Mark Green: What is ORI’s current number of employees and annual revenue?
George Bell: We have 116 employees. Revenue for 2018 was $56 million, and revenue for ’19 will be more in the $75 million range. The reason for the growth is that we bought a company in Nashville in mid-2018 and were only able to claim half of a year’s revenue.
MG: How has that employee number and revenue number changed over the last, say, five or 10 years?
GB: If we go back to ’04 when I purchased ORI, we were a (Steelcase) distributor with an office just in Louisville. We had 32 employees plus or minus three or four. Our revenue that year was just south of $10 million.
MG: ORI has made multiple acquisitions recently. What is the strategy behind these moves?
GB: Any decision you make, there are multiple reasons you make it. We did business with clients first in Louisville; then as clients worked within the commonwealth or in the region, they said they would like us to support them in these other areas. Some of the expansion and later acquisitions were to support great existing client relationships that needed local service.
Also, we’re seeing in our industry a desire to do business with fewer people rather than many. To have an opportunity to provide modular construction – maybe a low-raise floor; or modular voice, data and power; or (moveable) walls like these in our headquarter showroom as well as furniture and technology – to be in all of those businesses there’s a certain level of scale or revenue that is required. To become a single-point distributor, in some situations there’s just not enough revenue in a city like Louisville to support business investments. To be a one-stop-shop or a single-source provider and provide this integrated solution to clients, you have to grow big enough to make the corresponding investments so you can have some centralized resources and some decentralized resources. That was part of the reason for acquisitions.
And then we’re seeing shrinking margins, so you’ve got to grow your volume in order to reduce cost and gain some efficiencies to balance that out.
We’re doing it around attraction and retention of employees, too. It’s difficult to get the best employees if you’re a company of 30 and you’re not growing, and they don’t have the opportunity to do something new and different like project work. People like to have some flexibility as it relates to the organizational structure or geographically. Part of the long-term strategy around talent is being regional so we have an opportunity to attract and retain and give people a meaningful career.
MG: ORI’s headquarters are in East Louisville. How many locations and warehouse distribution centers do you have?
GB: We have headquarters and a warehouse here in Louisville. We have a location in Lexington with an office/showroom and warehouse, and in Bowling Green and Nashville. To leverage synergies and resources, we have found we need our locations to be inside of four hours of each other, and the closer the better. So we can move resources from Louisville to Lexington, or Lexington to Louisville, or Nashville to Bowling Green, and we can do it efficiently.
MG: How has the productive office workspace of today changed from that of a decade or a generation ago?
GB: Obviously technology has impacted where we work, who we work with, and how we work. That’s been a huge driver. Two, the world’s expectations around speed are very different today than before. We want it today, not tomorrow or a week from now. The issues we’re dealing with tend to be more complex. All of that has had an impact on the workplace.
Back 10 or 15 years ago, work and the workplace was divided into individual work and then collaborative work. You typically had two kinds of individual work places: an open office cube or a private office. You had a handful of conference rooms for very formal meetings, but most of your work would either be done in your private office or in your cubical. It may have been 80 percent I-space or me-space and 20 percent we-space or group-space.
Today, that has shifted dramatically and it’s just the opposite – the mix between individual space and group space or we-space that now is referred to as “I-am-we.” The total square footage is less per employee. You’ve seen the individual space shrink and the group space increase; in some cases they’re doing it all in the same amount of real estate as before, and some cases there’s real-estate saving. People have been willing to give up individual space because they now have access to lots of higher quality group space.
One of the big things right now – and this is true of millennials, of Generation Z, and frankly true of most office workers and supported by studies surrounding engagement – is they want choice and control. University students aren’t asked to do all their work in their dorm room or apartment. They’re given a range of spaces and can move through the campus and select the space that works for them. To focus because they’ve got a test, they go one place; to watch a video of a professor, they might go somewhere else; to do some group work, they go somewhere else. If they focus better with ambient noise, they go to Starbucks. The point is that a college student can select where they work based on how they work and with whom they’re working.
That same principle applies to the office. Today the we-spaces aren’t a single kind of space; they’re made of different kinds of spaces. Then we as workers get to decide, based on what we’re doing, what makes the most sense.
MG: Office structure trends evolve and are driven by technological change, new materials, cost cutting and social trends. What are the key needs influencing business office productivity today?
GB: Among the big trends is this idea of: Work is complex, and we’ve got to do it quickly. So how do we give folks tools to do that? Work tends to be not made up of a single modality. There’s a social aspect of work that builds trust, and when you have trust you tend to innovate and collaborate more effectively. There is focus work that requires a certain level of visual privacy, acoustical privacy so a person can focus. There are learned activities or training that are an active part of what we do. Collaborative work can be broken down into further modes.
One of the trends is making sure there are spaces that support each one of those modes of work. Social activity could be called the work café, where there’s an opportunity to gather, sit across from people, break bread together and do things that build trust. But you may also decide to work in the café because what you’re doing is really more about getting to know your team and forming a plan at a high level that doesn’t require privacy and that’s the perfect place to do that.
