How coworking office design increased new leadership by 84%

Intervention Business, 

Abstract

Office design can include the amount of people in one space, their social dynamics, and proximity to others. When effective, it can impact employee performance and affect productivity and success.1 Offices of the future will likely include highly networked, shared, and multipurpose spaces that redefine boundaries and improve overall performance. 

Based on the case study of online retailer Zappos – which used physical design changes to nudge their employees toward more coworking interaction – it appears that organizations are already progressing toward this innovative approach.1 As part of Zappos’ Downtown Project, the company developed its coworking spaces from a network of existing, non-professional spaces and ran an experiment in early 2012. After six months of increased exploration and energy, they saw a 42% increase in face-to-face encounters, a 78% increase in participant-generated proposals, and an 84% increase in the number of new leaders (who initiated work and collaboration and developed project scope and objectives).

Rating = 4/5 (Controlled experiment; directly improves lives of participants; expensive and challenging to execute)

How Office Redesign Improved Employee Motivation and Engagement 
Condition Results
Expanding Zappos’ office space to include coworking options across Las Vegas’ downtown area
  • 42% increase in face-to-face encounters
  • 78% increase in participant-generated proposals
  • 84% increase in the number of new leaders 
Involving community members and local business in the process Increased the number of probable interactions per acre per hour across the Downtown area

Key Concepts

Energy: In team-driven work environments, energy refers to an overall increase in social interactions. It’s key to successful communication.

Exploration: In team-driven work environments, exploration occurs when someone interacts with people from many other social groups. Similar to energy, it’s key to successful communication. For another case of exploration, check out how a pharmaceutical company increased sales with new coffee machines.

Nudges: Techniques to change people’s behaviors in predictable ways without forbidding any options or significantly changing economic incentives.

Physical design change: A type of nudge that focuses on changing the physical environment to increase a desired behavior or to decrease an undesired behavior. 

Zappos: An American online shoe and clothing retailer based in Las Vegas, Nevada, United States. Zappos was acquired by Amazon in 2009.

The Problem

Designing strategically 

Companies need to change their spaces to reflect how their employees work. This principle especially applies to start-ups, who must innovate to compete in existing, established markets.1 Coworking, which consists of employees working side by side and collaborating, can be a successful strategy for companies to capitalize on their workers’ potentials. Of course, this is dependent on the integration of a strategic workspace design that enhances interaction with other social groups (exploration), with the digital work habits of individuals and their smaller teams.

Zappos’ entrepreneurial community

Recognizing the potential of coworking, Zappos’ CEO Tony Hsieh developed the Downtown Project in Las Vegas, investing $350 million USD in the area surrounding the company’s headquarters.1 Situated in Las Vegas’ former city hall, Hsieh’s goal was to grow the local start-up and its entrepreneurial community in a way that attracted talent to the area, benefiting both Zappos employees and its surrounding neighborhood. 

What not to do

Hsieh’s priorities were well-thought-out and grounded in behavioral economics. Unfortunately, not all entrepreneurial and coworking companies have seen similar success. Companies like WeWork allocated their budget to marketing and rebranding the company rather than bolstering their workplace dynamics.2,3 They viewed designing a new coworking space as a lower priority than attracting new consumers. In reality, however, effective coworking spaces aren’t merely aesthetic: they leverage design principles based on behavioral science to accommodate for workers’ needs, drawing from principles related to efficiency and motivation.1

Design

Pentland’s 3 elements of communication

“The new science of building great teams”, a 2012 article written by computer scientist Alex Pentland, inspired Zappos’s strategy.1 Pentland used sociometric badges to track how people talked to each other, who talked to who, how people moved around the office, and how people spent their time. He used these variables to measure how successfully a team communicated and identified 3 key elements of successful communication:

  1. Exploration: Interacting with people in many other social groups.
  2. Engagement: Interacting with people within one’s own social group, in equal amounts.
  3. Energy: Interacting with more people overall.

Spaces that include Pentland’s three elements increase the likelihood of “collisions” to create positive outcomes: chance encounters and planned interactions between people inside and outside an organization.1 Zappos worked on developing its coworking space with its Downtown Project budget and launched a local coworking experiment in early 2012. Coworking spaces were improvised from a network of existing ones in the headquarter’s area, including an old church hall, the lobby of a casino, coffee shops, and the courtyard of a Thai restaurant. The coworking experiment grew to include almost 200 stakeholders which consisted of Zappos employees, local residents, start-ups, and independent workers. 

Creating a controlled experiment

Zappos’ Downtown Project is an example of a controlled experiment, in which only one variable changes. In this case, the changing variable was the working condition: people either participated in the new coworking spaces or they remained in their non-coworking spaces. Based on this change, the company could analyze whether factors of interest, such as collisions, employee involvement and community collaboration improved. Since all other variables were the same, any differences could be attributed to the coworking space.

