Anyone who does not understand the sunk cost fallacy should not be in management.
You’ve spent $x on office space. You can:
A. Use it, and make your employees hate working for you or
B. Let it go unused, and your employees are happier to continue working for you.
The money is spent either way. The only difference is morale, which does in fact directly contribute to your bottom line.
When you are locked in to a 3/5/10 year lease for the space, that’s not actually an option. Most leases signed pre covid should be up by now but clueless management probably renewed anyways.
And the really big corporations own their buildings. You think the company locked into leases are mad? The companies who own the building are pissed! Some have a multi million dollar building that’s losing value faster than the speed of light.
Or c, keep just enough office space to create rolling “layoffs” as people are asked to return to the office.
IMO, it’s worse than that. It’s not like creating a digital product, paying for a Super Bowl ad, etc. Those desks, phones, computers all still exist and can be sold. Not to mention the real estate! The slightest bit of foresight and planning and these companies could easily offset any costs they’re paying, but no; they only focus on the current fiscal quarter…
We had some slight pushing into going into the office more, but instead of firing people, it was decided to switch to a smaller office space, so the people who like to work in an office can do so, and less money is wasted on a mostly empty office
Understandable that this is not an option for all companies, but insane that people are happier losing talent than at least trying to work something out
When the CEO personally owns the building and leases the office space to the company, that’s not an option.
Then he should act like any other office building owner and rent some space to other companies.
Bonus points if he gets with the future and works to convert some of the building to living space so people don’t have to travel to get to work. Not everybody will want that, but it will appeal to enough to make it worth doing. Shopping malls across the country are being converted to such hybrid spaces so most everything one needs is within a convenient distance.
Bold of you to assume he already doesn’t. But WFH across many industries drives down urban office space value overall.
Then he should act like any other office building owner and rent some space to other companies.
There are more buildings/office spaces to rent than people wanting office space these days. There are LOTS of empty unrented buildings. He would have difficulty even finding a tenant.
Bonus points if he gets with the future and works to convert some of the building to living space so people don’t have to travel to get to work.
An exceptionally small number (we’re talking single digits in the world) of Class A office buildings are good candidates for this, and these are typically done with grants/subsidies from state or local governments. These are only in the most lucrative geographic locations where housing is at an absolute premium regardless of the cost.
For good value of converting office space look at Class C buildings. These are typically older and smaller office buildings (think built in 1910s-1950s). In these, there are ways to make cost effective residential conversions and these are happening by the dozen now.
I work in commercial real estate. Two years before the start of the pandemic, my company considered downsizing our office to have most employees work from home and just come in when needed. We also discussed how we expected the office building market to struggle in the future. (Thinking in 10 years, not two).
Anyways, we got a deal from the property owners to sign another lease, so we stayed put. And now, big surprise, they forced RTO. Someone asked our president about it in a quarterly call. He basically said “we’re never ever going back to WFH and you can quit if you don’t like it”.
So, naturally, we’re struggling with turn over and our headcount is down about around 10% so far.
For many of us, our teams are split up amongst multiple offices so there is no difference from working in the office and working from home. It’s all about that empty lease.
Also! I should add that for many property owners in commercial real estate, they can be “punished” for tenants that go dark, or stop operating at the location, even if they are still paying rent.
For example, say you own a strip mall with a grocery store and a few restaurants. If the grocery store stops operating in that location, there are less customers at the restaurants, making it more likely that they will stop paying rent also.
You would think that of all people, rich CEOs would understand the concept of the sunk cost fallacy.
The money on desks, rent, insurance, etc. is already spent. You’re not getting it back. Asking people to come back to the office “so that it doesn’t go to waste” assumes that you aren’t taking on additional costs for people coming to the office.
You now have worn carpet, doors, pens, paper, etc…money you could have saved if you weren’t such a knob.
Are you really suggesting that you expect CEOs to be competent? Scamming people and exploiting workers doesn’t require skills, except if immorality is one.
Early in the pandemic, our CEO asked why we paid so much for real estate if everyone could work from home. They’ve been trimming leases as quickly as they can.
We’ve been hiring people who live out of state. They only come onsite very rarely, maybe only once a year.
My company did that too, then they replaced us with cheaper labor from overseas.
Ours did that before the pandemic and not my area. Within a year, it went back to what it was because of how terrible the quality was. Now they are dumping all the buildings that aren’t needed and sent a lot of us home. Of course, the main product that my job deals with needs buildings for machines to work so they didn’t get rid of everything. No more corporate, and for now, we are all home for the foreseeable future. I also wonder when they will get the bright idea to start outsourcing again now that it’s been like 7 years…