There is Much Unknown about Work from Home as a Permanent Change

Nobody yet knows how much office work might change, post-Covid, on a permanent basis  though there is clear evidence larger firms are rethinking their needs for office space and the amount of work from home that should be the new pattern. Most surveys suggest workers want much more freedom to work from home. 

Along the way, managers will have to answer questions about why they need office space, and where its value might be found. To the extent that company culture matters, the office Is a place for new hires to learn that. 

Some managers might find offices a better way to supervise at least some workers. At least some of the time, when brainstorming or collaboration is an important part of work processes, offices can be a platform for collaboration. 

In other cases, when work is largely solitary (writing, coding, thinking), offices can be a clear hindrance. And many work teams or collaborative processes are only collaborative some of the time. 

Perhaps the better way to frame questions is to ask when virtual and when physical workspaces have value. And we might be able to learn much by looking at how we have tried to answer such questions in the past.

Redesign of office environments has not always worked. The move to “open” spaces and away from fixed internal spaces or cubicles was supposed to increase interaction and the potential for collaboration. Results are mixed. 

Especially in environments where workers spend most of the day online, they are not collaborating. They might as well be working virtually. Worse, open plans essentially turn a supposed feature (opportunity for collaboration or interaction) into a bug (distractions that require workers to don headphones. 

The value of venues intended to facilitate collaboration turns into the opposite. So the issue is when human, face-to-face connection adds value, and when it does not. 

Consider just one small anecdote. As part of my own work I moderate conference panels and sessions. Recently we have had to switch to doing so virtually, remotely and using video conference platforms. 

There are some subtle differences. I find that panelists are less interactive with each other than when they are seated next to each other on a stage. As video conference etiquette requires more discipline in terms of speaking, I find guests tend to “hang back and wait” more than when they are live and in person. 

Perhaps it is a subtlety, but the video conference format--though still providing a chance for each panelist to speak--does not seem to have the free-flowing, more-interactive nature of a live session. It is less a “collaboration,” where speakers respond freely to each other, and more structured, such as a linear set of presentations. 

The questions for virtual or physical; office versus “work from anywhere” are somewhat similar. Can enculturation of new employees be as effective? Can important non-planned collaboration still happen? And what is the impact on productivity--and life balance--for workers at home, when small children are also at home? 

In some cases, time zones can be a bigger challenge for remote than physical collaboration, as well. It might be more expensive and time-consuming, but getting a global team together physically might be the only way to get everyone together at once. 

In fully virtual settings, it is possible that colleagues in satellite offices might feel more engaged with the former “headquarters-based” colleagues. The issue with hybrid approaches is that firms risk jeopardizing that value. 

Also, office space imposes costs. So reducing the amount of office space might have financial benefits that outweigh even drops in productivity or some potential gains from informal and unplanned in-office interactions. Productivity matters, but so do other inputs into the business model. 

And then there is the challenge of measuring productivity, which is much more complicated than measuring quantitative inputs. Output is what matters for most firms. So how far towards zero can management supervision go? Clearly, some people, and some tasks are more amenable. 

You might be shocked at the hours worked by technology professionals when remote, though what it means in terms of productivity is not clear. One conclusion from the data might be that in-office environments create so much inefficiency that workers get all their in-office work done in far less time. 

The other possible conclusion is that at-home distractions are greater than we generally suppose, or that people are notoriously unable to accurately report their work time. Nor is there any easy way to measure qualitative outcomes, compared to inputs. 

On the other hand, a few firms have reversed ubiquitous work-from-home rules precisely because firms profits were dropping, and lessened collaboration was viewed as among the reasons. Yahoo and IBM have done so, in the past. Citi management worries about productivity as well. 

Nefflix CEO Reed Hastings has said work from home is a pure negative.   

Though it is too early to say for certain, hybrid patterns might not be the best choice for many firms, unless ways can be found to dramatically, and relatively quickly, shed excess physical assets. 

If not, a “worst of all worlds” outcome is possible: all the costs of the physical infrastructure, now converted into a stranded asset, plus all the costs of remote work (different information technology and whatever productivity impacts might occur).

How We Go Back to the Office Might Matter, in Terms of Productivity Benefits

How workers go back to offices might matter if the objective is to reap the benefits of physical interactions at work, including the unplanned interactions that are touted as a benefit of office work. 

Many firms now talk about hybrid work arrangements, partly in the office, partly at home. How that is accomplished could make all the difference. Right now, almost everyone is working from home. What happens when reopening happens? 

