The office is dead. Long live the office.

Homeworking looks here to stay 

With city centres relatively empty as office workers stay at home, the Government is getting nervous. Unemployment, which has already shot up since the coronavirus crisis, could rocket even further if custom does not return to our shops, pubs, restaurants and cafés.  

For cities such as London, office workers are a key source of custom for these establishments. Yet there is little sign of workers returning en masse even as lockdown is easing and Boris Johnson urges us to return. Only 600 of Goldman Sachs’ 6,000 employees have gone back to their desks at the firm’s London headquarters. Twitter has announced that employees can work from home “forever”.  Dentons, the world’s largest law firm by headcount, is shutting two of its UK regional offices in Aberdeen and Watford, with all staff due to work from home permanently. 

With the economy set to remain in the doldrums for at least the next year, many firms are almost certainly rethinking their commercial real estate commitments as a way of containing costs and staying afloat. Partial or permanent homeworking can enable firms to reduce their office floorspace requirements as existing leases end. Long leases look set to fall out of favour, as firms seek the flexibility of short leases, serviced offices and co-working spaces. 

The homeworking experiment, imposed on businesses during lockdown, has for many revealed the substantial cost savings that could be realised from such a shift. It has provided a “proof of concept” which means that many will now change their way of operating on a permanent basis.  

Critically, for many businesses, this homeworking “proof of concept” is unlikely to just be about potential cost savings, but productivity too. At the SMF, homeworking has for the most part worked very well. Collaborative working in the cloud and via videoconferencing has enabled us to (largely) go about business as usual. Even events, a core part of the SMF’s work, have taken place with success over Zoom. 

I suspect prior to the lockdown many firms held the view that homeworking would be detrimental to productivity, only to find that in fact it has had little impact, or even a positive impact on employee performance.  

Evidence of the impact of homeworking on company performance 

Past adopters of homeworking have been surprised by its benefits; starting in 2010, Ctrip, a Chinese travel company with 16,000 employees, experimented with homeworking to see if it would have an impact on company productivity. As part of a trial 250 call centre employees were examined. Half continued to work in the office while half worked from home for nine months.  

Like I suspect many firms in the UK, the initial hypothesis of Ctrip was that homeworking would allow it to save on office costs, but also have a negative impact on employee productivity. Yet the results surprised: productivity in the homeworking group of employees rose by 13% during the experiment with no difference in the quality of calls. 

Can government urge us back into offices?  

If homeworking does indeed carry similar productivity benefits across other firms, then we are right to question the validity of returning to business as usual. A shift away from offices, at least as we known them, will undoubtedly be painful – for the real estate sector as well as firms dependent on office worker custom. But in the long-run economies require innovation and new ways of doing business to flourish. Offices almost certainly have a place in the future, but it will be different to its current form.  

Rather than reverting to business as usual we should be using the mass homeworking experiment to craft a more productive, happier, future-proof economy. Increased rates of homeworking could save households thousands of pounds in commuting costs, cut emissions, increase leisure time and boost worker productivity.  

It could also help spread productivity and prosperity across the UK economy, giving firms the ability to hire talent from all parts of the country and end the congregation of wealth and good jobs in city centres. We could see a renaissance for towns, rural areas and suburbs as higher income workers  live and spend more in such communities.  

Not all will benefit – inequalities could be exacerbated  

Having said that, embracing change must not mean ignoring challenges faced by those that stand to lose their jobs – for example those working in the retail and hospitality sectors in city centres, and those helping to maintain large offices. We need to take adult education and reskilling seriously to enable individuals working in these sectors – who are disproportionately on lower incomes – to shift into new growth areas.  

From a distributional perspective, those that are unable to homework are disproportionately on lower incomes – raising the prospect of changing working patterns widening incomes and wealth inequality.  Reduced commuting costs will benefit white collar professionals, while those working in retail and hospitality face widespread job losses – raising the prospect of widening inequality as the economy evolves.  

ONS data from 2019 show that close to half (47%) of managers, directors and senior officials at least occasionally worked from home, compared with just 4% of those in elementary occupations.  

Offices 2.0 – a future of hybrid office/home working 

Notably, at the end of Ctrip’s experiment with homeworking, described earlier, the company expanded the work from home option to the entire firm. Two thirds of the control group in the experiment (those that stayed in the office) opted to remain in the office. Half of home workers opted to return to the office, citing “concerns over the loneliness of home working and the lower rates of promotion.”  

The performance gains by home workers nearly doubled after the experiment ended, reflecting the fact that those not enjoying the experience chose to return to the office – leaving a group of motivated homeworkers for whom working remotely is a success.  

Ultimately, this suggests that the impacts of homeworking on productivity and employee wellbeing could vary substantially across the working population – assuming the case of Ctrip is representative of how companies in other sectors and countries might fare.  

For many firms, perhaps the future of working is a hybrid model of homeworking and office working – leading to optimal levels of productivity. Employees can work productively at home most of the time, and then travel into the office for team meetings, training sessions and days devoted to collaborative team activities such as brainstorming new products and services. Those for whom homeworking does not work well could also choose to work in the office.  

Such a model would mean smaller, and different, kinds of offices – but it doesn’t mean they are redundant.  

In short, the office is dead. Long live the office.