Is remote work bad for productivity?

If you follow me on LinkedIn you might have seen my post about CEOs demanding their workers return to the office. Amazon’s CEO spoke to other CEOs, and all of them preferred in-office work. He based his return-to-office mandate on a judgement call. It surprises me that CEOs pride themselves on making data-driven decisions about everything except their employees. A “gut feeling” seems reason enough to claim that people should work in the office because they are more productive there. But is that true?

You know me – whenever there’s a myth to be debunked, I take an interest. In this edition of the newsletter, we’ll take a look at the latest research to understand if a return-to-office policy is good for business. Or for workers. Maybe both?

What are we talking about? 

Before we continue, this “RTO-battle” seems most pronounced in the US. It looks like in other parts of the world it’s less of a headline issue. Parties seem to come to mutually agreeable terms more easily (with maybe the exception of India, where three months ago a big RTO push started at large IT firms).

In this newsletter, I will use three terms:

• Fully remote or flexible – no demands on work location, usually working from home (WFH)
• Hybrid – minimum number of and/or set days in office
• Fulltime-in-office – work location is always the office

What does the data tell us?

When I started to look at the data, I quickly realized that the newspaper headlines do not accurately reflect what’s going on in workplaces around the globe. Sure, the bold statements of a few corporate CEOs make for great headlines, but all data points indicate that something different is happening. Except for maybe a few large companies, most people are not required to return to the office full time. Not even in the US.

With each passing quarter, the percentage of American companies requiring employees to work fulltime-in-office decreases, while fully flexible and hybrid remain stable:

And from that same Flex report (in cooperation with BCG), I learned that when it comes to revenue growth, fully flexible public companies outperform their peers who require in-office time with 13%! Even hybrid companies outperform their fulltime-in-office counterparts by 3% when it comes to revenue growth:

Data from Germany indicates that people are working from home in higher numbers than pre-pandemic and the numbers are stabilizing around 25% of the workforce. 37 percent of Australians work from home regularly, about five points higher than pre-pandemic. After analyzing several countries around the world, the trend is clear: even if companies publicly announce a fulltime-in-office mandate, the majority will only enforce a hybrid arrangement with a mandatory days-in-office requirement.

What about productivity? 

The first research studies about productivity in the post-pandemic workplace are coming in as we speak. Many of the studies are done in the technology sector. As these companies are highly digitized, that limits translating its findings to other industries. However, early results all point in the same direction: the hybrid work model increases flexibility, improves work-life balance, and brings job satisfaction. Workers agree that the hybrid model balances professional and personal well-being. The research recognizes the benefits of remote communication tools but stresses the importance of face-to-face interactions, collaborative engagements, and team dynamics.

And hybrid might be the preferred way to go, especially as a recent study from the University of Pittsburgh found that RTO mandates don’t improve employee or company performance. The researchers analyzed S&P 500 companies that implemented in-office requirements for at least a few weekdays between June 2019 and January 2023. The researchers found significant declines in employees’ job satisfaction but no significant changes in financial performance or firm valuation after RTO mandates. In other words, the return to office did not bring any notable results other than less happy employees.

Another study compared the productivity of fully remote workers with that of hybrid workers. The researchers found that fully remote work is associated with about 10% lower productivity than fully in-person work. This is caused by challenges such as communication, barriers to mentoring, culture building and issues with self-motivation. To remedy some of that, fully remote work also brought large cost savings from space savings and global hiring opportunities, that negated some of the productivity loss. But hybrid working appeared to have no impact on productivity when compared with fully in-person work, while it improved employee recruitment and retention.

CEOs are taking a hard stance 

Still, global CEOs are not convinced. KPMG’s CEO Outlook revealed that they hang on to pre-pandemic ways of working, and a majority (64 percent) think a full return to office is only three years away. 87 percent of CEOs say they are likely to reward employees who make an effort to come into the office with favorable assignments, raises or promotions.

After the first rounds of RTO mandates in 2023 failed to bring people back full-time, companies are now introducing more punitive measures to make their employees come to the office. They are tracking attendance and micromanaging employees’ time by scheduling required onsite meetings. They actively block remote workers from bonuses and career progression. E.g., if you don’t come into the office three days a week, you won’t qualify for a promotion. They also use badging data as KPIs in performance reviews: presence is more important than output… Which leads to the new employee trend of coffee badging: people show up to log attendance, but they are not sticking around for the whole day. They maintain a flexible schedule that includes a visit to the office. And I noticed a new badging-as-a-service offering.

This will not end well!

According to Gartner, high-performers, women and millennials are the most likely to quit when they need to return to the office. High-performers often react to RTO mandates as a signal that their organization doesn’t trust them to decide how they get their work done. And because these workers are in demand, they can easily pursue opportunities at organizations that offer hybrid or fully remote policies.

I find it so interesting that companies that relied on and trusted workers to do the right thing during the pandemic now step in and limit that autonomy. While companies benefited financially from that approach, we seem to return to a “If I can’t watch you work, you aren’t working” management style. The problem with that? The talent crunch is real and demographic trends point to a declining workforce. Employees will simply not come work for a company with antiquated management policies that doesn’t trust them if they can’t see them. And it’s far too early to replace them with AI (assuming that’s your endgame).

