In this episode of the McKinsey Talks Talent podcast, McKinsey talent leaders Bryan Hancock and Bill Schaninger speak with senior expert Phil Kirschner about the office space of the future: what workers want, what employers need, and how workplaces will need to change accordingly. An edited version of their conversation follows.
McKinsey Talks Talent is hosted by Lucia Rahilly.
The new balancing act
Lucia Rahilly: We’ve seen a lot of media coverage on the return to the office, including some CEOs coming out forcefully, essentially mandating return. At the same time, other leaders seem to be walking back previous recommendations about whether and how often they expect folks to come in. Phil, any sense of whether employees are actually responding to the call to return to the office?
Phil Kirschner: Generally speaking, they’re not. It’s important to go back to the pre-COVID-19 times and understand that we weren’t in the office 100 percent of the time. Almost anyone I ever talked to, any client I ever served, wanted one or two days’ more flexibility than they officially had.
Now we have a choice to be there. And because it wasn’t that great to be in the office before, we find ourselves at this impasse where employers feel they have to order folks in. But that’s new all around, to go back to something that they didn’t really like prior to COVID-19.
Lucia Rahilly: Bryan, you’re talking to business leaders every day. What do your clients think is at stake as they grapple with the challenge of bringing people back to the office?
Bryan Hancock: They’re seeing two things at stake: one, they’re trying to figure out “How do I get the people I need to execute on the mission?” And two, as they’re coming up with the strategy, they’re trying to figure out “OK, am I going to lose somebody if I have too stringent a policy?” Or on the flip side “Can I attract somebody if I open up my availability for talent anywhere in the country?”
We’re recognizing that some work can absolutely be done anywhere. Individual contributor work and going through your emails doesn’t require you to be in the office. But there is some work—in particular, coaching, mentoring, some of the creative interactions that happen together—that does require people to be together somewhat regularly. That balance does require some degree of flexibility but also some degree of in-person interaction.
We’re recognizing that some work can absolutely be done anywhere. But there is some work that does require people to be together somewhat regularly.
Lucia Rahilly: I want to go back to this question of attracting talent. But before we do, Bill, we talked on this podcast recently about what at least appears to be a rise in worker power, given the tight labor market right now. Do you actually think this recent spate of mandates will jolt folks back into the office?
Bill Schaninger: Probably not. I’m surprised we’ve had this run of mandates. People have gotten a taste now of not all work needing to be done in a cube. You don’t have to drive 90 minutes to get on a Zoom. I wish the resources we put into working capital, cost cutting, and new sales approaches would be reallocated to support the work that needs to be done together.
If there are enough meaningful kick-off meetings for projects, you might need two weeks together to say, “Let’s define it. Let’s scope it. Let’s lay it out.” Then, once you have the workstreams running with good governance, why not let the work drive the decision of whether to be together?
Some work needs to be done together, but not a spurious mandate—not a “We’re back in charge now” orientation. I think that’s a fool’s errand and will continue to destroy your value proposition.
What workers want—and don’t
Lucia Rahilly: How do you think the design and the configuration of the office dovetail with the design of an organization’s tasks, its roles, and its culture?
Bill Schaninger: There’s a cool science behind it. But also, this is a lot about power. We should let Phil tell us where we’re at because we’ve had this weird interruption for two years in what we were doing with office space.
Phil Kirschner: You’ve reminded me of my very first pilot of any workplace mobility program, which means when we come to the office, we share things—all of us. At the end of that very first pilot, one of the senior managers who had been in an office forever and was used to seeing the same set of people working outside his office forever realized, and said on camera, something you’d think we’d paid him to say.
He said, “I feel like I have lost my office through this transition, but I’ve gained a floor. I have all this diversity and access not just to meet different people but to use different typologies of spaces and technologies and signals and feeling and design throughout my day to best serve my needs and the needs of my team.”
