By Meghan Hall
The San Francisco Bay Area and Puget Sound regions are incubators for start-up businesses and hotbeds of innovation for Fortune 500 companies alike. Both regions have experienced economic booms in recent years, and employment is one of the major drivers behind not just the overall economy, but the health and dynamism of the commercial real estate industry. However, major companies are burning out faster than ever before; the average lifespan of an S&P 500 company has decreased from 67 years in 1920 to just 15 years at present day, according to a study released by Dr. Linda Wagener and Dr. Rich Beaton entitled “A New World of Work,” released in in the fall of 2018.
The report examines the rapid pace at which the economy — and modern businesses — change and how to prepare for a future in which a company is projected to last just barely over a decade compared to generations prior to that. According to research by Wagener and Beaton, just 11 percent of Fortune 500 companies from 1955 are still on the same list today, and the world of work will continue to change at an accelerated rate.
The report states that there are numerous trends that are contributing to the way in which the world of work is changing, but they are primarily all tied together by a single factor: technology. The rapid development of technology has altered how people communicate and where people work, and industries’ increasing reliance on high-skilled jobs have created an “era of ideas” in which workers are required to have more technical expertise. The rise of technology has altered the ways in which business strategize and plan for the future, and according to the research, that means that companies must change their organizational structure in order to survive.
Typically, there are two functions that dictate how organizations work and make decisions. The first is differentiation, in which each individual has a different set of skills such as finance, project management or technical expertise. The second function, integration, is how different individuals with varying responsibilities coordinate and work together. How these two factors work with one another have changed as organizations have restructured to keep up with the pace of change in a new era.
“Without fully functioning integration, the organization may have superstar individual performers but will not be able to execute a winning [business] strategy,” stated the report. “In the eras of industry and information, most organizations were hierarchies.”
Divisions within companies were created based on the type of work employees performed within the organization, with manager typically earning the distinction of having an advanced skill set in their area. Integration was accomplished by managers meeting to coordinate duties and goals. The fundamental problem with this structure of business, said Wagener and Beaton, was that its largely inefficient in a market where change is occurring rapidly every day.
“Hierarchies worked in a world where expertise and decision making were held by people at the top,” states the report. “But decision making and information sharing is a slow process in hierarchies.”
The ‘era of ideas,’ technology and the rapid pace of change now means that hierarchies are no longer the most efficient business model, and businesses are taking note. In response, businesses have created what Wagener and Beaton call “matrix teams,” teams that are cross-functional and come together for specific projects before moving on.
“Because of the pressure to be quick, nimble and responsive, organizations have pushed problem solving and decision making downward to the front lines,” Wagener and Beaton explain. “Cross function project-oriented teams have evolved in order to meet the high pace, complex customer service environment that dominates the world of work.”
Teams — instead of composed of a group of employees with similar job responsibilities — now include workers with backgrounds in a wide variety of business from sales to design to finance to technical specialties. This structure lends itself to a diversity of opinions and often innovative solutions and fluid, ever-changing group dynamics. Now, a team leader oversees the workflow of its individual teams while workers from different fields coordinate their work directly with one another. How successful these teams are is ultimately a function of company culture, state Wagener and Beaton.
Wagener and Beaton assembled eight metrics of high performing organizations as they pertain to company culture, including: clarity, relationships, autonomy, performance, alignment, equity, stress and space. A consistent company culture, where roles and responsibilities are clearly defined, supported by a well-designed space, has become integral to the modern business strategy and is a trend that has quickly become apparent in many of the top offices in both the San Francisco Bay Area and Puget Sound regions.
“Culture can be impacted by an infinite number of factors; everything from whether or not people smile and make eye contact, free food, the level of noise, the presence of a nap room or the number of hours you are expected to work.”
From a spatial and commercial real estate perspective, the efficiency of a company’s culture is enhanced by flexible work spaces that support differences in personality, work style and task. Exposure to practices in light, air and other types of stimulation are also key. The evolution of workplace culture has not been lost on major employers such as Indeed, whose new office at Skanska’s 2+U tower in Seattle will include an array of fitness and wellness facilities and CBRE, whose office in San Francisco’s iconic Salesforce Tower includes everything from a collaborative media wall and café to “plug and play” workstations. Such amenities are often pivotal to employee retention in two of the nation’s most competitive markets.
By measuring and managing these metrics, Wagener and Beaton see that company leaders can more aptly shape their company culture and achieve desired productivity and business outcomes — something that is becoming increasingly important in an era where the lifespan of a business has shortened significantly.