Episode 32: The Six C's of Why Office Exists
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Ryan Swehla:
The group that most wanted to be back in the office, the group that pulls highest for return to office is the entry level and call it the first five years of your career.
Well, hold on, these are the millennials, or I'm sorry, the Gen Zs. These are the Gen Zs. Gen Zs should want all the freedom and they're the most technologically advanced. There's no reason that they need to go in this old traditional office environment. Why is that? It's the coaching.
Modrator:
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Joe Muratore:
Let's talk today about why office exists. It seems like an interesting topic these days. People are sort of have forgotten why...
Ryan Swehla:
Isn't office like a four letter word?
Joe Muratore:
I guess it is, I guess it is. Well, today we are going to make it really easy. We have the six Cs of why office exists. And the first one is... the first two, rather are collaboration and creativity. And I want to start with the idea that an office...
What does an office do? It houses a workforce or a group on a shared mission. And what's interesting is in a functional office environment, people come from a lot of backgrounds.
You might have a CEO that lives in a very fancy neighborhood. You might have other people that live in less fancy neighborhoods. You might have people commuting from different cities and different towns. They come with their individual story. They come with their history, they come with their work experience.
And what an office does, and what an office can do is provide a sheltered, curated culture, cultured. Essentially, an environment where those things can come together and the distractions can be removed and the greatest effectiveness can be created.
So I think that's one thing an office does really well. It provides a spot for collaboration across all sorts of parties, with all sorts of different backgrounds, and helps them focus into one individual spot and one individual mission. And that leads to creativity.
Ryan Swehla:
Yeah. And interestingly, along the lines of creativity, I was listening to someone who was a part of the original Pixar when it started out this small group collaborating and creating some of the greatest animated films of all time.
And he was talking about that creative environment and how you create that creative environment, and it is always a physical space because you have to physically be there.
And we're in the investment business. So we could say, "Ah, creativity, who needs it? Not really important."
Quite the contrary. Investing is as much an art as it is a science, and our ability to solve problems, to think creatively about how we're addressing issues, how we're attacking a strategy. You just can't do it sitting in your room, in your cramp department or the closet that you've taken over as an office in your home.
Joe Muratore:
I think we sort of live in a commoditized world where our time is commoditized. My phone, even as I'm sitting in this interview has dinged and buzzed, and it's trying to tell me things. Some of them important, some of them not as important. Some of them are reminders that were just set a long time ago.
But our mission requires original thinking, original thought. It requires white space where we can develop and execute plans, hold each other accountable, build friendship and bonds. And it's almost a luxury to get to work in an office with coworkers on a regular basis.
We all have chosen to leave our other worlds behind for a bit and to come here and to do our specific mission together. And that is sort of an ancient luxury. It's something you don't see as much anymore.
Ryan Swehla:
Yeah. There was a study that I was reading that essentially said that in high-performing office environments, employees prefer to be in the office. But the flip side was, it showed that, quantitatively through surveys, in low-performing office environments, less productive office environments, people prefer to work from home.
And so, that really touches on when people come to the office, they're making a choice. They're saying, "This is where I want to be." It used to be, "Which office environment do I want to be in?" Now it's, "Do I want to be in the office at all?"
Joe Muratore:
Yeah.
Ryan Swehla:
And so as employers, it becomes even more important that when employee walks into the door, this is a place that they want to be, this is a place where they thrive, and they grow. And a big part of that, one of the other seas is culture.
"Culture eats strategy for lunch." I think that was a famous Peter Drucker quote. Culture, it is the currency really under which we trade. Compensation, they show time and time again, that compensation is one of the things that people look at when they're deciding to stay with a company or move, but it's never the number one. It's always down the list, four, five, six.
Culture is something that makes people. I mean, there's two sides of that. The bad culture makes people not want to be there, not want to show up, dreading going to work. But what we find in our company is culture is a dynamic, exciting, invigorating, energizing force.
