Replacing the traditional office with an open environment linked by computers can cut real estate costs and increase productivity. But if it's not designed right, it can create chaos as well

Pink Floyd's latest CD will hit the stores in a normal enough cardboard casing, except for the red light along its side that flickers at irregular intervals. That psychedelic effect is becoming a bad trip for Fran Griffin, administrative head of special packaging for AGI Inc., a $74-million package manufacturer that is producing the case.

Griffin is discussing the Pink Floyd job with a pressman on the plant floor when she is paged. Retrieving the message, she learns that the film for the Floyd job is going to be a week late. Griffin signs onto one of the 32 unassigned terminals in the facility and E-mails the gluers, die cutters, and production scheduler, sending a ripple of information across the plant.

At AGI's Melrose Park, Ill., headquarters, there are no traditional private offices. Instead, workers operate in an open environment with few walls and doors. No matter where they are -- at a co-worker's desk or on the plant floor -- they have access to their computer files from any terminal or PC on the premises. Those who use laptops can plug into the company's network at any of 250 data ports. Many employees carry pagers because, like Griffin, they spend 80% or more of their time away from their desks, solving problems on the fly.

That's just what CEO Richard Block had hoped for when he invested nearly $1 million in a "nonterritorial" work environment. By tearing down the physical barriers between workers and providing them with the information technology to work wherever necessary, AGI sought to eliminate hierarchies and to foster collaboration.

Several big companies have experimented with nonterritorial workplaces. In 1991 AT&T began a massive initiative to equip market representatives with laptops and cellular phones. Now when reps need an office, they call ahead and reserve one for the day.

At the Manhattan and Venice, Calif., offices of Chiat/Day, the $893-million advertising firm, no one, not even founder and CEO Jay Chiat himself, has a private office; instead, there are open, unassigned cubicles and meeting rooms. The only personal space provided is a set of lockers for belongings. Laptop data ports are located about every 30 feet, even in the cafeteria. Employees carry small Rolm phones that clip onto their belts or shirts.

One motivation is real estate savings. The average area per U.S. worker is 200 square feet; alternative work environments have allowed some companies to halve that. In cities like New York and Los Angeles, where office space can run as high as $70 a square foot, the savings can be substantial. AT&T reported facility savings of $80 million in 1994, 20% of which came from reductions in real estate costs.

There's also the promise of higher productivity from a more dynamic, mobile workforce. Research shows that workers are most productive in open work spaces, as long as they are provided with small private areas where they can escape from the group. Many tasks, such as accounting or letter writing, still require privacy and solitude.

At AGI, Block hoped that by redesigning his company's work space, he could encourage more participative problem solving. And the strategy seems to be working, though some executives complained at first that they didn't have enough privacy. For example, when Jim Oppenheimer, vice-president of sales and marketing, had to analyze the breakdown of a price quoted to a client, he'd sometimes want a door to shut. But now nearly everyone at AGI has embraced the open environment.

Block joined AGI as vice-president of sales in 1970, a year after the company was founded, and took control of the then $30-million company through a leveraged buyout in 1987. The old labyrinth of hallways and closed offices didn't suit Block's freewheeling management style. He ordered up an open environment where workers could see one another and respond together to problems.

The new offices are in a square with an oval track in the middle. Outside the oval is open space filled with modular office furniture; there are no walls, and the area is flooded with sunlight from skylights. Inside the oval's perimeter are executive offices with glass walls and no doors. And in its very center are conference rooms.

Block recognized early on that if he wanted his employees to work anywhere and everywhere, he had to make information accessible from all points in the facility. So he installed data ports everywhere, from individual workstations to conference rooms to executive offices. He also considered a $15,000 cellular-phone network that would have allowed his roaming employees to carry small phones with them at all times, but he balked at the expense. For now, workers rely on pagers, voice mail, and a VAX computer network to keep them in touch at all times and from anyplace in the building.

The result is that ad hoc teams are the rule. When AGI's Atlanta account executive, Allen Vaughn, learned during a visit to headquarters that a client was disappointed with the color quality of a package, he brought his PowerBook Duo 280c down to film production and quickly assembled the production planner, printing supervisor, and a finishing supervisor. Then he called up his client file, including all correspondence, so he could compare the client's requests with AGI's job-ticket specifications. Once the group members solved the problem, they called the client for final approval.

And when Mike Panveno, director of production, is in a "huddle" room with a pressman and has a question about the specifications of a particular package, he can turn to the nearby computer to look up the job's shipping date, the run volume, the kind of paper required, and whether that paper is in stock. He can also use the inventory-management program to check on raw materials and finished goods.

Block himself spends as much as 75% of his time walking around the perimeter of the facility, stopping to talk with designers, pressmen, and clients. When Ronnie Rumatz, a pressman, asks Block during one such tour about the success of AGI's multimedia packaging, a market that the company has only recently entered, Block replies, "Let me show you." He uses the terminal on the plant floor to call up the sales numbers. The computer shows that for the first two months of 1995 multimedia sales are up 81% over the previous year's.

Block says that one of the greatest rewards of the redesigned work space is that clients enjoy coming to AGI for on-site press approvals. One IBM representative uses her laptop to dial into her company's server so she can work while she waits to see press samples of her company's packaging. Notes Block: "Whenever I hear a customer say that he or she enjoys the space, I hear the cash register ringing."


Innovations in the work environment are still rare among manufacturers like AGI. More typically, they come from sophisticated professional-services firms like Axiom, a $15-million management consultancy, which this year moved into a restored warehouse in San Francisco.

Consultants now walk into an open space dotted with unassigned cubicles. They may choose to work in a cubicle, in a team room, in the lounge area, or even under the basketball hoop that hovers 10 feet above the ground of Axiom's exterior courtyard. Explains CEO Michael Korchinsky, "This should be a place where people are defined by their responsibility and role, not by where they sit."

The software-code writers at Aspen Tree Software also need plenty of opportunity to interact with one another. The $2-million company helps businesses such as American Express, Marriott, and Neiman Marcus computerize employee interviews. Producing the software is a team effort. At Aspen it's not uncommon to find a software-code writer sitting with a laptop on the patio, working out the details of a program with an interview scriptwriter.

To encourage such conversations, company president Brooks Mitchell gutted a Victorian house in Laramie, Wyo., set up a server in the basement, and told his 22 employees to plug in their laptops anywhere. "I want my company to feel like a family, and a family lives in a house," he says.

A restored bunkhouse serves as a bed and breakfast for company visitors. It's wired, too. Prospective clients who stay there often wake up to a country breakfast and a sales presentation on a laptop.

But sometimes workers don't fit so comfortably into nonterritorial work spaces. Work/Family Directions Inc., a $44-million consulting agency in Boston that addresses employee work-life issues, recently began a pilot program in which its 34 telephone counselors work in 6,000 square feet of unassigned space. The space was designed so that workers could sit in any of the cubicles, which were all equipped with computers and phones.

The problem was that Work/Family Directions didn't have a good way of routing incoming calls to the right counselors, who were always moving. "We learned that we need to do more reality testing before implementing a radical change," says principal Charles Rodgers.