us here today. You know, we’ve been through a lot the last few years — a lot of changes. But it’s given business leaders like yourself a chance, a rare opportunity, to rethink their business, rethink your market, rethink how you did work. So, we’re curious about your thoughts on those areas and how those have impacted you.

Hartmann: It’s an understatement for all of us to say the last few years have been crazy. In the context of COVID-19, this company, under the leadership of Mark Tritton, has been going through a massive transformation. Mark joined the company right before COVID-19 struck, and focused on a complete rethink of how we serve our customers, and in the context of COVID-19.

A number of things come to mind. One is the magnitude of a transformation of this company in the context of a global pandemic. And that has accelerated our focus on how we serve the customer. A few years ago, Bed Bath & Beyond was really behind the times — no real strength in the digital presence, in our absolute focus on accelerating our ability to serve our customer in that way. Two words coming to mind: innovation and investment. And they’ve really been the cornerstone not just for me in my role as the chief operating officer and the president of Baby but also across the entire organization. They’ve been the cornerstone to our thinking around investing in the customer experience and innovating to catch up and then get ahead.

Andreesen: So, as we continue to evolve and come out of the tumultuous times the last few years, what do you think are some of the key learnings?<>Hartmann: The interconnected world that we live in is obviously very clear now. A decade ago, we talked about globalization. We talked about how businesses could benefit — and, in some cases, not from the global economy. Clearly, the pandemic has taught us that there are massive implications for all of us if something happens, as we’ve seen with COVID-19. Those learnings I come back to — those cornerstones of our transformation — are to provide the customer with the experience that she expects, to provide the customer with that modern, for us, retail experience. Innovation and investment are things that can never stop.

And for us, historically, we’re a company that has been underinvested. We’ve not been on the cutting edge. Those are the three big lessons for us : the interconnected world — and I’m sure we’ll talk about the supply chain at some point — the importance of continuing to invest and the continuing innovation around how you serve your customer.

Andreesen: Obviously, retail was rapidly changing pre-COVID-19. And as you’re touching on, it’s been expedited during the past couple of years during the COVID-19 situation. Let’s think ahead, though — let’s think 10 years out, or 20 or 30. What does retail look like?

Hartmann: Who’s got a crystal ball? But we’ve been thinking about the future. And broadly speaking, for me, what comes to mind is, I can picture in my mind some overlapping circles, and one of those circles is the customer. And another circle is data — data about the customer, data about what they desire — and then in the third are the products and services that we provide. And I think about those connected, overlapping, integrated circles, and everything that goes with them: the customer and their desires, the products and services, and the product data — that content around the product. Where’s the product in the supply chain? All of the ancillary aspects of how retail comes together. And our focus is, in the context for our company, on how those overlapping circles come together in the next 10 years.

Andreesen: You touched on this already, but retailers are going to face risks and barriers that they do try to evolve 10 years out plus. What do you think some of some of those risks and barriers are, and what are retailers going to have to do to overcome some of those?

Hartmann: Resiliency comes to mind immediately. There isn’t a product, in many cases, and a services organization that hasn’t been in some way impacted by the issues around the global supply chain. The products around us are very important to our customers, are very important to the business, and they come from various places in the United States and around the world. Thinking through the risks of getting your products and services to your customer has never been more important. How you fortify your plans, how you diversify your risk — the importance of supporting your clients with thinking through the risk.

A related point is the third parties that we work with — yes, manufacturers and suppliers — but in the data realm, we have massive relationships with third parties that are an integral part of the way we run the business and, ultimately, how we serve the customer. And there’s a lot of inherent risk, and growing risk, in how we need to connect ourselves with trusted third parties. But from a technology perspective, from a data security perspective, there are very significant risks there as well.

Kornik: Considering where we’re sitting, we should talk about stores and the consumer and the future of retail. As you look forward to, say, 2030, what can we expect?

Hartmann: As digital business expanded massively and quickly here and abroad, there was a thought that stores are a thing of the past. And the philosophy about that is, the pendulum has swung back in the other direction. The data shows us, and the data is a great place to start, that stores are an integral part of a customer’s expectation for most businesses — not all, but for most, and for us. Stores are a foundational element of our omni approach to how we serve our customers.

How is that going to change? The expectations that customers have in stores has been elevated. We’re coming out of the pandemic, people have returned to the stores in large numbers and the experience they want is evolving. When I was a kid, there was no digital. It was just a store. Now, we have this great diversity in how we can serve our customers, and our customers expect to have a great experience however they choose to interact with us, whether it’s on the app, whether it’s on the website, whether it’s in the store or a combination thereof. From a store perspective, we believe we need to elevate our game. We are renovating hundreds of stores across our fleet. We are designing new components of our store. This will continue to elevate our presentation of our products and services to our customers to meet their expectations.

Kornik: What if we go a little further out? What if we talk about a decade out? Customers are evolving. The whole process, from a consumer standpoint, is obviously a natural evolution. Where do you think that the customer will be in 2030 and beyond? And how do you meet them there?

Hartmann: It goes without saying, the customer today is different than the customer a decade ago, and for a lot of reasons — COVID-19, but the upcoming generation of consumers, they’re digitally native. They’ve grown up with a phone or a tablet or device in their hand. That’s one of their principal ways of interacting, and as they evolve, that’s how they enter the shopping experience. So, where we meet our customers is important, and that’s how they want to interact with us.

