Getting Real: Transforming the Workplace at SCAN Health

Getting Real: Transforming the Workplace at SCAN Health IFMA Corporate Real Estate Council Sheraton Vancouver Wall Centre Vancouver, BC April 1, 2009 Diane Coles Director, Workplace Services SCAN Health Plan Dr. Charles Grantham Dr. James Ware Executive Producers Work Design Collaborative

Positioning - - Joel and Angie Us

Three Business Imperatives* - - * Corporate Agility , by Charles Grantham, James Ware, and Cory Williamson, AMACOM Press, 2007 Reducing Fixed Operational Costs Closing the Talent Gap Institutionalizing Innovation

- - Today’s Agenda Goal: A conversation about the benefits of making flexible work “work” – and how to do it Some Topics for Discussion: Why is remote/mobile work so important ? What are the challenges of implementing a flexible work program? What kind of business impact does flexible work produce? What are the important “lessons learned” from the SCAN Health Plan experience? What is the future of flexible work? Agenda importance of mobile work challenges a real-world example guidelines for success looking way ahead

An Important Perspective - - The way we work is changing, which will be followed shortly by where we work – or you disappear . . . Work Place

Work Evolves What “work” is changes: from agriculture to manufacturing to information How “work” gets done changes: from shovels to machines to computers Where “work” gets done changes: from open land to cities and villages to anywhere and everywhere What workers do changes: from brute force to brain force - -

Two-Thirds of Knowledge Work Today Is Done Outside Corporate Facilities - - “ 1st place” “ 2nd place” “ 3rd place” Opportunity in next five years: Corporate Facilities 30% At Home 35% In Between 35%

The Distributed Workforce is Growing Rapidly - - * Source: WDC Demographic Projections, 2008 Drivers of Change: documented Return on Investment leadership support energy costs simplification of process public policy incentives (i.e., environmental impacts) Barriers: old habits die hard middle management resistance scarcity of expert resources technical and physical up-front investments Wildcards: recessionary economy technology development global politics/terrorism 1990 1995 2000 2005 2010 Number of Distributed Workers* 0 5000 10000 15000 20000 25000 30000

What’s Really Going On? Most of the institutions and business operations that supported industrial work styles are crumbling—rapidly! - - ?

Drivers of Change A “Perfect Storm” is Converging on the Workplace - - Information Technology Globalization Demographics Public Policy Sustainability

Indiana Jones circa 2500 AD - -

A 2010 Vision Business travel significantly decreases; technologies substitute Four-day work weeks Globalization of all jobs; companies go to where the talent is located Cubicles disappear in favor of “collaboration spaces” Corporate headquarters housing hundreds or thousands of workers disappear Free agency becomes the norm of relationships between talent and company - - Source: Challenger, Gray and Christmas, June 2008 WDC Futurescope

SCAN Health Plan Embracing the Future of Work Charter to re-align the real estate portfolio to reduce cost and handle growth Moved several hundred non-exempt employees to flexible work In 2008 went from 185 sf/person to 155 sf/person at corporate headquarters (goal is 112) Expecting to achieve an ROI over 40% Now redesigning the workplace planning process, saving 38% in cost and time - -

SCAN Health Plan* Background A not-for-profit Medicare Advantage HMO Based in Long Beach, California, with operations in Phoenix, Arizona Approximately 850 employees Focusing on both cost reduction and growth at same time - - * SCAN = S enior C are A ction N etwork www.scanhealthplan.com

Business Challenges Changes in federal regulations Rapid growth Expansion into new areas Attracting and retaining talent increasingly difficult Corporate facility at some risk long-term, inflexible lease inappropriate physical location short of usable space Space did not meet 2012 vision and culture Workforce support costs high and growing - -

Redefining SCAN’s Workplace Strategy Enabling face-to-face management Inefficient space Traditional “grid” workplace design Space, technology, and services were silos Focus on place Cost focus No attention to Green More distributed/virtual workforce Less space but better space, and more effectively used More exciting, creative space that fosters teamwork (NO SILOS) Integrated solutions of space, technology, and services Focus on work Cost focus – with benchmarking Go Green In 2006: New Direction:

The AWESOME Project A lternate W orkplaces E ngaging S taff and O ffice M anagement E fficiencies Project Activities: Policy development Space Planning/Construction Technology Planning Business Unit Readiness - - Training & Change Management Communications Implementation Facilities Legal Marketing HR IT Risk Mgt. PM Office

