SUSTAINABLE WORK INNOVATION MEASURING THE IMPACT OF A NEW WAY OF WORKING AT MICROSOFT NETHERLANDS

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1 RESEARCH Briefing Nr. 1 January 2011 SUSTAINABLE WORK INNOVATION MEASURING THE IMPACT OF A NEW WAY OF WORKING AT MICROSOFT NETHERLANDS Eric van Heck, Peter van Baalen, Nick van der Meulen, Marcel van Oosterhout In 2009, for the second consecutive year, Microsoft received the Best Workplace in Europe Award in the Best Large Workplaces category. Competing with 1,350 companies from 16 European countries, local Microsoft offices across Europe won top positions on National Best Workplaces lists in all 16 countries, ranking first in Belgium, Ireland, Netherlands, Norway, Portugal and Spain. The new Microsoft building in the Netherlands is seen as a flagship example of how Microsoft is creating the next generation workplace for its employees. What did Microsoft do to win? What are the characteristics of best workplaces? What are the lessons learned from Microsoft s experiences? We address those questions in this briefing. There were three main reasons Microsoft initiated a new way of working. Firstly, Microsoft recognized that an increasing part of current knowledge work is no longer traditional office work it is about generating new ideas, convincing 1 other people, combining different perspectives, and producing new knowledge. Next generation knowledge workers are seeking inspiration, flexibility, and the use of the newest collaboration tools to create knowledge that has value and provides sustainable results. It s useful to think about their new workplace requirements. Secondly, Microsoft recognized that their operating model was changing from a traditional software vendor to a more service and customer oriented model. This operating model will require new forms of collaboration, teamwork, and customer relationship management. Thirdly, Microsoft recognized that business growth relates to the personal growth of employees in terms of empowering them with the tools and technologies that drive the business forward. 1 1 For more details see the Microsoft Whitepapers: Digital Work Style: The New World of Work (May, 2005) and People Ready: Inside Your Company is a Powerful Force (February, 2006).

2 Microsoft s New Workplace Located at Amsterdam Schiphol Airport, Microsoft s new building illustrates some key characteristics of the next generation workplace. 2 Microsoft employees arrive for work at all times of the day. Depending on their activities, they choose a functional area of the building in which to work. Some will meet customers in the video conference rooms or the trendy café to discuss new products and services, while others are preparing presentations in closed cubicles. One can have brainstorming sessions with colleagues in the open-air terrace garden or the auditorium provides space to present work to larger audiences in an interactive way. No employee not even the general manager of Microsoft NL has a dedicated office. Besides working at the office, Microsoft employees work at home, at the customer, while travelling or at external locations 3. The office is mainly used as a location for meeting clients and collaboration, while the home location is used for tasks that require a lot of concentration, such as intensive reading and analyzing information and process these into documents. 2 Microsoft The Netherlands (NL) is a medium sized subsidiary of Microsoft Corporation and part of the Microsoft European, Middle East, and African (EMEA) region. Microsoft NL was Microsoft s Subsidiary of the Year in Results based on the 2010 survey at Microsoft Netherlands. Among the reasons for working at home employees report the possibility to increase their productivity as highly important, followed by travel time and distance. The ability to (partly) work from home also contributes to a better work-life balance. Microsoft s new building, with its abundance of natural light, reflects the transparency that the employees want to radiate to their colleagues and visitors. The new building also features technology that ranges from the latest collaboration tools to a cooling system that provides lower CO2 emissions. Collaboration technologies include Microsoft Lync one platform, which combines presence, instant messaging, conferencing and enterprise voice capabilities; Microsoft RoundTable a tool for 360-degree video conferencing; and Microsoft SharePoint an integrated platform of server capabilities such as search, web site design, and business intelligence. Our research examined the impacts of this new workplace design on employee working styles and performance. We surveyed Microsoft employees in 2007, before they moved to the new workplace, again in 2008, after they had been in the workplace for six months, and in 2010, after they worked in the workplace for sixteen months. 4 4 The results of 2007 and 2008 are reported in a MIT CISR research briefing: Van Heck, E., The Next Generation Workplace, MIT CISR Research Briefing, Volume IX, Number 9B, September

3 We found that the move to the new workplace in combination with interventions on the people dimension (such as training), the leadership dimension (such as the introduction of new leadership styles) and the virtual dimension (such as the introduction of new tools for any time - any place collaboration) resulted in increases over time in worker productivity and work-life balance and a new equilibrium in work dimensions. Improved Individual Performance Although worker performance is crucial for overall company performance, improving individual performance is not an easy task. 5 Our research examined six dimensions of knowledge worker performance: (i) Employee satisfaction; (ii) ; (iii) Work-life balance; (iv) Job flexibility; (v) Team flexibility; and (vi) Change & Innovativeness, see Figure 1. The results at Microsoft NL showed improvements on all six dimensions between 2007 and For productivity and work-life balance continuous improvements were reported in the period The other dimensions showed in the period slightly lower levels. Figure 1: Levels of knowledge worker performance at Microsoft NL in 2007 (N=268), 2008 (N=293), and 2010 (N=366). Employee satisfaction 4,34 4,43 4,32 3,97 4,04 4,07 Work/life balance 3,52 3,59 3, Job Flexibility Team Flexibility 3,52 3,66 3,54 4,06 4,22 4, Change & Innovation 3,72 3,80 3,77 3,00 3,20 3,40 3,60 3,80 4,00 4,20 4,40 4,60 4,80 5,00 5 See for example research at the Institute for Innovation & Information ( 3

