Brian Kropp is the chief of research and group vice president at Gartner Research, Inc. He heads all business activities that support the human resources division and its leadership teams. Mr. Kropp works with Gartner Research leadership to develop strategic plans that will attract, groom, and retain top talent. He has authored over 40 articles at Gartner Research, led more than 200 strategy sessions with executive teams from Fortune 100 companies and directed 300-plus executive education sessions across the globe. He is a frequent contributor to CNN, The Economist, Financial Times, Wall Street Journal, and other top business and media publications. In 2020, Kropp was voted one of the Top 100 Human Resource Technology Influencers. He received his undergraduate and master’s degrees from Clemson University and his doctorate from the University of North Carolina, Chapel Hill.
David J. Faulds and P.S. Raju for Business Horizons: Thank you, Brian, for sharing your views, observations, and opinions with us on this very important trend sweeping across corporate America. In this interview, we would like to discuss in more detail the work-from-home trend and the impact it is having on employers, employees, and society in general. To begin, could you provide us with a brief history of the work-from-home trend and its current scope in light of the COVID-19 pandemic?
Brian Kropp: The idea of working from home really started in the 1980s when technology made it possible for people to work from home. Employees have always worked remotely when traveling for business-related assignments; however, that differs from the work-from-home trend that we see now and is the focus of this discussion. For a long time, working from home was viewed simply as a perk for special employees. Most CFOs and CEOs in the 1980s were largely against the idea because they were concerned about the loss of productivity when employees did work from home. The employers’ mindset had yet to adjust to the fact that employees were not just spending most of the day sitting on the couch eating pizza, watching television, and not actually working.
Concerning the scope of the work-from-home trend, the data we collected in 2019 indicate that about 10% of employees at that time actually worked full-time from home. Another 20% worked from home at least some of the time. However, during the COVID-19 outbreak almost 100% of the employees who could work from home did so. This situation emerged about the end of March 2020 and continued through April and the beginning of May of that year. Recently, the percentage has started to decrease somewhat. What the COVID-19 pandemic did was bring about the largest test market in the history of HR practices by forcing businesses to adopt a work-from-home policy. This forced policy brought about a number of important and interesting outcomes that we will be adjusting to over the next several years.
With regard to future trends, the data we recently collected from HR executives, business leaders, CFOs, and heads of real estate indicate that working from home will increase from the 10% we found in 2019 to about 20%. Another 28% will work from home part of the time, and about half of the workforce will work in a traditional office environment. So that is the way we see the future shift in the work-from-home trend post-COVID-19.
How is this trend changing long-held attitudes among employers and employees?
A long-term outcome that we are seeing is the change in the mindset of both groups. As I stated earlier, the mindset of CEOs, CFOs, and a lot of business leaders in the past was to worry about the loss of productivity. Interestingly, the mindset of CEOs and CFOs has flipped. In the past few months they have learned that for the vast majority of jobs employees can be just as productive working from home as they were in the workplace. Based on productivity metrics that can be accurately measured, they have found that employees are just as productive at home as they were in the office. Now these business leaders are aware that up to 20% of costs associated with office space for employees can be saved. So now CEOs and CFOs are saying, “We can now minimize our real estate footprint and reduce costs by having even more people work from home.” The real estate factor has become a major issue in the work-from-home trend.
On the other hand, for employees the mindset was, “This is a perk. I get special treatment.” Employees are recognizing both the benefits and drawbacks of working from home. One survey found that the work day has actually increased by 48.5 minutes and entailed about 13% more meetings. Employees also are beginning to feel more isolated and socially alone, and they express a desire to get back to the workplace at least some of the time.
What do you see as other primary advantages of this trend for employers?
For employers, there are short-term factors or advantages and long-term factors. The short-term factors are obviously health and safety in terms of getting people to work from home. A primary long-term advantage is the real estate costs savings. Employers are now faced with the reality that they will have more people working from home in the future and the issue now becomes whether to decrease the firms’ real estate footprint and save the 20% per-employee cost or repurpose the real estate facilities. This could potentially result in a long-term advantage if management can make the right decisions regarding whether the real estate should be redesigned to build corporate culture, engage employees, enhance employee collaboration, or facilitate innovation. Or should the facilities be a showcase for customers, a place where they tour the site and the facility is leveraged to develop customer relationships?
Some firms are also exploring nontraditional options, such as turning their facilities over to local school districts for educational uses or to the local municipalities for use as community centers or other purposes. The growing awareness among corporate executives that they will not need as much real estate in the future and how these issues are handled and resolved will greatly determine whether this trend will become a long-term advantage for employers.
