The big risks in return to offices: Harvard remote work guru

Like it or not, more employees are going back to work. With roughly 130 million Americans now having received at least one vaccine shot as of Sunday — about half of U.S. adults — the forced Covid-19 work-from-home experiment is coming nearer to an end. What results on the other side of it, though — a return to a traditional office-first model, hybrid employment, or permanent WFH — will depend on an employer’s specific cost-benefit analysis of factors including company culture, and talent and productivity to be gained or lost.

Already, major employers across sectors of the economy are choosing distinctly different paths forward.

Among West Coast technology giants, Microsoft has been clear on a liberal WFH policy since October 2020. Google, meanwhile, is limiting employees to a maximum of 14 days WFH annually without manager approval. On Wall Street, Goldman Sachs’ CEO called WFH an “aberration,” and JPMorgan Chase CEO Jamie Dimon expects “many” employees to be returning, and no more than 10% to be permanently WFH.   

If a boss is making a worker return, Microsoft’s chief people officer Kathleen Hogan says they should have “a really good reason why it’s really important for people to be in the office 9-5.”

The decisions — many still to be made across the corporate world — will result in winners and losers in recruiting and retaining talent, and leading the market on competitiveness and innovation.

CEOs are worried. JPMorgan’s Jamie Dimon told shareholders in his annual letter that onboarding and mentoring of new employees will not easily be recreated virtually; that remote work can “dramatically undermine” the character and culture a company is attempting to build; and “virtually eliminates spontaneous learning and creativity.”

The history of remote work doesn’t suggest that firms which abandon the practice necessarily come out on top. Take, for example, IBM and Yahoo, early adopters of remote work models only to later revert back to office-centric culture, and yet, these companies still lost ground to newer competitors in recent decades.

Harvard Business School professor Prithwiraj (Raj) Choudhury says examples like these show that companies going remote without thinking through the organizational overhaul that is required will not necessarily benefit. “That is a recipe for disaster,” Choudhury says. “The best practices have come from the GitLabs of the world because they reinvented the best practices,” he says, referring to the all-remote tech start-up he has closely studied.

But employers opting for a top-down mandate on back-to-office policies and hybrid work — rather than in collaboration with teams and individuals — may do no better.

Here are some of the Harvard Business School remote work guru’s top advice to employers and employees based on his research as the post-Covid workplace reckoning transitions from on-the-fly solutions to permanent structural changes in how we work.

The desire for flexibility from the workforce has always been there as a major force of change, but it has been growing over time and with newer generations of workers it has reached “a different order of magnitude.” “Millennials are rejecting ‘our way of life'” Choudhury says.

In a tight labor market and war for talent, that’s a reason for companies to think carefully about returning to offices. But Choudhury says it’s not only about younger workers, but importantly, women in the workplace who should be a serious consideration in these plans. Well before the pandemic the U.S. work culture had failed to figure out what he referred to as the “traditional worker dual career situation” — for example, when a family moves to a new city for a husband’s career and a wife’s profession is sidelined.

“It was never solved and has always wronged women more than men,” Choudhury says. “The latent desire for flexibility is a huge force.” After a pandemic which saw women leave the labor market at a rate that reversed decades of progress, there is more reason than ever before to use work-from-home flexibility as a means to undo the damage, permanently.

Saving money with a smaller real estate footprint may make shareholders happy coming out of the pandemic-induced recession, but short-term cost cuts alone won’t create the next generation of top companies. JPMorgan’s Dimon told his shareholders that while it will have less real estate in the future — enough for 60 seats out of every 100 employees as the era of the “hot desk” and “hoteling” at work begins — the bank’s new corporate headquarters in New York will house even more workers.

The fixed costs of real estate are a major headwind, and while some experts remains unconvinced the reduction in corporate square footage will be permanent — recent figures from New York indicate a decline of 25% over the last year in the value of office towers in the city and $1 billion lost in property tax revenue — Choudhury says there are examples in the market of why newer companies in particular may use less real estate as part of a success recipe to take down incumbents.

One example: the real estate industry itself. The Harvard Business School professor pointed to eXp Realty, whose founder and chairman Glenn Sanford took the company all remote after the financial crisis, a decision not only to build a tech-led business model but also a way to avoid the need so many entrepreneurs face of having to factor real estate costs into the capital they need to raise. As a result, the company was able to put more money into talent, including commission structures for agents and an employee stock program. “They had no need to raise tons of money from VCs early on and he had lots of equity he could share with agents,” Choudhury said.

“Work can be done from anywhere,” Choudhury says.

That has long been true and has not changed. What all employers and employees should be questioning now is why we come into an office at all, and flip the script to a focus on social interactions as the new equilibrium.”

The extroverts need a social connection” more than other workers, he says, and that won’t change either, but a fundamental part of team productivity will continue to be in-person collaboration among all.

“What the office will really symbolize going ahead is temporary colocation for social reasons, bonding as teammates,” in Choudhury’s view.

For starters, employees need to be honest about the work structure they want, the HBS professor says,”because if they are not, they won’t be happy with the nature of their work long term anyway, and they will think of leaving ultimately.”

Prior research on work-from-home involving a Chinese company indicates that when employees were given the option to work remotely on a permanent basis after a trial period, productivity gains increased even more among those who remained at home. Workers should have a big role in determining the work situation that fits best for them, but that doesn’t mean all workers will want to be at home all the time. The same study showed that many workers in the experiment preferred to come back to the traditional workplace after the trial and the author of that study has expressed caution about reading too much into it for the post-pandemic future being “all-remote.”

Choudhury, who leans more into the hybrid than all-remote work idea for most companies — “the vast majority of the world will be in a hybrid state,” he says — is focused on one big, practical question for this shift: Who should solve the hybrid scheduling problem?

