Nicholas BloomD., an economics professor at Stanford University, studied remote and hybrid work arrangements for years before the pandemic — but never on the societal scale we’ve seen over the past two and a half years.
we’ve got He interviewed Bloom several times Since the beginning of 2020, companies have widely followed his recommendations for approaching hybrids. Bloom’s research is running with colleagues It shows that, to date, approximately 55% of workers in the United States are employed entirely in person, 30% in hybrid arrangements, and the rest are completely remote.
We returned to Bloom earlier this week for his notes on how things actually work in practice, his anticipation of how CEOs’ efforts to get people back into the office so often, common mistakes companies make, and how to solve them. Relaxing the economy can change the trajectories of workplaces. Here are excerpts from our conversation, edited for space and clarity:
I’ve said that the hybrid is the best approach for most organizations, as the nature of the work allows it to be done remotely part-time. We now have extensive experience in hybrid for a few years. Based on studying this, are there any learnings or nuances you might add to your previous view?
Overall, I think the hybrid works really well. And the fact that most companies adopt it tells you so. As an economist, there is something called “revealed preference”. If people always choose product A over product B, then product A should, for the price, be just a better deal. You don’t need polls if everyone is voting with their feet – you know that’s really the best result. So the fact that the hybrid has become dominant tells you that it generally works.
But what was complicated was that there was this transitional phase where employers said, “We’re going to go hybrid, but we want a little bit of social distancing in the workplace. We’re going to let people choose, to deliberately distance themselves. Everyone you talk to is complaining about the outcome of that.” Most people, except introverts, have complaints about coming in and being quiet and dying and yelling at their laptops – and what’s the point of coming to Zoom all day? This makes things more difficult now. I talk to a number of companies who say it’s a bit difficult now to transition into, “Well, you’ll come for the same number of days, but we’ll pick the days, or at least the level of team you need to coordinate. If you look at surveys, the main reason people come into work is to see colleagues and work with colleagues.
When you ask people, when you come to work, do you like your colleagues to be there, 80% say yes. So 80% of people would like at least their colleagues to be there. (The other 20%, they’re probably at the wrong company. If you hate your co-workers, it’s entirely possible that you’re in the wrong job.)
But the biggest challenge – and perhaps the only thing unexpected – is how comfortable employees are with choosing the days in the office and willing to change that every week, for whatever reason, for reasons of childcare, work, personal reasons, etc. I think he’ll settle into team after team when it makes sense to get together.
What can we say at this point about the business impact of this shift to hybrid?
I’ll give you four reasons why people love a hybrid and then see if I can actually put a profit number on it. One is that it makes the employees happier. Smoking cessation rates are low. In the randomized control trial that we just finished, smoking cessation rates decreased by 35%. People have repeatedly reported in survey after survey that they value it somewhere like 7% or 8% of a pay increase. A free pension plan is about the same value for employees.
The second benefit is that it improves productivity. The numbers here are low, but the central estimate for more than a number of studies is 3%, 4%. Not huge but positive. Where do these numbers come from? They come from two places. First time. So, if you work from home two days a week, on average, you save 70 minutes commuting a day. In the survey data it appears that 30 minutes of that day are spent more at work, and 40 minutes are spent on other things. But as a business owner, if you have people working from home two days a week, they work about an hour extra for you over a 40-hour week. That’s 2% more hours. This is 2%. Then the other 1% and 2% come on the days when you’re at home if it’s well organised, it’s quieter so people are usually more efficient.
I have some high-resolution data on activity per minute and you can see people in the house taking fewer breaks, and fewer coffee breaks. They go to the toilet less. They are faster. They take lunches the shortest way. If you work from home, your lunch break is usually 20, 30 minutes. If you’re in the office, it could easily take over an hour. So these two add up to about 3% and 4% interest.
It’s hard to pinpoint three, but certainly important, which are support for diversity, equality, and inclusion. Slack Future Forum He has some things. We have surveys that show that everyone, of all demographics, ages, genders, etc., likes working from home. But there is a slightly stronger preference for people with children, for women, for minorities. And what that means is that if you’re tough and forced to go full back to the office, you’ll see a greater decrease in the number of diverse employees. This is a real DEI cost.
The final benefit, which, oddly enough, is last, but most people pre-pandemic first, is space savings. It turns out that it is really difficult to save space due to the hybrid. People usually come on Tuesday, Wednesday and Thursday because I want to work from home Monday and Friday. So you have this issue where you can’t sublet an office space on Monday, Friday. Nobody really wants that and it’s tough with security. If you share an office space, how are you going to lock down computers and save lockers and things?