But they’re looking for more than just a transaction. It’s not just about a product. Customers today want to know about the companies that they’re doing business with: They want to know what their stance on the environment is, what their ESG strategy is, what their commitment to the community is and how they interact with not just them as an individual customer but also with the community that is all of our customers. And that’s an important part of our focus. The one additional thing is that looking 10 or 20 years out, we need to be able, based on what we know today, to allow our customers a very fluid relationship with us.

In other words, whether it’s in a store, whether it’s online, whether it’s on the app, they want to be able to have a very seamless experience with us, because they’ve grown up digitally. If they choose to step into a store, that digital presence, that content that we can deliver, the personalized information that’s geared and curated directly to their needs, that’s what their expectation is.

Andreesen: John, as COO of Bed Bath & Beyond and president of buybuy Baby, you have teams — and you’ve touched on this — that are transforming and improving the business through some efforts focused on supply chain, procurement, technology, and those are ever changing. You hear about in the news, they’ve been hot button issues — you touched on the supply chain. How do you look at those challenges now, and how do those how those areas evolve in the future?

Hartmann: My home base is going to be the customer, so I’ll start there. Everything we’re doing — the innovation that we’re bringing, the investments we’re making — is geared on two things: One is the direct customer experience, and the second is, how do we empower our associates to give the customer a better experience?

But there are some fundamentals we’re in the middle of. It’s not an overstatement to say we’re doing a complete redo on our supply chain. We’re going from a historical supply chain that was geared toward cost — which isn’t a bad thing; you want to have an efficient, cost-effective supply chain. But for modern retailing, speed is important. We are migrating from what is an antiquated supply chain model domestically to be able to replenish our stores and our fulfillment centers and get product directly in front of our customers in the store or to their front door through our direct-to-consumer fulfillment in a much faster way. The introduction of same-day delivery, the introduction of buy online, pick up at store, the introduction of curbside — all of those things have rapidly evolved for us over the last couple of years.

But now we’re thinking about, how do we further cut time out of our supply chain, going from an average of 30 days or more for domestic replenishment to a store to under 10 days for key items by moving the products into a supply chain that’s closer, that brings the critical products closer to the customer.

Technology is another great example. It’s like a heart and lung transplant. We’re going from an older, antiquated data center–grounded technology footprint to a cloud-based, cutting-edge, modern computing-capacity model, and it’s everything — new ERP, new end-to-end merchandising systems, new supply chain and control tower visibility across our supply chain, to name a few. It’s, between supply chain and technology, a massive redo, and in some ways, probably 50% of it is bringing us to where we need to be, and then a good portion of it is preparing us for serving the customer in the future.

Andreesen: It’s an amazing amount of change. And you’ve touched on employees and associates. As a leader, you’re also helping transform through cultural change. And with everything we’re hearing about talent shortage, retaining talent, transitioning to this new work environment, and how multi generations react to that, that adds another element to your very full plate as a leader. How concerned are you about retaining and attracting talent, employee engagement, and that culture change that’s occurring?

Hartmann: I’ll start with the last part of your question around the culture, because it has been an intense focus for us. Mark brought to this organization a plan not just to transform the company from a customer-focused perspective but also to transform how we, as an associate population, serve our customers. It has been a journey from day one, and it’s been founded on transparency and authenticity.

The entire leadership team is committed to this approach, and when we talk to our associates, it’s a dramatic change from the previous culture of the company. And then, of course, COVID-19 hit in the early days, and we were super proud as a leadership team to see that we’ve not dropped the ball in terms of the cultural transformation of the company. And this isn’t my feedback — this isn’t me saying this. It’s the feedback that our associates and our teams are providing to us that have helped mold our approach to how we work with and guide our organizations.

Let me give some specific examples. I do want to come back to risk, because we are definitely concerned about talent retention — about the availability of talent and so forth. But culturally, we’ve embraced a very inclusive organization. And these are not just words for us. This is how we show up in the workplace. This is how we show up as leaders — we set the example for our associates, participating in committing to diversity, equity, inclusion, helping to create and craft associate resource groups focused on particular parts of our organization where our associates are telling us we need to put more attention. These are a couple of examples of our real commitment to the transformation of a culture that’s as important, because it’s supporting the actual transformation and driving transformation in business.

Back to the other part of your question, talent is a daily discussion. Even pre-pandemic, the strength of the economy in the U.S., in many parts abroad — a very difficult battle for talent is upon us, and COVID-19 has accelerated that. One of the things that I just saw last night was a terrific new program that our people and cultural leaders have put in place for our associates around self-guided development.

We have, as many companies do, a great process around personal development and an annual performance review, which provides associates with feedback and guidance on how they grow, and share the responsibility for their own career. But we’ve taken it to the next level around providing the tools for different modes of self-guided education and different modes of self-guided development to complement our existing process around talent development.

We think that today’s associate is, like our customers, interested in more than just a job. They want to feel that emotional connection, they want to feel that they belong, and it’s a place that they feel like they fit, where they not only contribute, but it’s also like home, and we call this corporate headquarters our home. That’s just one example of doubling down on building the connective tissue with our associates so that they feel like they’re part of something bigger than just showing up to work.