That’s been happening in the decade leading up to COVID-19—a real emphasis on the fact that space can signal what it’s good for. And if you untether people from the desk, and most important, train managers to rethink what it means to know that someone is or isn’t being productive, they can truly lean into a wider variety of spaces.
Especially now in the post-COVID-19 world, we’re seeing an explosion of supply—available work spaces of even more shapes, sizes, feeling, and locations than any one employer could ever provide. Giving employees access to that total ecosystem of spaces can provide empirically a higher perception of performance or workplace satisfaction than one location, one office could ever give them.
If you untether people from the desk and train managers to rethink what it means to know that someone is or isn’t being productive, they can truly lean into a wider variety of spaces.
Lucia Rahilly: Back to Bryan’s point about attracting talent, all of us would prefer to go into a nicer office versus a shoddier office. We all like good coffee. We all like high-quality snacks. But that doesn’t necessarily compensate, for example, for suddenly needing to resume a commute, especially with the rising price of gas. How does this new office you’re invoking have a role in helping to attract workers back to in-person work?
Bryan Hancock: There’s some great research by Steelcase, the office furniture manufacturer. They did some great research on individual workers to determine what kind of spaces were going to be most attractive or most needed, and therefore, what the future office would look like.
The researchers saw that there would be a rise in the need for individual spaces, not open-floor access but individual places where there’s quiet to get work done. They’re seeing a number of workers, in particular younger workers, saying they need a place to go to do that individual work, or least a subset would like to have that option available some of the time.
There’s also a rise in the need for real team space—not just the occasional conference room but actually the time to get together as a team, to have the right space together, to have the right access to the tools they need to collaborate, and the right access for snacks and other pieces. Do you have a convenient team space with the right setup? Or is it an old conference room that’s been converted? The needs might be a little bit different, but are we thinking about the right team space?
It really is thinking through the individual need, the team need, and the need for compelling broader space, and are we meeting all of those needs? And I think if they are, then it makes it an even more attractive workplace for the workers. Phil, I’d love your thoughts.
Phil Kirschner: I’m really glad you brought up the point about younger workers, because there is definitely a statistical correlation between the quality of the environment you have at home and your likelihood to want to overcome the friction of going to the office. The younger workers are more likely to have three roommates and two cats, sitting at the dining room table, versus all of us who are sitting within an enclosed space with a door, which we’re fortunate to have, either at an office or at our home.
Bill Schaninger: The office was the bully pulpit, you know, with leadership striding down the main hallway. Think about movies and TV shows where the centrality of the ecosystem was the office in terms of the power dynamics. It’s not surprising to me that the people who’ve been in charge are still anchored on that construct, because it’s what they’ve known and how they’ve been trained. I think when you saw libraries become less central because everything is accessible digitally, you saw a massive movement out of the physical space of libraries.
We’ve had a generation now entering the workforce who is used to accessing everything, all the time, anywhere, except for project work, as a solo endeavor. A huge portion of what we’re doing at work is not a solo endeavor. It requires working with others.
There is a pretty significant collide here in terms of the nature of the work changing and their experience on both ends: the folks who are in charge and the folks coming into the workforce. They’re not experienced with the sort of fluidity that Phil’s describing. It’s a massive mismatch.
Bryan Hancock: An interesting thing that I’ve seen about people entering the workforce was a survey done of college graduates and very, very few wanted to work remotely five days a week. There was an interest in having flexibility of when and where they work, but they wanted to come in sometimes because they wanted the connectivity to where they’re working, and they specifically wanted connectivity and mentorship with the generations above them.
In some cases, the need is not to get the young kids in; it’s making sure the people who can mentor, who are just happy to be remote in their vacation house in Aspen or in the Hamptons, to come in. Because that mentorship is something that is important to the new joiners and also important for the overall development and health of the organization.
Phil Kirschner: I find myself telling executives a lot these days, “Congratulations. You are the new amenity.” It used to be the gym, the cafeteria, being able to bring puppies to work, whatever it is, but the executives are the new amenity.
