The ROI of Renovation: A CFO’s Perspective
It wasn’t long ago that we renovated our Somerville, New Jersey, experience center. While we have reaped many benefits of a more effective and efficient workplace, it’s a fair question to ask if the costs of renovation were worth it. In the latest installment of our leadership blog series, we asked our chief financial officer, William Hendry, to share his unique perspective on the ROI of renovation. Does a new-and-improved workplace show up as anything other than a big expense on our balance sheet? Here’s Bill in his own words.
AN INFORMED PERSPECTIVE
As dancker’s CFO, I’m focused on the company’s financial function – forecasting, planning, banking, accounts receivable and payable, payroll, taxes – and on the team that carries out those duties. But as part of dancker’s leadership group, I want to understand how all departments work, not just my own. I maintain an operational focus so I can be sure that the budget allocated to each department, for example, truly supports their goals and strategies.
When we planned our Somerville renovation, we were motivated to maximize our current space rather than take on the cost of moving to new space, so it was important that we take a similarly holistic approach from the start. dancker had grown, so we knew we’d have to fit more people into the same amount of space. Our ways of working had also evolved, so we knew we’d have to build in more places for meeting and collaborating. We spent a year in the planning phase, first considering how departments relate to each other and work together most efficiently, and then looking at different designs and analyzing whether they’d be effective for each department.
It’s always worthwhile to understand the way people work, as individuals and as teams, since that understanding can lead to greater productivity and employee happiness. But it’s especially important in these early planning phases, before you’ve wasted hard costs on construction elements, furnishings or technology that don’t truly support your team. This kind of early research can be one of the most important predicters of ROI. Fortunately for us, our strategic planning helped us reduce costs per square foot right away, and free up space for new uses, like open workstations for mobile workers or colleagues visiting from other offices, in addition to more collaboration space.
EVERY WORKPLACE HAS ITS CHALLENGES
Mobility is a hot topic, and I know we’re not alone in this. Though the word implies something a little looser, mobility must have structure around it to work. In our own workplace redesign, we found that hot-desking, or removing desk assignments and letting anyone work anywhere, was a little too extreme – we just love having our own personal workstations. But our team members are increasingly mobile, so offering a variety of spaces for individual tasks, group collaboration, quiet focus work, or team meetings – and even allowing occasional work-from-home time – helps our employees feel supported in choosing where they work best. The benefits of a workplace culture that empowers employees through flexibility and trust will far outweigh the costs. In fact, just by cultivating a workplace that offers a diverse mix of spaces and the choice of when and how to use them, we’re seeing the pendulum swing back toward team members wanting to be in the office more, rather than working elsewhere – another boost for our productivity and ROI.
Of course technology is a big part of this, and it plays an even bigger, more important role as dancker grows and expands to new locations like Capitol Heights and Baltimore, MD. Technology has to be consistent across all locations to improve connectivity with team members. Even within each individual dancker office, each space must also include seamlessly integrated AV and IT resources, so our team members can stay connected whether they’re sitting at their desk, collaborating in a conference room, or connecting virtually with off-site colleagues. From an ROI perspective, our technology upgrades immediately supported dancker’s new ways of working and facilitated us going paperless – which also means we can work within smaller dedicated workstations, saving space as well as money.
The ongoing need to keep our technology current (and to train our team members to use new tools) comes with a hefty price tag, but again it’s a worthwhile investment. In our business as an integrated solutions provider, we not only need an effective workplace for ourselves, but we also want to put our best foot forward for our clients in the form of a cutting-edge showroom. We use our own offices as labs to test the products and services that we’ll ultimately recommend to our customers. This means we’re most likely pursuing a major office upgrade every 5-6 years and implementing much more frequent, incremental adjustments in between.
Fortunately, most furniture has a longer life than technology. This points to another opportunity for cost-savings: modular construction. Renovations no longer have to include knocking down and rebuilding walls using traditional construction methods that can be costly and disruptive. By using walls and furnishings that are mobile, we’re further supporting our culture of flexibility and choice, all while cutting costs and reducing down-time. When a space needs to be rebooted in order to be more productive for the people who use it, we can make that happen quickly – and once again optimize our current space rather than force a costly relocation.
THE PAY-OFF IS IN THE PEOPLE
New in 2019, companies are required to include the cost of their leases (and therefore the full extent of their real estate debt) on balance sheets rather than in fine-print footnotes. Real estate has always been one of any organization’s most expensive assets, but this new rule makes it an even bigger deal. Within dancker, our finance team will be looking more closely at the productivity of our workplaces to make sure they’re truly contributing to our bottom line as we think they are. We’ve recently installed Workplace Advisor technology that will help us understand how specific spaces in our Somerville office are being used, especially conference rooms. Are they being used the way they were designed, or are people just slipping into conference rooms to make private phone calls, or to complete quiet focus work behind closed doors? The data we’re now able to collect will help us make adjustments as necessary and deliver the kind of spaces that team members really need to be comfortable and effective.
There are real cost savings associated with a thoughtfully designed, more efficient workplace. For dancker, the integration of virtual collaboration technology not only means we can go paperless but also means we can maintain frequent face-to-face meetings with off-site colleagues and clients without the high cost of travel. The value of modular construction is another plus, as is fitting more people into the same amount of space. Not everything can be measured in dollars directly, but there have been other obvious positive impacts to our bottom line, too. We’ve seen first-hand the advances in employee engagement and productivity, and the business gains of getting people together to generate ideas and solutions for our clients, and for dancker. A brighter, better space allows people to flourish, which leads to happier employees, which leads to lower turnover. All of these offer greater long-term benefits than short-term balance sheet calculations might illustrate, and to me that’s the real definition of ROI.
Learn more about and connect with William Hendry, CFO of dancker here