Andreesen: Very important as part of the overall strategy. Continuing on with the people topic, fast-forward, being looking out to 2030 and beyond, what are some of the main high-demand skills and experience that you see retailers needing? And then, you’ve touched on what you’re all doing around self-development and giving them the opportunity to do that, but how do you see development and training supporting this evolution in 2030 and beyond, where there’s a hot demand for skills and experience?

Hartmann: For us, there are three buckets of different talented human beings that we need in our organization: We have a whole group of people that work within our supply chain, we have a whole group of people that work within our stores and then we have a whole group of people that work in the supporting functions on both of those organizations — supply chain and stores. So, the talent and the skills necessary are very diverse. There’s a need for diversity in all senses of the word, but diversity across the skill set. Retail is a people business, and individuals bring that passion every day to our stores. They bring the passion to supporting our customers. The ability to communicate, face-to-face interactions with customers, is a very unique skill. Some people really love it and excel at that, and we need a lot of those people, with pushing 1,000 stores in the country.<>From a supply chain perspective, we need a very diverse set of skill sets, from individuals that look after direct-to-consumer orders to individuals who manage teams of individuals who are working within the warehouse organization, and then other skills around material-handling equipment and moving products within a facility and across the country and across the globe.

Then, in the corporate setting, data and analytics are coming number one to the top of my mind — the extreme need in modern business, in modern retailing, to understand consumer behavior, be able to analyze it and then adjust your products, adjust your services, adjust the location of your inventory to meet the needs of the customer is an extreme need. Data and analytics will certainly be in the top three or four for a very long time.

Another area of importance is in the technology area. We’ve heard a lot about machine learning, we’ve heard a lot about artificial intelligence, but these things are real. From implementation we’re doing right now around a supply chain control tower, which for the first time in our company’s history will give us absolute visibility into where our products are located across the entire supply chain, from order placement to the time that it shows up at a customer’s front door or goes to a store. The visibility is one thing, but the ability for the system to guide you and provide options around how you best place your products in the supply chain, how you measure them, is super critical. And that’s just one example. Individuals that have talent in data analytics technology to complement our supply chain and our store needs, that’s a focus for us.

Kornik: John, you’ve been very forthcoming in your answers, and we’ve talked a lot about the future here, and this has been fantastic. We appreciate you taking the time to do this with us. But we’re not going to let you out of here without a bold prediction or two. We call this VISION by Protiviti because we like to bring smart people together and have them give us their vision of the future. You’ve done that quite a bit, but we’d like you to go out a little further — 2030, 2035, as far out as you want to go. Talk to me about what’s possible. What haven’t we thought of when we think about the future of work and the future of retail? What do you think is possible?

Hartmann: It’s a tough one because, as I said earlier, no one has a crystal ball, but I’ll give it a shot. If we went back I don’t know exactly how long, but let’s call it 20 years, there’s a business concept that was grounded originally in strategic planning called ecosystem. And I’m not an expert on what that meant then, but I’m reflecting on your question and thinking about what’s in my head today, and how that might impact the future.

What we’re seeing today, which I think will evolve rapidly — even more rapidly in the next decade — is how individual companies and how unrelated companies come together in an ecosystem to build a basket of products and services that better support and serve their customers — and they can be shared customers, or they could be new customers. But the evolution of how companies partner and how companies work together or acquire new businesses or build new capabilities, all with the focus on filling different components of an overall approach to serving the customer’s needs, that is really good. That’s going to accelerate, and we’re going to see a lot more of it.

An example is, we’ve recently publicly announced our collaboration with the Kroger organization, and so now you’re seeing, in Kroger’s digital marketplace, Bed Bath & Beyond products, buybuy BABY products, available now to the multitude of Kroger customers. You take the largest grocer in the United States, you combine it with the brand authority of Bed Bath & Beyond and buybuy BABY, and collectively, we think that collaboration will be great for both companies. That is one example of what could be many types of examples of companies working together to apply their collective force to an ecosystem focused on a particular customer.

Kornik: Fascinating. John — thanks for doing this! We really appreciate it.

Hartmann: It’s great, guys. Great to have you here. Good to see you both.

Kornik: Thank you. And Tom, thanks for the questions. Thanks for helping me do this, John. And thank you for watching the VISION by Protiviti interview. For John and Tom, I’m Joe Kornik. We’ll see you next time.

OFFICES OF THE FUTURE WITH REAL ESTATE EXECUTIVE DAVID MARINO OF HUGHES MARINO - Video transcript

Joe Kornik: Welcome to the VISION by Protiviti interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, where we’re looking to the future to examine the big topics that will impact businesses worldwide over the next decade and beyond. Today, we’re focused on the future of work and specifically the future of the office and corporate real estate. We have a great guest to help us do just that. Today, I’m joined by David Marino, executive vice president and cofounder of Hughes Marino, a San Diego corporate real estate advisory firm helping companies develop strategic solutions for their real estate needs — workspaces that work. David, thank you so much for joining me today.

David Marino: Thanks for the invitation.

Kornik: David, I’m excited today to get into the future of the office and corporate real estate as part of our Future of Work initiative. We still have to start with the pandemic, unfortunately. I was hoping that we wouldn’t have to be still talking about this in March 2022, but it looks like we do. I’m curious: How has the pandemic impacted your business, and corporate real estate in general?

