What (and where!) is the future workplace?
Empty office buildings, stagnating or ill-fitted branches, WFH standards and innovation in tech mobility have begged us to ask fundamental questions of long-standing norms of the ‘workplace’. Traditional branch and HQ office structures are being challenged. The emerging model is digital with physical presence targeted or by exception, leading to reduced investment on fixed, long-term assets (or liabilities, leases and contracts) in favour of physical presence flexibility. Our research has identified that asset light Leaders are planning and actioning bolder workplace strategies – including the shape of their physical footprint, their strategy for the office of the future, and their aspirations to reduce costs and capital tied up in premises which no longer provide a viable return.
The physical footprint of banks and insurers was already in a state of reduction prior to COVID-19. The bank branch network has been reducing by 3-8% YOY in developed markets, with a strong likelihood of continued reduction in the next years. Both bank and insurer Leaders identified in our surveys were nearly 3 times more likely to have bold moves planned for their physical footprint than the followers – with 1 in 10 even planning for more than 20% reductions.
To achieve and accelerate these changes, there are three common levers that banks and insurers are pulling:
- Redefining the role of the branch/sales office: Shifting focus on rebuilding the branch/sales office as an advisory centre, as less complex services move to digital and self-service channels .
- Share infrastructure, asset light presence: Piggy-backing on infrastructure (such as challenges using incumbents ATMs), shifting cost to customers for non-core services, coordinating partnerships to access extensive real-estate networks (e.g. post offices) for specific financial services, and smaller simpler branches/sales offices as cash-less accelerates.
- Virtual Banker: Servicing agents becoming generalists and cutting across multiple channels (e.g., branch, digital, call centre) to provide enhanced experiences while providing necessary workforce flexibility.
Further to the changing shape of the branch and sales office, office costs are also in the firing line for many financial service organisations. The good news being the disproportionate amount of capital tied up in long-term real-estate commitments may no longer be a pre-requisite for delivery of work and staff engagement. Today’s workforce now want to choose when to visit the office and when to work from home.
Whilst this shift to virtual may mean less office space needed per person, it has also given rise to new thinking and other opportunities to reduce costs. Distributed workplace models where corporate facilities are relocated into suburban areas with fewer costs are now more feasible as the lifestyle focus has shifted from the central business district and norms for commute times are questioned. More flexible models such as pay-per-use or renting out unused space are being implemented to best align cost with capacity requirements as they change.
Despite these factors, many financial service organisations are still planning to increase capacity. Our research shows that Leaders are bolder in their aspiration for change and considering or pursuing use of multiple strategies to reduce office footprint and/or cost.
Conclusion and what’s next
Leaders and Laggers are making different choices on what work adds the most value to their businesses and how do they best organise their workforce and utilise their workplace to get it done. In almost every category we surveyed laggers are further behind in adopting asset light concepts.
Although, it may be unfair to compare narrowly focused product challengers to multi-product retail incumbents, we believe the advantages are clear. Asset light operating models get better results and have greater efficiency advantages. Challengers are building operating models that focus on lighter assets that drive a greater source of competitive advantage. We believe this is part of the reason that challengers have higher market valuations. Many organisations should question and challenge themselves:
- What work creates the most value for my business?
- How do we go fast?
- What is the purpose of my workforce?
- How do we scale up and down at lower cost and quicker?
- How do we organise to react quicker to the market?
- Where should we source our capabilities from?
- What is the purpose of my workplace ?
- How should we best utilise our real estate?
For more information on whether you are locked into the wrong assets please get in touch with one of the contacts below.