4 How working dimensions influence Table 1 provides an overview of significant changes in working dimensions related to the productivity of Microsoft s knowledge workers. Three working dimensions made a significant, continuous, and strong contribution to workers productivity in the period from 2007 to 2010: (1) Job competence sense that employees felt better equipped to do their jobs after moving to the new workplace, which partially reflects Microsoft s training and motivation of its people. They motivated and trained their employees in such a way that they felt better equipped to do their job after moving into the new workplace. (2) Extrinsic job motivation which reflects forces external to the individual (such as income, bonuses, and career) that affect the employee s level of effort. (3) Empowerment impact, which reflects the level of control and influence the employee has on their department. More empowered employees are positively correlated with higher levels of productivity. In the period the increased level of productivity was determined by four factors, see Table 1: (1) Intrinsic job motivation indicated that aspects such as the content of the work, pleasure to do the work, and self expression; (2) Trust in management indicates a reverse relationship. Employee s that are indicating that they are relying less on their manager (because employees are empowered to act) will reach higher levels of productivity; (3) Relationship with superior in terms of that the employee can count on the superior and that the relationship is friendly; (4) Satisfaction with workplace. Table 1: Significant impacts of working dimensions on levels of productivity in 2007, 2008, and (*) indicates negative relationship. Work Dimension Level of 2007 (M = 3.97, n=254) Level of 2008 (M = 4.04, n=293) Level of 2010 (M = 4.07, n=366) Job Competence Extrinsic Job Motivation Empowerment Impact Self-determination Transparency 3.92 (*) - - Intrinsic Job Motivation Trust in Management (*) Relationship with superior Satisfaction with workplace

5 How working dimensions influence Work-life balance Work life balance increased substantially both in the period and Table 2 provides an overview of the relevant factors. It is interesting to notice that in the period four factors are associated with higher levels of work-life balance: (1) Self determination indicates that employees that are more selforganized, independence, and freedom will have a better worklife balance; (2) Transparency reflects that less learning from each others errors and mistakes lead to higher levels of work-life balance; (3) Distraction at the workplace indicates that more concentration at the workplace relates to a better work-life balance; (4) Job Meaningfulness means that jobs that has less meaningful for employees lead to a better worklife balance. Empowerment and Trust: A New Equilibrium Our broader study (see the Appendix) indicated that a crucial factor for adopting a more digital working style and creating higher levels of individual performance is the way top managers themselves use the next generation workplace: Practice what you preach. If top managers advocate this new concept but stay in their traditional offices (usually on the top floors of a building), the next generation workplace will not be easily adopted by the rest of the company. Table 2: Significant impact of working dimensions on levels of Work-Life Balance (WLB). Work Dimension Level of WLB 2007 (M = 3.52, n=254) Level of WLB 2008 (M = 3.59, n=293) Level of WLB 2010 (M = 3.64, n=366) Job Competence 4.23 (*) Extrinsic Job Motivation Self-determination Control over workplace Transparency (*) Distraction at workplace (*) Job Meaningfulness (*) Relationship with superior

6 The empowerment factor resonates in all our empirical results. 6 Managers need to trust their employees and empower them by giving them first, clear objectives and decision making tools and then allowing them the freedom, flexibility, and discretionary power to make their own decisions and execute operations. The relationship between managers and employees are changing, reflecting the firm s change into a new punctuated equilibrium. 7 Appendix About Erasmus@Work The Erasmus@Work research programme is based on extensive research on workplace innovation and is executed from 2007 to 2010 in the Netherlands. The research was sponsored by De Unie, Microsoft, Rabobank, Essent and Sogeti and was performed by researchers and master students of Rotterdam School of Management, Erasmus University. The research team collected data via interviews, online surveys, and analyzed secondary material such as white papers, web sites, and internal company documentation. Seven online surveys were conducted to measure 6 Lodewiek Jansen, Trust and empowerment: affecting employee satisfaction and productivity of the IT related knowledge worker, MSc Thesis, Rotterdam School of Management, Erasmus University, February the perceptions of knowledge workers and their work dimensions. The first online survey was conducted at the workers union De Unie after they moved into a new building (N=128). The second, third, and fourth online survey was conducted at Microsoft. Employees submitted a survey before (N=254), six months after (N=293), and sixteen months after moving to the new building (N=366) with 117 respondents participating in the first two surveys, and 44 respondents participating in all three Microsoft surveys. The fifth survey was conducted at Rabobank, a global triple A bank headquartered in the Netherlands, where two departments moved into new work spaces (N=191). The sixth online survey was done at Sogeti, where the relationship between trust, empowerment, work, employee satisfaction and productivity was investigated (N=1294). The seventh survey was done at Essent, where an assessment was made of the effects of teleworking on (home)productivity, work-life balance and mobility (N=300). In 2011 new partners such as TNT, Athlon Car Lease, Ericsson, Equens and CBG have joined the research programme. More information can be found at the website of Erasmus@Work at 7 The concept of punctuated equilibrium in organizational literature refers to that most organizational systems in rest are later punctuated by sudden shifts in radical change. 6

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Agenda Avanade Inc. All Rights Reserved. Agenda Introduction Digital Workplace Defined Low Hanging Fruit Digital Workplace Futures Digital Workplace Trends Benefits of a Digital Workplace Digital Workplace Platform Wrap Up 12 years in SharePoint,