Or, you may have a call with a client of a very confidential nature that’s very focused and you’ve got to be very careful about the details you’re communicating, and you need a private enclave to make sure you’ve got absolute privacy so you can focus.
A trend we’re seeing as labor gets tighter – and the market is very tight – is companies are using desirable space to attract, retain and develop people. Another thing happening is making sure there’s authenticity to your brand and your space. There’s nothing worse than a company that talks about a culture based on certain values and attributes, and the space doesn’t reflect that. Clients and/or prospective employees or employees get that. If there’s a gap or disconnect it creates tension, confusion and in some cases uncomfortableness for employees. If a business wants behaviors to be X, Y and Z, they can set up a space to drive those behaviors that ultimately form its culture. Your space ought to support that brand. Those are really important to communicating to your current or prospective clients.
The other thing we’re seeing is the idea of “agility.” Agile work has been in the IT industry awhile. It’s the idea of not looking at work as 90-day objectives or 180-day or one-year objectives. While the ultimate project may be six months, it’s based on two-week sprints and lots of interactions with your client, whether it’s internal or external. IT has been using agile concepts forever, and it’s now starting to branch out into non-IT functions. You’re seeing it in marketing, in finance, in accounting and other functions. A very different dynamic is necessary in the environment because they have to be fluid and flexible yet provide some order and structure because otherwise it’d be chaos.
MG: There is a cliché that marketing agencies all have exposed brick walls and Ping-Pong tables, an office dog and that sort of thing. How does that mesh with the values they are looking to express?
GB: If they’re trying to express creativity, fun, playfulness, certainly those images all speak to that, so there is something there. A huge trend on the East Coast and West Coast is this idea they call “resi-mercial.” It’s bringing residential materials and residential-like products into the office or commercial environment as a way to make the office not feel like the office.
It goes back to this is I- and we-space. They believe if people are sitting around and socializing, they’re building trust and trading ideas. If they can do it in a comfortable environment, be more casual, then they’re probably going to stay longer. Those are the kind of environments (desirable) employees typically are looking for. It’s called the ancillary space, and that’s become the primary workspace.
MG: The rate of technological change such as digital internet connectivity has been higher than normal the past couple of decades. Is there an expectation this change rate is going to continue?
GB: Yes. Statistics suggest that the rate of change today versus 10 years ago, and the previous 10 years, is moving much faster. It’s almost exponential. As the technology changes, we’ve seen the implications in work and the workplace. Not very long ago most people had a desktop computer; large terminals were placed on a desk and you went to that desk and you worked. Now we’re seeing the move to laptops, we’re no longer tethered to our primary individual area. We can move them around the same way we carry around our phones. That has had a huge impact on the office. Rather than sitting in one place, we can take our technology anywhere with us.
We’re sharing information and collaborating more, so the number of screens and the size of the screens has tended to be greater. It’s not unusual to have two or more screens at your desk so you can look at different materials and you can share with other people and rapidly compare and contrast information.
In ORI’s old headquarters we had six collaborative spaces with technology in two of the six. In our new (year old) headquarters we have 22 collaborative spaces and every one has some form of technology and a white board or something that allows us to work digitally but also in analog. Research suggests the ability to move from one to the other is important.
MG: How prevalent is video interactivity capacity nowadays?
GB: Really prevalent. There was a day when we would drive from (Louisville) to Lexington to have a meeting, and today we are using Skype For Business or some other mechanism. The quality of that is high enough that for a lot of interactions that’s sufficient. There are certain meetings that frankly you can’t replace face to face; it’s important to do that and we still do. But there’re a lot of meetings for which video works. And the infrastructure requirements, bandwidth and other technology have improved so much that it’s affordable. Most companies can deploy remote technology and use video conferencing pretty effectively. It clearly should be a part of your meeting strategy.
MG: Is there a square footage per employee rule of thumb?
GB: In 2017, the most recent number, the average was 151 s.f. per employee. If you go to 2012, it was 176 s.f., and if you go back to 2010, it was 225 s.f. So the square footage per person continues to shrink. There are reasons for that. One is this mix between I and we, and in other cases we’ve developed workstation applications that are just a lot more efficient. Some of the technology is smaller and more mobile. The requirements for larger offices are less.
There’s a realization that 82 percent of employees spend two to four hours a day working somewhere other than their primary area. In the past we may have designed assuming someone was going to be in their individual office all day, five days a week. Doing that today would be providing way more real estate than you need because you know 82 percent of these employees are gone anywhere from 25 percent to 50 percent of the day – at a client space or at one of the collaborative/team spaces within the facility. We’ve gotten smarter about that and our real estate in many cases is “working” harder than it did 10 or 15 years ago.
MG: For someone setting up a new office, is there any cost per employee rule of thumb?
