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The benefit of instituting remote work as part of the “new normal”

flexible work remote work

This analysis suggests businesses could see over $2,500 per employee a year in benefits through a combination of improved wellness, reduced turnover, improved productivity, and optimized office space utilization.

Introduction

Businesses are returning to work, and leaders are asking, “what is the new normal?” A critical challenge is to do better than “good enough” – to rollout working practices and policies to enable their businesses thrive and grow.  

As a product manager in Cisco’s Collaboration Group and former management consultant, I’ve worked with our experts and consulted with 3rd party sources to assemble this analysis to help business leaders do the following:

  1. Rollout best practices for remote and flexible work to enhance staff safety and wellness
  2. Combine these remote work best practices with policies to achieve concrete business benefits
  3. Calculate benefits in financial terms to help leaders to budget, plan, and make sound investments in how they address a post-pandemic world     

At the core of this analysis is the proposition of workplace flexibility and “remote work.” It is not strictly “work from home” but a broader approach, including work across multiple locations, rethinking office spaces, more dynamic work scheduling policies, and using multiple ways to communicate and collaborate. 

Another reason to address remote work is that the pandemic has changed our views around work. Consider a May 2020 Whitaker Institute finding that 78% of employees would like to work remotely for “some or all of the time” after the crisis is over[i]. Thriving in this “new normal” requires new thinking.

This analysis looks at the business benefits for remote work across four key areas: 

  1. Minimizing the spread of an illness
  2. Providing a more flexible, secure, and fulfilling environment that limits employee turnover
  3. Increasing staff output through improved remote and flexible work productivity
  4. Optimizing office space utilization, given likely changes in office visits and space needs. 

For each benefit, this analysis walks through the combination of policy changes and IT capabilities needed to achieve the business benefits. Benefits are calculated in financial terms and applied across the entire employee base in terms of $ / employee / year.    

With benefits captured in financial terms, business leaders and IT can better structure a comprehensive pandemic-response plan, allocate and prioritize IT investments, craft HR policies, and put metrics behind business objectives. 

Finally, this analysis should help planners with a sense of the magnitude of the opportunity.  With a very reasonable set of remote working assumptions, the analysis produced a net benefit of over $2,500 / employee / year of benefit.  For a 100 person business, that’s over $250,000 / year of net impact.

  1. Minimize the Spread of Illness

It is understood and relatively accepted that people go to work when they are ill – in some cases with a cold or in the early or late phases of a flu. A 2018 Office Pulse survey of 642 white collar workers reports that 70% of business professionals go to work sick[ii]. A 2019 Accountemps (a Robert Half company) survey of 2800 workers says that as many as 90% of workers go to work sick[iii].

This same 2019 survey shown below in Figure 1 suggests the many reasons workers will not stay home include “too much work to do” and an unwillingness to use up a limited stock of sick days.

Figure 1. Leading reasons why employees go to work sick

To keep sick people out of the office, leaders and IT need a two-part approach. First, companies need stronger policies to encourage workers to stay home when they are sick – especially at the first indications that a cold or flu is coming on. Second, employers need to equip staff so they can work remotely at home and remain productive. This second step addresses the root causes of why people come to work sick. This is not to suggest that people need to work when truly sick. Instead, this enables sick people who would normally come to the office to stay at home, remain productive, and not need to take a sick day.

The benefits are clear. Keeping sick people out of the office reduces the spread of disease in the office. ; A University of Arizona study in 2019 reports, “if just one person comes to work sick, they can contaminate over 50 per cent of the office surfaces, and their co-workers’ spaces, in less than four hours[iv].” A 2016 study from the NBER (National Bureau of Economic Research) on paid sick leave policies suggests that having sick workers stay home reduces overall sickness rates by 20%[v].

Given that the CDC report from 2015 that the productivity losses from absenteeism cost employers $225.8B / year or $1,685 / employee[vi], a 20% reduction would be equivalent to $337 / employee / year.

  1. Reduce Employee Turnover

Employees appreciate greater flexibility about where and when they work. A 2018 Harvard Business Review study revealed that 96% of US workers need flexibility around how they work.[vii] A 2017 Manpower study reports that 40 percent of global candidates report that schedule flexibility is now among the top three factors they consider when making career decisions[viii]. See in Figure 2 a detailed breakout of the importance of flexibility and increases from 2015 to 2016 across a variety of markets, long before Covid-19.

Figure 2. Importance of schedule flexibility in career decisions

There is also direct evidence that workplace flexibility reduces turnover. A 2017 study from Owl Labs’ reports that companies who support remote work experienced 25% lower turnover, a reduction from an average of 12% to 9%[ix].

A Work Institute’s 2017 study estimates that the cost to replace a worker is roughly 1/3 of their annual salary.[x] If this is applied to employees with an average salary of $65,000 / year, that is $21,650 / employee turnover. The reduction in turnover per year from 12% to 9% is equivalent to roughly $650 / employee / year.

  1. Enhance Staff Productivity and Effectiveness   

A common complaint through the pandemic is the realization of working “more” when working from home. It seems counter-intuitive but consider the following: 1) ability to schedule back-to-back-to-back meetings, 2) the lack of distractions from co-workers, and 3) the increased blur between “work” and “off” hours that leads to extended work hours. Of course, “extra hours” working remotely may not translate into greater productivity.  The “water cooler” is sometimes the greatest source of cross-organizational cooperation. That “distraction” from a colleague at your desk might spark the new idea that accelerates your project. One of the things we’ve learned during the pandemic response is how remote staff are taking full advantage of the more sophisticated tools and practices built into collaboration applications – even to the point of replicating the types of informal interactions that occur with an office. The virtual happy hour on Webex, for instance, has become more popular and often brings people together from across departments or divisions. The greater use of virtual “teams” spaces leads to “always-on” engagement and sparks the kind of open dialogue that brings dynamic interactions and cooperation. 

