Chiat/ Day was definitely one of the hottest ad agencies during the 1980s with its creative approach to advertising. This was manifested by the famous Macintosh TV commercial shown only one time in a break during the Super Bowl of 1984. Thereafter, the agency grew rapidly and added many high profile accounts. At the beginning of the 90s, Chiat/Day lost two key accounts, American Express and Reebok, which represented combined billings of $160 million.

In January 1994, founder Jay Chiat initiated the creation of a “virtual office” at the LA headquarters. The success of the concept led him to transform also the NY office (6/94) and the Toronto office (8/96) into virtual offices. Going “virtual” imposed a big change on work procedures, organizational structure and client relationships.

Chiat/Day day merged in the summer of 1986 with the agency TBWA. Today, TBWA Chiat/Day with billings of more than $2.5 billion is one of the world’s leading full-service advertising agencies with offices in 32 countries around the world. TBWA Chiat/Day is owned by Omnicom, a holding company which is also the parent of BBDO and DVB Needham. Today, some of the most high profile accounts of TBWA Chiat/Day are from Nissan, Microsoft, Wonderbra, Sony and Fructuosa from the Coca Cola Company.

The consequent implementation of the virtual office makes Chiat/Day such an interesting company. The move changed totally how work was done, how value was offered to the customer and how people perceived the future opportunities. It underlines the agencies creativity and trend setting work, supports teamwork and results into a better value proposition for the clients. Chiat/Day’s experience epitomizes what works and what doesn’t when creating a virtual office.

The main reasons why Jay Chiat shifted to a virtual office in 1994 were the following: a) enhance client service, b) improve staff satisfaction and creativity, c) increase flexibility in staffing, d) boost bottom-line result, e) charge clients only for their specific needs.

All these points should be achieved by inventing an organization that survives no matter what the future is and encourages the employees to embrace change rather than don’t just tolerate it. However, implementing a virtual office meant finding an appropriate technical infrastructure, adapting the office architecture, changing the organizational structure and the reward system, improving the client service and changing the management philosophy. In order to guarantee a successful implementation, Jay Chiat managed the implementation very top-down driven accepting no concessions to his idea. Today, the virtual offices in Los Angeles, New York and Toronto show the following characteristics:

• Nonterritorial workplace. The employees do not have a personal office. Equipped with a cellular phone and a PowerBook, the employees choose their place to work everyday depending on their work at hand. They can plug into data ports all over the office building. The office is organized like an university which offers different areas for different activities. The so-called War Rooms are dedicated to only one client and are the place where the client team regularly meets. All the other areas are accessible for all the employees to work in. The Library is a quiet place where no phones are allowed and the “Clubhouse” with a cafe bar in the middle and multiple televisions playing MTV, CNN, and ESPN is suited for informal meetings or for relaxing. The art Production Studio, the Post Production Studio and a Database Management Laboratory are other places to get work done. The use of these rooms depends totally on what clients’ needs demand. There is also no executive office.
• Team architecture. The basic idea is that the office architecture should encourages teamwork. Most ad agencies have interdisciplinary teams pulled together from the media, accounting, planning and creative departments to pitch for a client. However, the Chiat/Day approach is different in that it keeps the team together as a “strategic business unit” in the War Rooms after it had won a pitch. As nobody has his own personalized office, the war room remains the center of activity and keeps the team together. As the teams focus entirely on a single client, employees are no longer assigned to a department but rather to a client.
• Meritocracy. Management philosophy changed towards a true meritocracy in which changes in the social, political and economic environment are further regarded as opportunities to embrace and take advantage of.
• Technology. The technology expedites remote access to corporate computing and telecommunications resources. The remote dial-up access guarantees to perform all functions previously performed at the office desktop. Also the phone system allows to receive calls everywhere. The employees can work wherever they want be it at home, in the car, client’s office or on the beach.
• Paperless office. Copy machines disappeared very rapidly since the inauguration of the virtual office. Information is no longer passed from person to person on paper. E-mails are the substitutes and important documents are scanned. No secretaries are needed in the office to type letters on paper etc.
• Flexibility. The technological tools make the employees much more flexible. They do not have to wait for a phone call from a client in their office as they can be reached everywhere. They are less bound to special locations to perform their work. The employees can therefore better use their time and clients can reach the team member whenever they want.