I spoke to the head of real estate for a large bank that’s just done a major headquarters relocation during COVID—beautiful building. She said, “Yeah, people have been really excited to come in.” And I said, “What is it that is bringing people in?” And knowing this is a European bank, they’ve got a beer garden in the building, like, everything you could ever conceive of is an amenity. She said, “The other people,” which is a really hard thing to admit for the head of facilities. But it’s true.
The perks (and perils!) of proximity
Lucia Rahilly: How do you make the transition from colocation to collaboration? A lot of young people might say, “Well, I can collaborate virtually just as well as I can sitting in a silent, open-plan office.”
Phil Kirschner: I used to work at WeWork. I got a common question from executives who visited our headquarters building, not a traditional member building but a building full of WeWork employees and leadership. They’d step off the elevator, be within eyeshot of the elevator, coats still in hand,
and ask, “Why does it feel this way? What energy am I feeling?”
I would say this is a carefully curated combination of design, technology, people, community managers, baristas, whomever it is. This is a hospitality context brought to an office. And you’re feeling something wherein it is incredibly open, and it’s very dense from the perspective of how it’s built.
But the people that you see all around are quite comfortable being quite close to each other as
all of us are in the hot, new restaurant, sitting shoulder to shoulder with other people who are not related to us at all, but it’s OK because it’s a vibe. It’s an experience.
And in most offices where they may be beautifully designed but are not activated for that kind of connection and ongoing experience, it’s scary. We feel exposed. Somebody sneezes, and everybody pops their head up, and goes, “What was that?” And that was before COVID-19, so now it’s even worse.
Lucia Rahilly: I think it’s interesting that you raise the point of sitting so close together.
Phil Kirschner: Proximity is a difficult word these days, but it’s very important for deliberate experience.
Lucia Rahilly: Given how closely configured people have been in open-office plans recently, is it really such a negative if fewer folks are in the office on any given day?
Phil Kirschner: At most, in financial services, trading environments, the highest numbers you would ever see would be maybe 85 percent of an expected population. The explosion of transactional, flexible service spaces all around us—both in coworking facilities that were designed to be workplaces but also at every coffee shop, hotel lobby, gym, bar, bank branch, you name it—is where work can and will be done by someone who’s carrying a laptop and likes a latte and is willing to get their head down in the crowd.
Bryan Hancock: What struck me, Phil, about what you said earlier was the hospitality context, the software on top of the hardware. I think that is a powerful concept. I was wondering if you could expand on that a little bit for people who are listening or, like, “Oh, that’s interesting. I want to have more of a hospitality vibe to my office. I want to improve the software.” Where would you recommend they start?
Phil Kirschner: The short version is experiences of labor of opex, operational expense, not capex, which is, like, building the thing. That’s a very simple example in shifting from a “We own this” mentality to “We all share this environment.” A very simple example is office supplies. Who buys the markers for that whiteboard over there that used to be my whiteboard but is now our whiteboard?
And you just layer on from there to, ultimately, the thing that workers most appreciate about coworking environments is the presence of a community manager, who is there not only to connect people—find employees of same or different companies with like interests or needs—but to resolve issues of the environment. To try an event, you do Taco Tuesday, nobody shows up for that, so next week it’s Cupcake Tuesday, or it’s cold out and we can bring a sense of surprise and delight, and just say, “We, the community team, have gone and bought hot chocolate for everybody because it’s freezing today.”
When that’s happening on a regular basis, both physically and then spilling into the virtual environment for inclusion of remote colleagues, it’s really magnetic. We love being in places like that. And that I think is going to lead to an explosion of this sort of activation-related staff. And technology helps, certainly, like having booking systems and employee-experience applications. But we like to feel taken care of.