Marino: There have been incredible amounts of content produced by industry experts, architects, landlords and brokerage firms about what’s going on, and my lens that I see the market through and this activity through is a personal one. Even though I’m a cofounder of the company, I’m 100% client-facing in what I do. Since the pandemic started two years ago, I’ve spoken to over 800 business owners and CEOs and CFOs. And in my career, I’m out working with clients looking to move their headquarters facilities and their research and distribution facility. In my daily activities, I’m in the market looking at buildings, looking at spaces and firsthand witnessing what’s going on in corporate America.

My perspective is a little different than that of a lot of the pundits, who are maybe looking at some data and some trends, and have an agenda in terms of their presentation. Given that we only represent tenants, there’s really no spin. We’re not advocating for landlords and building owners, and so we’re calling balls and strikes as we see them.

And the reality is, it’s a very mixed story out there. If you’re a biotech company or manufacturing or distribution company, the commercial real estate market has never been better because, even during the pandemic, all of those industries have to be present to conduct their business activities. But if you’re an office tenant, it’s a quite different set of affairs. As everyone knows, everyone that occupies office space in the United States essentially went remote two years ago. The question is, what are they doing now? The reality is, in the market, companies generally have yet to reoccupy their facilities. If you were to walk through most office buildings that were 90% leased pre-COVID, the occupancy levels in those buildings are anywhere from 15% to 25%. Generally, people still have not come back, and what business owners are still struggling with is, will they ever?

Kornik: That’s a good spot for me to ask, “Will they ever?” When you think about corporate offices of that future, workspaces that work, what are some of the big factors to consider when you think about the transformation that offices will undergo in the future? Let’s start with that first question, though: Will they ever come back?

Marino: What I’ve learned is that there are three buckets of employees. It’s different company to company, but employees fall in one of these three categories: There are employees who are desperate for engagement, who only work well when they’re present, who really want to be back in the office at least three days a week, but as much as full-time. Generally, there aren’t a lot of employees who said, “I want to be back five days a week and have a normal workload like I did before including the commute, all the other things involved,” but most people in this category do want to come back at least three days a week.

There’s a second category of folks who want to come back never. There is this work-from-anywhere program where employees have moved away, changed states and left the location where their home office was previously located. So, you have a tremendous amount of people who aren’t even in the same community than they were pre-COVID. Those folks aren’t coming back. Or people who had an hour of commute each day and have simply said, “Look, I’m just never coming back. I’m happy at home. I can see my kids. I have a better relationship with my partner. I’m healthier, I’m happier. I’m saving money not commuting, paying for parking.” So, there’s a whole category of folks that are just never coming back. The reality is, the employer can’t make them. The employer today is effectively powerless in the job market.

Then there’s this third category, what I’ll call the hybrid. Those are the folks who have said, “Yes, I’ll come back for a meeting once a week” or “I’ll come back a couple of times a month, but I don’t really want to be managed. I generally want to work from home or from anywhere, and I’ll see you a couple of times a month.” I’ve talked to companies that are 25 people and 500 people, and everywhere in between, and employees fit cleanly into one of those three boxes. The challenge is, for each business owner, what percentage of your employees fit into each of those boxes?

This is where employers need to move quickly to the acceptance stage of the five stages of grief. The last stage is the fifth, which is acceptance. It is acceptance of the fact that if 30% of your employees say they’re never coming back, well, that’s just true. You can’t wish it to be something different. You can’t say, “Gosh, they’re going to miss out on promotions and culture and communication, and all these other things.” Yes. They’re willing to forgo all that stuff and the beautiful office to live their new life.

Then there’s this other category that want to come in once a week, once a month, that you have to provision some community space for, or co-working space or hoteling space, whatever you want to call it. It is now to the point where employers have to get religion around this. We’re in year two, moving into year three, and it’s not going to be different a year from now.

I’m working with companies real-time that have given up. I, in the last 30 days, have eight different clients that have chosen to sublease their space, that have anywhere from two to six years left on the lease, where they’ve said, “We now have come to acceptance. We have 65,000 square feet of space, and we only need 12,000.” “We have 8,000 square feet of space. We only need 3,000.” “We have 33,000 square feet. We only need 15,000.” I could tell that story thousands of times around the country, and the latent effect on this is huge.

The potential in the market for companies to go through radical downsizing is right in front of our faces, because everyone is now starting to move to acceptance. The CEO and business owners are showing up and seeing that they have five people where they had seats for 50, and they’re not going to continue to pay the rent. They’re not going to continue to carry these liabilities until the terminal point of lease. If they’re silly enough to do so, then they’re going to downsize when that lease expires.

Kornik: What does that mean for the market? Are there opportunities for them to sublease, and what happens to those spaces? What does it do in terms for your business? When you think about strategic planning and design and architecture, functionality, what does that tell you about the future and how it will work? What happens to those spaces, and what does it do to the market ultimately?

