The Productivity Illusion

Office or home?  Which place is more productive?

If you’re Jamie Dimon (CEO of JP Morgan), James Gorman (Chief Executive of Morgan Stanley), Tim Clark (CEO f Apple), Andy Jassey (incoming Amazon CEO) or a number of other prominent CEO’s, you firmly believe employees are most productive when they are in the office together[1].

However if you’re Ralph Hamers (CEO of UBS), Jack Dorsey (CEO of Twitter), Chuck Robbins (CEO of Cisco), Dean Tong (Head of Human Resources for UOB Bank) or others you firmly believe work from home can be as- or more productive than the office, and that work from home (WFH) has earned its place as a legitimate, permanent place of work for most employees some or most of the time.

Who is right?  Does it matter ?

I believe the more important questions are:

1. Are claims of more or less productivity even valid? What are leaders (or surveys) benchmarking supposed productivity changes against?  Are there comparable pre-covid measures?
2. Is ‘productivity’ a legitimate measure of the value of knowledge work, especially in the digital economy?

I’ll tackle each of these challenges and argue that is there was ever a time to throw off the century-old Taylorist paradigm that still dominates management thinking about office-based work, and embrace the need for people to be valued as knowledge workers – that time is now.

Are claims of more or less productivity valid?

Most of the ‘evidence’ on productivity during the enforced WFH periods is based on self-reported survey responses and I would bet that if you asked 10 or 10,000 people for a definition of work productivity you would get almost as many different responses.  So the reliability of these productivity statistics for decision-makers is flaky at best.

There’s also evidence to suggest that productivity is often conflated with hours of work – especially in Asia where long hours have generally been equated with productivity or employee value.  Longer hours of work during lockdown thus equals higher employee productivity (or so the theory goes).  Longer work hours during lockdown are probably due a combination of things: the natural result of not having to commute[2]; a desire to prove to managers who can’t see them that employees are “working”[3]; and to overcome the natural inefficiencies in remote communication and collaboration.[4]

More hours of work doesn’t mean more effective outcomes; in fact while employees report the same or higher levels of productivity they report at the same time feelings of exhaustion, stress or other mental health challenges – especially in Asia and especially across Gen Z (those aged 18-25) where more than half are struggling to survive.  Compare this to leaders who appear to be thriving[5] and are often largely ignorant of the toll organisational expectations and personal anxieties are taking on their people.

What we know about WFH productivity

Hours of work aside, there is plenty of pre-pandemic research into the productivity of remote workers and the conditions most likely to support a successful remote work experience for the worker and the organisation[6] [7] [8] [9].  Regular remote work was becoming increasingly common within organisations of all sizes around the world before 2020, primarily fuelled by globalisation, enabled by the internet and digitisation, and driven by increasing demand from companies and workers for flexible and project-based work options.  The pandemic lit a firecracker under a trend that was already well-underway.

One relatively robust source of office worker productivity data is the Leesman Index™.  The responses from employees of Leesman corporate customers are self-reported measures so the interpretation of “productive” is somewhat open, however the comparisons of in-office responses (dating back a decade) to home-based responses in 2020 supports to many other claims regarding WFH productivity.[10]

The Leesman comparison suggests that overall, people felt slightly more productive working from home during the 2020 lockdowns than employees had reported on average during the previous decade.  This was heavily skewed towards people with access to a dedicated workspace at home, and to more experienced employees whose roles are both more complex and more empowered (who are often the same, more senior people).  The results also support the widely-held belief that focus work, private/confidential calls and video/phone calls tend to be easier at home, and that learning from others, sharing ideas and informal social interaction and sense of community is better supported by time in the office.

No real surprises there.

Balance long term and short term impacts

This and other studies on WFH productivity tend to focus on assessments of narrow, short-term outcomes and tightly specified task-based metrics.  The industry and academic research is relatively silent on longer-term effects and effects that are difficult to measure, such as innovation, employee retention, integration of new colleagues, and team cohesion.  If shifts to greater WFH affect social capital build-up (as there is some evidence to suggest[11]), the long term effects of hybrid work may be different to recent ‘crisis-mode’ experiences.