If hybrid work environments create two tiers of employees (those who are in the office and those who are not, or those who have the ability to informally interact with senior leaders and those who do not), virtual employees risk becoming a “lower class.” And that will create incentives for people to prefer in-office working, rather than staying at home. 

Nor is it clear how much benefit might accrue from the unplanned interactions that can happen at a workplace. 

Even in-person interactions might suffer if “mask wearing” in the office and social distancing are required. Extended wearing of masks likely means conversations and meetings will be shorter. 

That and social distancing will inhibit informal face-to-face communication, which is the main reason for sending employees back to the office. 

About 70 percent  or more workers consistently say they would rather continue to work from home than go into reconfigured offices and be required to wear masks, the authors say. 

That noted, widespread work from home policies arguably have not lead to a drop in productivity many would logically have expected. 

A survey of 600 U.S. white collar employees, 40 percent of whom say they are “in management,” suggests the enforced work-from-home experience has been unexpectedly more successful, in terms of perceived productivity, than expected. The authors believe the “everybody has to do it” context made a big difference, as some early work-from-home studies suggested a drop in productivity could be expected. 

That has many speculating about whether many or most such employees might “never” return to the older office-based patterns. The authors of the study say there are some issues that will likely have to be addressed for that to happen on a widespread scale. 

Unplanned interactions that lead to important outcomes are one advantage of physical settings. “Physical offices cause people who don’t normally work with each other to connect accidentally — bumping into each other in the hallway or the cafeteria — and that interaction sparks new ideas,” they say. 

“In our analysis of the amount of digital interaction at a different technology company, we found that, after the lockdown, employees increased their communication with close collaborators by 40 percent but at a cost of 10 percent less communication with other colleagues,” the authors day.

“There also tends to be less schmoozing and small talk among virtual workers, which Michael Morris of Stanford and Columbia and Janice Nadler, Terri Kurtzberg, and Leigh Thompson of Northwestern have shown leads to lower levels of trust,” they note. “The decline in such spontaneous communications and trust can have a big negative impact on innovation and collaboration.”

Virtual work could undermine three other activities that are critical to long-term organizational health: 

• Onboarding new employees

• “Weak” relationships

• “Strong” relationships

Onboarding new employees in terms of inculcating culture seems fairly easy to do in a virtual context. It seems harder to assess and develop peoples’ unique strengths. 

Virtual work also means it is harder to develop “weak ties,” shallow or peripheral relationships among members of an organization who don’t work closely with each other but have nonetheless connected over time.

Weak ties have been shown to play an important role in organizational performance, including innovation, raising or maintaining product and service quality, and attaining project milestones, they argue. That is difficult to create, on a virtual basis.  

Strong ties also are harder to develop. “People are still getting the work done, but the long-term relationships that once sprang from such shared experiences are undoubtedly at risk,” they note. 

Beyond that, the way that workers come back to work might matter. Hybrid work environments--a combination of virtual and office-based work--sounds like the best of both worlds. 

It might also become the worst of both worlds. Many of the benefits of having everyone work virtually may be lost if companies send just some employees back to the office. 

Some research has found that teams with isolated members (one person per location) or an equivalent number of members in each location (two in one office and two in another) reported better scores on coordination and identification within the team. 

“But if some team members were collocated and others were not (as would likely be true in hybrid environments), team dynamics suffered, which presumably hurt performance,” the authors note. 

Impact of Covid on Telecom, IT Spending Not Yet Completely Clear

When all the data is available, it is likely we will find that the Covid-19 related work-from-home and other measures reduced global service provider revenues  a couple of percentage points, though some firms might have seen far-worse hits, and some see higher revenues. 

Overall, full-year global results might show less than one percentage slippage of service provider revenue, IDC predicts. 

source: IDC 

And in many cases, it will be hard to separate specific Covid-19 impact from the underlying trend of declining growth. Something similar might happen for information technology spending, even for cloud services which have been on a steady growth path.

Though it might seem obvious that information technology executives increased cloud computing spend to support remote workers during the Covid-19 pandemic, it is not yet so clear how much spending actually might have changed. It is possible we might actually see spending fairly close to what had been predicted prior to the pandemic. 

An October 2020 survey of 230 information technology professionals by OpsRamp finds 60 percent of firms increased IT budgets while 22 percent reduced spending in the second and third quarters of 2020. Some 63 percent of respondents reported accelerated or maintained digital transformation initiatives because of Covid-19.