Another potentially long-term advantage for employers is the productivity gains that result from a more flexible work environment. As I stated previously, companies are now more confident that employees are going to be just as productive at home as they were in the office environment. A closely related HR issue is that it is not just a question of where people work but when they work. Companies are finding that not all employees are the same; some are more productive at different times of the day, some are more productive on weekends, and so on. For example, a financial services company we work with primarily processes claims. They found that some employees who work from home are dramatically more productive from 6 to 10 in the morning, others are more productive from 1 to 5 in the afternoon, and others are most productive in the middle of the night. We do not really know why this occurs, but it offers a potential long-term benefit to employers to let employees adjust their work habits to be most productive.
More specifically, what we are finding among companies involved in sales is that employees who are working from home have similar or slightly lower conversion rates, but they have a lot more sales interactions by working from home and not traveling as much. Individual salespeople can actually generate more prospects even though their conversion rates may be a little bit less, thus making them more profitable salespeople in the long run.
A very important advantage that we are now finding for employers is that they have access to a thicker and broader labor market. If a company is located in a geographic area perceived to be less desirable for recruiting talent, the work-from-home trend now liberates the employee from geographically based concerns and simultaneously provides employers with access to a greater swath of talent. We are finding that many employees do not want to move but now can take advantage of working from almost any location that has internet access, which is now virtually the entire country. This is becoming an extremely important advantage for both employers and employees. By offering more work-from-home opportunities, employers can expand their talent pool and have access to a thicker part of the labor market than they would otherwise.
And what might be the disadvantages for employers when employees work from home?
Possibly the biggest disadvantage, and one that employers have yet to fully realize, involves employee turnover. Employees who work from home are dramatically more likely to quit than employees who routinely work in an office environment. One reason why this occurs is that employees who work from home do not have the same social connections with their co-workers who are routinely in an office. They do not go to lunch with their colleagues, they do not get coffee with them during the day, they do not go to happy hour with them, and so forth. So, they lose that important social fabric and that makes it easier for people to quit. Employees who predominantly work from home also view their job opportunities differently than those who come into an office setting, and this attitude can also contribute to higher turnover.
A second disadvantage of having employees working from home is their inability to easily collaborate and innovate with their co-workers. It is simply more difficult to generate new ideas when people are working from home rather than in an office setting where you can have moments of serendipity when people come together and discuss or share ideas. When employees are batting ideas back and forth, there is more collaboration, more ideation, and more innovation than when they work in isolation or via video conferencing. This can be a subtle disadvantage to employers until video conferencing technology and techniques are more fully developed to enhance this important and critical process.
The other challenge related to retention is employee disengagement and withdrawal. In looking at the data from 2019, we found that employees who work from home and those who work in the office on average got the same performance scores, but employees who worked from home got more negative corrective feedback than employees who came into the workplace. So, work location can cause a difference in how management may treat employees and this may lead to more disengaging behavior by those employees who work from home. This in turn may reduce their likelihood of becoming positive brand ambassadors and their commitment to the organization, thus increasing the probability that they leave the company altogether.
One interesting phenomenon we are seeing is that as companies make their return-to-workplace decisions, they often use surveys that ask for employees who want to be the first to return to the office. What they consistently find is that more men than women want to return to the workplace early. If a workplace gender imbalance occurs, where there are more males than females returning to the office, this may create some important diversity issues. Typically, it is the people who are onsite and physically present who exert more influence than those individuals who are working from home and appear only on video. Therefore, the people in the room are more likely to get recognized for the work that they do and are more likely to get promoted than people who are working from home. There are all sorts of questions associated with how employers can maintain workplace diversity in this changing environment and build an organizational culture that is inclusive and avoids that trap of “survival of the fittest.”
The way employers currently think about the structure of the workforce may not be consistent with its future composition, which in turn presents another potential problem. Employers currently believe that work location is a dichotomous phenomenon, that it will take place either at home or in a traditional office environment. We believe that it will not evolve that way. Most likely, 20% of the workforce will work full-time from home and another segment will work full-time in the office. But the biggest challenge companies face is presented by yet another group of employees who need to split their work schedule between home and the office. Having these three separate groups means that many organizations will have to manage a hybrid workforce where some people are present in the office part of the time and work from home part of the time. This could require inefficiencies in the form of a duplication of effort. For example, you may have to have a meeting for office employees and a separate meeting for those working at home. The same may be true for training sessions and other organizational tasks.
The other thing that we are seeing is a reordering of which companies are perceived as being the top-tier employers and the best companies to work for. Right now, a lot of technology companies are viewed as the best companies to work for, for a couple reasons. First, they are developing state-of-the-art products and services. Also, they pay very well, and employees can increase their income substantially through stock options and other financial inducements. These same companies have been the desired employers because they built campuses that offer all sorts of wonderful amenities and services to their employees. But work-from-home employees are less interested in those types of amenities because they are not located where they can easily take advantage of these facilities. We are beginning to see a reordering where campus work facilities are not necessarily the attraction that they were in the past. A lot of companies without campuses can offer dramatically more flexibility and greater support along a new set of dimensions.