As a result, I think it is highly likely that leader decisions on where work should be done based on where employees are most productive are misinformed.

Such decisions are likely to be based on assessments of productivity that are highly subjective, not independently benchmarked against pre-covid productivity measures, and not measuring the stuff we do that really adds value.

Is ‘productivity’ a legitimate measure of knowledge worker performance?

What’s not measured in survey results (and acknowledged by Leesman) are likely reduced levels of learning and growth through sharing and observing, individual expression and the “in-between” conversations before/after team-based activities.  This underlines the difficulty in quantifying the most valuable outcomes of high-performing knowledge workers.

Is the term ‘productivity’ as we generally use it relevant in the dialogue around the “Future of Work” in the digital economy?

Productivity in the digital economy is not easy to measure

I would challenge most business leaders to describe how they measure productivity in their organisations.  Sure, its not too hard to measure certain metrics, for example sales per person or team, response times, processing times, error rates, assets under management etc., but many of these are ‘office worker tasks’ that computers do for us already and will probably completely automate within the next few years.

These metrics are ill-suited to assessing the messy, dynamic, interdependent way of working that is increasingly what the valuable knowledge workers in organisations do. The gradual decline of productivity (as measured by GDP per capita) in most developed nations since the 1960’s is another indicator of the difficulty of measuring productivity in an advanced knowledge economy.[12]

It is also important to note that “if WFH simply shifts costs from employers onto workers whilst keeping the underlying ‘production function’ in terms of labour and capital inputs unchanged, it will have no direct effect on aggregate productivity [in the economy].”[13]

Real productivity increases are only likely if organisations and society reassess what successful performance looks like for knowledge workers in the digital age, and re-tool ways of working to effect these improvements.

Interrogate data for performance-related insights

Metrics on workstyle changes such as the number and duration of meetings, and changes in email and instant messaging traffic during the lockdowns provides some evidence of shifts in the way people are working as a result of increased WFH.[14] [15]  However they are limited in helping us understand if these shifts are related to changes in employee effectiveness and business results.

The development and application of capabilities that contribute to corporate competitiveness like learning, problem solving, creativity, multi-disciplinary collaboration and empathy are not measured in terms of inputs but in long term, complex and often interactive effects.

The critical issue to consider in assessing home versus office is not productivity.  Measuring and managing by ‘productivity’ is a zero-sum game which as evidenced in survey after survey can obliterate the benefits of WFH and workstyle flexibility for many people.

Pay attention to performance eroders

Employees say the three biggest work-related challenges associated with remote work are maintaining company culture, maintaining team cohesion and coping with increased silos.[16]  I believe the strain on team cohesion[17], company culture and collaboration is the slow fuse on the lockdown impacts.

The likely sustained impact of enforced WFH on a company’s ability to innovate may be less immediate and less observable than on ‘productivity’ but it should be gravely more worrying for leaders, who for the most part rank workplace innovation as their top transformation priority.[18]

Enforced WFH has forced many organisations to grudgingly admit people can be trusted to work responsibly when they are not in the office, although at the same time the rise in digital presenteeism and remote monitoring signals an erosion of trust.[19]

While workers have shown remarkable resilience and adaptability through the crisis, there is significant room for improvement.

Many of the challenges presented by remote work are less of a technology problem and more of a people problem, primarily caused by carrying pre-pandemic culture and practices into a remote or hybrid way of working.

Companies have shown less ability to adapt than individuals in this regard but there are signs that many organisations have taken this opportunity (or been forced) to adapt processes, policies and management techniques to support employees through the lockdowns.

Focus on fundamental drivers of sustainable performance

If managers and leaders are able to continue this cultural shift in the way they manage and reward employees, then employees may not only be more engaged with their work but also more easily be able to solve problems, devise process improvements or suggest new ideas.  These are fundamental drivers of corporate adaptability and innovation.

If the pandemic has taught us anything it should be that more innovative, flexible and independent ways of working are essential for survival in the digital economy. To move the needle, we need to reimagine many of the cultural practices that we’ve carried from the office into our homes.