In my Equal Pay book, I mention the motherhood penalty. On average 24% of women leave the labor force in the first year after the birth of a child and that has huge implications for their career and compensation. The good news is that recent research indicates that in fields where remote work increased, motherhood gaps in employment narrowed. In other words, the rise of working from home turned a set of jobs into more family-friendly occupations (also for men!).

This also means that working from home policies are driving economic growth by increasing the labor-supply of mothers. This is a huge benefit to society as it provides family with (more) benefits and increases the labor pool. It also has wider social and economic benefits (e.g., more earning and thus buying power, less poverty). Beyond flexibility, female employees also report they prefer remote settings due to fewer encounters with microaggressions and biases, as compared to when working in an office (we really need to change workplace culture).

Organizations also need to recognize that their employees are not the same as they were pre-pandemic. Everyone went through a life-changing event at the same time. The pandemic changed mindsets, behaviors and expectations, especially when it comes to work and the workplace. A recent survey shows that employees who are mandated to return to the office fulltime suffer from higher burnout and stress. They also have lower trust in their organization, leading to lower productivity levels. And they increasingly resent the extra commute, for time as well as cost reasons.

Where do we go from here?

If a fulltime-in-office mandate does not move the needle on productivity but has a negative effect on employee satisfaction and trust, maybe it’s time we embrace a new way of working? You have probably noticed the trend in the research I shared: No matter how you slice and dice the data, or what industries the research looks at, the hybrid model brings advantages that the other two models don’t have. I did not find any research that suggested increased productivity associated with a fulltime-in-office mandate (but feel free to share what you’ve found).

Even Goldman Sachs agrees: “Remote work appears likely to be the most persistent economic legacy of the pandemic.” They note that the share of US workers working from home at least part of the week has stabilized at around 20-25%. Economists at Goldman say that remote work is here to stay and that it’s having a net positive impact on e.g., the retail sector because remote workers consume more goods than services.

Employers who accept a hybrid standard benefit from a talent advantage. This is also reflected in the latest LinkedIn Workforce Confidence Index. Just 39% of employees in the U.S. would prefer to work onsite all the time. The rest would prefer a hybrid (30%) or completely remote (29%) model. And even though the image shows a generational view (and you know how I feel about that), the differences aren’t that large. Which means that the desire to adopt a hybrid way of working is a shared wish among people of all ages.

The talent advantage of hybrid

Nick Bloom, Stanford professor and well-known WFH expert, recommends that companies introduce strategic scheduling: reserving office time for collaborative tasks while empowering employees to tackle independent work elsewhere. “This model doesn’t just trim down commute times but also optimizes the workday, allowing for deep concentration when needed and collaboration when it’s most fruitful. The key is having employees commute to the office only for the activities that can be most productively completed there, such as intense synchronous collaboration, nuanced conversations, socializing, team bonding, and on-the-job training and mentoring. You can do these activities remotely, but it takes more time and effort, which lowers productivity. […] The underlying message is clear: Deliver on your commitments, and you will gain the freedom to work in a way that best suits your life and work style.”

The 2023 Workmonitor data from Randstad shows that 78% of workers said they have a good work-life balance, and a majority would not accept a new job if it negatively impacted this. Flexibility remains one of the most valued aspects of a job, and a significant proportion of workers would start looking for a new role if they had to work from the office full-time: Randstad also recommends that “companies may need to consider how to make the office experience more engaging for employees.”

And that’s exactly what the Delft University of Technology found when they looked at the consequences of reducing office space as a consequence of hybrid work. They conclude that a reduction in office space also contributes to lower productivity: With a higher occupancy, employees are forced to have video meetings in the open workspace, while their colleagues are doing concentration work in the same space at the same time. The study includes case studies of pharmaceutical companies that successfully reduced office space while maintaining employee productivity. They find that when you reduce office space you must improve office quality. That means creating an office identity in line with your corporate identity, adjusting the office layout to allow different types of collaboration and focused work, and introducing policies to inform employees about expectations toward work location.

A final word about inequality

Before I wrap this up, I want to remind you of a side effect of working from home: inequality. The levels of flexibility between front-line staff and professional & managers are highly unequal. Organizations with high levels of front-line workers need to take extra precautions when introducing these remote work policies. It does not mean it can’t be done – but you must be more careful in your approach. You could e.g., limit the number of days that people can work from home and ensure there is enough face time between employees in all roles. Or maybe extend compensation and benefits to groups that can’t work remotely. There is no one-size-fits-all solution, but with some creativity you can come to an arrangement that is beneficial to all.

Is remote work bad for productivity? As always, the answer is: it depends. When I started to write this newsletter, the headlines seem to suggest that working in the office increased productivity. Unfortunately, they parrot what corporate leaders claim. I found an overwhelming amount of research and data showing that hybrid is the most optimal, financially beneficial and productive scenario for both organizations and employees. This is also supported by two recent reports from companies that completely redesigned their approach to working locations:

• 1,000 days of distributed at Atlassian documents the company’s experiences during their shift to remote work. 92% of employees say it makes them more productive and they have the data to proof it.
• Hubstaff did something similar. Their report shows how remote work supports deep, focused work and allows employees to better balance work/life.

It’s time we end the debate and accept hybrid as the new way of working. What do you think?