All these changes resulted in a significant reduction of office space. In the New York office the 150 employees occupied 98,000 square feet divided up in six floors before they moved in the virtual office. For the same number of employees the virtual office required less than 30,000 square feet and only one floor. Obviously, not all of the employees welcomed the virtual office. Some left Chiat/Day criticizing the lack of space and feel for community. Also the jobs itself and the performance measurement based on meritocracy made the jobs more demanding. Longer working hours and more commitment are required.

The virtual office made possible savings in office space and an increase in revenues (only eight months after inaugurating the Los Angeles virtual office, revenues rose $30 million). Overall, business profitability improved significantly in the virtual offices. The successful implementation at the headquarters made the implementation easier in New York and Toronto. Clients perceived the changes very positive and continue to regard Chiat/Day as a very innovative and creative agency. This is a major reason why Coca Cola contracted the agency for its Fructuosa ad campaign. Generally, the employees regard the virtual office very positive. They are treated as adults and assessed on performance and are given more room for creativity. How quickly the other offices will become virtual depends not only on Chiat/Day but also on TBWA’s appreciation of this concept.

Clearly, the virtual office focuses on client needs, makes the pricing mechanism more transparent and increases the responsiveness of the client team member because their work is more visible and based on urgency. These changes may improve the value to the clients significantly. However, another factor may provide even more value. The virtual office idea initiated a transition from being in the ad business to being in the idea business. The virtual office changed the management philosophy and underlined the innovative approach of Chiat/Day. In combination with meritocracy, many breakthrough ideas may be found for the client’s of Chiat/Day.

An interesting approach is shown on Chiat/Day’s home page on the Internet where the agency describes its new five P’s of Marketing. Instead of Product, Price, Packaging, Place and Promotion one reads Paradox, Perspective, Paradigm, Persuasion, Passion. The new five P’s describe our faster and faster changing environment. For each of the P’s Chiat/Day shows possibilities of how clients can take advantage of changes in their environment. It may well be that Chiat/Day reaches again for the Super Bowl break.

Chiat/Day’s is interesting because it has implemented the idea of a virtual office and taken all of the relevant aspects like organizational structure, reward system and technology into account. The implementation process itself shows what worked and what did not work. For example, a very strong leader is necessary to make the transition which is not a gradual one. Chiat/Day succeeded in making the virtual office function well. Apart form the “hardware” like team architecture and the IT the “software” enables the whole idea to work properly. Functional departments vanish, the reward system moves towards a meritocracy and interdisciplinary teams are created to serve clients best.

The virtual office supports the creative environment of an ad agency well and enhances the client service. Interestingly, the creatives were most resistant to going virtual. They needed big screens, wanted to work in a familiar environment and refused to switch to PowerBooks. Today, they are to only ones with a “own” desk top computer. This example shows that some adjustments need to be made to address the different working styles and needs of specific employee groups.

Chiat/Day is also interesting because it imposes questions about the future of the virtual idea within the whole company?

To address some of the issues, Chiat/Day is developing together with Art Technology Group of Boston, a offshoot of the MIT Media Lab, a computer program called Oxygen. The idea is to create an office in cyberspace in which everybody can meet his/her peers and has a personal room he can decorate. The idea is to stimulate the feeling of working face-to-face in a group which is spread all over the place. Whether this is the answer to a lack of community in a virtual office remains an open question.

Should going virtual really pay off big time, Chiat/Day will transform more offices into virtual offices. Many new possibilities will then arise.