In his view, the most important scheduling function shouldn’t sit with the C-suite or with the individual.

“The equilibrium comes down to what a team wants and less of what a company or individual wants,” Choudhury says. He is advising the companies with which he works to let teams decide together on the optimal balance between in-office and remote work. “Let the team decide because every team needs to meet once in a while, but what frequency or schedule is best decided by the team. If every employee is making the choice for themself, there’s a risk teams are never together,” he said.

His research on Tata Consulting Services, part of one of India’s largest conglomerates, indicates that if the day-to-day, in-office schedule is not led by a team, the development of a bad hybrid work model is a big risk.

TCS implemented a 75% remote work model as an organization, but that could mean different things to different teams, such as one week every month in the office for some, or three months of the year for others.

“Never seeing teammates creates really bad outcomes,” Choudhury says.

One of the biggest decisions to be made in new work structures is how to pay employees who move to lower-cost geographies. Facebook’s CEO Mark Zuckerberg has said that employees may be paid based on where they work. Other tech companies, such as Reddit, have said no matter where an employee is based, they will not see a pay cut.

Choudhury says he has heard all the arguments in this debate and there is not enough existing research to form hard conclusions, but he comes down on the side of thinking the best geographic dividing line over pay is national. Within a country, companies should not adjust pay based on a specific city, town, state or province where a worker lives, but if a worker moves to another country, it might make sense to set pay based on that country’s labor market.

He thinks cutting the pay of the worker who moves from California to Tulsa makes less sense. When the U.S Patent and Trademark Office, an early adopter of work from home which Choudhury has studied, allowed employees with several year of service to move to less expensive regions, they did not cut salaries. What they found was that female workers could afford daycare for the first time and the new economics made them more productive workers.

Choudhury stressed that this is one topic where it is such early days, his view might still change. “My heart is saying we should allow true flexibility globally, but there is an interim period where we’re trying to understand not only salary issues, but tax issues and the employment regulations.” He added that a phased approach is less disruptive, and allowing complete flexibility without pay implications within a country is a good first step, and it could expand to include more countries, and at some point, maybe even the entire world.

One of the first-ever significant moves to remote work in the U.S. was during the oil embargo of the 1970s, when employers did their part by cutting down on commuting requirements. Now, with many major corporations embracing net-zero carbon goals for the future decades and embracing climate change as part of ESG (environmental, social and governance) mission statements, they have less room to make the case that employees commuting long distances supports the goals of fighting climate change.

As Choudhury noted in his recent Harvard Business Review article, in 2018 the average American commute time was 27.1 minutes each way, or about 4.5 hours a week. “Eliminating that commute — particularly in places where most people commute by car — generates a significant reduction in emissions.”

Choudhury says factoring climate change into the future work model would serve multiple environmental goals, from reducing existing carbon emissions related to highway commutes, to allowing people to move away from congested cities, cutting down on real estate growth, and in little ways, like saving on paper. “People print less working from home,” he says. “In the office, workers obsessively print out everything.”

Many large office buildings are more energy efficient than residences, but for workers at companies where climate change has been cited as a priority, it is going to be harder for those companies to justify the five-day-a-week office model as being aligned with carbon goals without a more clear accounting of exactly how that is being measured.

The U.S. Patent and Trademark Office estimated that its remote work model led to 84 million fewer miles being driven in 2015 and a carbon emissions reduction of more than 44,000 tons.

Many leaders and technologists worry about the creation of two classes of corporate citizens, with the most ambitious, for example, back in the office getting face time with executives and promotions, while remote workers are relegated to “second-class” status. Choudhury looks at this divide through another lens.

The Orwellian idea that companies will need to track “slackers” who are working remote using software is an idea he opposes.

That was an issue for the USPTO, which Choudhury cites in his recent HBR article, including claims of “attendance abuse” in its work-from-anywhere program made within a review by the U.S. Commerce Department’s Office of the Inspector General. Even though the data related to hours and shifts logged and not productivity measured in the core work of number of patents reviewed, the government agency’s teleworkers were subsequently required to use stricter organizational tools, such as the now-common virtual private network (VPN), and have a “presence indicator” turned on in a messaging system.

But the USPTO was “pleasantly surprised” to find that Harvard’s review of the productivity data from both before and after the use of this technology showed no effect on average output.

At the office, companies have long measured time “in seat” and “on screen,” but Choudhury says recent discussions with managers and employers shows consensus that the shift to more remote works means companies need to change how they measure employee activity. The data being tracked may be the same, but the reasons for tracking it should be updated.

“Screen time is important to measure for wellness and data security, not productivity,” Choudhury says. And he stressed that if there are concerns about an employee’s wellness, it should not necessarily be their direct manager who sees the data and discusses it with an employee. Employers need to have a wellness team which is empowered to contact an employee “who is on email at midnight.”

Choudhury is seeing experimentation, even among the corporations more resistant to a move away from offices, with onboarding and mentoring of new employees in a virtual world. The fears about the conversations in the office, at the cafeteria or water cooler, which led to moments of “serendipity” and helped to establish career paths for new employees, were still most often siloed interactions.

“We never ran into people from another floor,” Choudhury says.

While Wall Street interns are coming back to offices this summer, last summer he helped run an experiment at Goldman Sachs in which interns working remotely were matched with senior managers and other interns to expand their social network. He said the experience “worked beautifully” in meeting the goals of expanding a new hire’s social network and receiving career opportunities, even without that physical proximity and connection. More technology is being used to recreate the office experience virtually, and it will be disseminated more widely in the future, but he does not think that necessarily means for most companies the actual office will disappear.

“These ideas are permeating from the all-remote world,” Choudhury said, but companies which have made the choice to leave the world of physical offices behind for good remain “still very few.”