Green Buildings and Productivity

Healthier space need not be new space. In fact, some new buildings are extremely unhealthy as chemicals leach out into the air from glues, carpets, concrete and paint. There is no reason this must be the case. The cost to provide healthier environments is modest compared to the benefits. Healthier buildings reduce sick time and increase productivity, making it easier to recruit and retain employees. The results provided here are based on a survey of over 500 tenants who have moved into either LEED or Energy Star labeled buildings managed by CBRE. It is part of a much larger study that includes details on operating expenses, leasing and management available from the authors or www.josre.org INTRODUCTION: Do green buildings improve productivity? While we now have some evidence on rental premiums and occupancy differences for green buildings, defined as including both Energy Star labeled and/or LEED certified at any level, from several studies we know little about the real impact on productivity for tenants. There has been one widely cited early study by Greg Kats (2003) which had a sample of 33 green building projects that suggested present value benefits of $37 to $55 U.S. dollars per square foot as a result of productivity gains from less sick time and greater worker productivity. These resulted primarily from better ventilation, lighting and general environment. Here we greatly expand our scope of analysis and re-visit the productivity issue. Unfortunately one impediment to answering this question is the problem of measuring productivity. Studies in the past that dealt with typing speed or output are not quite satisfactory for those who wish to know about overall productivity in better environments. Here we review some of the literature on measuring productivity in office environments, then we examine some of the attempts to monitor productivity and last we examine our own efforts to determine if better environments result in greater productivity. This is part of a larger joint study by the authors with details available by request. Subjective Productivity Measurement An excellent review is provided by Kemmila and Lonnqvist (2003) where they state “Productivity is an important success factor for all organizations. Improvements in productivity have been recognized to have a major impact on many economic and social phenomena, e.g. economic growth and higher standard of living. Companies must continuously improve productivity in order to stay profitable...There are several different methods for productivity measurement. Most of the methods are based on quantitative data on operations. In many cases, it is quite difficult and sometimes even impossible to collect the data needed for productivity measurement. An example of this situation is the work of professionals and experts. Their work is knowledge-intensive and the inputs and outputs are not easily quantifiable. Therefore, the traditional productivity measures are not applicable...An old but scarcely used approach to productivity measurement is subjective productivity measurement. Subjective productivity measures are not based on quantitative operational information. Instead, they are based on personnel’s subjective assessments. The data is collected using survey questionnaires.” Essentially, Kemmila and Lonnqvist point out that measuring productivity directly is a great challenge. This is because direct measurement for professionals in an office environment requires the ability to monitor things like: 1) Ability to focus and think, synthesize and add value to the firm, 2) Ability to measure the contribution of individuals that likely work in a team environment. 1 See for example Miller, Spivey and Florance (2008) or Eicholtz, Piet, Nils Kok, John Quigley (2009) or Fuerst, Franz and Patrick McAllister (2009). 2 Kemppila, S., & Lonnqvist, A. Subjective Productivity Measure. Institute of Industrial Management, 1-8. 3) The ability to monitor quality of work as well as efficiency and output. While productivity itself could be measured using financial and economic measures for the entire system, firm or division using statistics like revenues, billable hours, net income or market share gained there are leads and lags from the input of capital and labor to the output effects based on measureable indicators. Even if these indicators can be measured in real time there is the question of external and internal influences that must be controlled. Did the competition change material costs in some way? We do not live in a status quo world so controlling for external changes is a challenge. Last, assuming you could control for all external changes, you need to be able to divvy up the output by internal inputs as well as vendors and others that contribute to the firm’s revenue generation or production of services. Direct measures may be useful such as customers served by a cash register operator or calls taken by a customer service representative and certainly management does use such measures. But often these are hard to apply to professional service environments where many participants contribute to a process and service. Most commonly we use indirect measures such as: absenteeism hours worked tardiness safety rule violations number of grievances filed employee turnover The reason these are indirect measures is that managers often assume that hours worked equates to productivity. Yet, there are many examples where workers are not efficient and hours worked do not equate to productivity. This is one of the problems with managers allowing more telecommuting. Telecommuting requires managers to use other measurements