Ep 12: Virtual First, but Not Place-Less: McKinsey’s Phil Kirschner on the Future of Work

I’m excited to welcome Phil Kirschner to episode 12 of our podcast. Phil Kirschner is Senior Expert and Associate Partner of Real Estate & People and Organizational Performance at McKinsey & Company, where he advises executive teams on the future of work, employee experience, organizational health, and post-pandemic workplace strategies. This includes the leadership behaviors and change management systems necessary to minimize resistance and accelerate adoption of new ways of working, and why he's joining us as a hero of hybrid work today. 

Phil Kirschner has been deeply involved in workplace strategy for over a decade, working with various organizations to shape the future of work and employee experience. His passion for this area of research and consulting is evident through his work at Credit Suisse, JLL, WeWork, and now McKinsey. Together, we discussed the evolution of the workplace over the past decade and strategies for making hybrid work successful.

Pioneering Workplace Mobility and Change Management

Phil Kirschner shared his experience shifting over 100 managers from private offices to a more shared workspace around 10 years ago at Credit Suisses in New York City. The shift was influenced by the rise of super tech-forward and highly amenitized workplaces like Google and Facebook, leading other companies to explore workplace mobility. That was when he realized workplace strategy was deeply personal to employees.

Phil Kirschner explained that companies like banks, professional services, and life sciences were more inclined to adopt workplace mobility due to the inefficiency of their office spaces compared to tech firms. These companies focused on making the workplace more diverse and supportive of a range of activities. They were already seeing 20-40% capacity improvements before the pandemic, but COVID-19 just accelerated the need for workplace transformation. 

“Where we sit all day is deeply personal. It’s not just about work anymore.” - Phil Kirschner, Workplace Strategy Leader at McKinsey & Company

Optimize For Distributed Work to Enhance In-Person Interactions

Phil Kirschner believes the future workplace should be virtual first but not place-less. The ongoing debate about whether we are returning to the office, staying at home, or adopting a hybrid model misses the mark. The term "hybrid" typically refers only to where we work—not how we work. 

Phil Kirchsner pointed out that there were already efficiency issues in traditional office setups where employees were mostly in the office, and now the situation is more complex with employees being less predictable due to hybrid work. Hybrid work has exacerbated existing problems such as meeting culture, productivity measurement, lack of digital tool adoption, and decision-making processes.

Companies are focusing on guiding employees on when to be together but are not helping them reimagine their ways of working to prioritize remote collaboration. Phil Kirschner explained that to make the most of in-person time, employees need to be equipped for not being physically together all the time. Teaching employees to be self-sufficient in their work, even when not physically together, is essential for maximizing the value of in-person interactions.

“In order to make more meaningful time when you are together with someone, you actually have to teach employees to not need to be there together. The more that business as usual can carry out remotely, the more that we can be here and do the things that are better when we’re together in-person.” - Phil Kirschner, Workplace Strategy Leader at McKinsey & Company

Implementing Remote Work Strategies in Hybrid Work Environments

Phil Kirschner shared the importance of organizational health on company culture and productivity in a hybrid work environment. He explained the organizational health index is a 20 plus year survey instrument studying the connection between ways of working and organizational outcomes and performance. Organizations with higher levels of health and success are often characterized by a culture of writing things down, transparency in tasks, progress, and processes.

Fully remote companies tend to have great organizational health because of their cultures of transparency through extensive documentation. They have a unified handbook culture that outlines how things are done across the entire organization, allowing employees to access and understand other teams' priorities without the need for multiple meetings or extensive communication. Transparency in decision-making promotes leaders to be more thoughtful, inspiring, supportive, and consultative in their approach.

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Phil Kirschner stated that hybrid companies can learn from organizations with successful remote cultures in terms of communication norms and styles. Giving employees flexibility in when and where they work is not as impactful as establishing clear communication norms and processes for overall organizational health. Having a consistent way of working can allow for more focus time and productivity in a hybrid environment and help employees work more efficiently.

