Why did it take a virus for work to go remote?

Harnessing the outbreak to build stronger businesses by Dr. David Macauley and Dr. Nancy Dixon

In the wake of the Corona virus, it seems that everything from the NFL to regional music festivals are looking to technology to continue operations.  The trend has only picked up steam as the national lockdown has continued with an increasing number of individuals , organizations, and educational institutions making headlines as they embrace remote work to combat COVID-19 and cope with the challenge of social distancing mandates.  However, while the outbreak has put a spotlight on remote work, it is hardly new.

 Before the outbreak, 40% more U.S. employers reported offering flexible workplace options than they did five years ago, according to Connected Nation.  Remote work has grown by 91% over the last ten years.  Even without a public health threat, a whopping 80-90% of the US workforce say they would like to telework at least part-time, two to three days a week.  Notably, 74% of workers even say they would quit their job for more flexible options elsewhere. The population of workers who regularly work at home has grown 11% faster than the total workforce and nearly 47 times faster than the self-employed population.

 Yet despite the rapid growth in percentage terms, the absolute number of people engaged in remote work remained small before the impact of Covid-19.  On any given day, only 3.4% to 16% of the US workforce reported working remotely before the outbreak.  Why?

If it's so great, and employees want it, why wasn't everyone doing it?

Perhaps the most fundamental and least visible reason is the inertia created by employees, managers, and business leaders who wake up each morning with the assumption that commuting to a set location is the most effective and productive way to work. While this observation may seem trivial, it's not.  The power of habit and mental paradigm to shape our decision making and define what we believe to be possible has been well documented in both academic and popular business literature.  The virus is creating new experiences to draw from and causing firms to recognize and re-frame previously unexplored assumptions that may have previously prevented them from going remote.  With up to 50% of all US jobs estimated to be at least partially remote-compatible, firms are learning that they can do more with remote work than previously assumed. 

Managerial Uncertainty and Trust

The popular belief about the merits and cautions of remote work has typically been framed around managers wanting their people in the office (e.g., The boss wants you back in the office) versus employees making their case for flexibility (e.g., When Your Boss Wants You To Return To The Office).   Organizations, and the people that lead them, have many fears when it comes to embracing remote work.  A few minutes on Google with terms such as "remote work," "telecommuting," and "distributed work team fears" will generate many results that report on management concerns that remote work may negatively impact employee productivity, engagement, satisfaction, and employee development, in addition to company culture.  They worry that they will lose touch with their employees and see less productivity.  In short, managers do not know and trust remote work or that their employees will be as productive when they are out of site.

In periods of uncertainty and transition, there is often an increase in the number of companies that move away from remote work, as we saw in 2017 when Yahoo, Bank of America, and others called workers back to the office.  This supports the assertion that organizational attitudes toward distributed or remote work and its ability to create competitive advantages have as much to do with the firm's beliefs about managerial technique and culture as with actual productivity.  This flight to comfort and familiarity is understandable but unnecessary.  Recent studies coming out of both Harvard and Stanford show that remote work typically leads to higher levels of productivity and more satisfied employees.  In fact, recent data from survey data shows that US employees working from home due to the virus are spending an average of 3 hours per day more at work than they did before the outbreak. 

The current crisis is unusual in that it is forcing many organizations to embrace remote work even as it creates uncertainty in global markets and world economies.  Remote work may become the silver lining of the corona virus outbreak, as more organizations learn how to leverage remote technologies. To leverage this newfound experience, businesses should take the opportunity to systematically identify and assess the assumptions and realities of virtual work within their firms.  This will be critical to leveraging their strengths, managing their weaknesses, and developing the culture and work ethic that reflect their mission, vision, and values in the digital realm after the outbreak is over. 

Making the business case after Covid-19: Benefits and barriers

Some of the most significant financial benefits of remote work stem from reduced office space. For example, in 2015, companies saved $44 billion via remote work; an average of $11,000 per year per remote employee, because of reductions in workspace needs, office supplies, equipment, cleaning costs, electricity, parking, etc.