Bryan Hancock: It feels a lot different when at 4:30 p.m., you’re walking into the kitchen and there’s a fresh, hot pizza there for people who have been working all day, versus the leftovers from the noon lunch that have been sitting out and you’re, like, “Hmm, do I risk it or not? What is it?”
Purpose versus buzz
Bill Schaninger: I think we’re out of the habit of the workplace being central. And we’ve had two recruiting seasons of the place not being central. So it’s, like, what’s the reboot? Is it bringing those two classes back? Is it re-onboarding them? Is it to onboard them with the classes you’re hiring right now? Is it to demand that the midlevel execs actually show the hell up, to provide some mentorship and some coaching?
We’re out of the habit of the workplace being central. And we’ve had two recruiting seasons of the place not being central. So what’s the reboot?
It feels to me, and I’m curious, Bryan, to your thoughts, and yours, Phil, that we need an intervention in a way of, if you want to have any chance at all of rebooting the culture, where the community means something, you actually need to act like the community means something.
Phil Kirschner: And that intervention is purpose. When asked, “Why aren’t my people coming back? Why are we struggling to do this hot-desking program? How do we design the office for the future?;” my most common question to clients now is, “For what purpose?” We have to go back to basic principles. It’s something your employees will not sniff out as just jargon or that you’re placating them.
If you ask any company, “If all of your offices were all to evaporate, which ones would you build back and why?,” retailers or even bank branches know exactly why a location is where it is. And they scrutinize, with incredible intensity and frequency, how well that decision is going; foot traffic sales, customer engagement.
But we’ve never applied that to the places we ask our workers to go to, which, again, does not have to be our office, so to speak. I don’t think necessarily that innovation is a default reason for saying, “Oh, we have to come in.” Even just saying, “We think the role of this office is for accelerating sales,” or for someone who might have gone to work for a life sciences firm because they have a medical background or feel passionate about care, to tell them, “This place exists because we are accelerating clinical speed,” that speaks to them.
Some other company might just say, “We’re doing it to increase productivity, collaborate more, help our clients.” That’s not specific enough. If you have an organizational purpose that aligns around being good to the planet, being good to the community, increasing diversity efforts, that’s OK. How does your office or the places where your employees go speak to that mission?
Bryan Hancock: So, Phil, I have a question for you on how important it is to have a buzzworthy office. Or is it what’s happening there that is more important than the buzzworthy environment itself?
Phil Kirschner: It’s the latter, and does it align to what I want to be doing or contributing to? And that, in and of itself, can be a huge magnet without being Instagram worthy per se.
How to reconfigure your office space
Lucia Rahilly: Phil, I want to talk a little bit about some concrete examples of what the office of the future might look like. What is an example of the way that the physical workspace can have a role in accelerating learning that’s different from virtual learning that you might engage in?
Phil Kirschner: One is shifting training rooms from the windowless basement, awful experience that they had in the past, and to really inspiring and pervasive nooks and alcoves in the environment that almost are magnetic.
Two is moving from thinking of your building as a vertical silo for just us into asking, “What is the role of the campus and the community around us in bringing new ideas and new people into our building or encouraging our people to meet and interact with new ideas?” So opening the door a little bit.
Third, shifting from reservation-only spaces to real, open, activated, so-called centers of gravity, natural places where the energy in the building will pool, and accelerates the likelihood that you’re going to meet or interact with other people.
And finally, making it feel a little bit more like home so it’s not just like every day is the same, but that no two days in that place are the same and everything that’s happening over and above the built design is kind of forcing you to meet new people, see new things with a level of autonomy that you’d expect at home and not traditionally from the office.
Lucia Rahilly: Office experiences can lead to that social and emotional connection you mentioned, but they can also be expensive. Realistically, how can you sell this idea—economically?
