Why employers should value remote work

For columnists, remote work is the gift that keeps on giving—first, because we do not really know what is going on, which creates endless opportunities for speculation. And second, to the extent that we do know, individual employers do not seem to have settled on their approach long-term. Current practices diverge wildly across employers.

The underlying conflict that drives our continued interest in it—even if it does not affect us directly—is the apparent titanic dispute between employees, who would like to work from home, and employers that do not want them to.

It is typically presented either as inevitable—employees want it, so it will happen—or a tragedy: Remote work is better but employers just will not allow it. When we lift that rock up, though, we see a much messier story: Employees do not get something simply because they want it, they do not all want the same thing and whether remote work is better or worse for the employer is simply not clear. Results showing good job performance are limited to individual contributor roles and often to “permanent remote” where offices are taken away.

Even then, it is one thing to say that, if the practice continues, new hires who never had remote experience could be just as successful doing so as experienced workers who know their jobs could work remotely. Hybrid models are where the big interest is and also where the biggest questions are for the employers, as it is just not clear how it helps them.

“Hoteling” to cut real estate did not work when it was tried 20 years ago. Because we do not have any good measures of job performance for most white-collar jobs, trying to see whether remote work is more productive—when the tasks differ, when the people doing them differ and where our measures are poor—is just not possible to do well now.

One way it could help is with hiring, retention, and wages. Another way to put that is, in an open labour market, is remote work something that employees prefer enough to shape which jobs they take? Could you hire better people at the same wage or the same people at a lower wage by offering it? The evidence that this might be an advantage has been around for some time, even before the pandemic. PwC, for instance, did a survey at the beginning of the pandemic showing that employees might take lower pay to be able to work from home, even in a hybrid schedule.

What we would like to see, of course, is not what people say they would do but what they actually do—because doing these things is often hard. For example, the plethora of surveys reporting that employees will quit if they do not get to work remotely is highly unreliable.  We know from prior surveys like these that people do not quit unless they have another job to go to, and it has to be at least as good as the one they are leaving. Even then, moving is unlikely because of all the other disruptions and costs.

What would be strong evidence is if people chose jobs with remote options when they could have had a job that was at least as good but with no remote opportunity. Or if they stayed where they had remote work rather than take a job elsewhere that was better on other dimensions but did not offer remote options.

We have not seen that yet, but we have seen something that is promising. In a study published in the National Bureau of Economic Research this month, researchers explored results from a survey of employers about what they did this past year and what their intentions are going forward in terms of where their employees work. Self-reported explanations are not the best evidence of anything because of all kinds of response bias (we report what we think is the socially desirable response, for example), but to the extent that it represents something about what employers believe, it is really important, as their beliefs are the most significant factor, in my view, in explaining what they will actually do.

These data show that 40% of a representative group of employers said that last year they allowed more work from home to keep employees happy and to moderate wage growth. That is not the clearest evidence because we do not know to what extent keeping employees happy had material benefits for them. They guessed that it saved them 1% off the wage bill compared to what they would have had to pay without work-from-home options. In other words, they think it works for them as a cost savings.

The more interesting result is that 38% said they will use work from home this coming year to reduce wage pressure. Most of what businesses do happens because of what they believe rather than what they have tested and confirmed, and so this is promising for those who would like to see work from home expand.

Of course, the more employers that follow this approach, the less useful it becomes, as it would no longer be an important feature that differentiates them from competitors. Another possible development is the sorting out we are likely to see across individuals and jobs. Not all industries can use work from home (healthcare and hospitality, for example) and not all jobs within those industries lend themselves to it, either. People who really value work from home are likely to start making different career choices to get it.

But this is the way market works, and it will be inevitable when it starts to happen.

About the author: Peter Cappelli is HRE’s Talent Management columnist and a fellow of the National Academy of Human Resources. This article was first published on Human Resource Executive.