GB: It varies a lot, but we do have a budget tool that allows us to make some assumptions on the number of private offices, workstations, collaborative spaces, square footage of an office. And very quickly we can come back with a per- and square-foot or per-employee budget. We do that on a low, medium and high range. You can buy a $100 chair and you can buy a $1,000 chair; they are very different in look, very different in performance, in their quality and attention to detail, fit and finish, that kind of stuff. There is a wide range, but we can provide that to a client relatively quickly. There was a day where $3,000 to $3,500 an employee was the range, and that was all in. That considered your entry way and lobby, collaborative areas, a cafeteria or a work café, everything. If you took every dollar you spent on furniture and divided it by the number of employees that’s what you would come up with.
MG: How does someone making the investment in a new or improved office assess their return on investment?
GB: There are two main views. One would be, I need a place to work, I’ve got to give people furniture, I don’t want to spend a lot of time and money on it, so I’m going to worry about cost first. You could clearly not spend any money and have an office, but the office isn’t going to be productive.
On the other side, there are accounts that say it’s important that our space support and connect with our brand. It’s important to support and connect the behaviors that will drive culture, and it’s important to give people the best place to work because we want them here, not somewhere else. They invest money the same way you invest in high-quality people and training, the same way you work on continuous improvement around processes and best practices, the same way you invest in technology. The best companies say, ‘Where we work is really important, so we’re going to spend the time and effort to make sure we’re supporting it.’
ORI previously was in 100,000 s.f. of office in Louisville, and after building our current facility we’re now in half that. The savings per year because of our lease rate is X; you can apply that to the furniture expense and very quickly come up with an ROI. If you can reduce your real estate by 40 percent you typically can pay for your furniture in 12-18 months depending on the lease rate.
Employee turnover is another thing people will look at as another potential ROI measure. They’ll look at employee satisfaction and employee engagement.
MG: What are the current trends in office design? What are people asking for?
GB: A few years ago everything was white. Today it’s about bringing nature inside. Materials tend to be more natural, both in color and in feel; warmer in feel rather than cold and institutional. Most offices are designed around maximizing access to natural light. Private offices that used to be on the exterior are now on the interior, so everybody has access to natural light. That’s been a 20-year trend. People are providing that residential feel; lounge-y, more comfortable furniture in the office is a huge trend. The materials and style are very different. Five years ago no one would have thought about putting a West Elm furniture product in the office; today it’s done all the time.
MG: How long does a workstation last?
GB: That’s an awesome question because from a utilitarian standpoint, especially for the high-quality manufacturers like Steelcase, furniture can last 20-25 years, which means it’s in good working order and it looks fine. In a practical sense, not unlike your computer, there’s a point where it’s not supporting the way you work either as an individual or a group. I would say if you get five to seven years out of it, that’s pretty good.
We find you need to buy furniture and apply furniture in a way that it can move and change and adjust so that the useable life cycle is longer. Most furniture will last a heck of a long time if all you want to do is sit in it and read. But in terms of supporting work, because work’s changing so fast, that continues to get shorter and shorter. You need to build flexibility into your spaces so there isn’t a disconnect between the way you work and your spaces.
MG: When a client comes to you to assess whether it’s time to change or upgrade their office space, what factors into the decision?
GB: Typically the driver is that they are growing and need to add space. Or their lease is expired and they’ve got to figure out do they re-up the lease or do something else. As a tenant, it’s a great point of renegotiation and opportunity to get the landlord to reinvest in tenant improvements and those things. In some cases folks are doing employee engagement surveys and finding out they’re not providing the kind of tools and spaces their employees need and want. That would be another trigger to invest. One of the trends we’re seeing now in all industries is Big Data, the relevance and insights that can be gathered from smart statistical analysis.
In the work environment, we see and deploy sensors for many customers that identify which areas are used and the frequency, by how many people for how long, in an effort to inform decisions around space. If you have 10 conference rooms and five of the 10 were being used, it’d be nice to know which five were being used, when, by whom and for what reason. Then as you make space decisions, you’re making decisions on an informed basis.
MG: You operate in the Kentucky-Tennessee market. Is the Kentucky market different than other regions?
GB: I mean this with no disrespect to Kentucky or Tennessee: We lag. We’re conservative. If you’re looking for indicators about what’s going to happen in Kentucky five years from now, you’ll see it in L.A. or in Silicon Valley, or in Boston around MIT and in those areas. In some cases the lag is shorter, in some cases it’s longer. Some of that changes because you have companies like Yum! Brands and Humana and others that have operations all over the country or all over the world, and they are bringing best practices and ideas back. But for most of the Kentucky-centric local or smaller companies, there is a lag between what happens on the West and East coasts.
On the up side of that, sometimes a faddish idea seems interesting and people implement it and find out it doesn’t work. We think we have a responsibility to educate the market in general – architects, designers and others – about what’s available and what others are doing as a best practice so they can leverage some of that sooner rather than later. We spend time educating our client base – and those we hope to be clients – so they can take advantage of it. ■
Mark Green is executive editor of The Lane Report. He can be reached at [email protected].