By John Brady
Glenbrook North High School might not be a household name outside of the Chicagoland suburbs, but if you’re a movie fan of a certain age, you’ll recall the image of Judd Nelson crossing its athletic fields, fist in the air at the conclusion of “The Breakfast Club” (1985). One of several themes in the film was clear: you’ve got to find your own path in a world that gravitates to institutional conformity. But what happens more than three decades later when, just a few miles down the road from that iconic scene, a global pandemic forces a storied corporation and community to ask some hard questions about their future?
On October 8, 2021, Allstate announced plans to sell its headquarter campus in the area of Northbrook, IL, citing increased employee choice about where to work and embracing the hybrid/remote model the company has been operating under throughout the pandemic. It is a more consequential harbinger than most realize.
Remote vs. Return Spoiler Alert: Remote & Hybrid Will Win (Just Not for the Reasons People Think)
COVID-19 accelerated the normalizing of a remote, work-from-home/work-from-anywhere (WFH/WFA) paradigm for most office workers. The clickbait content world has largely characterized the post-crisis return-to-office (RTO) debate as:
- workers freshly empowered by a tight labor market versus a holdover industrial age management philosophy by older, mostly white men, OR
- executives concerned that engagement, cohesion, and serendipity suffer with a distributed workforce.
Our future office work environments are, to some degree, influenced by these tensions. But collectively, we are having the wrong conversation if we want to prepare ourselves for what’s next. What will drive the future norms of office work? Finances.
A Case Study in the Chicago Suburbs
Allstate is a 90-year-old Fortune 100 company. Initially a division of Sears, Roebuck, and Co., Allstate owns the six-building HQ campus it had built in the late 1960s. Three miles from the property is Glenbrook North High School. The late John Hughes, best known for writing, directing, and producing comedic coming-of-age films of the 1980s, attended Glenbrook North and drew on his formative experiences there as inspiration for his filmography. Multiple iconic scenes in “The Breakfast Club” and “Ferris Bueller’s Day Off” (1986) were filmed on location at the high school and other venues around town.
Glenbrook North is part of Northfield Township High School District 225. The district receives a whopping 95% of its revenue from property taxes. Allstate is the largest employer in town, with a headcount five times larger than the distant second. It is also the largest single source of property tax revenue supporting the school district. Allstate paid nearly $1.2M in property taxes on its HQ real estate last year. Since the start of the pandemic, the residual economic activity that accompanied the 9,000 people who worked at Allstate’s Northbrook campus has gone.
Commercial real estate hasn’t exactly seen its best days since the arrival of COVID-19. When a 53-year-old collection of modernist buildings with almost 2 million square feet of Class B office space and 5,200+ parking spaces drops onto the market, it might not be pretty. Several days ago Allstate announced preliminary terms of sale on the land to a warehouse developer triggering a land-use battle. Adjacent acreage involved in the deal would result in several municipalities fighting over their share of tax revenue in addition to general opposition toward a large trucking operation based in the community.
On the other side of this story is a company doing the only thing that makes sense. The Northbrook property is not Allstate’s only office space in greater Chicago, let alone North America.
Six months before announcing the decision to sell the property, the company’s CEO, Tom Wilson, publicly shared some of Allstate’s lessons learned and its “future of work.” Pre-pandemic, 20% of their employees worked remotely. They found that 60% of employees could easily WFH/WFA permanently, and 38% would, at most, need office space several days per week. As a result, Mr. Wilson stated that Allstate’s use of office space companywide would likely be cut in half. According to public statements, this reflected the will of employees, and broader reflection about enterprise goals going forward. As Mr. Wilson said in an interview with CNBC, “commuting is way overrated.”
Those of us who grew up watching John Hughes’ films about teens desperate to break free of outdated buildings and practices might see victory in the decision by companies like Allstate to embrace the digital nomad as normative. While tempting to think we are entering some gilded age of the office worker, we’re probably not.
Employer: What Is the ROI on Your Space?
