Corporate Coworking: On Campus or 3rd Party?

Twenty five percent of WeWork’s members are ‘corporate coworkers,’ and the company now boasts that 22% of the Fortune 500 companies have employees who work in their spaces. At the current rate of growth, some 40-50% of coworking members will be corporate users within five to seven years. With firms such as GE, Samsung, Microsoft, Dell, HSBC, Accenture, Unilever, Amazon, Salesforce, Google, and IBM leading the coworking headlines, large firms are turning out to be enthusiastic adopters. It would seem that the corporate adoption of coworking is at least part of the story behind WeWork’s eye-popping $35B valuation.

The growth in the corporate coworking market provides exciting new opportunities for all operators, not just for WeWork, and is one of the driving forces behind the maturation of the industry. It is likely that many operators, or at least those whose infrastructure can support corporate usage, will benefit from the rising tide. From the operator side of the equation, it is difficult to find a down side.

The Why and the What

For tenant companies, though, these are still relatively early days of coworking adoption, and the process is perhaps not as straightforward as may appear at first glance. First is the question of why companies are buying employees memberships and allowing them work offsite at 3rd party coworking spaces (such as WeWork).

• Often, companies make the plunge into coworking when they are in transition between leases or purchased properties, using the spaces essentially as temporary office space (similar to the case with Regus over the years).
• In other cases companies are opting to shrink their fixed real estate footprints (and costs) by embracing a more modular and mobile approach to officing. Recognizing that utilization rates are consistently quite low (between 40-60%), coworking represents an approach to ‘right sizing’ a company’s officing usage.
• In yet other cases, there is some evidence that some companies are embracing coworking in order to attract and retain top talent. As Millennials and Gen Z become more prominent in organizations, demands for greater choice and autonomy in workplace practices are being baked into companies’ employment value propositions (EVP).

 

Then there is the question of what the other benefits are for those companies who have employees coworking in 3rd party spaces?

 

1. • First is the increase in interaction and collaboration with knowledge workers from other companies and industries. The thinking here is that these serendipitous encounters will lead to innovation (in the form of new products and services) for the companies whose employees are engaged in such interactions. Surely there have been tangible examples of this type of innovation over the past several years, but until sufficient academic research validates this, such claims remain anecdotal.

 

1. • Another benefit lies in the sheer freedom that a coworking membership provides a coworker (corporate or freelancer), where an individual can work more or less when and where she chooses. Building a culture of choice, empowered by coworking, seems to be a no-brainer in terms of nudging company culture in that direction.

 

 

Challenges & Requirements of 3rd Party Coworking

While these benefits may or may not be material for participating coworking companies, it is nonetheless the case that there are significant problems and challenges for companies that embrace 3rd party coworking. There are individual and team level practical/tactical issues, and there are much deeper cultural level challenges that present themselves as well.

Tactical/Practical Issues

1. Individual employees and teams must adapt to not having much (if any) ownership over their physical environments. Within cramped ‘private offices,’ individuals have less privacy and ownership than they probably did in their previous open-plan office. Pictures of your dogs and cats might need to go onto your phone from here on out.
2. Individuals need to amp up their powers of concentration, as the relative levels of chaos can be extremely high. With hundreds of workers from dozens of companies milling about and doing their own things, the skill of focusing on one’s own work comes at a premium.
3. Individuals need to develop skills of digital collaboration, as only a handful of company colleagues might be physically co-present in the space. From project management, to simple communication, to storage and document management, one’s “office” more or less shifts to the cloud.
4. For managers whose team coworks, they need to once and for all move past ‘line of sight management,’ and also embrace the full suite of digital management tools. The old notion that ‘how do I know that my people are working if I can’t see them working’ has to go out of the window.
5. In parallel to this, managers must also further develop their abilities to clearly communicate company vision and strategy to keep team members aligned with strategy and rowing in the same direction. Coworking necessitates new types of communication skills that are fit for purpose.

 

 

Cultural Issues

Over the past several years Yahoo!, Bank of America and IBM reversed years of remote working policy and have called employees back to the office to work co-present with their colleagues. The idea, simply, is that when colleagues spend more time collaborating and working together, there is an increase in social bonds and cultural cohesion. Social ties not only build trust and enduring relationships (i.e. the stuff of culture), they also allow for more opportunities for cross-functional, cross-departmental collaboration. If one is working in relative isolation (from the bulk of one’s colleagues) in a coworking space, then such broader collaboration opportunities are more difficult to achieve.

If insufficient attention is paid to a company’s cultural health, then several critical areas of company life can be undermined:

 

1. 1. • Community: Community is an everyday thing. It is made up of mundane and unrehearsed interactions. Take these away and a company’s overall sense of community weakens.

 

• • • Communication: How companies communicate, both formal and informal messaging, varies widely. While technology can relatively easily replace formal communication, informal communication is still best accomplished face-to-face.

 

• • • Collaboration & Innovation: The opportunities to work with colleagues from different parts of the company can be easily sacrificed if teams are plucked out the the hub and paced among strangers. From a collaboration and innovation perspective, it makes sense that creativity benefits from proximity and density.

 

• • • Cultural Identity: There is no question that coworking spaces have their own cultures, and that members can become a part of those cultures. From a company perspective, though, this does little to reinforce its own values and goals among its employees.

 

 

Coworking on Campus

To date, much of the impetus behind the growth of corporate coworking has been real estate driven. As discussed above, these reasons are clear and straight forward. In other areas of company life, such as the ‘people and culture’ dimension, the consequences and challenges of 3rd party coworking have been insufficiently addressed.

This is not to suggest, in any measure, that coworking is a poor officing choice for companies. Rather, it is a question of where. Elsewhere we have discussed the deeply positive aspects of coworking, and we anticipate that more (not fewer) companies will eventually embrace coworking as a modality of work as part of their overall workplace strategies. We think that coworking on-campus is a logical next step in the evolution of corporate coworking.

On-Campus coworking (to be discussed in greater detail in Part II of this series), has the potential to address the real estate issues at the heart of the first phase of corporate adoption, while at the same time it can address the ‘people and culture’ issues that are currently being mismanaged.

Still in its early days, coworking as a mode of working remains associated with 3rd party operators such as WeWork (and the thousands of others). Over time, though, it is likely to become more and more just the way that companies work. At that point in time, the ‘co’ might just dropped away and become ‘working.’