“You can operate in a much more consistent way 95% of the time, but take 5% of choice away to set expectations and free employees up to focus within the framework.” - Phil Kirschner, Workplace Strategy Leader at McKinsey & Company

The Three Gravitational Forces of Hybrid Work

Phil Kirschner likened the challenges of planning for hybrid work to the three-body problem in astrophysics. The three-body problem in astrophysics refers to how two bodies in orbit or with gravity affecting each other is a solvable problem, but just introducing a third body makes predictability impossible. Similarly, the “three gravitational forces” that make hybrid work planning unpredictable are place, time, and activities.

Instead of trying to control all the variables, Phil Kirscher advised companies to “embrace the chaos and learn from it.” He believes companies should plan around uncertainty, build muscle for improving employee experiences, and encourage incremental improvements rather than striving for perfection.

“There will never be a fixed or predictable answer to a very flexible and dynamic problem, so we must embrace the chaos and learn from it.”- Phil Kirschner, Workplace Strategy Leader at McKinsey & Company

According to Phil Kirschner, companies that are transforming their ways of working are doing the following:

1. They are naming someone responsible for the employee experience, transcending partnerships between HR, IT, and real estate. Leadership is becoming more clear in understanding the employee experience much in the way that we think about our customer experience.
2. Executive leaders are acknowledging that COVID-19 has changed everything and are focused on making tomorrow better than yesterday through experimentation and learning. There are experiments being conducted in areas such as technology, physical space, and processes, with leaders being transparent about the results and willing to make changes based on feedback. 

Phil Kirschner emphasized that anyone claiming to have everything figured out is not being truthful, and that we are all essentially customers of our company's work environment product.

Real Estate Trends in Corporate Spaces With the Hybrid Work Shift

Phil Kirschner shared current real estate trends in corporate spaces. There is an oversupply of office space, especially in big cities like New York, leading to increased vacancy rates. Some of these office spaces need to be upgraded to meet the evolving needs of employees, such as providing community spaces and flexibility. And there’s a drastic need for better technology throughout the entire experience. Phil Kirschner pointed out a disconnect between high-tech advancements in some areas (e.g. hotels) and outdated procedures in others (e.g. office buildings) as an example.

Sustainability is also a key concern, with cities like New York implementing laws to improve energy efficiency in buildings. Older buildings need to be upgraded to meet new energy efficiency standards. With that comes more focus on office use optimization and occupancy rates. Phil Kirschner referred to a bank in Asia as a prime example. They call their workplace program “half the space, twice the experience.” Office space ratio is inverting to focus more on group spaces rather than individual spaces. 

Lastly, Phil Kirschner explained the impact of the exponential growth of third places (non-home, non-office spaces) like Starbucks and airport lounges. Workspaces closer to where individuals live are growing and can help support the notion of using the office for a more simplified purpose. Offices should identify their strengths and limitations and offer alternative workspace solutions for different tasks, with employers embracing the idea of employees working together outside the traditional office setting. There is a need for infrastructure and booking technology to support flexible workspace arrangements.

The Future of Work: Hybrid Work, AI, and the Gig Economy

Phil Kirschner emphasized that Artificial Intelligence and the gig economy are still transforming work and that solutions addressing hybrid flexibility shouldn't ignore these ongoing trends that have existed pre-Pandemic. Companies reverting back to traditional ways of working should consider the increasingly fluid and freelance nature of the workforce. AI is making it easier to break down work into smaller tasks and outsource them, contributing to a more fluid workforce. Planning for everyone to be in one place or returning to the old ways of working may not be feasible given the evolving nature of work trends.

Phil Kirschner also emphasized how AI can be used to create greater transparency and productivity within organizations. AI can help personalize content, improve productivity, and provide tailored suggestions for actions by analyzing meeting notes and interactions within an organization. Future applications of AI could include automated processes that suggest personalized actions based on individual roles and responsibilities, ultimately enhancing productivity and outcomes within a work setting.