of productivity beyond hours worked such as projects completed or in the case of lawyers, billable hours. In a fairly recent study in Australia a law firm tracked the before and after sick days after a move to a 5 green star rated building, a high rating in Australia, and found sick days reduced by 39% overall to .28 days per month. That change alone cut the average monthly cost of sick leave significantly. Other productivity gains were said to have “gone through the roof.” But this is one case study, and we need to know if we can generalize from such indicators. (Dunckley 2009) Drucker (1999) also suggests that knowledge-intensive work is not easily quantifiable. He points out the common delays in outputs or results from inputs or the variations in quality and the lack of a measurement culture among management. There is also the problem of controlling environments such as interruptions to work by colleagues or the general public or social interactions with clients that may support long-term or team success but take away from current short-term productivity. We are left with indirect and subjective productivity measures in most cases, based on subjective assessments. Subjective productivity data is usually collected using survey questionnaires gathered from employees, supervisors, clients, customers or suppliers. Survey data is subject to all sorts of biases so any survey data including the qualitative data 3 Perhaps the challenge of developing new ways to measure productivity within knowledge based work environments is too great for management researchers to solve. provided here should be repeated and based upon as large and representative a sample as possible. Objective and Subjective Productivity Measurement Halpern et al. (2001) performed a study to quantify the differences in productivity between current, former and never-smokers in the workplace. The targeted sample was 300 employees at a reservation office of a major U.S. airline. The study consisted of three types of productivity measurement, including assessment of absenteeism, objective assessment and subjective assessment of productivity. The reservation center collected data on number of attendance interruptions, absenteeism days, and lost hours caused by both absenteeism and work injury as an assessment of absenteeism. The reservation center collected other objective productivity measures based on an employee’s performance: Revenue calls handled—The number of calls leading to a sale handled per month by an employee. Ticket delivery system segments—The number of flight segments arranged by reservation personnel for delivery. Call work time—The average time a reservation clerk is unavailable between calls. Hours lost—The average time a reservation clerk is unavailable between calls without a sanctioned excuse. Potential flown segments—The total number of flight segments booked in the past scheduled to fly during the time period reviewed. In addition, five measures of productivity were assessed as performance ratios: 1. Dollar amount per revenue call handled. 2. Dollar amount per productive sign-in time. 3. Potential flown segments per revenue call handled. 4. Potential flown segments per productive sign-in time. 5. Ticket delivery system segments per productive sign-in time. The Health and Work Questionnaire (HWQ) assesses productivity subjectively and consists of 24 questions. Six subscales were identified and include productivity, impatience and irritability, concentration and focus, work satisfaction, satisfaction with supervisor, and personal life satisfaction. The results showed current smokers had significantly greater absenteeism than did never smokers, with former smokers having intermediate values; among former smokers, absenteeism showed a significant decline with years following cessation. Former smokers showed an increase in seven of 10 objective productivity measures as compared to current smokers, with a mean increase of 4.5%. Workplace productivity increased and absenteeism decreased among former smokers as compared to current smokers. If smoking affects productivity then so may air quality in general, something encouraged by better ventilation in green buildings. Evaluating Productivity Measurement In this paper, Haynes (2007a) evaluates different methods of assessing productivity. The author presents historical context to office design and reviews appropriate literature. The review aims to establish the limitations in defining office productivity and the range of approaches to its measurement. Aronoff & Kaplan suggest using absence measures, activity logs, and attitude and opinion surveys, along with direct measures. Hadi believes productivity measures should be split into three sections: quantifiable and tangible measures, indirect measures, and organizational measures such as teach-work and creativity using data collection methods such as questionnaires, observational techniques, structured interviews, focus groups and job/task analysis. Oseland believes productivity measures should be split up into performance measures, self-assessed productivity, staff costs and profit. The Office of Real Property suggests several measurements of productivity including turnover, absenteeism, self-assessment of workplace effects on one’s own productivity, time-tracking devices such as long books, overtime and project hours, observed downtime for modifications, complaints and interruptions, anecdotal evidence on workplace suitability, and finally churn costs which include employee downtime, space move costs, and time to execute a move and get a person back up and running. The review of the literature reveals that there