When we walk in the office, it is a fun place to be. People have mutual respect for each other. They enjoy the work they do. We operate at a world class and the culture that goes through that office, you absolutely cannot replace that.
So companies that have a poor culture, yes, outsource. Get out of the office. In fact, your company might do better being out of the office than in the office. But companies that have a dynamic and energizing culture, you absolutely can't replace that with a virtual environment.
Joe Muratore:
Think about what people want. They want more good stuff, unless bad stuff. If your company has a lot of bad stuff in its culture, if you walk in and feel poorly about yourself, if you walk in and think about the politics you need to navigate that day to stay afloat, it's a drag to come in the office.
You're better off at home, where you're buffered from the daily politics. Maybe the antagonist won't call you that day. Maybe you can play defense better, but if you work in an office that has tremendously positive culture, that's empowering, that helps you be a better person, and better worker, better employee, better manager, then you would be on your own.
If you're collectively better as a group than you are as an individual, then you want to be at the office because that's where collectively things get better. And it's important to know with culture that gets deeper than just good and bad. This gets to the psychology of communities. This gets to our inner workings of wanting to build our self esteem and be effective.
Culture is the water we swim in. Culture is the air that we breathe, and having a positive culture leads to tremendous outcomes. And I think that an office building good, bad, or otherwise, is a great place for a company to hold and contain its culture so that when those people walk in the door, they are lifted when they walk in. And it's a positive thing.
Ryan Swehla:
You can almost-
Joe Muratore:
I'd add real fast, Ryan.
Ryan Swehla:
Yeah. No.
Joe Muratore:
We are really careful about our culture here. Our admin staff that's at the front of the office, when you walk in, they see themselves. And we train around this, that they're customer service people.
Our highest cost is our team. And we make sure that the coffee pot is full, that the kitchen is stocked, that there is food regularly, that when they come in, they are greeted and appreciated because we appreciate them and we rely on them.
Ryan Swehla:
You can almost call an office, building a culture keeper.
Joe Muratore:
Yeah.
Ryan Swehla:
And that can, again, be good or bad, but it embodies the culture of a company as contained within the walls of that place.
Another one of the Cs that we talk about is coaching. What's interesting, again, another survey that showed recently was senior level people, they liked being in the office. And if I remember correctly, the conclusion was more around their traditional nature of being in the office and being in the office felt like work.
The mid-level, those who are mid-career, they were the ones least wanting to be in the office because they had already started their career. They knew where they were going. And they were also, by the way, in their personal life at a stage in their life where they have a lot of other polls. And so, the appeal of being at home or not spending time in the commute was important.
The group that most wanted to be back in the office, the group that pulls highest for return to office is the entry level and call it the first five years of your career.
Well, hold on, these are the millennials, or I'm sorry, the Gen Zs. These are the Gen Zs. Gen Zs should want all the freedom. And they're the most technologically advanced. There's no reason that they need to go in this old traditional office environment.
Why is that? It's the coaching. It is the mentoring, it's the mentoring aspect. They intuitively have this desire to learn, to be inculcated with the wisdom, the collective wisdom of those who have been in the business longer.
And so they know how important that culture or that... I'm sorry, the coaching aspect is. You can't coach through a Zoom meeting. You just can't.
Joe Muratore:
Not very well. You can supplement.
Ryan Swehla:
Yeah. Yeah, exactly
Joe Muratore:
The last part to this would be convenience and concentration. And certainly an office can create that. When you're working from home or an apartment...
I've got kids and a wife and a puppy and a house that requires effort to maintain. When I'm culture of my house, for me personally, it's pretty hard to separate. There are other demands that I care about.
My daughter walks in the door and wants to talk, and I want to talk to her, but it's helpful for me to be able to compartmentalize my life a little bit and to come to work and do epic work in an epic location and then go home and try to be an epic father and husband and home person. But both of those...
It's funny how place makes a thing. I mean, the same way when you dress up, if you wear a suit and tie, you tend to feel like a suit and tie kind of person. And if you're wearing shorts and flip flops, you feel like a shorts and flip flops kind of person.
