Big Surprises in the Latest Remote Work Research
The latest research on remote work movements like work-from-home (WFH) and work-from-anywhere (WFA) has upended several generally accepted assumptions about these new trends. Below we review some of the more recent findings that are especially significant for the pre-MBA and MBA students in our audience here at BSchools.
The latest findings from the Survey of Working Arrangements and Attitudes (SWAA) provided by WFH Research form the basis for many of the conclusions in our report below. One of the most influential surveys about remote work in the United States, the SWAA has polled between 2,500 and 7,500 employees every month since May 2020.
The study’s principal investigators are led by Dr. Nicholas Bloom, an economics professor with Stanford’s Department of Economics, Institute for Economic Policy Research, and Graduate School of Business. His team includes Dr. Steven Davis from the Booth School of Business at the University of Chicago, and Dr. Jose Maria Barrero, a finance professor with the ITAM Business School at the Instituto Tecnológico Autónomo de México in Mexico City.
1. The Salary Value of Remote Work Is Massive
The latest surveys report that, on average, United States employees value a typical hybrid work-from-home option plan—one with at least two days away from the office each week—equivalent to an 8 percent pay increase.
Compared with some of the typical perks that American employers routinely throw into signing bonus packages, such as complimentary health club memberships, the value of such a work-from-home program amounts to a massive benefit. Moreover, after 32 months of a pandemic—and during one of the tightest labor markets in U.S. history—by now, the overwhelming majority of American employers are aware of this value and its significance to employees during salary negotiations.
But for MBA graduates, the perk value of such a remote work program will typically be even greater. Keep in mind that these days, most MBAs take their first jobs after graduation in only three industries: technology, finance, or business services like management consulting. And in these industries, the generally accepted value of these programs is much greater than the mean. In the tech industry, it’s almost 11.5 percent—which is 44 percent greater than the U.S. average. In finance, it’s just under 10.5 percent, and in business services, it’s roughly 9 percent; those figures are respectively 31 percent and 13 percent greater than the American average.
In 2022, the average nationwide starting salary for U.S. MBA graduates is approximately $106,000. So let’s suppose that a freshly-minted graduate wins an offer for a typical MBA-required management job from a bank paying that average salary. Other things equal, that grad should reasonably value a remote work program offered along with that job to be worth about $11,200.
That’s a powerful incentive. It’s apparent that a savvy employer can transform an average job offer that’s nothing special into a high-value offer that could blow away competing bids simply by expanding this remote work option.
Incredibly, the remote work plan delivers all this value to the job candidate, but it doesn’t require the employer to incur any additional variable or fixed costs at all. Instead, employers will actually save money because they don’t need to pay the overhead necessary to support the workers within their offices. And meanwhile, the productivity of the workers away from the office usually increases by nearly 5 percent. On balance, it’s difficult to imagine how an employer could lose by offering a generous remote work option to a job candidate.
It’s important to also note that employees’ valuation of remote work options amounts to a global phenomenon, and these values vary around the world. For example, workers in Italy, Sweden, Hungary, and Australia assign values roughly equivalent to their American counterparts. However, employees in Serbia, Turkey, Egypt, and Brazil assign substantially higher values than the American average.
2. Without “Anchor Days,” Remote Hybrid Programs Risk Failure
Unfortunately, the research shows it’s best not to allow work-from-home employees the freedom to come to their offices on whatever days they choose. Instead, a company needs to specify regular days during the week when it requires attendance at the workplace by all team members, which are known as “anchor days.”
For example, at Apple’s headquarters in Cupertino, these recently-introduced anchor days now take place every Monday, Tuesday, and Thursday; employees then work at home on Wednesday and Friday. This pattern of three days per week in the office followed by two days away appears to be an emerging norm across North America and Europe that’s reduced time on-site by a third or more.
Why? The reason employees can’t come to the office whenever they want is that new research shows that different kinds of employees exhibit very different office attendance preferences within work-from-home programs. For example, unmarried males in their 20s typically prefer to come to offices more often than any other group, and that’s especially true if they live in urban centers near their employer’s facilities.
On the other hand, certain workers prefer to work at home as much as possible. This group includes working mothers with childcare responsibilities for infants or young children, some minority professionals, and senior executives in their 50s and 60s who commute long distances to the office from distant suburbs and outlying rural areas.
As a result, if management doesn’t restrict office access, ambitious young male employees could show up at the office all five days of the week, but the other groups might not want to come to the office more than the likely minimum-required two days per week. This disparity could give the young males much more “face time” with their supervisors, which can build better relationships with them. More time on-site could also help those employees bond with mentors and network with senior executives who could offer additional opportunities.
Meanwhile, working mothers wouldn’t have equal face-to-face access opportunities with their supervisors and other executives because most of the moms would be working at home on their computers for 60 percent of the week. The concern is that the young males will “zoom up” the corporate ladder through rapid promotions, but the working mothers will never advance, and their careers will stagnate.
However, whether this concern seems justified based on the latest research is not clear. Published in one of the world’s most respected economics journals—the Quarterly Journal of Economics—a 2014 Stanford study of the 16,000-employee Chinese online travel agency Ctrip.com compared a control group of traditional on-site workers in Shanghai with a matched employee group that instead worked from home. The researchers discovered through a multiple regression factor analysis that the on-site workers received a staggering 50 percent more promotions than the employees working from home. This single finding has been repeatedly cited by stories in the legacy business press as support for a broad range of arguments that remote work inevitably damages workers’ prospects for promotions, salary raises, and other forms of career advancement.
