Bruce TulganOf RainmakerThinking

The thousands upon thousands of workers who have been laid off in the current recessionary bloodbath have tasted a bitter pill, but is the medicine having any effect at all on the corporate bottom line? Possibly not, says research and management training consultant Bruce Tulgan. Tulgan, author, and CEO and founder of New Haven, CT-based RainmakerThinking, says that productivity has plummeted right along with the employment ranks, and this is largely because corporate America was shortsighted in its hiring policies throughout the Roaring ’90s. The staffing situation, of course, reflects directly on the real estate situation, and he says that just as corporate America may have been wrongly sized, it may also have been wrongly spaced. In an exclusive interview with GlobeSt.com, he explained why.

GlobeSt.com: Needless to say, it’s really tough to measure productivity in the corporate workplace.

Tulgan: The definition is output per labor unit. Increasing productivity means producing more with less. What you’re referring to is value creation. Productivity is easy to measure. Quality is not.

GlobeSt.com: You’ve quoted Labor Bureau statistics that indicate a recent drop in productivity.

Tulgan: One of the signal characteristics of the new economy has been a dramatic and steady increase in productivity throughout the ’90s. Many have attributed this to technology, but my view is that is comes from a new entrepreneurial spirit and better management techniques. What’s noteworthy is that, over the past several quarters, we’ve seen productivity increases first diminish and then drop. It’s a definite shift that’s taking place.

GlobeSt.com: Based on your definition of productivity increases, shouldn’t layoffs allow these corporations to do more with less?

Tulgan: Except that morale is adversely affected, and the time, energy and resources consumed in implementing downsizing can drain productivity. People are not machines, and when they watch colleagues removed from the workplace involuntarily–it has a direct effect on morale.

GlobeSt.com: From the standpoint of productivity, how does the layoff cycle relate to the massive subleasing of space?

Tulgan: Just like companies that downsize find they are wrongly staffed, they may also be wrongly spaced. CFOs are realizing that they got caught in the exuberance of the boom rather than learning from the lessons of the early 1990s. They became overstaffed and over-spaced and promised long-term commitments–both in terms of people and bricks and mortar–instead of taking advantage of more flexible resources.

GlobeSt.com: So the current corrective measures–subleases, or sale/leasebacks, for instance–are a good thing–rightsizing the portfolios. Right?

Tulgan: Yes, if it’s the result of a larger strategic decision. That’s not really the leverage these companies seek since they are not in the real estate business. You don’t control real estate to lease it; you control real estate as one element in a larger productivity strategy–hopefully one that incorporates more flexibility in terms of people as well as space. In terms of sale/leasebacks, these aren’t dissimilar to turning your employees over to a professional employment organization and leasing them back.

GlobeSt.com: You mentioned flexibility. How can that apply to both people and space?

Tulgan: Corporations have to stop making promises they can’t keep. In both sectors, there is a tension between the need for stability and continuity and the need for flexibility. In terms of people, it means hiring the right skill sets as well as the need to staff up and down quickly. In terms of space, it means staying as lean as possible and having access to additional space capacity on flexible terms. One of the problems with real estate–as well as employment relationships–is that sellers are going to seek long-term commitments from buyers. But buyers should be negotiating more aggressively and build in a wider repertoire of expansion options that may not rely entirely on long-term exclusive leases.

GlobeSt.com: You’re playing dramatically with traditional concepts of size and image.

Tulgan: That’s the reality of business today. Promises may be made, but they’re not being kept anymore. During the exuberant days, they should have leveled with people and said that this will last only so long. The same is true in real estate, where people have to remain lean and flexible.

GlobeSt.com: So, in terms of employment, is the day of the 50-year retirement and the gold watch over?

Tulgan: Yeah. I think so. That whole thing was on its death bed when the economy crashed. There are those who cling to the notion of loyalty and longevity, but the front pages should be a reminder that those days are gone.

GlobeSt.com: Are the days of the monolithic corporate HQ also gone?

Tulgan: Companies will always need a strong core group even though most have pared down their core operations. Even if they have a short-term workforce, they’ll need a center of operations. A lot of work still can’t be done virtually. Most companies will require some real estate.