First, let’s consider the employer perspective; assume the average square footage (sf) per full-time employee (FTE) is 150-185sf (about the same as the average bedroom – go figure). Maybe you’re spending $4,000/year/FTE for Class A or B space. That’s $20,000 per head on a 5-year commercial lease. Did you extract $20,000 of value from having that employee tied to that physical space? For a small field office of two dozen people, call it $500,000 over that hypothetical 5-year lease. What is in that space? Power outlets? Ethernet ports? VOIP/Softphones? A space you pay for 24/7 (usually including utilities) but only use 30-40% of the time? What value did having that desk in that spot give your top or bottom line? If you own the space, the cost of maintenance and insurance is substantial. Absent a generally accepted financial case against it, if a company can reduce or eliminate costs of leasing or ownership, it probably will.
Consider recent trends towards IT support of bringing your own device (BYOD), which has grown tremendously despite the complexity and security risk to employers and the potential privacy implications for employees. It turns out many employees have been happy to make that trade to work in, and on, the devices and platforms they prefer. While some employers pay for this, many pay either nothing or subsidize those costs to some percentage. If all or a portion of that hypothetical $4,000/year/FTE lease can be pushed off the books and down to the employees who are enthusiastically embracing it for their WFH/WFA preference, esoteric arguments about team cohesion are not going to hold up well-come lease renewal time. After wasting money for an expensive time capsule these last 12-24 months, many CFOs will find it especially difficult to justify a return to pre-pandemic models of operation and associated fixed costs.
Employee: Be Careful What You Wish For (At Least, Be Ready)
The power in the labor market will swing back to employers eventually. Markets always move in cycles. As we stomp our feet pointing to worker productivity, employee engagement, environmental impact, and even social justice issues in our push to work where we want, how we want, there may be more significant shifts at play. Suppose educated, skilled knowledge and office work can be done from anywhere. In that case, an employer could reduce their salary expense significantly by hiring equally capable talent from outside mid-to-larger metropolitan markets.
Neither WFH nor full RTO is likely, but there will be a future of work: gradations of hybrid models for F2F, remote, and virtual/mixed reality that change how we work.
How strong is your resume? How well can you interview? How robust is your verifiable experience? They all better be outstanding because you could easily be competing for jobs with millions more candidates rather soon. It is challenging to break through the crowd now. In addition to candidates in the city you’re near, imagine competing for the same job with talent from Boise, Little Rock, Chattanooga, Rochester, Fargo, Birmingham, and countless others. What about overseas? When white-collar workers were all making Tom Friedman’s “The World is Flat” (2005) a bestseller, few appreciated that it could apply to their own employability as well. Geographic differentials in compensation are under more pressure now than ever, even while real wages are finally rising overall.
What Should We Do?
The current RTO debate is reductionist and pointlessly oppositional. Investors care about EBITDA and multiples. Valuations are about the future, not the past, so stop trying to go there. At the individual level, whether Gen Z or C-Suite, start thinking about your career and your visible brand with fresh eyes before you are forced to: so, now. We all need to learn to be visible in new ways, document our contributions in a compelling and accurate manner, and genuinely connect digitally or in-person well beyond the circuits familiar to us.
Those of us who watched Judd Nelson cross the athletic fields of Glenbrook North HS and pump his fist into the air on the big screen are now in our late 40’s and 50’s. In that freeze frame Hollywood conclusion, the genre of percussed synthpop theme music that defined our youth left us pleading not to be forgotten. Like all good art, with age lyrics prove fitting anew, just for bigger, more complex concerns. Hopefully, we are wiser than the adult generation Mr. Hughes caricatured.
This is one of those moments where we have a chance to rethink our path and be deliberate or be left behind. Beyond career self-preservation, most of us care as much about how we earn our money as we do about how much money we earn. If so, we share a moral imperative in addition to our fiduciary responsibility to embrace this uncertainty and refashion workplace norms for productivity, profit, civility, and inclusivity. False choices are misleading and a waste of time, as is trying to solve problems by using old paradigms as future frameworks. There is no going back and WFH is far from a universal ideal. Knowledge workers are paid to think, after all, and leadership is only real when it can be activated at times of uncertainty, so let’s get to it. This need not be as difficult or contentious as it appears. Life does indeed move fast. If we don’t harness the moment and innovate, we might miss it.