THE IMPACT OF THE PHYSICAL WORK ENVIRONMENT ON ORGANIZATIONAL OUTCOMES: A STRUCTURED REVIEW OF THE LITERATURE

The way people work has changed considerably over the past thirty-five years as a result of technological advances, globalization, demographic shifts, and the constant demand to innovate and compete (Kampschroer & Heerwagen, 2005). Work is becoming “more cognitively complex, more dependent on social skills and technological competence, and more time pressured” (Chan et al., 2007). There is a growing body of literature that suggests that workplace design can affect organizational and employee outcomes, such as better communication, collaboration, creativity, and higher employee engagement, satisfaction, well-being, performance, and employee retention. (USGSA, 2006).

The purpose of this research is to provide an extensive review of the academic literature regarding the impact of the physical work environment on organizations and their employees. This research is important because it can help leaders make better decisions about the physical work environment, the people who will use it, and the success of their organizations.

Several databases were searched using the keywords: ‘office design', ‘workplace design', ‘physical work environment', and ‘office environment'. The databases utilized included Business Source Complete, ABI / Inform, JSTOR, and ProQuest. The results were narrowed to peer-reviewed academic journals. Articles were further filtered by reading the abstracts and selecting only those papers that linked the physical work environment with employee and organizational outcomes. Of the different types of work environments, only office-type environments were selected, excluding, for example, manufacturing work environments. The remaining articles were read and further sorted by types of academic articles: conceptual, commentary, or empirical. Table 1 shows the Journals used in this study and the number of relevant articles from each.

The study of the physical work environment, like most subjects, comes in waves of interest. Table 2 below indicates the frequency of relevant articles per year.

Table 3 below provides a summary of the current academic literature on this subject

There is a great deal of available research on the impact of the physical work environment on positive organizational outcomes. Kotler & Rath (1984) said that good design can enhance the environment, communication, corporate identity, customer satisfaction and company profitability, and that the major elements when considering design (of the environment) are performance, quality, durability, appearance, and cost. Sailer et al. (2009) found the physical space influences the way organizations communicate, interact, and perform. Saurin et al. (2008) examined how organizations can design environments that can help them meet the challenges of uncertainty and complexity. According to Mitchell-Ketzes (2003), “an organization's struggle to adapt to current business conditions, a high-performance workplace is no longer simply a desirable long-term goal; it may well be a key to survival” (p. 259). Work environments today need to be ‘agile' in order to support “people, the nature of their work and the business performance they are committed to achieving” (275).

McKinsey & Company report that more than seventy percent of senior executives surveyed rank innovation as one of the top three drivers of their organizations (Barsh et al., 2008). Several studies have focused on the relationship between the design of the physical office environment and innovation. Haner (2005) concluded that spatial design, or the layout of the physical space, plays an important role in supporting creativity and innovation in organizations, and that management needs to purposely address the spatial layout to support convergent and divergent thinking. Both are necessary in innovative environments. Peschl & Fundneider (2012) suggest that the physical work space can be orchestrated to create ‘enabling spaces' which support, encourage, and facilitate the innovation process, especially radical, game-changing innovation.

Waber et al. (2014) studied organizations from a wide range of industries to understand how spatial configurations can be designed in organizations to produce specific outcomes, like innovation or performance. Socio-metric badges were used to measure interaction in the work environment and how components such as density and proximity impact the organization. Interestingly, Waber et al. concluded that face-to-face interactions were the most important activity in the office environment. The key, according to the authors, is for companies to first have a thorough understanding of what they want to accomplish with the space, before attempting to change it.

O'Reilly et al. (2014) found that there is a ‘clear association' between organizational culture and the level of performance of the organization. There has been much interest in the relationship between the physical work environment and organizational culture. Vischer (2007) suggested that the value of the physical work environment to a company is heavily influenced by the culture of the organization, and that value cannot be determined without considering employee comfort, needs, and organizational expectations. Price (2007) agreed and notes that success or failure of new work environments is dependent on the overall culture of the organization, and even the ‘micro-cultures' that exist within each department. Becker (2007) used the term ‘organizational ecology' which describes the workplace as “a system in which physical design factors both shape and are shaped by work processes, the organization's culture, workforce demographics, and information technologies” (p.47). He suggested that successful organizations have an ecological system, including the physical work environment that operates in harmony, and how the work environment is designed, used, and managed is critical to dynamic organizations.