The COM-B framework

Zappos’ Downtown Project exemplifies the COM-B framework for behavioral change, which focuses on the interaction of capability, opportunity, and motivation to influence behavior.4

  • C(apability): The stakeholders of coworking spaces have the physical capability to use the new spaces, since they target Zappos’ employees and surrounding community members, located by Zappos’ headquarters. The variety of spaces may even increase accessibility, thus increasing physical capability. There are also no expected barriers to stakeholders’ psychological capabilities to utilize the coworking spaces.
  • O(pportunity): Similar to capability, it would seem that stakeholders have the physical opportunity to use Zappos’ coworking spaces, as there were no indications of surpassing a maximum capacity. Stakeholders also have the social opportunity to interact with coworkers or community members, increasing their networks and developing projects in the inherently social nature of a coworking space.
  • M(otivaton): As stakeholders experience increased exploration and collaboration, they will be motivated to return to the coworking spaces.
  • B(ehavior): Motivation to return to the coworking spaces will result in behavioral adoption of utilizing coworking spaces.

Results and Application

Increased employee interactions

Zappos’s coworking experiment was a resounding success. The small, shared nature of the neighborhood fostered mobility that increased collisions.1 Exploration (interacting with workers from other social groups) and energy (overall interactions) were both very high. After six months, the data showed a 42% increase in face-to-face encounters, a 78% increase in participant-generated proposals, and an 84% increase in the number of new leaders (participants who initiated work and collaboration and developed project scope and objectives).

Increased community projects

In addition to fostering better employee communication and work outcomes, Zappos’s experiment also fostered better community outcomes, catalyzing ten new civic and local community projects.1 Zappos continued experimenting with its surrounding area and developed a new metric – “collisionable hours” – to measure a space’s effectiveness, defined by the number of probable interactions per hour per acre. Hsieh’s goal was to reach 100,000 collisionable hours per acre in the neighbourhood.

The Downtown Project provides a model for corporate designs of the future, weaving together public and private spaces, employees and community partners.1 By following this model, companies gain a productive and innovative advantage over companies that restrict employees from the necessary exploration to improve performance.

Industry

Application

Education Thoughtful campus design could lead to cross-faculty interactions and interdisciplinary thought leadership.
Financial Services To mitigate the stressful hours and high-pace work environment, banks and other financial services companies can design offices which promote interaction and frequent breaks.
Climate & Energy Collaborative office design can increase environmental nudges over individualized work spaces, i.e. sharing resources.

Ethics

Yes

Room for improvement

Insufficient information/Not applicable

Welfare
Does the intervention demonstrably improve the lives of those affected by it? Zappos’ coworking experiment improved its work environment through leadership and social encounters, and improved community partnerships.
Does the intervention respect the privacy (including the privacy of identity) of those it affects? No sensitive information was given regarding the identity of Zappos’ employees and/or community members involved.
Does the intervention have a plan to monitor the safety, effectiveness, and validity of the intervention? It is unclear whether a plan was made to monitor the safety of the intervention, though perhaps unnecessary. 
Autonomy
Does the intervention abide by a reasonable degree of consent? While physical design change did influence participants’ choices, there are no expected ethical implications. Though employee interactions were tracked, they would have been aware of this at the onset.
Does the intervention respect the ability of those it affects to make their own decisions? The intervention gave employees the chance to choose among meaningful options: if employees opted to participate in the coworking experiment, they had full control over who they interacted with. The nudges strengthened users’ choice sets. 
Does the intervention increase the number of choices available to those it affects? It increased choices available to Zappos’ employees and the downtown area community members.
Equity
Does the intervention acknowledge the perspectives, interests, and preferences of everyone it affects, including traditionally marginalized groups? No information was given regarding the acknowledgement of traditionally marginalized groups.
Are the participants diverse? No information was given regarding the diversity of the participants involved.
Does the intervention help ensure a just, equitable distribution of welfare? The intervention increases the welfare of those involved in it, but does not necessarily touch on equity issues.

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Sources

  1. Waber, B., Magnolfi, J., & Lindsay, G. (2014, October 1). Workspaces that move people. Harvard Business Review. https://hbr.org/2014/10/workspaces-that-move-people
  2. Zeitlin, M. (2019, December 20). Why WeWork went wrong. The Guardian. https://www.theguardian.com/business/2019/dec/20/why-wework-went-wrong
  3. Austin, D. (2019, November 25). Why WeWork failed – And what it means for coworking. Medium. https://medium.com/derek-develops/why-wework-failed-and-what-it-means-for-coworking-5d6bb209f5e2
  4. Flanagan, A. E., & Tanner, J. C. (2016). A framework for evaluating behavior change in international development operations (IEG Working Paper 2016/No. 2). Independent Evaluation Group. https://openknowledge.worldbank.org/bitstream/handle/10986/25872/110890-WP-PUBLIC.pdf?sequence=1