As for the hours worked from home, a 2020 Airtasker survey suggests the average remote worker ends up working the equivalent of 2.6 more hours per week[xi]. Additional information about working remotely and productivity is shown in Figure 3. That seems reasonable, even just converting about half of the typical commute time to actual work or productive time. For an employee base with an average salary of $65,000 or $31.25 / hour, that boost in productivity is equivalent to $4,225 / year. If the target with “flexible work” is to plan for people working remotely 15% more across the employee base, then this productivity boost equates to $634 / employee / year. Note that if you already have 5% of your staff working remotely at any one time, then you would need to move to 20% remote work to achieve this annual benefit.

Figure 3. Employee productivity: remote vs office.

  1. Reduce of Office Space Needs

Another key consideration from flexible work is the ability to reduce office space needs.  More staff working remotely or from home reduces the number of permanently assigned desks and collaboration spaces.  Businesses may consider how to combine this with a “hoteling” or “hot desk” strategy to further optimize space needs. 

Given that new social distancing guidance may affect conference room capacity, some office managers and planners may now be looking at a need to expand collaboration space. Thus, the reduction in permanent desk and supporting space may enable planners to reconfigure offices from desk space to collaboration spaces and avoid the very hard cost of adding new square footage. 

According to the SquareFoot, the US average cost for office space is between $2.41 (Dallas & Atlanta) and $7.72 (San Francisco) per square foot / month[xii]. Planners estimate roughly 200 square feet per office employee to support a desk and supporting space (20’ by 10’). For this analysis, we skew towards the lower end of the market at $2.50 / square foot / month to be conservative. This suggests an average cost per employee /year for office space of $6,000. If we can reduce office space demands by 15% across a typical employee base, that translates to $900 / employee / year.

Summary

The combined benefit of these four factors totals $2,521 / employee / year. This is a substantial financial return for executives and IT planners to consider. Many of the recommendations implicit in this analysis, especially in the areas of health and wellness, bring forward the “new” best practices that employers need to address in any case. Moreover, the pandemic response seems to be accelerating trends for how remote work brings benefits around reduced turnover, optimized use of office space, and increased productivity. This explains how remote work grew 140% over the decade from 2007 to 2017[xiii].

The magnitude of the benefit calculation may be conservative for many businesses. Some of the key drivers in this analysis are around employee salary and target % for remote work percentage. Consider the number of businesses with average employee costs substantially greater than $65,000 / employee / year or who might target 20% or more for remote work?  Planners may also see substantial additional benefits in productivity for job profiles and tasks more suited to remote work.

Regardless, seeing benefits starting in the range of $2,500 per employee / year should help executives and IT planners prioritize remote work and help them partner with finance to put together more detailed plans, budgets, and timelines for implementation. 


[i] 5/2020: https://www.irishtimes.com/business/work/most-workers-expect-to-be-back-in-office-by-september-survey-shows-1.4250301

[ii] 11/2018: https://officepulse.captivate.com/automatic-reply-ill-be-wws-working-while-sick

[iii] 11/2019: https://www.shrm.org/resourcesandtools/hr-topics/employee-relations/pages/coming-to-work-sick-.aspx

[iv] 2019: https://www.sciencefocus.com/news/return-to-work-does-covid-19-mark-the-end-of-the-office/

[v] 8/2016: https://www.nber.org/papers/w22530.pdf

[vi] 1/2015: https://www.cdcfoundation.org/pr/2015/worker-illness-and-injury-costs-us-employers-225-billion-annually

[vii] 6/2018: https://hbr.org/2018/06/96-of-u-s-professionals-say-they-need-flexibility-but-only-47-have-it

[viii] 2017: https://www.manpowergroupsolutions.com/wps/wcm/connect/976d951f-5303-41d4-be36-4938169d2d80/ManpowerGroup_Solutions-Work_for_Me.pdf?MOD=AJPERES

[ix]2017: https://www.owllabs.com/state-of-remote-work/2017

[x] 8/2017: https://www.benefitnews.com/news/avoidable-turnover-costing-employers-big

[xi] 3/2020: https://www.airtasker.com/blog/the-benefits-of-working-from-home/

[xii] 5/2017: https://www.squarefoot.com/leasopedia/dollars-cents-much-cost-rent-office-space/

[xiii] 2017: https://globalworkplaceanalytics.com/2017-state-of-telecommuting-in-the-us

Comments

  1. David Walters says:

    Quick follow up – the WSJ article below makes some great points about the importance of collaboration within an office environment. I think it provides an excellent complement to my article.

    Just to be clear, I am not advocating 100% remote employee workforce. The $2,500 / employee / year benefit is derived in a 15% shift from in-office to remote-work. I am suggesting that businesses can benefit from *more* remote work but not entirely (100%) remote work.

    The WSJ author also makes a great point about younger staff and the importance of in-office interactions. New workers – whether new to the job or new to the workforce – especially benefit from the in-office environment.

    Please have a read (subscription required – sorry) https://www.wsj.com/articles/companies-start-to-think-remote-work-isnt-so-great-after-all-11595603397

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