At first glance, this week’s title may sound a bit incongruous – what does recruiting have to do with space planning? Well, depending on who you talk to, there are many who say that a spacious, modern, and conveniently located office is a great recruiting tool, and that the extra cost incurred in having such an office needs to be offset against the performance benefits of getting better people.
Personally I’ve always found this connection a bit of a stretch, and that good staff are more motivated by salary and a strong company identity (particularly a recognizable brand). But I have to admit that a certain proportion of employees are indeed willing to offset higher wages against the prestige of working in a nice office. Without being too specific, I find that younger people care more about a modern and spacious office, while older employees value convenience, i.e., proximity to the station and/or to home.
These days in Tokyo, outside of going to a really high-end building, a good B-class office near the station is going to cost you around JPY 45,000/tsubo (3.3 m²) and you can calculate a spacious interior at around 3 tsubo per person. This means that a typical 50 tsubo floor plan can accommodate around 12-15 people, two meeting rooms, and a good-sized reception space. This is the typical size and configuration requested by hedge funds, software company representative offices, and government representative offices. Not the absolute high end – but good enough to be impressive.
So, while you will pay JPY 2.25 million for a convenient location and modern-looking office, by moving a bit further out from the station (10 minutes or more) and taking a lower-end B-grade building, you can get the same amount of space for around JPY 1.25 million or less per month. That's quite a big difference, and the question is whether the extra JPY 1 million a month for rent is worth the perceived gains of a better recruiting flow?
To answer that, I guess it depends who you ask. Interestingly, I did some training with the employees of one of my companies last year, and in the course, one of the goals the Japanese staff had set for themselves was relocating to a nicer office once they got the profit margins up. So for them a nice office is just as important as higher salaries.
This being the case, changing offices may make a difference. A situation where I can personally see an office move having effect is where you might already be in business rather than just starting up, and the staff are stale – thus causing employee retention problems. Coupling a comprehensive employee team-training program with a move to a nicer building might provide the catalyst you need to re-motivate your employees. Certainly I have done it before, with good effect.
But a pragmatic boss will be thinking not only of the rent but also the other costs of having an attractive office. It pays to remember that landlords of high-end buildings demand larger deposits. Nowadays it is normal again to be paying 12 months of deposit on a good building – which can tie up JPY 27 million in long-term deposits for the JPY 2.25 million per month rental we mentioned before, versus JPY 7.5-15 million for the B-grade building further from the station. Then of course there is the cost of western-size furniture, walls, fittings, etc.
Perhaps a more relevant question to ask than whether high-end offices pull better quality recruits is whether or not you should be looking at basing your office in Tokyo at all. While most smaller firms do better when they are located in a single room with a single leader, larger firms of 50+ employees can still thrive if they split up their operations. The idea is to keep sales close to the customers, which typically means within the city center, while operations can be located in a more distant suburb.
As the CEO it may sound counterintuitive to do this, especially if you’re still ramping up sales. But you probably need to ask yourself, at what time should you cut the umbilical cord? If you’ve done a good job at training new managers who are loyal to the company, then they may actually do better if they are given the responsibility for their part of the business. And for a trial period, you can still attend both offices – although this can be disruptive, especially if you’ve been very “hands on.” The other thing is, that if you have a good, proactive distributor, then you really only need one good manager for the sales office to keep it functioning properly. However, in a direct sales team, strong leadership is needed, and the CEO should be there – or a very talented VP of sales.
Technical and back office employees can quite easily be accommodated in an outlying suburb. Indeed, for many engineering companies, being in a slightly “remote” suburb of a large city can be a great retention tool. Over time as good employees age and have families, they tend to look for homes close to their office. Thus, a technical or supply center in Kanagawa, Saitama, or Chiba (sorry about being so Tokyo-centric) can provide employees with the attractive option of not having to commute and also being able to buy a nicer house for less money than if they lived closer to the center.