Related to this reordering of the most desirable companies to work for are changes in salary and compensation policies that are occurring as a result of the work-from-home trend. For example, Facebook now adjusts employee salaries based on the cost of living in the area where the employee resides. This type of policy, or signal, can be very damaging to a company’s status when other employers say, “I will pay you what you are worth, not based on where you happen to work.” This is the global market value of an employee, not the employee’s local market value. Therefore, companies are adjusting their salary packages and compensation policies to better reflect the true value of remote workers.
What do you see as the primary advantages of this trend for employees?
For employees, the flexibility that a work-from-home schedule offers is a huge advantage. A closely related issue is the autonomy that working from home affords to individuals. These employees often want to be more autonomous in their decision making and want less guidance from their managers. Quite often, this autonomy allows them to be more productive and in turn enhances their self-image.
Working from home does not automatically imply that employees will be working on a traditional 9-to-5 schedule. There is a difference between letting employees kind of navigate and wander into that flexibility vs. companies being more direct about that flexibility. What we found is that employers are now encouraging at-home workers to work during the time period that makes the most sense to them.
Another advantage that we always hear about are the cost savings that work-from-home employees enjoy. For an individual who commutes to work every day in a tier-1 city, transportation—cost of gas and related expenses—can easily amount to $6,000 a year or more. So, you factor in commute time, wear and tear on a car, parking fees, and potential subway fees, that all adds up. Other incidental cost savings include things like reduced childcare expenses, dry cleaning expenses, and eating out. The flexibility, autonomy, and cost savings that working from home offers are the three biggest advantages for employees.
The final point I will make is that, because of their educational experiences, the generation of employees now entering the workforce are accustomed to having a lot of flexibility. They bring with them a mindset that flexibility in the work environment is not only an advantage but a requirement. If they are not offered that flexibility, then the employer will be perceived negatively, and it will make it more difficult for the organization to hire new university graduates or attract the talent necessary to compete in this new work environment.
And what disadvantages are you now seeing for employees who work from home?
We see much greater loneliness, we see much greater isolation, and we see fewer social connections from employees who are working from home. Interestingly, some are detecting health risks associated with work-from-home employees. One of the effects of working from home is that employees are less physically active during the workday than employees in a workplace setting. For example, when employees come into the office, while it is expensive to drive to work or whatever, they often end up walking to the office, they walk to lunch, they may walk to another floor or another building to have a meeting, they may walk up and down stairs, or whatever. When you are working from home, the extent of your walking is far more limited, which contributes to more sedentary behaviors. We work with a lot of companies that have equipped their employees with Fitbit in order to track their steps, and what we are now seeing is that the employees who work from home do have fewer steps on average than employees coming into the workplace. So, there’s actually a real health risk associated with working from home unless employees are aware of their physical activity.
Two other disadvantages for employees that I alluded to earlier include the increase in the length of the work day and the number of meetings, as well as the potential for a gender discrepancy developing where more women elect to work from home than men. This could negatively impact both the quality of the work environment and the promotional opportunities for those individuals.
In the cyber age, what security issues related to working from home must firms be concerned about and how is artificial intelligence (AI) affecting this trend?
The information security issue is very important and actually pertains to both remote work and working from home. Because a lot of people working from home end up working part of their day at a coffee shop, this presents enormous information technology security risks. Employees using their virtual private networks or other security networks also create enormous problems. Chief Information Security Officers have had to make substantial investments in buying the right technology to maintain information security.
One issue often overlooked yet common among younger employees who work from home involves the security risks associated with having roommates or other individuals who might gain access to an unattended or open computer. There are issues that can be addressed with technology investments, but this type of issue requires behavioral training concerning the proper protocols when working from home. For example, if you have roommates who can access an open laptop computer, no amount of technology investment is going to prevent that. Avoiding this type of breach requires behavioral training.
Concerning AI, one major issue we are seeing is an increase in the technology investments that companies are making to actively monitor their employees who are working from home. A lot of that technology had AI built into it for employee monitoring and tracking. This represents an enormous shift that is happening because of the work-from-home trend.
This technology entails many things, including tracking employee computer keystrokes, when they log in and log out, taking photographs with laptop cameras to see if employees are present, and taking facial photographs to get a measure of how hard they are working based on facial expressions. As of April 2020, about 16% of companies we surveyed had bought new technology to monitor their work-from-home employees. By June that number was up to 26% and by August about a third of companies we surveyed had purchased this technology.
Employers are reaching deep into employees’ homes to collect more data about their employees’ productivity and health. Employers are now able to collect far more data as a result of AI technology, and what they do with that data will remain an enormous question.