Marino: Another question that could have an hourlong answer. I’ll try to keep it brief, though. First, for us as a business, we’re very fortunate that we represent a lot of manufacturing companies and distribution companies and biotech research facilities and office tenants. Certainly, the office sector of what we do is sluggish, but we’re very busy in this other industry sectors taking care of clients, representing tenants and renewing, downsizing, renegotiating, subleasing, relocating. That’s what we do for a living. There is always activity. So, even though a tremendous amount of our clients are office tenants, for us, we’re still going to represent a lot of tenants moving around the market as they downsize.

If you look back at what happened in the prior recessions — let me walk you through. I’ve been doing this for 33 years now. The early-’90s commercial real estate meltdown was a supply-side problem. The market was overbuilt by a lot of speculative real estate and a lot of capital that flooded the market. If you look at the tech rec, you had a demand-side problem. You had the capital markets implode, which caused companies to mostly fail, and therefore default on their leases. Then, if you look at the mortgage crisis of ’07–’08, something similar — again, we had a capital-markets problem that spilled over into the tech and other business sectors that caused a demand-side problem.

It’s different this time. We now have structural change in how corporate America uses office space. The initial shock in 2020 was, everybody vacated their space. But we thought this was going to be over in about six weeks, back in March 2020. So, here we are two years later. What happened are two phenomena in 2020: First, tenants who had leases expiring in 2020 let those leases lapse and didn’t occupy any space. The secondary thing that happened is, tenants immediately started putting space on the market for sublease. In most urban areas, sublease inventory went to record levels: New York City, 22 million square feet of space on the market; Seattle, Denver, 8 million square feet; Boston, 8 million square feet; San Francisco, 10 million square feet — and those numbers have been static since 2020. They haven’t shifted down.

What’s happening is, as tenants that vacated their space in 2020 looked to come back in 2021, a lot of those companies occupied sublease space because they wanted plug-and-play, cheap, low length-of-lease term options. What’s happened simultaneously is, more and more companies every day come to the conclusion that they’re never coming back, so the inventory keeps getting added to each day. It’s stuck in neutral. You’ve got one that comes off and one that comes on. Just as I described earlier, these eight clients of mine in the last 30 days that have dumped space, that is what we’re going to see a lot of this year: Companies that have remaining lease liabilities of two years or more are just going to throw in the towel, because they’re only occupying 20–30% of what they have. I forecast that sublease overhead inventory is going to persist and probably get worse in a lot of markets before it gets better.

But the punch line on all of this is, availability rent rates went crazy in 2020. Some markets, like San Francisco, doubled. Other markets went up 30%, 40%, 50%, and so we saw this incredible spike in 2020. Twenty twenty-one started to flatten off, but we’re going to see over the next three to five years, as more leases expire, that the remaining companies that have yet to address their lease-expiration date are mostly going to get smaller.<>We call that in our industry, Joe, negative net absorption. It’s when a 50,000-square-foot tenant becomes a 20,000-square-foot tenant. That’s negative 30,000 square feet of absorption. We’re in a negative-net-absorption cycle that is going to persist for three to five years, and this is going to end badly for owners of office buildings.

Kornik: I was going to ask you about new construction. I imagine that the construction market is probably thrown into complete upheaval and disruption based on this. Correct me if I’m wrong, but it sounds like you think there’ll be less need for offices in the future. If you were to project and look out five to seven years, would you say that we will have a lot fewer corporate offices, or a lot less square footage, at least, being dedicated to that market?

Marino: I would be so aggressive to say that, with a few exceptions, within the next 10 years, no one will need to build another office building anywhere in the United States. In fact, what you’re going to see is a general repurposing of office buildings. Already, people are having the conversation about “How do we convert these things into multifamily residential?”<>You can look at certain situations and certain markets like San Diego County. In the central-county area, where the biotech industry is so robust, the biotech industry has signed 4.5 million square feet of leases in the last two years, and most of those tenants are going into former office buildings.

In these submarkets, there are 30 office buildings that are being converted into biotech wet-lab research facilities in San Diego right now. Something similar is happening in Boston in the Cambridge area, in Lake Union in Seattle and in South San Francisco. As the life science industry changes, these companies are going into three- to six-story office buildings being converted to biotech research.

You have conversion for different industries happening. To give you some crazy examples, in the South Bay, in Los Angeles County, industrial space is now at a record-low vacancy rate. You can’t find it, because of the supply chain activity coming in through the Port of Long Beach and Los Angeles. So, those companies, to find warehouse space, have to move out to Ontario or Riverside or Corona to get a building.

Developers are going into the South Bay — the Long Beach and Torrance area — and they’re going to be tearing down one- and two-story office buildings to build warehouses. This class B, class C, generic real estate that’s 30, 40 years old, that doesn’t have a lot of value — office buildings with big parking lots — a bunch of those things are going to be coming down in the next three to five years around the port area of Los Angeles, and you’re going to see warehouses pop up. We’re definitely in a cycle where people don’t need these office buildings, and everybody is scratching their heads long-range on what we’re going to do with all this excess inventory.

Kornik: A disruption like this, we haven’t seen in a long time in this market. David, I’m interested in those corporations, those firms, that do plan on keeping a substantial footprint. They’re all trying to figure out what the footprint should look like, how should it be different, how it should function differently than it has in the past — the design, the layout, how many floors they would need versus whether there’d be collaboration spaces or whether there’ll be offices that look like they did a decade ago. What’s your take on that from an architecture and functionality standpoint — of the offices that do remain? As firms move into trying to think about the next five to 10 years, what those offices of the future will look like?