Well, when you're in a house, you feel... For me, I feel like a home person. And when I come to work, I've got my game face on and I'm here to move the mission of the company forward.
An office building is designed to remove distractions. So you come to an office building, hopefully it's quiet. Hopefully, you have a place where you can concentrate. Hopefully, your computer is set up in a perfect way so you can see the things you need to see, the inputs and make the decisions you need to make.
Ryan Swehla:
Yeah.
Joe Muratore:
Hopefully, it's obviously air conditioned and there's snacks or there's a refrigerator, but I mean, all the things that you could need to accomplish a work mission should be in an office building. And those aren't laid out quite that way in a home.
Ryan Swehla:
Well, and when you talk about convenience, on the one hand, we think of, "Okay, there's a coffee machine, there's a stock supply room," whatever, but convenience also is it relates to the efficiency of getting work done.
The convenience of, "I've got a problem. I know that Sarah is right down the hallway and I can go talk to Sarah and she's going to give me the answer that I need. She's going to help me solve that problem." So part of that convenience is the convenience of the shared mind that is available.
I was talking to a friend who their company, it's a large winery actually. And they were all working from home and he was talking about how he went in the office and there was a particular issue that arose. And it just so happened that the two other people that would be able to solve that issue were in the office also.
And he was talking to me about how the efficiency with which they got that issue solved was unparalleled. When they were working remotely it was, you on a Zoom meeting. Okay, you're not. I got to schedule a Zoom. Then I got to get this other person on the Zoom. Then we're all going to talk together. And after that, we're going to have follow-up Zoom meetings. And yet when you're in the office, that convenience of being able to get together and huddle and solve the problem efficiently.
Joe Muratore:
Yeah.
Ryan Swehla:
Yeah.
Joe Muratore:
So I think in today's world, the big question is the both end, how do you channel a great culture, highly convenient, coachable office and make use of technology, make use of talent that is remote?
And I think that we're not talking today about how there should only be an office. We're talking about how an incredible office can be accentuated by a technological platform and by talent in other areas. And I...
Ryan Swehla:
Yeah, even today in our company, we have somebody who works remotely in another state who works for us or does work for us. We have a few people who drive into the office one or two days a week, and they work because of the distance of where they drive and the type of work they do. We have other people who have flexible work environments.
So I think the broader theme is that the centrality or the necessity of that place of work is really critical. And yet what we've learned through this environment is that there are a lot of nuances to that. It's not... And larger companies by their very nature, they have to take a structured, "We're doing this, we're doing that."
As a small company, we have the ability to understand people's situation, to understand the dynamic of the type of work that they do, and fit the most effective work environment for that person.
So rounding out, one of the things that we recognized through COVID and this mass work from home environment is that we all recognized that permanent work from home only works for some people. It only works for certain roles for certain aspects.
And coming back to the office, what we've recognized is that the office is important. The six Cs that we talked about are an important reason why the office exists. And yet today we are in a flexible environment that allows a lot more variations of how that work is done.
Modrator:
Thank you for listening to Durable Value, an investor's podcast, where we demystify commercial real estate with safe, sound investment strategies to help you balance your portfolio.
If you enjoyed this podcast, be sure to rate it on iTunes or wherever you get your podcasts. To learn more, visit graceadapartners.com, where you'll find more information, investors' tools, case studies, and more.
This podcast is hosted by Joe Muratore and Ryan Swehla. It's produced, edited, and mixed by Melodic, with intro music by Ian Post. Thanks again for listening, and we'll see you next time.
Summary
To some, the office asset class is a "four letter word". In this episode we share why we still view office positively and how we're pivoting to make sure our office properties are meeting the needs of tenants post-covid.
Runtime
17:16
In this episode:
The pre-requisites for Collaboration
Creativity is just as important to investing as knowledge
“Culture eats strategy for breakfast”
The role of Coaching
For some, Concentration can only happen in the office
Convenience, a necessity to efficient work