Do you think that when people get back to the office environment that some of these things might be extended in order to monitor them at work?
Absolutely, because once employers cross that line, they can track employees at home and get valuable information. So why would they stop? You can be assured it will continue to occur in the office environment as well.
What specific industries are most suited to this trend and which are least likely to adopt this form of work?
From a broad perspective, it is not simply specific industries that are affected but also functions within organizations that are likely to lend themselves to a work-from-home schedule. The variability is more driven by function than industry in terms of where work-from-home practices are being adopted.
The technology industry, particularly information technology, has been most affected. However, less obvious service industries have also been impacted by the work-from-home trend. Professional services, even those that entail client-facing activities, are resorting to a work-from-home format. In the medical industry we see tele-med being used, which involves a reversal of roles in that the healthcare professional is in the office while the patient is at home having the services delivered virtually.
Various levels of government represent another interesting case study. The federal government has long been against the idea of letting employees work from home. Prior to COVID-19, parents were required to take family leave when caring for a child at home. That was suspended at the start of the coronavirus outbreak. This policy may continue well into the future although that remains to be seen.
When you think of organizations—HR, IT, finance, legal—all have functions that can easily be converted to work-from-home. We are finding that salespeople are drastically increasing their work schedule to fit a work-from-home environment. Function-wise, the functions where work-from-home have not increased are those where employees really do have to be at the workplace to get the job done. Scientists involved in lab work, government contractors who need security clearance, and manufacturing-type work that is performed on an assembly line all have been immune to the work-from-home trend. Retail jobs, which represent a huge sector of the economy, have also avoided this trend.
What geographical areas are most affected by this trend, and what are its economic and social consequences?
The places where we see more work from home occurring during COVID-19, and are likely to continue after the COVID-19 crisis, are the places that have greater population density. The other thing that we see is that where the cost of real estate is highest, the incentive is greater for employers to convert to a work-from-home model. I mentioned the 20% cost savings associated with real estate, but that is on average. It is much higher in big cities and lower in less densely populated places, which is true of real estate as a whole. So, companies in our large metropolitan areas are seeking to have a smaller real estate footprint.
What we are likely to see coming out of this is a greater push out into less densely populated places. We are seeing a significant decrease in on-site work in urban areas, and an increase in the work-from-home labor force in suburban areas. However, we have yet to see a major movement to the rural areas. This shift in work force location will result in a number of associated societal shifts.
Another societal shift we are encountering is a significant decrease in large-scale corporate events. Large conferences, off-site leadership events, and off-site training sessions are becoming less frequent with fewer and fewer people attending these events.
A third societal change we are seeing, and one that I mentioned previously, is the impact this trend is having on hiring and labor force issues in general. As companies hire more people who will be working from home, we are likely to see a greater velocity of people changing jobs in the labor market. This can be attributed to the fact that working from home eliminates one of the big constraints related to job movement, which is: where do you live? If employees can work from home and have jobs in other places, the cost of switching jobs is not a huge factor because they are not required to move. So, on the one hand, employers will look more broadly for potential hires, and that creates a greater thickness in the labor market. On the other hand, that thickness will increase the velocity of movement in the labor market. What we are likely to see is more turnover and less loyalty to an employer because it is much easier for employees to switch jobs.
An interesting point that will affect both employers and society in general is the impact this will have on the tax system. The way that the tax system works now, your tax is based on where you live, not where you work. If your residence is in a different state or city from where you work, this will definitely have tax implications for state and local governments. Also, as people move out of the large metro areas like New York City and the San Francisco Bay area, this migration will affect property values and property taxes. This will in turn impact the public school systems in both areas, those that are experiencing a net outward migration as well as those experiencing an inward migration. All these issues emphasize that we will be seeing all sorts of third- and fourth-order conditions associated with a spreading out of the workforce in different geographical areas.
Based on your research and interviews with corporate executives and human resource managers, what suggestions and advice going forward would you offer to companies dealing with issues surrounding the work-from-home trend?
While most of the conversation on this topic focuses on employees working from home compared to employees who come into an office, it is important to note that the choice is not binary. There are some employees who do prefer all home or all in an office. However, there are other employees who want a hybrid experience, where they are at work some of the time and at home some of the time. This can be the case because of their personal preferences, the type of work they are doing on a particular day, or other external competing realities. Given this hybrid reality, organizations need to make sure they are creating a seamless experience for their employees that enables them to move back and forth from remote to in-person without having the experience feel disruptive or inconsistent or without jeopardizing workplace diversity or advancement opportunities. These are important issues that employers must carefully consider in going forward.
On behalf of Business Horizons, we would like to thank you for sharing your valuable insights and opinions on the work-from-home trend, and we anticipate hearing more from you on this rapidly evolving employment practice.