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Hard Cost Reduction Operations Real Estate Optimization

Hybrid Work Model

#Media & Entertainment #Television Production

Practice this advanced cost reduction case interview question from Deloitte in the Media & Entertainment sector. Includes detailed problem prompt, clarifying questions, structured framework, and expert recommendation. Part of ProHub's 835+ consulting case library.

ProHub Comment

This case tests the candidate's ability to balance quantitative analysis with qualitative judgment and pushback against client assumptions. The core challenge is recognizing that while headline rent savings appear significant ($740k annually), once implementation costs and lease breakage are factored in, the deal becomes cash-negative over the CEO's stated 2-year timeframe—requiring candidates to challenge the CEO's premise and introduce strategic benefits (talent acquisition, hiring competitiveness) from market data to justify the move anyway.

Estimated Time 36 minutes
Difficulty Hard
Source NYU
25 / 100
You’ve been called into the headquarters of Galloway Entertainment, a small television production company in New York. The company carefully managed employee interactions during the pandemic, and as a result was able to get through without making significant operational changes. However, the CEO has been reading up on the new ‘hybrid work model’ and is excited by the opportunity to consolidate her real estate footprint and generate what she expects will be significant near-term operational efficiencies. Her team has pulled together an initial estimate of what it will take to enable a hybrid workplace, and she has asked you to evaluate whether she should pull the trigger.

Clarifying Information

  1. A hybrid work model describes an environment in which employees spend some, but not all of their time, in the office
  2. Galloway Entertainment produces scripted television and is exploring getting into documentary filmmaking
  3. Galloway makes money by licensing its content to cable television companies and online streaming platforms
  4. Galloway films in multiple locations across the US
  5. Operations are currently in New York City, NY, in an office a few blocks away from the CEO’s apartment
  6. The CEO’s primary focus is making decisions that are cash-neutral or better over a two-year timeframe
  7. The company’s lease is up in three years. If they want to move, they need to break the lease
  8. Lease Breakage Cost: 50% of remaining lease value
  9. Moving Costs (One Time): $250,000
  10. New technology enabling remote work: $500,000 implementation cost plus $250,000 annual license
  11. The company plans to move their server room offsite, and has found a 1,000 sf location in New Jersey that costs $5 per square foot per month
Mock Interview
Interviewer

You've been called into the headquarters of Galloway Entertainment, a small television production company in New York. The company carefully managed employee interactions during the pandemic, and as a result was able to get through without making significant operational changes. However, the CEO has been reading up on the new 'hybrid work model' and is excited by the opportunity to consolidate her real estate footprint and generate what she expects will be significant near-term operational efficiencies. Her team has pulled together an initial estimate of what it will take to enable a hybrid workplace, and she has asked you to evaluate whether she should pull the trigger.

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
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Practice this case with AI Mock Interview

Galloway Entertainment’s CEO wants to implement a hybrid work model to reduce real estate costs. While the move to a smaller SoHo sublease appears to save $740k annually in rent, one-time costs (technology implementation, lease breakage, moving) total $1M, making the 2-year cumulative return negative $20k. Candidates must calculate this accurately, identify that the new space may not meet all requirements (no server room), and ultimately recommend the move based on qualitative benefits (accessing new talent in filmmaking hubs, competitive hiring advantage) rather than cost savings.

Key Insights:

  1. Distinguish between annual recurring savings and one-time implementation costs when evaluating capital-intensive operational changes
  2. Challenge client assumptions: the CEO’s belief in near-term cost savings is mathematically unfounded once all costs are included
  3. Qualitative factors (talent access, market positioning, organizational agility) can justify strategic moves that fail traditional ROI hurdles, particularly with a timeline that may be too short
  4. Always verify that proposed solutions meet all operational requirements (e.g., the new space initially lacks a server room)
  5. Space utilization per employee changes under hybrid model; compare headcount to square footage to assess whether new space is appropriately sized