Callahan et al. (2008) presented a case study on the design and construction of a new LEED certified medical facility in San Diego. A post occupancy evaluation revealed that in addition to successfully satisfying the project requirements, the project was also successful in supporting and shaping the organization's culture of being open, positive, optimistic, and abundant. Mallak et al. (2003), in another study in the healthcare industry, found that perceptions of the physical work environment moderate the effect of organizational culture on organization processes and outcomes.

Pitt & Bennett's work (2008) sought to find a balance in which the commercial requirements of the physical space are addressed and the human needs of the space are not compromised. They proposed that the most important element of success is to have an organizational culture that supports innovation. Zalesny & Farace (1987) warned that organizations need to be careful when migrating to new work environments to ensure that the new environment does not undermine existing organizational culture and how employees perceive their role and jobs. Morrow et al. (2012) suggested that the key for organizations contemplating work environment changes is to first make employees aware of the individual and organizational benefits of the change, and secondly, to express their appreciation and empathy for the personal discomfort that may accompany the change.

Numerous studies have shown that a focus on the well-being of employees is important for both the organization and the people who work there (Harter et al., 2003). Researchers at the World Green Building Council (2014) concluded that there is ‘overwhelming evidence' that the design of the office environment influences the well-being and health of the people who work there. Heerwagen (1998) considered employee well-being from a biological perspective and noted early on that companies need to shift their focus from thinking about office facilities as real estate costs to thinking about office environments as an employee benefit that can improve health, performance, and well-being.

Inalhan (2009) conducted a study about the effect of office environment changes on employee well-being. He determined that employees experience a sense of loss and grieving when changes are made and that there is a need for management to support its employees during times of transition. Jahncke et al. (2011) conducted office environment experiments to measure the effects of noise in open office environments. Results indicated that participants were less motivated, more tired, and remembered fewer words in high noise environments as compared to low noise environments. Ajala (2012) concluded that quality lighting can reduce fatigue and eye strain as well as improve overall well-being.

Obviously, a more open environment results in less privacy for employees. Laurence et al. (2013) studied the relationship between architectural privacy, personalization of the work area, and well-being. They concluded that there was a negative relationship between the level of privacy and emotional exhaustion, and that a lack of personalization intensifies the negative effects. The takeaway for management is that as the physical office environment moves more and more toward open and multi-purpose spaces, the need for personalization, even temporary personalization, increases.

In a study of workers at call centers in the U.K., McGuire & McLauren (2008) confirmed that employee well-being mediates the relationship between employee satisfaction with the physical work environment and employee commitment. According to the authors, satisfaction with the physical work environment can be influenced by the correct fit of the work station (adjustability), greater involvement by the employee in the design of the workplace, and the employee's ability to personalize their work area.

Employee performance can include the quantity, quality, and creativity of the work involved (Lee & Brand, 2005). Several studies link employee performance and productivity to the physical work environment. According to Olson (2002), support for focus work and impromptu meetings are the two most important activities in an organization that contribute to individual performance, team performance, and job satisfaction. A well-designed work environment can and should support these two activities within the same individual work areas. Gould (2009) studied how control of certain interior environmental factors influence productivity. According to his research, allowing employees to control the temperature in their work areas resulted in a 3.5% increase in productivity, utilizing high-performance lighting resulted in a 6.7% increase in productivity, and the addition of natural light and window views resulted in 9-12% increase in productivity (p. 61).

In a review of the empirical literature, Oneill (2010) found there is a consistent relationship between environmental control and the performance and behavior of individuals and groups. Research by Maalevald et al. (2009) concluded that certain psychological dimensions of the office environment, including pleasant surroundings, sufficient privacy, and the design of the office have a strong influence on employee productivity.

Creativity and the generation of new ideas within an organization can be an important source of competitive advantage (Anderson et al., 2014). The design of the physical work environment has also been linked to creativity. Haner (2005) suggested that creativity can be purposefully addressed through the design and layout of the work environment, and space is needed for both individual and group creative activities. To assess the climate for creativity in an organization, Amabile et al. (1996) developed KEYS, a tool designed to evaluate perceived ‘stimulants and obstacles' to creativity in office work environments. The scale measures employee perceptions in five different areas, one of which includes the available facilities. Dul et al. (2011) identified three aspects that independently contribute to creative performance in organizations: creative personalities, corporate culture, and the physical work environment. In a later study, Dul & Ceylan (2014) showed that companies with a creativity-supporting work environment develop more new products and have more new-product financial success than firms lacking the supportive environment. Steidle & Werth (2013) studied the effect of lighting on creative performance in office environments and concluded that lower lighting levels can stimulate creative output.