So if you have to put a number on it to give a very approximate number for a typical business, with two-thirds of the costs from payroll, you’re essentially reducing your payroll costs by 7% or 8%. All other things being equal, if hybrid people consider a 7% and 8% increase in wages, you basically can’t increase their pay as much and make them not give up on you. So that’s probably a 5% net addition to net profit. Increase productivity from 3% to 4%. That’s 3%, 4%, maybe more revenue, keeping costs flat. It’s hard to determine the cost of DEI and space, but you can easily see a 10% and 20% profit increase for the full return.
This is why every company is about to do the hybrid, because it makes no sense to increase profits. The bigger question is how it is implemented.
In terms of implementation, what are the biggest mistakes you see organizations make and what should they do instead?
The biggest mistake is ceding complete control over the choice of days to employees on what and how many days. Employees, when they come in, want to see their co-workers. So if you let people choose entirely, you’ll find that in a team of 10, you never get a day where everyone is there. Therefore, every meeting of the entire team should have people on Zoom. It is uncomfortable. Leave people outside. There are such groups. He’s frustrated. The meeting ends, people disconnect in Zoom, and of course the meeting continues down the aisle.
The other thing is trying to bring people back for several days because of sunk cost fallacies. Like “we have this space, we should use it”. The fact that you have this space does not mean that you have to force people unnecessarily. There is plenty of evidence of significant resistance. We find the great resistance of two forms. The first is that we surveyed employers and only 80% come for as many days as their managers or company want them. So 20% are not, which is a high number. If you poll people before the pandemic and say how many people don’t come every day they’re supposed to get, it would have approached zero.
The other problem is, what does your manager do about it for those who don’t come? The largest response of about 40% is none. Managers are also resisting. The reason is that middle managers basically say, it doesn’t make sense to force employees to come back four days a week. So if the staff comes in two or three, I’m just going to turn a blind eye. And it’s kind of an old saying about laws: A bad law makes a law unenforceable. Well, bad management rule constitutes an unenforceable management rule because middle management does not approve of it. They resist as much as the staff below.
Coming back after Labor Day seems to be a bit of a standoff in some companies where CEOs want people and employees to come back reluctant, as I just said. How do you see that happening?
I’ve been laughing about a Labor Day thing in the media because this is the third Labor Day showdown. I can tell you it’s 2-0 to the staff. It wasn’t even close. It’s like Manchester City facing Grimsby Town – I know what happens. It will be 3-0. They just won’t come back. I’m not saying they won’t be back for zero days, but any company that tries to bring people back five days a week, that’s the quickest way to get out of a whole bunch of employees.
I would support employees returning two or three days a week, but they mostly do it. So I don’t think you’ll see a shift in the overall numbers. I’m going to make that prediction now, it’s the end of August. We’ll do the survey again in September and October and you can look at the data, but after looking at a now basically flat streak in terms of the share of work-from-home days over the past six months, I really see Labor Day as sort of an imaginary deadline that’s coming and going as it was in Past, like multiple RTO dates that came and went.
To what extent do you see uncertainty about economic growth affecting far and hybrid plans, particularly in terms of employee effectiveness for resilience?
To be sure, the Fed is trying to engineer a smooth landing. Even if it is a soft landing rather than a hard one, it will make the labor markets less tight. So it will be difficult to change jobs. Employers will have more power. The right question is whether it will affect the uptake of working from home. I do not think so.
Going back to the four reasons, keeping employees happy, increasing productivity, supporting diversity, and providing office space — collectively, I don’t think these are more important in a boom period than a slump. For some of them you can actually argue the opposite. In the short term, it will fluctuate a bit, but I don’t see it changing more than a few percent as it goes up and down.
The big problem in the long run is technology. The pandemic has resulted in a sixfold increase in working days from home, which has dramatically increased the rate of technological progress in hardware and software to support it as companies consider it a much larger market. If the markets become large, companies innovate to support them, as in America there are a lot of older people and drug companies developing drugs to support older patients.
The exact same thing happens with the technology of working from home. Things like virtual reality, augmented reality, holograms, and AI optimization to support audio and visuals. So it will surely mean in three years or more – and maybe even sooner – the trend will continue to rise again. If I’m making any long-term decisions about organizational structure, strategy, office space, growth rates, I would actually expect if anything, working from home goes up, it’s not going down. Certainly five years from now, I think it will be higher than it is now.
Read Full version of our interviewincluding more about why he thinks hybrid is a dominant paradigm and how to best manage it when you have remote and hybrid workers.