How changing business processes and technology have impacted the location decision

by FM Media
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RODNEY TIMM of Property Beyond discusses how changing business processes and technology have impacted the location decision.

Business processes have changed. Today, business is conducted differently from the way it was conducted five years ago and the way business is conducted today is unrecognisable compared to business models from the last decade.
But, some aspects of the decision-making processes, including corporate accommodation decisions, appear to have changed little. As always, location forms a key part of the accommodation decision.
Workplace technologies supporting new business processes and the financial implications now have a significant impact on the location decision and influence the key questions. What are the advantages of staying or relocating? Where to next – a consolidated or distributed workplace model? What will the future of accommodation look like?

Without financial constraints, the location and accommodation decision would be simple, but few companies live with the luxury of no financial constraints. Most businesses know that the rent-bid curve indicates the closer the location is to the centre of the city business district, the higher the rent payable.
With limited financial resources, location decisions usually become a compromise between maintaining essential client and customer face to face interactions, sourcing appropriately skilled and experienced workers, and driving value-for-money rent outcomes. The challenge is to work through each consideration to achieve the optimal location model.
In the last decade, the primary impost that changed office location models was technology. Evolving communication technology has enabled businesses to operate efficiently using distributed workplace models – anywhere, anytime, anyplace. The internet, cloud computing, social networks and alternative media are providing different, more efficient and more cost-effective ways of dealing with clients. Fewer and fewer team members now need to be located in the centre of business.
Determining the optimal location model now requires a detailed understanding of the business. This covers the functions and services, the extent of face to face interactions with clients, the ability to attract and retain talent, and linkages to special facilities or amenities. The impact of all business components and processes needs to be assessed against rent payable in terms of the rent-bid curve.

The starting point of the analysis is reviewing the key business functions and activities and linking these to the staff undertaking these tasks. Simplistically, business functions may be categorised to include management and leadership; administrative support activities, including finance, receptionists, human resources, and information and communications technology; and technical specialists with specific knowledge, qualifications or accreditations, such as engineers, lawyers, accountants and architects.
Within these categories, the analysis should determine the time spent interacting directly with customers and clients in delivering the business’ functions and services. Even in this day and age of modern technology there is still a need for face to face interactions. This is usually a key location determinant.
In many business dealings, the complexity of the issues, the cut and thrust of negotiations and the need to understand the other parties’ priorities require these face to face interactions. Even though much can be achieved via technology, personal contact can create instant rapport and, ultimately, trust. Eyeballing is essential to understand the nuances of another party’s requirements and can be crucial when trying to close a deal.
From a location perspective, the importance and need for face to face interactions with external stakeholders and clients require detailed assessment from a number of perspectives:

  • what is the significance and nature of the external stakeholder in the interactions and what are the reasons for the interactions
  • based on the status and nature of the external stakeholder, on whose premises are the interactions usually held
  • what is the frequency of these interactions – daily, weekly or monthly
  • what is the urgency of these interactions and are these generally scheduled or unscheduled
  • who and how many of the team usually attend these interactions, and
  • what are the implications if these face to face interactions are done differently; for example, via telephone or teleconference?

In certain businesses, the spontaneity in responding to prospective client demands for a meeting may be vital to secure more business and survive.

For businesses – particularly for those in the knowledge industry – success is all about being able to tap into the emerging talent pools of the brightest stars, the innovators and the future leaders. The commercial centre of the city is traditionally where the top talent is located, close to the wine bars, cafés and restaurants.
Staff requirements based on specialist skills may also dictate a location close to the city centre – if that is where that particular group of specialists has gravitated towards. If these skills are only likely to be available within the proximity of a CBD location, it is futile to locate elsewhere and attempt to attract these skills in competition to rival businesses. Being located in the city in high rent premises may be a specific advantage to entrench competitive advantage. But, the analysis should be able to indicate that significant portions of the employees in the business can function and provide support via technology from decentralised cost-effective accommodation.
Part of weighing up the advantages and disadvantages of locations is the key decision whether to have one or multiple business workplaces. Despite the financial advantage of having a balance of expensive and more cost-effective locations appropriate for the functions being delivered, the management of a split workplace can be a challenge for some. Many managers still believe they need to see people to manage people.
Analysis is required to determine whether the cost advantage offsets the disadvantage of having a split workforce with a duplication of key business support functions and amenities, such as receptions, meeting rooms and informal breakout areas. Consideration should also include the impact on the business from the loss of informal and direct contact ad hoc communications between team members. There may, for example, be a location model that provides an optimal balance between client-facing team members interacting with customers, and the synergies achieved when managers reside with their direct reports and all members of the team are co-located. As with many business decisions, the location decision is likely to end up with some compromises.

The location decision may also be affected by the requirement to be close to specialist facilities, such as law courts, the stock market or auditoriums. Lawyers, for instance, have to be near the courts as no one wants to employ lawyers at their hourly rates for travel time from a location away from the city centre to attend last minute court proceedings. In some cases, the nature of these specialised facilities may be that they are only available in the city centre. In other cases, there may be an opportunity to construct these specialised facilities in a decentralised location in lower rental location.

When it comes to location decisions, there is no right answer that works for all businesses. As with many business decisions the answer is: it all depends. The nature of the business must be assessed and the key components of the business’ operations need to be considered. The cost of accommodation and business efficiency processes, balanced with the nature of client face to face interactions, may provide the answer. For other businesses, sourcing of talent may be a key location anchor point.
The implementation of business changes, including service consolidations, co-location decisions and technology solutions, all need to be assessed based on the likely impact on service delivery – both positive and negative – and balanced against possible rental savings.

Rodney Timm is the director of Property Beyond.

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