Marino: There are definitely going to be some trends coming out of this. The first trend you’ll see is less of what we call bench seating. It was in vogue pre-COVID: Internet and tech and software companies would have this face-to-face, shoulder-to-shoulder, very small workstation to try to encourage collaboration. Yet, at the same time, everybody was sitting around with headsets on because it was so distracting and so noisy. That’s the funny thing about those work environments: They didn’t actually work that well. They saved a lot of rent because you could pack a lot of people in and they looked cool, but they weren’t particularly humane.

In the post-pandemic reality, with social distancing, employees, to come back, are going to need to feel safe. That means giving them adequate separation among their coworkers, and so we’re going to be looking at a minimum of a six-foot-by-six-foot module going forward for proper safety, or perception of safety and health and welfare. You’re going to see an untangling of the workplace — less of this bench-seating culture and environment.

The other thing you’re going to see is a lot more conference rooms — particularly, small conference rooms. It used to be that people would gather in groups of 8 or 10 or 12, and you had a lot of medium to large conference rooms. What I see in the future is a lot more conference rooms, but smaller: two people, four people — six people, max. That will also help support remote workers that want to come in once a month or once a week, because they can jump into a conference room with a laptop. As people continue to do more video calls and more small meetings and more remote activity, more small conference rooms are going to be the norm, and what I’ll call community space: bigger lunch rooms, bigger social spaces, where someone who comes in once or twice a week with a laptop can sit in a kitchen or lounge area and not need a dedicated workspace or an office. You’re going to see that.

Most companies we’re talking to are trying to figure out the hoteling component. Do they have 10 or 20 workstations in two or three offices that are the remote-working area, where folks can either reserve a desk or come in at their discretion and know that there’s a workspace available for them? A lot of companies are going to be talking about how to accommodate the remote worker, and how to try to get people back to the extent they’re willing to come back — with that point that you can’t make them come back, but you can encourage them.

The last thing, Joe, I’m seeing is companies looking to top-grade. As you’re trying to bring your employees back, if you’re going to bring them back to the same generic office space that’s in an R&D park in a suburban area, that’s nondescript and has no amenities, I don’t know that that’s very exciting for people. The companies I’m working with that are trying to get their employees back, we’re talking about walkability of amenities for food and retail. We’re talking about on-site fitness with lockers and showers. We’re talking about having nicer buildings in a class A location, perhaps closer to mass transit to minimize the commute.

As employers, we’re going to have to bait these people back. We’re going to have to have incentives and inducements and create a work environment that’s exciting and better than they had pre-COVID to encourage them to come back to. That’s what we’re working with our clients on right now — counseling them to spend a little more per square foot, because chances are, you’re going to take less square footage. In other words, moving from a class B building to a class A building might cost 20% more, but if you can shed 40% of your space, you’re still saving money. That’s where I think this is going.

Kornik: David, you’ve given us a lot of amazing information and great insight into the market and the office of the future. We call our program Vision by Protiviti because we like to bring smart people together and have them give us their vision of the future, which you’ve done here a great deal. I want to ask you to look a little further out, and ask if you have any bold predictions. Take me to a decade out or more even, if you could, and what’s possible? What haven’t we mentioned? What haven’t we thought of?

Marino: These trends that I described can potentially even become exacerbated. Look at what’s happening from a technology-backbone standpoint. Entire technologies are being developed today to support remote working, whether they’re online communities — beyond video, beyond Zoom or Riverside and all these tools that big tech like Cisco and these other companies are providing, Webex. There are all of these dashboard management tools for executive teams and business owners to understand what their employees are doing when they’re remote working: Are they logged on? What are they logged on to? How many calls do they have? What are they doing on the internet?

Between management tools, communication tools, community tools, all of the technology that we have yet to even deploy and understand yet, the future is being built on how to support the remote worker — how to make this reality not have to pull people back into the office, So, if you look 10 or 20 years out from now, we have a whole generation of college students in their 20s and young professionals in their 30s who are now being trained to remote work. Those young people, who, 10 and 20 years from now, become the CEOs and CFOs and business owners, they’re going to have been raised with their careers on how to do this well.

I fear it’s here to stay. Most people in my industry who would be on this call want to talk about this being temporary, and everybody is dying to come back, and everybody can’t work from home. That’s wishful thinking, because they want to see these office buildings fill up. That’s in their economic agenda, to see full office buildings. For us, it is what it is. If they’re full or vacant, we just, like I said, call balls and strikes. The reality is, these people aren’t coming back. If anything, 10, 20 years, from now, we’ll see more virtual companies, more hybrid styles of working, that we can’t even imagine today. Unfortunately, the horses are out of the barn, and this trend is here to stay.

Kornik: It sure sounds like it. David, I can’t thank you enough for that look inside the market. Your insights are valuable. You gave us a lot to think about today, so thank you so much for joining us today on the Vision by Protiviti interview.

Marino: Joe, thanks for the opportunity. It’s a real pleasure. Great seeing you.

Kornik: Thanks, David. That was such a wonderful discussion. For VISION by Protiviti, I’m Joe Kornik, and we’ll see you next time.