Phil Kirschner: The usual average is something like $10,000 to $15,000 per seat per year, the average carrying cost of having an office. And while you’ve still got that office now, the idea of spending more on experience, like, “We’re going to engage with such-and-such a business school, or we’re going to take everybody away and do this big event,” is terrifying because you’ve still got this other expense. And if the real-estate portfolio load gets reduced, I think executives will very quickly fill the gap, using some of those savings to deliver a better experience overall.
There has to be an executive level head of what it feels like to work here, where they may not have direct accountability over training and real-estate budget, but they can break the tie and say, “We should actually get rid of that office that nobody really likes, take all of that money we’ve saved, and solve the learning issue we know we’ve struggled with for years, or retention, or anything else, and connect across the lines.”
Bill Schaninger: I am wondering if we have lost the era of the prestige address because the youngsters don’t care. What do you think?
Bryan Hancock: I think it’s the new prestige address. So if I think about our Atlanta office, it was at 133 Peachtree Street, right in downtown, an iconic office building, beautiful view of the surrounding area. That was the old iconic. We’ve moved to 725 Ponce, right on the Beltline, right next to Ponce City Market, which, 20 years ago, no one would have envisioned this neighborhood being anything like what it is today.
But it is the most convenient to walk to, to bike to, to have an apartment near. So it may be trading the traditional to the environment where people want to live. In New York, it might be instead of living in Midtown, are we opening something in Brooklyn?
Making the return matter
Bill Schaninger: The office or the idea of the office is back in the mix as part of the norm. I’m trying to get my head around how do we re-normalize, without a mandate, and just create some draw, because people go, “Oh, I get to see the boss there. Oh, I get a little face time. Oh, we’re going to go out after work for drinks.” The idea that we start building some momentum and it becomes re-habitualized.
Phil Kirschner: That’s absolutely right. For me, the key is choice. There are thousands of permutations of reasons why we might or might not go in, from the weather and transit to “Who do I think is going to be there?” It’s hard, and it’s easier for us to just stay put.
In order to implement the choice architecture that we need, you have to make it not hard for us to make the right decision. You first have to identify, as you said, those moments that matter, at the organizational level, the unit level, all the way down to someone who might need some coaching or a colleague because they’re having a rough week.
Once you can identify the moments that matter, ideally through measuring outcomes—like giving people, teams, and leaders together the data to decide, like, what was a good or bad outcome for sales, engagement, training, strategy meeting innovation—to then use the technology you have at your disposal to suggest the next best action, which could be to get rid of a meeting because it’s not so great.
And then, test and learn, because then you can condition everybody back to a state where we are seeking time together, whether or not it’s in the office traditionally. But it will re-normalize our use of space to do something that is objectively good, both for the company and for our own personal success and well-being. I agree with you that the choice will gravitate toward one to three days in the office.
Lucia Rahilly: Phil, you mentioned test and learn. Is there a test-and-learn equivalent to experimenting with workplace design for leaders who want to get started but maybe can’t invest massively in a major transformation?
Phil Kirschner: The two simplest tools that are out there that most people and companies simply don’t think of as transactional—serviced, flexible, coworking, whatever you want to call it, workspace on demand—are in any larger metropolitan area now in pretty significant and growing supply.
It’s a really easy way to not spend very much money and to try something. If you’re willing to communicate to your employees, “This is a test. It’s not going to look the way we want to make it. It’s not going to necessarily be in the place we want to put it. But we have a chance to try putting two groups together or a different configuration of furniture. We can try it in a way that’s not as scary as taking the lease that might go bad for ten years.”
And on the furniture point, furniture can be rented. That was not a common practice before. But furniture as a service is also becoming more common. So if you’re willing to message that we’re going to try something out, which is a phrase—again—that would give almost any traditional facility manager a heart attack. If leaders can support them and say, “We’re willing to try, and make mistakes, and own the mistakes. We built a room like this. Nobody liked it. We’re not going to do that again.” Just that level of authenticity I think is incredibly engaging.
Lucia Rahilly: Thanks, all. Great discussion.
Phil Kirschner: Thank you, guys.