The survey included IT professionals in the United States and United Kingdom working for firms with  at least 500 employees and $5 million in annual IT budgets. 

Reported priorities for IT leaders included information security and compliance (59 percent), remote work and collaboration (55 percent), public and multi-cloud infrastructure (50 percent) and monitoring and management (42 percent). 

Among capabilities acquired were artificial intelligence for IT operations (57 percent); digital experience monitoring (50 percent) and network performance monitoring and diagnostics (50 percent). 

A Computer Economics survey in August and September 2020 finds a split pattern of information technology operations spending: 30 percent increasing spending while 29 percent were decreasing. About 41 percent of respondents say there has been no change in spending. 

Back in April and May 2020, 41 percent of respondents reported unchanged spending. But 30 percent already had made moves to reduce IT budgets in response to  To the extent there had Covid-19 work from home rules.

source: Computer Economics

The 30 percent of respondents who reported cutting spending seems not to have budged much. In the fall, the percentage of respondents reporting lower spending was still 29 percent, substantially the same as the 30 percent who reported cuts in April and May 2020. 

What changed was the percentage of respondent firms that boosted spending, probably for hardware, software or services related to supporting remote workers. “Of course, the big reason for increasing budgets is to respond to the increased need for employees to work from home,” said David Wagner, Computer Economics senior research director. 

source: Computer Economics 

It is hard to separate out the response to Covid-19 remote work on cloud computing, which has been growing robustly before the work-from-home mandates were imposed. And even some firms that one might assume boosted cloud spending to support at-home workers eventually reduced spending from surge levels. 

Some studies suggest cloud revenue growth from 2020 to 2021 will be about 12.5 percent, perhaps lower than many would have expected, even under normal circumstances. The only issue is whether the work-from-home rules affected cloud computing uptake rates. And that might ultimately be a different matter from earlier expectations that cloud computing among smaller businesses, for example, would increase because of the pandemic. 

To some degree, the changes might hinge on whether customers are active about turning off or reducing payment for unused cloud services. It also will matter how much aggregate demand changed when workers shifted from offices to homes. In principle, that might have shifted the location of consumption, but not the volume of use. 

Though early in the pandemic many expected increased reliance on cloud computing, beyond growth already expected, we will have to wait and see what actually transpired. Covid impact might ultimately turn out to have been less of a change inducer than we expected. 

Work from Home and the Solow Productivity Paradox

It is easy, but perhaps wrong, to attribute many types of change to “Covid-19” or the responses made to the pandemic. To be sure, the prevalence of work-from-home, learn-from-home modes required by governments to slow the spread was a precipitating event. It arguably speeded up trends already in place and convinced larger numbers of people and firms to consider joining trends, such as substituting Zoom video conferences for older meeting formats. 

With good reason, increased amounts of work from home are viewed as a permanent shift in venues where many types of work are done on a routine basis. The conventional wisdom is that hybrid models will dominate, with more workers spending parts of the week working from home, rather than “in the office.”

source: Researchgate  

But it is worth noting that this “remote work” trend has been in place and growing for more than 50 years, though we used to call it “telecommuting.” 

source: Federal Reserve Bank of St. Louis 

The point is that forecasters have expected a huge increase in remote work patterns for quite some time. 

Source

So it might be safe to say that belief in permanent change of remote work arrangements will happen. But the change might be more gradual than some believe. 

There might be unexpected barriers in the form of cost issues, as has proven true in the past, for at least some firms. 

More importantly, it is hard enough to measure office worker productivity at all. It will be devilishly difficult to determine what impact on productivity remote work in large doses might produce. 

Obviously, at some level of productivity (higher, same, lower), many types of work can be performed remotely, at home. 

source: McKinsey

But productivity is an issue. To be sure, most of us assume that higher investment and use of technology improves productivity. That might not be true, or true only under some circumstances. 

Investing in more information technology has often and consistently failed to boost productivity.  Others would argue the gains are there; just hard to measure.  There is evidence to support either conclusion. 

Most of us likely assume quality broadband “must” boost productivity. Except when it does not. The consensus view on broadband access for business is that it leads to higher productivity. 

But a study by Ireland’s Economic and Social Research Institute finds “small positive associations between broadband and firms’ productivity levels, none of these effects are statistically significant.”

