Platt Perspective on Business and Technology

Meshing Human Resources processes with business complexity 6: rethinking workplace requirements 2

Posted in HR and personnel by Timothy Platt on January 14, 2014

This is my sixth installment to a series on the new and emerging workplace, and developing personnel policy and practices to better meet the needs of a 21st century business (see HR and Personnel, postings 190 and following for Parts 1-5.)

I have been discussing the issues of terms of employment and workplace engagement that are supported at a business in recent series installments (e.g. full time in-house work on site, telecommuting and other off-site work, flex-time and job sharing and other work arrangements). For that, I specifically cite Part 3, Part 4 and Part 5 of this series where I analyzed this set of issues from a risk management, cost and benefits perspective and as a joint exercise involving Human Resources and other departments, and Information Technology in particular.

I turn back in this posting, with that discussion in place, to continue a line of argument and analysis that I began earlier in this series in its Part 2: rethinking workplace requirements 1. I discussed overall workplace requirements that would at least ideally be met in establishing supported terms of employment in Part 2, with a focus there on the dynamics between employer and employee, and on bringing in and retaining the right people, and under terms where they can most effectively perform at their jobs. My goal here is to step back from that more localized context to consider how more flexible and adaptive terms of employment can impact upon the business organization as a whole.

In Parts 3-5 my focus was on the coordination of Human resources and Information Technology in defining and implementing an approved suite of employee work engagement terms. I turn here to more explicitly add in Operations and Finance. And I begin that discussion with the issues and challenges of fixed operating expenses. And in this, fixed operating expenses constitute the inventory of ongoing, recurring expenses that a business can plan for and expect to have to deal with – as opposed to one-time, and other nonstandard expenses such as payment for the occasional services of an outside auditor or other consulting specialist.

• Payroll tends to be the largest single fixed operating expense for most businesses, and certainly for businesses with anything significant in the way of an employee headcount. And this definitely holds when benefits and other supplemental but predictably consistent indirect compensation expenses are added to salary expenses, and direct compensation due.
• Expenses related to securing and maintaining office and sales and other business space, and for keeping all of this space effectively usable with all required utilities and other services included, collectively come in as a close second. And when all support services and other expense sources are added in that would go towards maintaining the business’ physical space and its usability, this can become the largest single overall source of fixed operating expense and certainly when that involves having to pay premium storefront and other rental fees.

I wrote an earlier series on limiting and even fundamentally eliminating dedicated physical space requirements, and associated expenses as a collective source of ongoing operating expenses in my series: Virtualizing and Outsourcing Infrastructure (see Business Strategy and Operations, postings 127 and loosely following for its Parts 1-10.) And I note in that context that 21st century businesses face an increasingly diverse and flexible, and I add complex and even bewildering range of options for managing and even limiting operating expenses, and particularly fixed operating expenses. But some caveats have to be allowed for in any such effort.

• Simply limiting fixed operating expenses will not automatically improve a business’ overall finances or expand its working liquidity or financial strength – and certainly if any fixed expense reduction is matched by likely recurring increases in special or one-off, non-fixed expenses incurred.
• And in fact if a reduction in fixed operating expenses leads to even just a close but still smaller average increase in non-fixed expenses, from a risk management perspective that business can still be worse off as far as its financials are concerned. That is because fixed operating expenses are predictable. They can be consistently anticipated and planned for. Special and non-recurring expenses do not offer that luxury, and can come all at once in single months or quarters (in single reporting periods) and break any budgets in place in the process. They carry significantly higher fiscal risk as a result and this translates directly into increased expenses that have to be accounted for; liquid reserves have to be increased to allow for them and that means less operating capital available at any given time that could, among other things be used to address sudden new challenges or sudden emerging opportunities.

And effective selection of supported and approved terms of employee engagement of the type that I have been writing about here, can help reduce fixed operating expenses, but in a predictable manner and without necessarily causing any significant changes in non-fixed expenses – only with a rebalancing in what goes into those still required fixed operating expenses.

• When a business supports telecommuting and other off-site work and can accurately predict that some given percentage of its workforce will be working from off-site at any given time, it can reduce its physical footprint, and the amount of space it actually has to maintain and with proportional reductions in utilities and maintenance and other ancillary expenses that holding physical space entails.
• Desk sharing, workplace kiosks that employees who usually telecommute but who find themselves at the office, and other approaches can be used in coordination with this to accommodate normally off-site employees who do have to come in for face to face meetings or other purposes – and if this capability is built into the basic floor plan of occupied business space formally held, then maintaining occasional onsite work requirements all goes into fixed operating expenses with their predictability.
• If hoteling – occasional use of off-site rented office or conference room space is called for, that can become a non-fixed and less readily predictable source of expense. But if a business knows that is it is routinely going to need certain levels of access to this type of resource it can budget for that as if a fixed operating expense and it is also often possible to enter into ongoing rental agreements with businesses that specifically supply this type of rental service – and often with receptionist and other trained personnel who greet any visitors in the name of the renting business that those visitors are there to meet with. The larger of these office space rental services have multiple locations and ongoing contracts can be signed with them that would allow for possible use of space in any of a wide range of available locations and with certain amounts of exceptional peak usage covered in the basic contract.

That is a fairly obvious example of how a strategically well planned and executed approach to employee terms of engagement with the business, and terms of employment can lead to a reduction in how much physical space that business needs to maintain. But a number of other alternative terms of employment can contribute to similar savings. Consider job sharing, where two employees split a larger job, doing their portions of it on different schedules and at the same desk – except when they have to get together face to face to coordinate their joint effort, in which case they either use a conference room, or bring a second chair into their shared work area, or meet off-site for this. Then and of course for my telecommuting scenario just noted, the discussion I have been developing in Parts 4 and 5 of this series come into play where sensitive business information might be called for in this work. So all of the areas of this overall discussion that I have been exploring in this series up to here, come together in this.

I am going to continue this discussion with a series installment on audits and performance benchmarking, and on bringing this into the overall business-level strategic process. Meanwhile, you can find this and related postings at HR and Personnel.

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