Another benefit is employee retention. The 2019 report from Owl Labs found that remote work options decreased employee turnover by 25%!  The Society for Human Resource Management  estimates that replacing a salaried employee costs an average of 6 to 9 months of pay. For an employee making $40,000 a year, that represents $20,000 to $30,000 in recruiting and training expenses saved per retained employee.

There are several operational benefits for the firm as well.  Remote workers are typically more reliable than on-site workers. Virtual workers arrive on time more often, take fewer sick days (for themselves or family members).  They are also unable to infect other staff members if they do happen to come to work sick. Working remotely protects firms from situations such as severe weather, road closures, traffic tie-ups, or other issues that prevent employees from making it to an office. 

Reducing or eliminating employee commutes has direct benefits for employees as well. People who work remotely, even 50% of the time, save an average of 11 days per year in travel time, spend $2,000 less on gas, and save $7,000/yr on other automotive expenses. They also enjoy considerable health benefits from remote work. Several studies have found that people with long commutes have higher obesity rates and high blood pressure because they spend more time sitting in the car than being physically active.

While the benefits of remote work are clear, a business case cannot be articulated without also considering the organizational costs and barriers that are frequently unaddressed by would-be adopters or champions of the remote work movement.

The benefits of remote work outlined above typically accrue at either the organizational level or the individual employee level. However, remote work rarely provides managers with additional resources or a reduced workload relative to others in their organization who lead traditional collocated teams.  For example, many organizations utilize an employee "head count" charge to cover the cost of facilities, IT, and other overhead costs related to staffing. While the organization as a whole may benefit from cost savings associated with not having to provide the same kind of physical resources for remote employees, none of those savings typically provide additional funds that a manager sees reflected in his or her department budget.  Managers of remote employees expend greater coordination effort due to multiple time zones or maintaining special HR protocols for remote teams.  Rarely does going remote lead to additional resources for travel or event planning that managers can use to build and run their remote teams more productively.   

Even at the organizational level, cost savings can be illusory.  Few pre-Internet industries have embraced virtual platforms at scale as readily as education. As Derek Newton pointed out in his Forbes article on the economics of online education, cost savings on overhead from physical space will only be realized if an organization is free to downsize its physical spaces. Firms will not generate costs savings if a remote employee simply creates an empty desk in an office for which the company is still paying.  Also, remote workers do not remove the employer's obligation to create an environment that is conducive to productivity and engagement.  Creating and maintaining an engaging digital work experience for a distributed workforce requires its own investment of time, resources, and expertise that can be substantial.  It take a monetary investment to create high quality user experiences while addressing issues such as equipment, security,  language, and multiple time zones. Because of this, established organizations may fail to see expected cost savings materialize immediately.

When the pressure to embrace virtual work from the current public health crises is over, these structural issues will need to be addressed if organizations wish to benefit from virtual work.  Businesses must consider alternative methods to account for overhead costs from remote and collocated employees.  These organizations must create separate "digital overhead" budgets to identify cost savings that accrue to the organization. That will enable remote managers to tap into these savings to fund the cost of additional logistics or periodic face-to-face meetings as needed. 

Leadership and virtual work:

Over time, remote work tends to self-select employees who are self-directed, proactive, and who value autonomy (State of remote work 2019 Owl Labs and Buffer, and 2020 Buffer). This suggests that leaders and managers of remote employees need to shift their focus away from the "command and control" functions traditionally associated with management in order to increase their focus on leadership, organizational justice, and ensuring uninterrupted access to the resources and support that remote employees need to succeed.  However, the distributed nature of virtual work can make it more difficult for firms to identify leadership in practice or spot examples of best practices to be shared across the organization.

To properly leverage remote work after Covid-19, organizations must focus on leadership and how managers demonstrate it virtually in their organization.  The virus has created an opportunity for firms to develop and test strategies to actively seek out, identify, and share examples of best practices within their organizations.  Those that leverage this opportunity now will be better positioned to embrace virtual and remote work when the emergency has passed.

