No one in business loves fixed costs. A big reason why is that they’re not typically dependent on the level of sales. Once committed, over a financial year, for example, they don’t vary with the activity of the company. These costs — salaries, utilities, rent, facilities — burden the management accounts even when revenue growth slows or prospects diminish. And once seated, these bollards of the cost structure are hard to move, even over time.
Why even get them seated?
Our world, in the infancy of the Big Technology Bang, offers companies myriad opportunities for flexibility and agility. Workers no longer expect 35-year careers with the concomitant long march up the same company’s ladder, winding from the junior associates’ bullpen through offices and up floors until the final posting in a corner somewhere with a nice view and an executive PA.
The new normal, characterized by slower economic growth, has produced a Darwinian shakeout of those least able to adapt. Those most able to adapt are in the ascendancy, as never before. Part of this adaptive process is to recognize that when one clean-sheets a company and begins to populate the expenses lines, or when one decides costs are bloating absurdly and enough is enough, the focus should be on variable rather than fixed. Spend only where you have to, and when you have to.
Start with strategic planning and a good, hard look at headcount. Then research the market and its requirements, do a competitor analysis, and think about how many people you need to be sitting in the office every day, or even at all.
A laptop computer (which beyond its basic functionality also hosts calls, video conferencing, email and instant chat), a work surface and a chair in a congenial and productivity-friendly environment are what most workers need. The company doesn’t have to be paying to keep all of those people and things in the same space indefinitely.
There are chief executive officers who are leading by example. Business Insider has reported that the CEO of Meetup, a company which allows users with common interests to set up meetings offline, doesn’t have a desk or a private office. He works in any available space in his headquarters, even in the lounge.
If CEOs can do it, most people can do the same.
One understands the arguments for having the whole team in one venue, every day. Yes, they are able personally to swap ideas, to chat, to bond and to meet at short notice. Quantifying the intangible benefits of having, say, 50 people occupying one large workspace with multiple pods at the same time and every day over having, say, only 10 of them there with the rest working from home is another matter.
Financially, it’s a simple calculation. Which option, for a company that requires 50 workers and deals with sales cycles, is more expensive, burdensome and risky over time:
Paying the fixed costs associated with 10 people who work at desks in an office and the variable costs of 40 contractors, interim managers, independent consultants, or even full time staff who are working off site, at places of their own choice and outside of the company’s ambit of facilities-related expenses; or
Paying the fixed costs associated with 50 people who work at desks in an office?
The answer’s self-evident. For those occasions, even several times a week, when the group or parts of it need to get together, a meeting room will do. For the rest, forget the desks. The miracle of digitally-enabled workflow and communications will suffice.