During my last job search, I had a really great conversation with the SVP of R&D for one of my top companies. The company was opening a new office, and our conversation got onto the subject of agile project rooms, which I was proposing to set up for the team if I came on board.
Two of the best teams that I've ever been on were an agile project co-located in a single room, and a "virtual office" project with no two team members in the same city. With the co-located team, it's obvious that sitting around the same table makes it easy to just speak up to talk to someone, or to overhear a conversation between pairing partners. In the virtual office case, it seems counterintuitive that we had good team communications (and jelled well), but it was so obvious to everyone that we absolutely had to make an effort to pick up the phone regularly and talk to one another.
I've worked in plenty of cube farm environments, where team members would sometimes go for weeks (or between weekly staff meetings) without ever having a conversation about pressing technical issues. It's easy to get complacent about a coworker being just down the cube aisle, or over in the next row, and then never get around to walking over and talking to them. As flimsy as cube partitions are for blocking out noise and distractions (i.e. they don't), they do create a barrier to communication that people need to spend some energy to overcome, and without the reinforcing effect of being obviously remote, it's one that's easy to let drop.
Joel Spolsky is big on giving all of his developers private offices with doors that they can shut. Leaving aside the extra real estate costs involved in doing that, that seems like an even easier way to let intra-team communication fall into that "death zone" in the middle distance. Certainly, cubes that let in noise and interruptions are far worse, but while private offices allow each individual developer to have more "flow" time to work independently, that's very much optimizing for the wrong thing -- what matters is the team's output, and that's largely a function of effective communications.
Communicating with people right next to you is easy. Communicating with those far away is important enough that you won't skip it. It's the middle distance where the danger lies.
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