I urge leaders to stop trying to decide if office or home is more productive and mandating how much time employees should spend in either location each week – it’s time to focus on new work solutions.

We have a unique opportunity to rethink how people can work rather than where they can (or should) work.
Let’s not waste it!

This article was originally published on LinkedIn on 30 July 2021.

Notes & References

[1] Based on public statements by these people or their company representatives at the time of writing.  This is not to say that these organisations have not acceded to employee pressure to allow some level of work from home, at least for a period of time.

[2] Barrero, Jose Maria and Bloom, Nicholas and Davis, Steven J., Why Working From Home Will Stick (April 22, 2021). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2020-174.  “Only one-fifth of this productivity gain will show up in conventional productivity measures, because they do not capture the time savings from less commuting.”

[3] https://www.bbc.com/worklife/article/20210604-why-presenteeism-always-wins-out-over-productivity

[4] Gibbs, Michael and Mengel, Friederike and Siemroth, Christoph, Work from Home & Productivity: Evidence from Personnel & Analytics Data on IT Professionals (May 6, 2021). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2021-56.   The research showed that Total hours worked increased by roughly 30%, including a rise of 18% in working after normal business hours; time spent on coordination activities and meetings increased, which meant that uninterrupted work hours shrank considerably; employees spent less time networking and received less coaching and 1:1 meetings with supervisors; and employees with children living at home increased hours worked more than those without children at home and suffered a bigger decline in productivity than those without children).

[5] “The Next Great Disruption is Hybrid Work – Are We Ready?” by Microsoft WorkLab in https://www.microsoft.com/en-us/worklab/work-trend-index/hybrid-work

[6] A. Maher & R. E. Bedawy, Core Practices for Managing Virtual Employees in Public Organizations. Journal of Business and Economics, 6 (2015) 113–120. https://doi.org/10.15341/jbe(2155-7950)/01.06.2015/011; and J. W. Gibson, C. W. Blackwell, P. Dominicis, & N. Demerath, Telecommuting in the 21st Century: Benefits, Issues, and a Leadership Model Which Will Work. Journal of Leadership Studies, 8 (2002) 75–86. https://doi.org/10.1177/107179190200800407.

[7]Diego Battiston & Jordi Blanes i Vidal & Tom Kirchmaier, 2017. “Is Distance Dead? Face-to-Face Communication and Productivity in Teams,” CEP Discussion Papers dp1473, Centre for Economic Performance, LSE.

[8] S. Kazekami, Mechanisms to improve labor productivity by performing telework. Telecommunications Policy, 44 (2020) 101868. https://doi.org/10.1016/j.telpol.2019.101868 .

[9] Unpacking the Role of a Telecommuter’s Job in Their Performance: Examining Job Complexity, Problem Solving, Interdependence, and Social Support. Timothy D. Golden and Ravi S. Gajendran, Journal of Business and Psychology, 1/2019.

[10] “The impact of home working on employee experience”, June 2020, Leesman.

[11] “Moving beyond remote: Workplace transformation in the wake of Covid-19”, results from the Remote Employee Experience Index commissioned by Slack, 2020.

[12] https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2020&start=1961&view=chart&year=1980

[13] “Covid-19 briefing: working from home and worker productivity” by John Lewis, Andrea Šiško and Misa Tanaka, Bank Underground (2021).

[14] https://hbr.org/2020/07/microsoft-analyzed-data-on-its-newly-remote-workforce

[15] https://www.economist.com/briefing/2020/09/12/covid-19-has-forced-a-radical-shift-in-working-habits

[16] “The Next Great Disruption is Hybrid Work – Are We Ready?” by Microsoft WorkLab in https://www.microsoft.com/en-us/worklab/work-trend-index/hybrid-work

[17] “Moving beyond remote: Workplace transformation in the wake of Covid-19”, results from the Remote Employee Experience Index commissioned by Slack, 2020.

[18] Building resilience & maintaining innovation in a hybrid world”, report by Microsoft Corporation, 2020.

[19] Mortensen, M Gardner, H (2021) WFH Is Corroding Our Trust in Each Other. Harvard Business Review. https://hbr.org/2021/02/wfh-is-corroding-our-trust-in-each-other