“We also find no significant effect looking across all service sector firms taken together,” ESRI notes. “These results are consistent with those of other recent research that suggests the benefits of broadband for productivity depend heavily upon sectoral and firm characteristics rather than representing a generalised effect.”

“Overall, it seems that the benefits of broadband to particular local areas may vary substantially depending upon the sectoral mix of local firms and the availability of related inputs such as highly educated labour and appropriate management,” says ESRI.

Most of us are hopeful about the value of internet of things. But productivity always is hard to measure, and is harder when many inputs change simultaneously. Consider the impact of electricity on agricultural productivity.

“While initial adoption offered direct benefits from 1915 to 1930, productivity grew at a faster rate beginning in 1935, as electricity, along with other inputs in the economy such as the personal automobile, enabled new, more efficient and effective ways of working,” the National Bureau of Economic Research says.  

There are at least two big problems with the “electricity caused productivity to rise” argument. The first is that other inputs also changed, so we cannot isolate any specific driver. Note that the automobile, also generally considered a general-purpose technology, also was introduced at the same time.

Since 1970, global productivity growth has slowed, despite an increasingly application of technology in the economy overall, starting especially in the 1980s. 

 

A corollary: has information technology boosted living standards? Not so much,  some say. The absence of huge productivity gains has created what economists call the “productivity paradox.”

Basically, the paradox is that the official statistics have not borne out the productivity improvements expected from new technology.

 

Still, the productivity paradox seems to exist. Before investment in IT became widespread, the expected return on investment in terms of productivity was three percent to four percent, in line with what was seen in mechanization and automation of the farm and factory sectors.

When IT was applied over two decades from 1970 to 1990, the normal return on investment was only one percent.

This productivity paradox is not new. Information technology investments did not measurably help improve white collar job productivity for decades. In fact, it can be argued that researchers have failed to measure any improvement in productivity. So some might argue nearly all the investment has been wasted.

Some now argue there is a lag between the massive introduction of new information technology and measurable productivity results, and that this lag might conceivably take a decade or two decades to emerge.

Work from home trends were catalyzed by the pandemic, to be sure. Many underlying rates of change were accelerated. But the underlying remote work trends were there for decades, and always have been expected to grow sharply. 

Whether that is good, bad or indifferent for productivity remains to be seen. The Solow productivity paradox suggests that applied technology can boost--or lower--productivity. Though perhaps shocking, it appears that technology adoption productivity impact can be negative.

Half of Tech Workers Say Work Hours Increased during WFH, Blind Reports

Nearly half of respondents to a Blind poll of technology industry workers said their work hours had increased during the enforced “work from home” policies put into place because of Covid-19. About 10 percent of respondents say their work hours have decreased.

If you quantify “productivity” as output compared to input, and if the output remains the same, while hours worked increase, productivity arguably has dropped. There is some evidence that productivity has not changed. 

There is some evidence that workers believe they are just as productive, or more productive. A survey of 365 U.S. workers by The Manifest found that 30 percent of respondents think they are more productive working from home. 

Fully 45 percent believe they are more productive working in an office, and 24 percent say they’re equally productive working from home and in an office. Keep in mind those are examples of what people think about their productivity. It is not an actual measure of whether they are, or are not, more productive in home or office settings. 

source: Agility PR 

Some have argued that even if productivity can be sustained for a brief period, it might well not sustain itself over the long term. A survey of the heads of nearly 50 U.S. businesses employing 443,895 people in industries that include technology, legal services, advertising and the finance, insurance and real estate sector found that 40 percent of them have started to see decreases in productivity as staff work remotely. 

J.P. Morgan also seems concerned that WFH productivity is slipping, while others note growing evidence of mental health issues caused by enforced WFH. 

At least, that might be true for the 25 percent of workers who can work from home.  

Also, there is a growing sense among professionals that WFH is hurting their career progression. Others might point out that WFH has positives and negatives, not including burn out or work-life balance, even if WFH once was viewed as a perk. 

One might think less commuting time “has to improve productivity.”

Reviewing time-use diaries of 1,300 U.S.-based knowledge workers, collected in the summers of 2019 and 2020, professors Andrew Kun, Raffaella Sadun, Orit Shaer, and Thomaz Teodorovicz found a reduction in commuting time to work of about 41 minutes, on average, because of extensive work-from-home rules. 

Intuitively, you might guess that has led to an increase of productivity. The study is far more nuanced. 

