Cubicle Hell: The Importance of Sound HR Policies
I read an interesting analysis recently about how folks who work in cubicles are less productive than people who work in private offices. That is because there is a basic human characteristic that, when we can see other people in our peripheral vision, we tend to keep track of what they are doing and, hence, pay less attention to what we are supposed to be doing.
Now there are very strong evolutionary biology reasons for doing that-for example, we don't like being out in the woods near rushing water where the noise is so great that we can not hear approaching animals or people. Don't believe me? Then try camping out at night by yourself in Algonquin Park and have a bear run through your campsite when you are near a waterfall. You can't hear him until he is right on top of you and that is darn scary. I know because it happened to me and I will never camp near a loud source of noise again.
We don't like people sneaking up on us either-they might want to run a spear through your heart or make you a slave or do other nasty things to you and your tribe.
So modern folks too keep an eye on their neighbours and they don't necessarily do that consciously.
Wait until you have kids-you'll never get a good night's sleep again and your peripheral vision will be enhanced, trust me, when junior decides to drink Drano just for the taste of it.
No one is really sure just how much productivity drops when you put people in cubicles but I wouldn't be surprised if it was 20 to 25%. And that is a lot.
The number one most important thing in your business after you get past the startup phase and bare survival stage is your HR; no matter how great your idea is, how great your assets are, how great your business model is, it isn't ideas or assets or business models that produce income and great results, it is your people.
So when you hire your first person, hire up! Surround yourself with great people and you are much more likely to be successful. I can't believe how many business owners try to hire 'cheap' or are afraid to hire people who are smarter than they are.
If I see someone doing something better than me, I stop what I am doing on a dime and adopt their best practice immediately. You should too.
I fooled around with a spreadsheet to see what kind of impact putting people in cubicles might have versus private offices.
I worked in a place where senior people were making $100,000 a year and were packed in like sardines. It was a tough place to work-when you were on the phone it was like being in a call centre: you couldn't hear the person on the other end of the line and they could hear back chatter. Not very professional in my view and probably penny-wise but pound-foolish.
Private offices that are 12' by 10' (not exactly the lap of luxury) cost in Canada around $7,440 per year to rent from, say, a mini office complex. Cubicles are probably around 1/3 to ½ of that or around $2,976 per annum. So the business can probably 'save' around $4,464 per employee per year by treating their staff like chaff (i.e., in cubicles that are 8 by 6 feet each).
But as you can see from my analysis (click here to download the spreadsheet in .xls format so you can fool around with the paramters yourself and also follow along) a margin for each employee of 45% means that, for an employee who makes, say, $75,000 per year as base pay, you expect he or she (in a private office environment) will produce value for the firm of $75,000/(1-45%) or $136,363.64 per year. If there is degradation in productivity of 22.5%, the margin on each employee drops to 35% and this reduces their value to the firm to $115,163.15 per year, a decrease of $21,200.49. So your firm saved some money on space costs but lost a ton more on productivity.
I worked out the IRR for this scenario, assuming the owners of the business had a cap rate (capitalization rate) or 7.5%. Their Internal Rate of Return if they put their people in private offices under all of these assumptions is 34% p.a. But I would bet you that it is actually higher than that. Their churn rate (i.e., the turnover in staff) would be much higher in the cubicle environment and their best people would leave too. And the costs of those two factors are huge in the industry I work in (real estate brokerage).
The place I currently work in has their staff in private offices and they tend to attract top performers in the industry and they tend to stay.
Dr. Bruce
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