DIGITAL DISRUPTION: FUTUROLOGIST AND PROFESSOR DR. STEFAN GRÖNER ON LEADING THROUGH RAPID CHANGE - Video transcript

Joe Kornik: Welcome to the VISION by Protiviti interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, where we look into the future to examine the implications of big topics that will impact businesses worldwide over the next decade and beyond. Today, I’m joined by Dr. Stefan Gröner, a renowned German futurologist, professor, speaker and consultant who helps business leaders set their company’s strategic course for the future. He is dean of studies for digital management and corporate communications at Fresenius University of Applied Sciences, where his research areas are in the fields of digital transformation, digital communication of the future and business technologies of the future. Doctor, thanks so much for joining me today.

Dr. Stefan Gröner: Yes. It’s a pleasure having me.

Kornik: I’m excited to speak with you, as your unique background as both a professor with expertise in the future of tech and your role as an adviser to C-level executives gives you a very unique perspective to talk about the future of work. Let’s start on the tech side. You talk a lot about digital disruption, its role in the future of work and why it’s so difficult for companies to adapt to all that disruption. Can you expand on that and talk about some of the common mistakes executives make and how we can avoid them?

Gröner: First, it’s important to know that disruption is nothing really new. Disruption was basically true all the time. Just think of the letterpress versus the handwritten letter, or the CD versus the audiocassette, or the smartphone versus the Nokia 3210. It’s, simply spoken, meaning that old business models are going to disappear or be less attractive due to new technologies of competitors which meet the customers’ need in a better way. It’s nothing new, but it is still so hard for companies, for the old players in the market, to adapt to the changes.

Out of my experience, competitors in the market usually tend to focus on their own products and less on the solutions and ecosystems. Take the example of the stagecoach: If you ask the stagecoach owner what the customer wants, they’ll probably say, “Improving my stagecoach — meaning more horses or more comfortable seats,” stuff like that, but was it really the true customer need? The true customer need was mobility, getting faster from A to B, and with the invention of the automobile, stagecoaching was out.

It’s always the problem for players in an existing market to say goodbye to their old business model, to say goodbye to their own products and become more focused on the real customer needs and solutions for the customers. This is not an example just of the past, it’s also true for the automotive industry at the moment, because when digitization arose, what did they do? They tried to put new features in their cars, improving their existing models. When new technologies came — like AI, like sensor technique, like platform technologies, stuff like that —new competitors with other skills came to the markets: Waymo, Uber and so on, they have new competencies. What I usually recommend is thinking more broadly of customer needs and having the courage to forget about your own product, but that’s hard. That’s super hard.

Kornik: You mentioned AI, and I wanted to stay on the tech side for the time being. It would be tough to have a discussion around the future of work without discussing AI. It’s obviously going to be incredibly impactful and important. What is most important when we talk about incorporating AI into our work lives of the future? What advice would you give?

Gröner: That’s a huge question. Simply speaking, what can I do with AI, or what can companies do with AI? First, they can increase their efficiency. They can automate processes. This is very important. This is the cost side, but on the other side, that is even more important. With the help of AI, you can predict your customer needs in a much better way — your customer needs and your customer actions — and you can learn much more about your customers. If you can do that, you’ll be able to adapt to changes way better.

This is pretty much what you can do with AI, but what do you need as a company? There are four important ingredients: First, it’s computing power. That’s why AI is so hot at the moment, because computing power increased dramatically over the last years. It’s algorithms, of course. You need algorithms. It’s data, and then it’s people. What is most important? Everything is important right here, but the most important is data and people. Why? Because you can buy computing power and you can buy algorithms. There are companies that provide that. You still need a couple of specialists to adopt that, but that’s a task you probably can do.

What you can’t buy is data. If you don’t have data about your processes, your market, your customers, then you can’t set up a working model. I usually recommend that it’s overdue to set up a data culture, which means collect all data possible and make it universally accessible to everybody in the company. Even if it’s through a department of your competitor as being a CEO, it’s super necessary. You have to do that if you don’t have data, and this is the most important factor of digital disruption: You probably can’t catch up anymore, because if you don’t collect data right now, your competitor is way ahead, and there is no chance of catching up.

The fourth factor is people, the human factor. At the moment, it’s still true that, of course, you need specialists. You need data analysts, you need software engineers, people like that, in order to set up AI, but I’m pretty sure that in a couple of years, once your AI works, you need another type of employee: people who have a broader interdisciplinary knowledge, for instance, or who are more creative in order to think ahead, in order to think about new markets. And that’s at the moment lacking, because even at university, we produce specialists right now. It’s getting way more important to produce generalists in order to face the challenges which are ahead.

Kornik: It sounds like there are some opportunities when it comes to jobs in AI, but what a lot of people think about when they think about the future of work and AI is, what impact will it have on their current jobs? Which jobs may go away with AI? Specifically, when it comes to jobs in the future and looking, let’s say, in 2030, you touched on it there, but how else do you think AI will impact the jobs that we’re doing right now, and how different those jobs may look in the future?