“Independent employees (i.e., those without managerial responsibilities) reallocated much of it to personal activities, whereas managers just worked longer hours and spent more time in meetings,” the researchers note. 

Independent contractors simply used the extra free time for non-work activities. Managers had to spend more time in meetings. 

“For managers, the increase in work hours more than offset the loss in commuting time: Their work day increased on average by 56 minutes, and the time they spent replying to emails increased by 13 minutes,” the researchers say.

Was Collaboration Better During Enforced Work from Home? Maybe Not

It is common to hear technology business or policy leaders argue that remote work has not harmed productivity. Leaving aside the issue of whether remote work productivity changes can be measured, collaboration--deemed by most to be vital for knowledge workers--might have gotten far worse because of Covid. 

People like the freedom to work from home, no question.  

That might have happened despite reports that suggest information, knowledge and office workers now are spending more time with electronic forms of communication. But “communication” is not necessarily “collaboration.”

If collaboration is defined as “people working in teams or with others,” then collaboration seemingly has suffered. 

According to Gensler, “high-performing people at top companies tend to do individual work and collaborative work in equal measures—45 percent each, according to our research--with the remaining 10 percent made up of learning and social time.” 

For better or worse, those balances were changed during the period of enforced work from home policies. “While at home during the pandemic, people reported working in individual focus mode 62 percent of the time and 27 percent in collaboration, a disparity that negatively impacts company creativity and productivity,” Gensler argues. 

Before the pandemic, U.S. workers spent an average of 43 percent of their work weeks collaborating either virtually or in person. That number fell to 27 percent for workers who worked from home in 2020, for example. 

source: Gensler, Fortune 

 

So people might report--and likely actually are--spending more time on conference calls, sending or reading emails and messages. But they are collaborating--working with other people--less. 

As many firms explore “hybrid” work models, mixing in-office and at-home days during the week, it might prove hard to capture the fluid collaboration that used to happen, Gensler argues. A hybrid model might capture some of the “formal and structured” collaboration that happened pre-Covid. 

But it will be harder to capture the informal collaboration that is not scheduled and formalized. By design, most “focus” or “do it on your own” work will make more sense “at home.” Team work might logically make more sense “in the office.” 

The problem is that not all moments when collaboration can be helpful can be scheduled in advance. 

source: Gensler, Fortune 

Most reports on “productivity” rely on subjective reports--what people believe has been the case--rather than on more objective metrics. The reason is simply that there exist few “hard” or “quantitative” measures for productivity output. Mostly, people are forced to rely on measuring inputs. And, by definition, inputs are not “outcomes.” 

Gensler found that students are overwhelmingly of the opinion that enforced remote learning has been worse than in-person learning. Whether learning actually (objectively) has suffered is not clear. Students believe their learning has suffered. 

 source: Gensler 

Professional educators, on the other hand, tend to believe remote learning has worked rather well. Students do not agree. 

 source: Gensler 

One potential implication for business leaders is the effect of remote or even hybrid work models on the extent and quality of personal relationships that are considered important for just about any organization. Some 3,000 persons surveyed by Gensler--about 83 percent of whom were students--finds a perceived decline in every type of relationship, compared to pre-Covid and pre-remote learning modes. 

 source: Gensler 

As “soft” as most productivity “data” might be, the “quality of relationships” angles might be even more difficult to capture. And it is likely that future work modes will matter, as enforced remote work has mattered. As most full-time remote workers have traditionally felt they are at a disadvantage to co-workers “at the main office,” so some workers with more “remote” than “in person” experiences might also eventually see disadvantages. 

Most organizations can function for a short time under duress, without compromising long-term effectiveness. It arguably is a different matter if durexx continues for a long time. The reports we all hear about worker “burn out” or “Zoom fatigue” are of that sort. 

Up to this point, collaboration has been “synchronous,” bringing people together in real time. It is unclear whether “asynchronous” collaboration will work as well, or better, than synchronous modes. 

Over time, enforced isolation might start to have implications for organizational effectiveness, even if emergency, “short term” performance metrics do not seem impaired. 

Other business metrics, such as the ability to inculcate company culture, or create internal relationships important for young worker advancement, might also be suffering. It simply is nearly impossible to measure such processes. 

Most business leaders hope that hybrid work modes will provide the best of both worlds: happier employees and sustainable productivity. We simply do not know yet whether that is possible or likely. 

Always difficult to measure, we will have to make do with best guesses about long-term productivity from hybrid or remote work.