Employment law and virtual work:

As remote work expands, business leaders must consider the resources and expertise required to take advantage of access to a distributed talent pool.  Simply having access to a larger pool will not add value without the capacity to support and optimize a workforce that can work from anywhere.  Employers may not be prepared for what it takes to hire from a national, let alone global, talent pool. 

For example, when determining the employment laws and regulations that an employer must follow, the location in which work occurs typically determines which statutes apply. This means that companies with employees in multiple locations within the United States must navigate numerous employment laws and regulations at the city, county, and state levels in addition to federal regulations.  In short, there are extra HR costs for remote work related to complying with employment laws, as well as costs for providing secure network access offsite and the logistical complexities of communicating with employees in multiple time zones.

While current national and multi-national organizations generally expect to take on this type of administrative burden, this presents a significant barrier to utilizing virtual work for smaller firms that represent the vast majority of U.S. employers.  Organizations must factor this into their staffing costs and seek out the help of competent business attorneys and human resource professionals. 

Talent pool & hiring logistics:

Among the most frequently cited benefits of virtual work is the ability to access a wider talent pool and thereby increase the overall talent and capabilities of the organization.  Finding the right people to fill open positions is made easier when a manager can offer applicants remote working options. When geography is not a constraint, managers can hire the best, no matter where applicants live. And when the perfect applicant is found, managers don't have to take relocation expenses out of their budgets.

On the other hand, the cost and capacity considerations that come with remote work can create a significant barrier that prevents firms from realizing these benefits.  Given that there are both potential costs and potential savings, a scenario-based approach can help employers take multiple factors into account and measure them against costs savings, cost increases, and productivity considerations when considering a remote hire. 

For example, assume a position is expected to contribute $200,000 per year in profit to an organization.  If it costs $50,000 to fill with a local candidate and $60,000 for a remote hire, the productivity hurdle rate for the firm to break-even in the first year is 5% (the $10,000 extra cost/$200,000 contribution = 5%).  Similar valuations can also be modeled for issues such as retention or relocation.  Identifying these break-even points and hurdle rates allow decision makers to make more informed decisions about when it is in the firm's best interest to stay local or go remote in the search for talent.  

Breaking through:

For organizations seeking to leverage remote work the benefits are clear, but the barriers are real.  The futurist Paul Saffo said, "Never mistake a clear view for a short distance."  The power of remote work to improve individual, organizational, and societal outcomes (see life after the outbreak below) is well documented.  Now is the time for companies to do the work to overcome barriers, align individual and organizational efforts, and create breakthroughs to drive long-term value. 

What you can do right now:

• Focus on the three C's: Communicate, Contextualize, and Celebrate

  • Communicate: the sudden shift to remote will place considerable demands on team leaders and managers to maintain contact with newly remote employees and teams.  Email will not be enough to keep remote staff in the loop. Follow up via phone and utilize team collaboration apps to ensure consistent and effective communication.

  • Contextualize: Story is the level at which organizational culture is built.  Managers need to be intentional about the story their organization tells as it responds to the Covid-19 outbreak. For example, will remote work become the new normal for your firm, or is it a temporary response to the outbreak?  If you plan to return to work as usual, be clear about the transition plan for how and when employees will be brought back to the office.  Let your people know about the decisions being made and the criteria being used. 

  • Celebrate: Look for successes, highlight your heroes, and share widely.  The first step to success is knowing what it looks like.  A little bit of good news goes a long way in a stressful time.  Highlighting success within your organization and the people that made it happen is an effective way to show more people how to embody your organization's digital ideals.

• Adopt a video conferencing platform (if you have not done so already) and set aside time to practice using it. 

  • Although there is no substitute for face-to-face communication, today's video conference providers come close.   Check out solutions from companies such as Webex, Zoom, Google, Go-to-Meeting, or Skype. 

  • Video conferencing software will generally work with even the most basic camera and microphone built into most laptop computers.  Pairing these software solutions with any one of the emerging crop of low-cost cameras with high-end features goes a long way toward making remote meetings feel more like face-to-face interactions. 

