The new normal: working from home is here to stay

Working from home is here to stay, Stanford University hybrid-work expert Professor Nicholas Bloom told a CEDA audience last week, as return-to-office mandates failed to stick.

Around 37 per cent of Australian workers now regularly work from home, suggesting there are now new norms around flexible work in the wake of the COVID-19 pandemic.

In the United States, work from home was stabilising at about 28 per cent of days, the William Eberle Professor in Stanford’s Department of Economics said, with similar trends in English-speaking countries across Australia, Canada and the United Kingdom. 

“An issue that comes up is not everyone can work from home…about 60 per cent of people can't work from home at all,” Prof Bloom said.

The remainder of jobs are either hybrid, where employees spend their time split between the office and at home, or fully remote roles, where workers are not required in the office at all.

"Hybrid looks like on a lot of different metrics...it's not a particular downside, there's not an upside either," Prof Bloom said.

"You're basically doing it because it cuts attrition rates by 20-30 per cent and every person that quits is very expensive for the business."

Prof Bloom’s recent randomised control trial found quit rates fell by 35 per cent for hybrid work compared to full-time in the office.

Benefits for employers included better retention and recruitment, while employees valued the flexibility and reduced commutes.

"The ability to work from home two to three days a week is the same as about an eight per cent pay increase on average" in terms of perceived benefits, Prof Bloom said.

The evidence on fully remote work was mixed, however, with some studies showing productivity impacts anywhere from negative 30 per cent to positive 13 per cent, averaging out at negative 10 per cent.

“It depends a lot on how well managed it is, but on average it's negative and it looks like it's harder to mentor,” Prof Bloom said.

He noted the savings on office space and the benefits of hiring from a broader pool of remote workers could create overall cost-savings.

“Maybe you lose 10 per cent on productivity, but you can maybe save 30, 40, 50 per cent on costs, so it's actually very profitable.”

A recent US study looking at companies that had implemented return-to-office mandates found no change in profits and stock performance, although employee morale had been affected.

"I would not call senior managers and executives back for five full days a week,” Prof Bloom said.

“Particularly Friday is really costly."

Prof Bloom said the hybrid model of work seemed to strike the right balance of productivity and employee satisfaction, specifically where worker schedules were carefully aligned to business needs.

"What I call ‘organised hybrid’ is maybe team-by-team, or the company coordinates and says two or three days a week, and people stick to that," he said.

The importance of those in-person days included collaboration, mentorship and culture building.

“Measuring and rewarding effective mentorship is critical for making hybrid models succeed,” Prof Bloom said.

Despite a recent survey that found two-thirds of chief executives saw workers returning to the office five days a week within the next three years, Prof Bloom surveyed thousands of managers in the UK and the US and had the opposite finding.

“They all predict that work-from-home levels about five years from now are going to be similar, if not slightly higher than they currently are.”