Gröner: There are a lot of fears around at the moment. Of course, there are new technologies, and nobody knows what’s really happening. If you want to put it positively, the happy news is, first, with the help of AI, you can get rid of boring, routine jobs. That’s the good news, definitely. There are a lot of studies, but in a huge percentage of all the jobs that are purely routine, with AI, you can get rid of that. On the other hand, you probably have to evolve other skills which are needed, and these other skills are more human skills like empathy, like creativity, stuff like that which I mentioned earlier. That’s probably the hardest challenge for people who are not used to think in that way, and only work their routines. There are chances — there are huge chances — but there are also some risks if you don’t want to adapt.

Kornik: I think we’d all agree that we’re in a time of rapid change. The pandemic accelerated some of the changes that were already in place, but all this change and all this technology has a profound impact on human beings. When we’re talking about the future of work, it’s how it’s going to impact those human beings. I’m sure this comes up a lot when you talk about strategy in your conversations with the C-suite and executives. What is crucial for executives to be focused on right now when it comes to leading through these times of rapid change and disruption?

Gröner: What I usually recommend are two things. I mean, there are two main challenges. First, you have to think, what kind of employees do I need in the future? As I already said, are these specialists at the moment for the next two or five years? Probably, yes, but then this is the kind of workforce you need in order to think of new markets, in order to think ahead and stuff like that, and I doubt that. It’s mainly necessary to start thinking about recruiting people with other skills than you have, like creative skills, broader knowledge and so on, in order to be prepared once your AI is set. That’s the first challenge. The second challenge is the leading challenge. If you want to work with more creative people who are at some points annoying or even demanding and stuff like that, you have to change your leadership style.

What is important is, the times of top-down leading are definitely out. There are couple of reasons: First, the world is way too complex in times of AI. You can’t get through all the algorithms with business analysts, with software engineers. It’s just not possible, first. Second, If you have an open mind, if you’re thinking new markets, you don’t have experience on that, and then you just have to trust. You have to trust your team. You have to lead by trust and not by hierarchy — that’s super important. First, attract more creative people, and on the other side as well, in order to be competitive in the future, trust and flexibility are probably the most important leadership skills in the future.

Kornik: Those leaders are the future, and leaders of today, ultimately, are going to be leading multiple generations. That’s one of the trends that we’re seeing as we look forward. People will be taking potentially second careers, or people may not actually retire at the same age as they have. Maybe they’ll work part-time. There’s a lot of that that’s going on. When you look at the younger generations, what stands out to you in terms of their style or their priorities for what they’re looking for, attracting them, retaining them, recruiting them? You talked about that in your last answer. What will fundamentally be different about that generation in their working style and then, ultimately, as they become leaders down the road?

Gröner: First, I need to break a lance for this generation. I’m an oldster, and I have a lot to do with younger people — that’s basically why I’m at the university. I have to break the lance because stereotypes are, they are egocentric, they’re only leisure-oriented, stuff like that, but almost every one of my master’s students, they have a 30-hour-plus job in the industry, in addition to a very demanding curriculum. That’s much more than I was willing to do when I was studying. They are pretty focused, but the main difference is, when I started working, it was more like, “Here’s the job — do it,” and I did it because that was ordered at some point, and I just did it, because I wanted to make a career.

The younger generation — and I don’t think it’s a bad sign — they are purpose-oriented. They want to see a sense of what they’re doing. They want to see some kind of purpose. They want to understand why they’re doing something, and they’re much more critical. That’s a good sign.<>On the other hand, if you’re not willing to listen to them, then probably it’s hard to retain them, then they are just gone, and then you lose a huge opportunity in order to get other perspectives in order to learn more about new skills. They are digital natives. I learn every day at the university. I teach them a lot about strategy, of course, but I have no idea of some stuff they are doing, and I learn. Listening is an important task for leaders of the future, and then, if you listen and if you build up trust and if you explain stuff, if you say, “This is the purpose — that’s why I’m doing that,” if you try to put empathy on them, then you can attract and retain them.

Kornik: A lot of interesting insights. We’ve covered a lot. I know there’s probably a lot more that we could cover, but I would like to wrap up here by asking you to look out with me to 2035 and give me a couple of predictions about, what will be different when it comes to the future of work? What might surprise us? What are we not anticipating? What shall we be expecting in 2035?

Gröner: I always tend to think positively, so I only want to bring some happy news at the end. I’m pretty sure that we’ll have a much more flexible and a much more satisfying work life. We’ll get rid of routine jobs. We’re going to be encouraged about more job enrichment and more time spent thinking ahead, stuff like that. It’s going to be definitely more interesting to work, and less boring and more satisfying. What you need — and that’s super important — you need more empathy. You need more creativity.

This is not only true for leaders. It’s crucial for leaders, but it’s also crucial for employees, because if you don’t have that and you don’t try to get some kind of creativity in your life, if you don’t try to think ahead, if you do not try to be open-minded, if you do not try to make your own decisions, and just follow, then you’re going to be replaced, most likely, by algorithms or robots in the near future — probably not only in the workspace, but also in your private life. That’s what I’m saying to my students: “Try to be creative. Open your mind and think on your own — then, everything is going to be good.”

Kornik: Excellent. Thank you so much, Dr. Stefan Gröner, for the time today and those insights — really valuable from the two different perspectives that you’re able to bring to the discussion today. Thank you so much for joining me.

Gröner: Yes, thank you. It was a pleasure.<>Joe Kornik: For you at home, thanks for watching. I’m Joe Kornik. We’ll see you next time.