How information gets distributed is vitally important to the success of any organization. The physical work environment can have an impact on communication in an office environment. Allen (2007) identified three types of technical communication used by knowledge workers: coordination, information, and inspiration, and concluded that proximity to co-workers was the most important characteristic for the third type of communication – inspiration – to occur.

Proximity can also impact collaboration. For example, Wineman et al. (2009) found that the nearness of college faculty offices played a significant role in the likeliness of collaboration or co-authorship of a academic paper. Heerwagen et al. (2004), in a study of the literature, concluded that the physical work environment can be designed to improve collaboration. The literature also suggested that the negative side of collaborative environments was cognitive overload. Cross & Gray (2013) agree that many popular designs to improve collaboration can cause collaboration overload and hurt individual performance. They suggest using certain design and behavioral interventions to reduce the negative aspects of collaboration. Hua et al. (2010) studied how particular spatial layouts can either support or hinder collaborative work. Their research suggested that a uniformly distributed cluster of shared spaces works best for collaborative environments, as opposed to centralized or randomly distributed spaces. Their study also indicated that individual workstations were overwhelmingly preferred by employees for collaborative as well as other types of work. Parkin et al. (2011) studied different types of office layout with respect to levels of employee satisfaction and support for collaboration and privacy. They concluded that a combi office design – a work area consisting of open and half-open spaces – was more desirable than an open-plan office.

Employees with a high level of job satisfaction are more committed to their organizations and more interested in delivering high quality work (Yee, 2008). The largest amount of research regarding the physical work environment has been conducted in the area of employee satisfaction. Oldham & Brass (1979) investigated employee reactions when their workplace changed from traditional to open-plan environments. Data was collected before the change and twice after the change. Results indicated a significant decrease in both employee satisfaction and motivation after the change. Marans & Spreckelmeyer (1982) discovered that the degree of control that employees had over their immediate environment was positively related to their level of satisfaction. Interestingly, they also concluded that employee feelings about the organization were strongly influenced by their feelings about their immediate environment. Lee & Brand's (2005) research also supports the relationship between personal control over physical work area and levels of job satisfaction and perceived group cohesiveness.

Lee (2006) studied the relationship between employee expectations of the physical work environment and job satisfaction. Results indicated that an office environment that exceeds expectations does not improve satisfaction. However, when the physical work environment does not meet employee expectations, job satisfaction decreases. Kim & DeDear (2011) researched how certain environmental factors impacted employee satisfaction. The two most important factors identified were temperature and noise, and when either of these were below employee expectations, satisfaction declined. DeBeen & Beijer (2013) investigated the relationship between types of offices and employee satisfaction by gathering data from 12,000 office workers in the Netherlands. Results showed that office type was a significant predictor. People who worked in traditional offices were most satisfied with privacy and concentration. Those who worked in combi-offices, a combination of open and half-open spaces, were most satisfied with the communication and social interaction. Employees who worked in flex offices, in which workers did not have an assigned space, were most satisfied with the design and aesthetics of the space.

Andrew et al. (2014) indicated that the number one competitive advantage for companies in the future will be its top talent. Several studies have indicated that the design of the physical work environment can help attract, develop, and retain employees. This is especially important since, for the first time in history, four generations of workers are now employed in the office environment. Pullen (2014) studied how different age groups assess different types of office design. Results showed that there were significant differences between age groups and that organizations should design their office environments with the needs of the different generations in mind. This multi-generational workforce has caused a tension in how to design office environments today. Companies are changing their work environments to attract millennials (Ferri-Reed, 2014) while, at the same time, there is a higher concentration of older employees in the workplace, due to the large numbers of baby-boomers in the overall population. According to North & Hershfield (2014), there is still a need to accommodate older employees in the design of the work environment. Their research shows organizations that make changes to adapt to an aging workforce, such as changing workplace ergonomics or implementing a phased-retirement program, have seen significant improvements to productivity, retention, organizational culture, and profitability.

Office environmental factors, such as temperature, air quality, lighting, and noise, can also have a positive or a negative impact on organizations. The problem is that there is no universally accepted definition of office comfort nor how it should be measured (Haynes, 2008). Hameed & Amjad (2009) concluded that environmental factors do have a substantial impact on employee productivity, with lighting as the most important. They also note that gender differences exist in rating the most important factors. For example, noise levels impacted male productivity more than female productivity, and temperature influenced female productivity more than male productivity. Mak (2011) examined the effect of five environmental factors and concluded that all influenced office productivity and that temperature and sound had the greatest influence. Although open-plan offices increase communication and collaboration, noise levels can be higher. Smith-Jackson & Klein (2009) studied the impact of ‘irrelevant speech' in open-office environments and determined that it has a negative effect on employee performance, and can increase stress, and fatigue. The authors recommend that organizations regularly gather feedback regarding workers' perceptions of the ambient environment.

