October 11, 2015

Pitney Bowes World Headquarters Sale

I applaud Pitney Bowes’ recent decision to sell its World Headquarters. In fact, I wish I had made it years ago. The Pitney Bowes World Headquarters was designed in the early 1980’s, when the Company’s Chairman and CEO Fred Allen decided that it was important to consolidate many Pitney Bowes Stamford facilities into a single site and to become the anchor of a revitalization effort for Stamford’s South End.

That revitalization effort was delayed from the 1980’s until the mid 2000’s, because of dysfunctional state environmental policies and lack of local political leadership, until Dannel Malloy became the City’s Mayor in 1995. Mayor Malloy (now Governor of Connecticut) did an outstanding job supporting many separate initiatives to upgrade the South End, including the construction of a fire station in a building donated by Pitney Bowes, the deployment of police officers to address crime issues, and the inducement to absentee property owners to clean up vacant and abandoned properties.

The Headquarters building, a magnificent structure designed by world-famous architect I.M. Pei, was not an optimal site for a large business by the time I became the CEO. The offices were too big, and there were an insufficient number of enclosed conference rooms, which caused company employees holding relatively small meetings to leave the building and go to a local restaurant or conference center.

The Headquarters’ layout tended to isolate people from one another, rather than bringing them together. The distances between two corner offices at opposite ends of the building are nearly ¼ mile, which reduced contacts among departments and between corporate and business unit people. The layout also encouraged conflict and exaggerated hierarchies, because there were 14 office sizes. Decisions about who received the “privilege” of a larger office ended up creating nasty battles.

Executives were also isolated from everyone else both physically and emotionally, and had to make an extra effort to walk to the non-executive spaces. I made that effort by having breakfasts and lunches in the cafeteria, whenever possible, and by taking coffee breaks in the cafeteria whenever I could. My visibility was noted, because few other executives made the extra effort to walk the long distance from the executive suite area to the cafeteria.

Employees throughout the building and the region would signal the executives’ isolation by referring to them by their location, “the 6th floor.” There were even separate bathrooms for each executive office, and my office even had a separate living room with a fireplace, and a bathroom with a shower. Many executives even had their own coffee machines and, in some cases, when I became CEO, had fruit delivered every day to their offices, because the walk to the cafeteria took several minutes.

The Headquarters environment created a psychology throughout the Corporate staff and the centralized business unit leadership that everyone was owed “perks.” The executives had a separate parking garage, and, when I became CEO, every one of them had a dedicated parking space in what employees cynically called “the Bat Cave.” I eliminated the dedicated spaces and opened more capacity as a result. The preoccupation with perks carried over to who got “free” individual limo service, and to the access to First Class airfare.

We made the best of this dysfunctional facility situation. In 1992, we built a great walk-in clinic that saved the Company over $1 million a year and delivered great healthcare. We also built a fitness center that was used for both regular exercise programs and rehabilitation for both active employees and retirees. The cafeteria served far healthier food than would have been available in an outside restaurant or in a shared cafeteria.

Company executives used the Headquarters to host many wonderful community events, including an incredibly moving Tree of Life ceremony to support the Visiting Nurses and Hospice Care organization during their Christmas holiday fund-raising drive, an event I personally hosted. I also commend Pitney Bowes employees who deeply committed their time and effort to supporting the Stamford community and its many charitable organizations.

I was persuaded to renovate the building in 2005, rather than selling it. Why did we not sell the Headquarters?

  • The number of people occupying the building in 2005 was sufficiently large that we would not have had many good options for staying in or near Stamford. Every potential alternative location would actually have caused us to pay higher annual facilities costs if we gave people comparably sized offices. Today, only about half as many people work in the building compared with 2007, when I left the CEO job. The Headquarters would never again house the 1,300-1,400 employees it was intended to house.
  • We considered moving from Stamford to a less expensive and more remote location, but we would have lost many talented executives and professionals, including many women and people of color who lived in New York, Westchester County, Northern Jersey, and even Long Island. We drew from a much more diverse and high quality talent pool by being close to the Stamford Transportation Center, and within reasonable commuting distance of these communities.
  • The Headquarters was worth far less than what we had paid to build and improve it over the years. Many executives believed that it would get far more valuable over time, because of major South End redevelopment efforts and because we had just sold our Main Plant for a significant gain in 2005. However, the 2008 financial crisis depressed real estate values for many years, and the Headquarters is now unlikely to get back to its pre-2008 market value any time soon.
  • The renovation addressed many, although not all, of the issues I described. We also were able to reconfigure the 4th and 5th floors to provide great natural light, LEED-certified furniture and furnishings, a showcase for our shared multi-functional devices, ample conference room and huddle spaces, many more open cubicles, and more commingling among the employees. We eliminated most of the variation in office space sizes as well.

However, despite all this work, in retrospect, we would have been better off with a fresh start in a new Headquarters location.

I am now the CEO of a small, startup company. We are in a small, cramped space in downtown Boston, and I do not even have a dedicated office. I usually put my belongings in a conference room. We have open offices, with no walled individual offices, and every cubicle is the same size, so we have gotten away from sizes based on status.

Most importantly, we carry our “office” in our laptops, tablets, and smartphones. Our key documents are stored in a cloud-based server, and we communicate via telephone, email, text message, and, with our prospects and customers, web-ex presentations. Every one of us has far more technological capability, because we need to be able to use the tools available to us.

We have no “perks,” other than complementary fruit deliveries to the kitchenette. The fruit is available to all employees, not just the executives. We take subways and trains, and coach airfare on trips, although I use points to upgrade for business class travel on coast to coast trips. We have no parking spaces included with our lease because we are in Downtown Boston, and are five minutes walking distance from South Station. When I go to local airports for short trips, I drive and park near the airport at a fraction of the cost of even a one-way limo ride.

We are very frugal, and some of our executives (including me) have deferred cash bonuses to help the Company conserve cash. It is a far more collaborative environment, and everyone is focused on the Company’s survival and growth.

There are exceptions to every rule, including the merits of large headquarters facilities. Many corporations use large corporate headquarters to showcase products and services used in other large office buildings by their customers. Others have large showrooms in which major account customers or prospects are visiting every day. Still others have business activities that require huge, centralized investments in infrastructure, such as trading floors for major investment banking firms. It also is very difficult for executives to pass up the opportunity to build a corporate headquarters when state and local governments provide generous incentives to do so.

However, Pitney Bowes fit none of these exceptions with its Headquarters, so I commend Marc Lautenbach and his team for making a decision that will signal a radical, but necessary, break from the parts of the Company’s traditions that need to change.