    • A short Google search will reveal many affordable aftermarket camera options with premium features such as the Meeting Owl from Owl labs, which turns small rooms into digital round tables for under $1,000, or  Logitech BCC950, which gives users access to features such as noise-cancelling audio, pan, tilt, and zoom for less than $300.

• Invest in digital security.

  • Home networks may be more vulnerable than enterprise hardware, and remote employees may be more vulnerable to phishing attempts, especially in times of transition.  Make sure your people are on the lookout for suspicious emails and work closely with your IT and data security resources to review network security protocols. 

  • Focus on prevention but identify security issues quickly if they happen.  Respond quickly and communicate rapidly in order to maintain operations and customer trust. 

Leverage remote work over the long haul:

• Don't assess profitability and productivity for remote employees during the outbreak.  It may be tempting to use the Covid-19 outbreak to evaluate how well your firm's business model lends itself to remote work.  However, it is crucial to keep in mind that between social distancing, grocery store panic buying, and school shutdowns, employees are juggling multiple challenges that impact their productivity even with the best remote work technology, leadership, and support.  These additional temporary issues will confound any results evaluated during the outbreak.  Use this as an opportunity to assess your company's connectivity, communication plans, and resiliency, but avoid the temptation to draw premature conclusions about long-term profitability

• Get comfortable with the vocabulary.  There are multiple terms when it comes to remote work, many of which are used interchangeably.  Don't let the lingo stop you from contributing to the conversation and finding out what works for you. 

• Modernize accounting systems and policies to segregate overhead by both employee location (traditional and remote) and expenses incurred for each type of employee (traditional, remote, and all employees).

• When organizational costs savings accrue, use them to create additional resources for the managers and team members who created them.

• Don't assume that going virtual will always reduce costs.  Identify expenses that will remain due to un-utilized capacity or previous financial commitments, and avoid the temptation to over-promise when making the business case for remote hires.  

• Focus on leadership over management for employee development.  Inspiring people to give their best effort day in and day out is the most important thing that managers and organizational leaders can do, both in times of transition and in the world of remote work.  Empower managers to give their people the time, resources, and flexibility that they need to learn new ways of doing things and juggle competing priorities. 

• Be realistic about your firm's capacity to support complexity within the firm's human resource function.  If you don't have the knowledge or talent to support a global talent pool, you may need to hire it or bring in outside resources. 

• Utilize scenario analysis to identify cost drivers, savings opportunities, and break-even points.  Utilize data to assess whether the total savings and incremental investments in recruiting, managing, and developing remote employees will increase the firm's bottom line. 

Life after the outbreak:

As a worldwide phenomenon, virtual work is growing and will be with us long after the memory of Covid-19 fades.  The businesses that weather the virus outbreak and also  address the structural barriers highlighted above will help shape and address critical quality of life for years to come.  Laurel Farrer,  CEO of Distribute Consulting and Founder of the Remote Work Association, sums up the benefits this way, "the benefits of remote work are so much bigger than just convenience and work-life balance. When we eliminate commutes and empower professionals to choose their workplaces, the entire world is impacted. Carbon emissions and energy usage are dramatically reduced, transportation infrastructures are less congested, and last longer, family dynamics and mental health are stronger, teams are more diverse and inclusive, the urban-rural divide shrinks, consumer debt decreases, and the list goes on. Virtual jobs aren't just changing the future of work, they're changing the future of our global society."

Additional resources and support:

For firms seeking to embrace or leverage remote work, either to survive the virus or create a new normal, we hope that this article will help you clarify the benefits and identify the barriers that you will need to address.  You may also wish to utilize the following resources:

• Running Remote 2020: the world's largest remote work conference is currently scheduled to take place in Austin, Texas on September 2-3 at the Sheraton Austin Hotel at the Capitol.

• Contact Nancy Dixon at Common Knowledge:

  • Managing Performance, Engagement and Morale in Remote Teams

    • nancydixon@commonknowledge.org

    • Additional Insights at: www.nancydixonblog.com

• Contact David Macauley at Wendworks:

  • Managerial effectiveness and development specialist for distributed teams

    • David.Macauley@Wend.works

    • Additional Insights at: www.Wend.works/insights