The spatial layout or configuration of the physical work environment can have a significant impact on organizations and their employees. Sailor et al. (2009) recommended that the layout of the space influences the way in which organizations perform, communicate and interact. Allen (2007) suggested the importance of office adjacencies and proximity and provided an informative matrix for office layout. A study by Hua et al. (2010) highlighted how particular office layouts can support or inhibit collaborative work. Chaboki et al. (2013) examine how the spatial variables of visibility and accessibility influences face-to-face interaction, which according to their review of the literature, increases teamwork and organizational productivity.

Individual workstations play a significant role in employee outcomes. According to research by Jaiti & Hua (2013), personal workspace was rated as the most important workplace feature contributing to employee satisfaction. The authors encouraged organizations to dedicate sufficient resources to improve personal workspace. Numerous studies support the role that ergonomics plays in employee performance (Asmui et al., 2012). Hanson et al. (2007), in an anthropometric research study, noted that there have been significant changes in the physical characteristics of the population and that current ergonomic standards for seating and other office furniture have not been adjusted accordingly.

Measuring the effectiveness and impact of the physical work environment is complex. Vischer (2006) introduced the Environmental Comfort Model to analyze employees' relation to the workplace and help organizations assess the value of certain investments in the office environment. Haynes (2008) provided an evaluation tool for measuring office productivity based on four components: employee comfort, office layout, interaction, and distraction. Kaczmarczyk & Murtough (2002) presented three models to measure innovative work environments: Cost Per Person Model, Employee Satisfaction in the Workplace, and the Productivity Payback Model.

Maaleveld et al. (2009) developed and tested the Work Environment Diagnosis Instrument, also known as the WODI Toolkit, a diagnostic tool to evaluate employee perceptions of the physical work environment. The assessment tool can support the decision-making process regarding the design of new facilities or the re-design or adaptation of existing ones, and help determine the best possible fit between employees, work processes, and the environment.

Several authors discussed the importance of aligning workplace design strategy with organizational mission and goals. Olson (2002) suggested a workplace design strategy as follows:

1. Define the business objectives and success factors

2. Describe the key employee behaviors needed to achieve the business objectives and success factors

3. Describe the qualities of the workplace that are needed to support these key employee behaviors effectively.

Kampschroer & Heerwagen (2005) recommended that the workplace design strategy should start with a discussion of the mission, goals, and core values of the organization in order to be most effective. Levin (2005) presented a model that can be used to align the workplace design strategy with five organizational categories: strategy, structure, processes, reward systems, and people, to support the organization's ability to succeed and compete.

There are many factors that contribute to the success of organizations today. These include a focus on creativity and innovation, leadership, and effective communication. There is also a renewed focus on the health, well-being, and development of knowledge workers who make up effective organizations today. One way that organizations can stay competitive is to pay attention to the value of the physical work environment. This review of the academic literature has shown that the design of the physical work environment can have a positive or negative effect on organizational success and the people who work there. According to the studies described above, the physical work environment can influence organizational outcomes, such as performance, collaboration, innovation, effective human-resource management, and profitability. It can also influence employee outcomes such as engagement, performance, well-being, and satisfaction.

Most researchers agree that the demand for talent in the world marketplace, in the near future, will exceed the supply of available and qualified workers. This means that organizations that prosper and remain competitive will have to use all the tools available to attract, develop, and retain this valuable resource. Evidence shows that there are several factors of the physical work environment that impact the effectiveness of people who work there. These can include the layout of the space, architectural elements, aesthetics, and furniture. Research also shows that certain environmental factors such as lighting, air temperature and quality, and sound can also have a significant impact on workers.

The significance of this research is that is brings together, in one place, the vast amount of current academic literature on this subject and provides a great starting point for future research. This study is also beneficial for mangers and leaders of organizations in that it can help them better understand the importance of the physical work environment, and make more informed decisions regarding facilities and human resources. It also introduces managers to several models that can be used to measure the effectiveness of the work environment so they can align a workplace-design strategy with organizational mission and goals. There are several areas where additional research would be beneficial. These include:

• How to best manage change in the physical work environment, in order to maximize the impact and minimize the challenges associated with change.

• How the physical work environment impacts employee engagement.

• What the relationship is between organizational culture and the office environment.

• Which methods are most effective to measure the impact of the physical work environment.

Although a significant amount of research has been completed regarding the physical work environment, this is still much to do.