The Business Case: Scenario Planning - - *For the year 2010, assuming no change from 2006 business parameters Baseline* 2008 Update Key Assumptions “ Mobile” Employees (Goal) DW Sharing Ratio Total Staff Square Feet per Person Facilities & FFE Cost/Empl IT Support Cost/Empl. HR Support Cost/Empl. Admin Support Cost/Empl CRE Support Cost/Empl. Total Support Cost/Empl. Conversion Cost/Empl. 249 3.50 865 164 $7,847 $10,109 $3,585 $8,033 $1,118 $42,435 -- 2006 Analysis 369 4.37 820 133 $7,036 $6,792 $2,188 $6,370 $ 980 $33,258 $11,412 369 4.37 820 133 $7,260 $10,802 $2,271 $6,370 $ 986 $37,498 $19,709 Selected Outcomes

Three Dimensions of Success Efficiency – making the most of the space density of occupancy cost of occupancy cost of change (moves, adds, changes) ROI Effectiveness – making the most of the people attraction/retention of employees interaction among support groups (IT/HR/CRE) departmental productivity Expression – making the most of the mission employee engagement job satisfaction/flexibility

The Numbers Provisioning cost Provisioning time Space requirements Return on investment Employee productivity Employee engagement 38% 12 weeks to 3 days 22% 40%+ 18% No change

Business Outcomes In Summary - -

Personal Perspectives Drawn from Focus Groups Employees “ I would rather find another job than come back in the office.” “ My production went up slightly at home, but my accuracy went way up!” “ We feel we are more of a team now than when we were in the office.” “ We can talk to each faster than someone in the office – when you call the office you get voicemail.” “ I’m calling my manager asking, ‘Is there anything else you want me to do?’” Managers “ We should have manager training prior to selecting ‘remote workers.’” “ I’m surprised how quickly they separated themselves from the office. They don’t want to come back.” “ The home-based workers are telling me about things that I don’t even know are happening here at SCAN.” “ I’m concerned about keeping the AWESOME employees connected with the company.”

Lessons Learned Home office setup Productivity Communication Space planning Managing remote workers Unexpected marketing/recruiting benefit - -

New Collaboration Spaces - -

New Collaboration Spaces, continued - -

The Next Step A Flexible Office for Flexible Work

Participatory Design Using an Interactive “Smartboard”

Workplace Policy – in Pictures

What’s Around the Corner? - - Up to one-third of existing commercial (office) real estate market will evaporate in three years Customers will demand more balance between 1 st , 2 nd, and 3 rd places Lease length will decrease significantly Innovators will discover how to generate revenue streams from sources other than real estate lease fees There will be significant industry consolidation

Given the SCAN Story: 1. Does the corporate real estate industry want to become a commodity in a shrinking market? or 2. Does it want to play a significant role in supporting work wherever and whenever it takes place? If option two, then . . .

You Need a “Strategy of Place” We are not in a normal “business cycle” Someone has hit the “re-set button” on the entire wealth-creation machine. The creation of wealth now depends on the creation of knowledge and its application to sustainability —both environmental and social. We must invest in the physical, technological, and social networks that support this post-industrial economic engine Knowing where to invest your resources—both geographically and in which economic sectors—will produce a powerful competitive advantage - -

A New Kind of Workplace is Emerging We call it a “Business Community Center™” A shared facility and service operation Located in suburban and exurban areas to reduce commuting Available on an “as-needed” or drop-in basis Fosters economic development; supports local businesses Provides enterprises with a community presence - -

How is a BCC Different from Other “Third Places”? Significantly lower price a low monthly membership fee for access modeled after a health club – a base membership fee plus incremental charges for incremental uses bulk of revenues are service fees Location a network of smaller facilities located in or near residential neighborhoods near other needed services and retail outlets. (for example: day care and health clubs) leverages under-utilized commercial properties Member experience multi-function (work, learning, service) hospitality model of business a place “where you want to be” - -

What We are Doing Now Helping SCAN refine the alternative work model in its core markets Introducing concentration and order into the provisioning process Designing a “Strategy of Place” planning process Developing a “Playbook” to guide expansion into other geographies Bringing Business Community Centers into the portfolio planning process - -

What are You Gonna Do Now? (Besides Call Us – Hint, Hint) - - You as a professional Your firm The industry

For Further Information - - Dr. Charles Grantham Prescott, Arizona +1 928 771 9138 office +1 928 771 9138 fax +1 928 533 9149 mobile [email_address] Dr. James Ware Berkeley, California +1 510 558 1434 voice +1 510 558 1431 fax +1 510 206 8147 mobile [email_address] Website: http://www.thefutureofwork.net Blog : http://www.thefutureofwork.net/blog Book: Corporate Agility ( http://www.corporateagilitybook.com ) Diane Coles Long Beach, California +1 562 989 8327 office +1 562 427 7346 +1 928 449 8998 mobile [email_address]

Getting Real: Transforming the Workplace at SCAN Health

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Getting Real: Transforming the Workplace at SCAN Health