But when the Stanford researchers replicated the study at the 35,000-employee Ctrip subsidiary Trip.com in 2022, they found no difference in the promotions rates between the on-site and home worker groups. In their paper published by the U.S. National Bureau of Economic Research, the investigators write that they had “found no impact on WFH performance reviews or promotions overall or in any individual sub-group.”
Interestingly, some researchers have observed that “mixed mode” interactions—with Zoom video hookups linking colleagues at home to the rest of their team back at the office—tend to exhibit several technical and interpersonal challenges that render these meetings less efficient and productive for many of the team members.
Instead, gathering all the team members in the same location on anchor days for meetings, collaboration, and socializing tends to overcome these difficulties. The remaining at-home days tend to emphasize non-collaborative assignments and individual work that requires quiet for concentration.
3. Companies Might Start Closing Offices on Non-Anchor Days
To prevent the kinds of favoritism we just described, a new, corollary best practice entails discouraging or preventing workers from coming to the office on non-anchor days. Some companies might even decide to close their facilities or campuses during these periods.
But this sounds like a harsh strategy, doesn’t it? Is this kind of access restriction really necessary?
It might very well be. If upper management allows some workers to unfairly benefit from on-site, in-person collaboration with their managers and other executives even though remote workers don’t experience equal opportunities, the consequences for the organization as a whole could be adverse.
These repercussions could include damaged morale, attrition, and even litigation. Lawsuits could be filed by remote workers who claim that employment discrimination in favor of on-site workers was the real reason they had been passed over for promotions or denied salary raises. Although those plaintiffs might not prevail in court, the legal fees required for corporations to defend against these actions and the costs of their settlement payouts could be substantial. Few companies will accept these expensive risks when all they need to do to avoid them is to simply close their offices on non-anchor days.
4. Firms Aren’t Cutting Back on Their Office Space
During 2020, many commentators predicted huge plummets in the demand for office space. They had forecast the swift destruction of the market for commercial real estate in urban financial centers like Wall Street and in tech hubs like Silicon Valley. Some experts even predicted that many office towers would sit vacant for years to come, and would either be converted to other uses or demolished.
That hasn’t happened, with cuts in office space only amounting to two percent or less on average. But why? This analysis from the Harvard Business Review explains three main reasons.
First, employees are no longer comfortable with density, mostly because concerns over infection risks persist. Workers don’t want crowds around their desks, and they certainly don’t want to be surrounded by crowds in elevators or cafeterias. And there’s no way to reduce density while minimizing square footage.
Second, workers typically want to perform their remote work on Mondays and Fridays, and most employers have caved to these demands because of the tight labor market. What this means is that the middle three days of the week at many companies aren’t necessarily less crowded than they were before the pandemic. To have enough space available that minimizes density during these days, companies can’t afford to cut their space utilization.
Third, if employers have a prayer of attracting and retaining talent—let alone getting that talent into their offices as the work-from-anywhere movement gains momentum—they had better redesign their facilities so that they’re more inviting and spacious. “Designing for collaboration” can take various forms, but one approach applied by Accenture has transformed conference rooms and large offices into lounges by replacing conference tables and desks with sofas.
5. The Real Objective of Return-to-Office Policies May Be to Purge Nonconformists
In a recent BSchools report, we pointed out that after Goldman Sachs and JPMorgan had announced they’d require all employees to return to their offices for 40 hours each week, Dr. Bloom then found out about conversations throughout the ranks of those firms where employees had threatened to resign. Here’s how he explained to Anne Helen Petersen at the University of Pennsylvania’s Wharton School how things turned out:
About a year into the pandemic, most companies at this point were saying, “Look, hybrid is pretty clearly here to stay. We’re never going back to where we were.” But there are a couple of exceptions that I’ll call out.
Goldman Sachs and JPMorgan both said back in spring of 2021, “You know, we’re bankers.” And there’s a lot of chest beating around this.
“So, you’re going to come back into the office, five days a week. That’s how we do business. No exceptions.”
By now, a year later, they’ve just gone quiet. And you know, folks I know that informally I’ve talked to in these companies have said, “Look, I’ve gone to my boss and said I’m going to quit. You know, I’ll go join Merrill Lynch or Morgan Stanley or most of the other competitors that allow it, unless you let me work from home.” And their bosses conceded.
So where we are now in 2022 is that two things have changed. One is that it’s very clear that work from home—at least hybrid, say, two or three days a week—keeps employees happy and probably improves productivity. And two, we’re in a red-hot labor market, so it’s just not possible if you’re an employer to force it, you know.
From our server data, we see this. We’ve surveyed tens of thousands of Americans, and 40 percent of them say that if they were forced back to the office five days a week, they would actively look for another job or quit. Now, I don’t know of any firm that can, you know, lose 40 percent of employees. So market forces and technology have forced pretty much every firm I talk to now to accept it’s here to stay.
Writing in the Harvard Business Review, the professors note that the ostensible reasons stated by firms like Goldman and JPM for their return-to-office policies were that in-person interactions work better for collaboration and that employees at home are less productive.
But the researchers then suggest that the real reason is to purge nonconformists. They cite a senior manager quoted in the Economist who declares, “Goldman does not want to hire people for whom the most important thing is how many days they have to spend in the office. The others can have them.”
The professors then offer the following advice to firms such as Goldman and JPM:
Companies that take this route could become the next Yahoo, which received a media roasting in 2013 after famously banning working from home, and then quietly relenting.