is no universally accepted measure of office productivity but recent researchers have adopted the self-assessment approach. Haynes’ followup paper (2007b) establishes links between real estate and facilities performance metrics and the organizational performance metrics. The aim of Haynes’ follow-up paper was to provide a validated theoretical framework for the measurement of office productivity. Haynes suggests that office productivity can be linked to the physical office environment through office layout and office comfort. It can also be linked to the behavioral environment, which likely has a greater impact on office productivity. Haynes established a model to represent the concept of office productivity with the dimensions of both the physical and behavioral environment. His model used seven distinct components to represent office productivity: 1. Distraction (interruptions, crowding, noise, privacy, overall atmosphere) 2. Environmental services (ventilation, heating, natural lighting, artificial lighting) 3. Office layout (personal storage, general storage, work area, desk, overall office layout, position of colleagues, circulation space) 4. Interaction (social interaction, work interaction, physical security, creative physical environment) 5. Designated areas (informal meeting areas, formal meeting areas, quiet areas) 6. Comfort (décor, cleanliness, overall comfort) 7. Informal interaction points (position of equipment, refreshment areas) Evidence from the study proves that interaction and distraction have the greatest negative and positive influence on self-assessed productivity. The goal is then to find the optimum balance between encouraging positive interactions while reducing negative distractions and to allow group collaborative working to coexist with individual private working. This can only be achieved if the office designers can identify and quantify the impact of the behavioral environment on office occupiers’ productivity. 4 Aronoff, S. and Kaplan, A. (1995), Total Workplace Performance, WDL Publications, Ottawa. 5 Hadi, M. (1999), “Productivity in the Workplace,” Facilities Management World, No. 17, pp 19-21. 6 Oseland, N. (1999), Environmental Factors Affecting Office Worker Performance: A Review of Evidence, Technical Memoranda TM24: CIBSE, London. 7 Office of Real Property (1999), Workplace Evaluation Study: Introducing the Cost Per Person Model, U.S. Government Office of Government Wide Policy, Washington, D.C. Recent Workers’ Productivity Gains From Technology or Economic Pressures According to the results from the 2008 White Collar Productivity Index (WPI), the only study of its kind providing long-term data on how people actually spend their time at work, there was a reduction in the time people are spending on low productivity tasks during 2007 as compared to both 2006 and 2005. According to Bary Sherman, CEO of PEP Productivity Solutions, ‘The WPI study indicate[s] that America’s white collar worker are becoming smarter and more effective in their day-to-day routines. They appear to have a better grasp on how to use technology as a productivity tool and are getting more of the right work done in less time. Until this year we have seen a steady increase in non-productive time usage every year since we started measuring office productivity in 1994. It will be exciting to see how this trend plays out over the next years.’ The WPI study generated serious interest from academia and organizations when it was first made public in 2005, presenting annual statistics collected since 1994 from over 3,200 employees (administration, staff, middle management and senior executives) in major U.S. companies representing a variety of sectors, including the manufacturing, automotive, finance, biotech, education, insurance, accounting, and technology industries. The core subjects measured by the 2008 WPI study are handling e-mail, handling paper mail, attending meetings, working overtime, delegating responsibility, dealing with interruptions, looking for lost data, managing work backlogs and planning work. What may be happening is that as the economy weakens we are forced to work smarter and more efficiently. In other words, highly profitable firms or economies allow more goofing off. The entire WPI, expressed in hours per week, per person, is as follows:” ISSUE YEAR 2006 YEAR 2007 % CHANGE Handling Email 9.4 hours 7.3 hours -22% Handling Paper Mail 1.2 hours 1.0 hours -17% Attending Ineffective Meetings 3.0 hours 2.2 hours -27% Working Overtime 5.8 hours 4.4 hours -24% Delegating Work 4.3 hours 3.0 hours -30% Being Interrupted 4.6 hours 3.8 hours -17% Looking for Information 1.6 hours 1.3 hours -19% Working on Backlog 3.0 hours 2.2 hours -27% Planning Work 2.0 hours 2.1 hours +.5% 8 PEP Productivity Solutions, Inc., (2008, May 1). Office Workers Make Gains In Productivity. Retrieved June 22, 2009, from PEP Productivity Solutions Inc. Web site: http://www.pepproductivitysolutions.com/index.cfm/PageID/7/ViewPage/News/fullarticle/10 Telecommuting and Productivity Telecommuting is becoming more prevalent in today’s workplace. It has evolved for various reasons for employees and employers. Employers may opt to allow their employee to work from home when rush-hour traffic is a true hindrance in arriving to work at a set time, hence reducing commuting time and potentially increasing productive work hours. Working mothers who cannot afford to maintain a full-time job and a full-time household now have access to achieving the goals of home and work through telecommuting options. In addition the working student or professional that seeks to further his education is more valuable to