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Elijah Moore, CEO and Founder of Collage, is photographed in the company's downtown Toronto office on March 16 2017.Fred Lum/The Globe and Mail

Human resources software company Collage has a stereotypical office space for a tech startup – a large, wide-open room in an old brick and beam building in downtown Toronto with lots of natural light. The 4,200-square-foot space is great, says co-founder and chief executive Elijah Moore, with one major exception – employees find it difficult to work in.

"We have a space that is too noisy for developers to focus and too quiet for salespeople who feel like they're the only people talking in a big empty room," says Mr. Moore, whose company currently has 18 employees. "While open office is great for collaboration … it also creates a space where no one is actually getting what they want."

The company is looking at building soundproof areas for its sales team, but can't renovate too much given that it has a two-year sublease that expires in the late summer of 2018. At that time, Collage is hoping to find a bigger space to fit its growing team – and something with a physical divide between developers and salespeople. Collage is among a growing number of companies, big and small, discovering the downside to the open-office concept, which started in the 1960s. The belief all along was that barrier-free environments not only save space, but also boost camaraderie, collaboration, innovation and, in turn, productivity.

Instead, a growing body of research shows open offices create endless distractions and a lack of privacy that can stunt creativity and curb motivation. The result, some studies show, is more irritable, stressed-out and unhappy employees as well as an increase in sick days.

These findings are driving more companies today to build more hybrid workplace environments that include a wider variety of both open and closed spaces.

It's the model that consulting firm Deloitte went with for its new 420,000-square-foot office space in downtown Toronto, completed last fall. Deloitte's 4,500 employees have 18 different types of workspaces to choose from, ranging from cafés and lounges to closed offices and high-back, sound-reducing chairs.

"We are looking to offer our team the type of work environment that's right for them on a particular day, or week," says Ryan Brain, managing partner for the Toronto region at Deloitte.

Deloitte designed its new space based on its research showing 90 per cent of people prefer to work at the office and two-thirds of employees are more loyal to companies with flexible work options. It also found a 63-per-cent reduction in absenteeism in these more agile office environments.

Still, Mr. Brain acknowledges the new office has been a big adjustment for some employees, especially since they no longer have assigned desks. Instead, staff has designated lockers for personal belongings.

Employees have also been reminded not to hold unused space, using coats and backpacks, for long periods of time, not unlike what tourists try to do with beach towels to snap their favourite poolside chair.

"While there are bumps and adjustments – and constructive feedback that has been passed along – in almost every case, when you ask people if they would go back to the previous way of working, most would say no," Mr. Brain says. Still, the open office or even hybrid model isn't for every organization.

Wojtek Dabrowski has worked in both open- and closed-office environments at some of Canada's largest financial institutions and, based on his experience, plans to have closed offices as he expands his own company, Toronto-based Provident Communications Inc.

"Where I've really seen open-office work well is when a team is working on the same information on the same project and pushing in the same direction," Mr. Dabrowski says. "Where it doesn't work is when employees are working with confidential information."

He recalls working on the announcement of a multi-billion-dollar transaction in an open-office environment and spending a lot of that time trying to find a closed-office space to handle confidential calls.

"You're chasing a closed-office space with a private, closing door, which is the antithesis of what open space is about," he says.

Rodney McDonald, principal at commercial real estate company Avison Young, says companies considering an office-space revamp need to think first about their broad business goals, the corporate culture and what kind of employees they want to attract, as well as how employees work throughout the day and how they use technology.

"To realize the desired results from their office-space design, such as employee satisfaction and productivity, companies need to focus more time and attention on upfront thinking," before the designers come in, Mr. McDonald says. "The layout of an office needs to support today's workflow and processes and recognize that people have different tasks."

John Arnoldi, executive managing director for Eastern Canada at commercial real estate company Colliers International, says he's not seeing companies abandon the open-office concept entirely. Instead, more are taking the mixed approach, including at his organization. This spring, Colliers is moving into a new headquarters in downtown Toronto with a mix of open and closed spaces, offering employees more choice about where and how they work.

"We are trying to create an atmosphere where people can work where they want to work in different situations at different times of the day," Mr. Arnoldi says.

"It's not a one-size-fits-all remedy. … Day to day, people like to have more variety."