the company working from home where he can still maintain his workload and focus on scholastic achievement simultaneously. Many workers, who for various reasons, prefer or need to work from home, when permitted assist firms in the retention of successful talent. Thus the prevalent need for telecommuting forces recognition of its pertinent impact on worker productivity. Gary Alan Jensen of the University of Phoenix in his study examined employee and manager awareness of home-office distractions and productivity. Jensen found that, “a positive relationship exists between the level of managers’ self reported awareness about telecommuters’ home-office environment distracters and managers’ self-reported levels of telecommuters’ productivity.” (Jensen, 2008) The managers’ mean reported that the immediate manager had a low level of awareness of home-office distractions for the telecommuting employee. His study showed that even when managers were aware of these distractions, they did not rigorously attempt to solve the problem. Thus management acknowledged the changing workforce and is learning to manage the telecommuter. The telecommuter is becoming a growing percentage of the workforce, so if management does not determine how to effectively manage them now and implement new policies, there will be an insurmountable dilemma in the future. Health and Productivity Health care maintenance has a close relation to an employee’s productivity level. In times of economic turmoil, Taggart states that employers reduce company health care premiums to alleviate uncontrollable financial losses in other areas. When in actuality states Taggart, “the cost per month per employee for wellness programs can range from as low as $2 (more traditional health promotion only) to $10 depending on the complexity of the program.” Companies neglect the importance of the health of their workforce when it is in competition with financial incentives of reducing company health care costs. Perhaps the question to ask is “How much will NOT investing in wellness cost my business?” 9 Jensen, Gary A. (2008).Telecommuting productivity: A case study on home-office. Dissertation Abstracts International Section A: Humanities and Social Sciences, OECD Manual, 283. 10 Taggart, Nina (2009, June). A New Competitive Advantage: Connecting the Dots Between Employee Health and Productivity. . Benefits & Compensation Digest, 522291 541612 923130, 20-23. 11 Ibid The company obtains its cost reduction through passing-on higher deductibles and out-ofpocket expenses to the employee. Often the employer rationalizes that this shift of liability grants the employee autonomy over their own health, but in periods of economic hardships many employees also have a decrease in expendable cash flow and health care costs can be one of the first expenses to be eliminated. Employees realize the benefits of a healthy mental and physical state of being, and prefer its rewards versus the companionship of stress and physical ailments. Therefore, through the implementation of employer sponsored wellness programs “employees can and will change their lifestyles if approached in the right way and consistently reinforced through the process.” Taggart believes that company wellness programs must be aligned with the preferences of the employees. If programs are viewed as beneficial to employees’ health, there can be a two-fold advantage for the company. First, worker productivity will improve in the future for the organization. Second, company morale will increase due to the company’s interest and success in the betterment of employee health. Successful wellness programs focused on the employee include time management training, conflict resolution classes, and team-building exercises. Yet some alternatives are coordinated to assist with external employee matters, such as: child care, legal assistance, and elder care. All approaches should be available through numerous access points, whether via online learning, telephone, one-on-one, or group activities, so that all employees can utilize these resources despite their personality type. Today’s work culture is team oriented, hence if one employee is absent or not working at full productivity, then the team is hurt exponentially. If employer implemented wellness programs can reduce absenteeism, increase presenteeism, (when employees come to work in spite of illness), decrease employee turnover, and increase employee retention then the financial benefits to the company will eventually outweigh the present costs of health care premiums. “The challenge for employers is to help employees begin to connect productivity with being in better health, greater life satisfaction, and being physically active.” Temperature and Productivity Many office studies were performed in call centers where the time required talking with customers, the processing time between calls with customers, and other relevant information were automatically recorded in computer files. In these studies, the speed of work, e.g. average time per call or “average handling time,” was used as a measure of work performance. Laboratory studies typically assessed work performance by having subjects perform one or more tasks that simulated aspects of actual work and by subsequent evaluation of the speed and/or accuracy of task performance. Seppanen et al (2009) calculated the quantitative effect on performance of temperature. “We calculated from all studies the percentage of performance change per degree increase in temperature, positive values indicating increases in performance with increasing temperature, and negative values indicating decreases in performance with