The Economic Impacts of Companies Switching to Permanent Remote Positions
The Economic Impacts of Companies Switching to Permanent Remote Positions
It’s not all Zoom calls and happiness.
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As economies begin to open up around the world, many companies have already made their stance clear: remote work is here to stay. Or at least here for some employees. In PwC’s CFO Pulse Survey, 49% say they are looking to make at least some roles permanently remote.
In the headlines lately, we’re seeing a lot of moves toward remote:
In Canada, massive tech firm OpenText won’t reopen all of its offices after COVID pandemic subsides, making some roles permanent remote.
Globally, both Singapore and the UAE have mandated continued remote work even as economies reopen.
Amazon has extended its work from home option (for employees that can) until October at the earliest.
While this makes me happy as a remote work advocate, I have concerns. Going remote is more than getting zoom and having virtual team lunches, especially for companies with a hybrid model (some office workers, some remote workers).
I want to spend a bit of time exploring those pros and cons, and that’s what today is all about. Here’s what I’m seeing as the key benefits - and challenges - that are coming in the months ahead.
The pros of more companies transitioning roles to remote
A lot of good can come from this shift.
For employees
From the individual perspective, remote working provides a few key benefits.
Time flexibility
No mandatory commute. No requirement to dress for “the office” on days you aren’t in video meetings. All that time you gain back in your schedule (even just your commute saves, on average, an hour a day). And this is to say nothing of the more micro flexibility you have during the day - you can prep lunch while waiting for code to compile or clean your room while waiting for a response to a critical question.
Location flexibility
When you’re working remotely, all you need is your computer and a wifi connection. Save for privacy concerns about working in cafes, you can work from anywhere - and live almost anywhere.
Whether you want to start a family in a smaller town, move for an adventure, or simply just because you found your dream home, remote work empowers you to have that control.
Monetary value
Working from home saves you money. A study by FlexJobs found that remote workers save about $4,000 annually from reduced commuting costs, not having to buy “work clothes,” and reduced spending on expensive lunches and coffees on the go.
For individual businesses
Business also save money, but benefit even further from increased productivity and a new form of talent advantage.
Save money
Businesses can end up saving upwards of $10,000 per remote employee per year compared to office workers. This includes expensive downtown rents, desk setup costs, other building fees, perks, and more. A lot of companies funnel some of these savings into higher salaries, remote tools, and stipends for remote employees to set up shop. However, the savings can still add up.
More productivity
In 2014, Harvard Business Review published a study that remote workers are more productive. In 2017, Stanford corroborated that finding. The productivity boost usually comes from the fact that remote workers are a bit more work focused, meaning less chit chat, more agenda and time based meetings, and less distraction from getting work done.
A talent advantage
In 2017, I published a feature in BetaKit entitled Process, not perks, is key to good corporate culture. I was not alone in this call. Many workplace culture advocates bemoaned how foosball tables, catered lunches, and open offices were Silicon Valley hokum and not real company culture. Turns out, they were right. Remote work has eliminated all those things, and that means the companies focused on process will win the day. When there is no office, perks can’t be used to mask a poor culture.
For the economy
Distributed work has some major potential economic upsides.
Small towns and cities could win
Every urbanite dreams, at one point or another, of a peaceful small town life. You know, the kind where you can afford a home. Maybe even have a yard. But, you justify to yourself, the good jobs are in the city, plus there’s life here! Even small cities become part of this dream, since you get most city amenities but also get more space and a lower cost of living.
Enter remote work. Suddenly you can work from anywhere and earn a good living. Check. And you can afford to spend money locally, increasing demand for local artisans, shops, and other town features. Double check.
Solopreneurship and side-hustles could grow exponentially
As more people work remotely, they gain more time. Perhaps they move out of cities and into small towns, but perhaps not. Either way, the process of working remotely will show more people that you can start - and grow - a profitable business with just a laptop and an internet connection.
This will drastically decrease the entry costs of entrepreneurship - even lower than before - and remote workers will be trained on the fundamentals of administering value delivery remotely. And for folks that did move to small towns... they may choose to open up a new cafe in response to new digital nomads. Or they start an e-commerce side-hustle in addition to their job. It’s all possible once you realize you can deliver value from anywhere.
The cons of more companies transitioning roles to remote
It’s not all zoom calls and happiness.
For employees
Humans are fundamentally social creatures - that want to be valued and respected.
The risks of loneliness
While being surrounded by people can make people feel lonely (perhaps ironically), suddenly jumping from being surrounded to being alone can be horrible. We already saw this in a big way with COVID lockdown, and forcing people to go remote could exacerbate this challenge. This issue can be avoided with adequate socializing both virtually with colleagues and leadership and encouraging employees to build ample social lives in their communities. If budgets allow, there should also be some in-person elements to the company, such as an annual retreat or more ad-hoc get togethers.
Fear of being written off or ignored at work
In an office environment, you can physically show up as a signal of your commitment. That’s harder to show remotely. It can be done, but employers will need to be clearer about work requirements and be ready with recognition of the behaviors they want to see in the virtual workplace.
Work-life balance could get worse
A big reason remote workers are more productive is because they end up working more than their in-office peers. This is not necessarily a good thing from a work life balance perspective. Further, when you don’t have physical separation between your home life and work life, it can be even harder to unplug. This issue needs to be addressed with clear guidelines from organizations about working hours and similar processes that encourage employees to have a life outside of work.
For individual businesses
The benefits are fantastic, but only if you can overcome potential issues along the way.
Employee experience becomes fragmented
As much as open offices and foosball tables don’t make company culture, they are sometimes pleasant parts of the employee experience. If companies go fully remote or have a hybrid model, there will be a difficult period of transition and refactoring of the employee experience. This is something Clearbanc co-founder Andrew D’Souza experienced in the company’s move to remote due to COVID. While he’s generally more supportive of remote work than before, the employee experience issue is a big concern for him.
This is one of those “we know it’s coming so get ready” kind of challenges. It’s inevitable as you make the change, but if it’s planned for and communicated in advance, the pain can be mitigated.
Communication could falter
“Out of sight, out of mind” could become a key issue for the newly remote organization. Suddenly, you go from ‘you know what I mean’ in person to ‘what the heck is this person trying to say?’ via email. While video conferences can make things a bit easier, it’s not a total solution. Instead, newly remote companies will have to model good communication behavior from the top down and learn a few new communication skills to avoid messaging mishaps when working remotely.
Company culture could break down
Depending on how a company’s culture was built, it may not survive the transition to remote. This could lead to internal strife, further breakdowns in communication, and key-person turnover if not managed well.
Erin Bury, CEO of digital wills startup Willful, was concerned about culture breakdown as her company went remote due to COVID. So far, planning for virtual game nights, lunches, and sending employees gift cards for local companies has proven effective at getting everyone on board in the short-term. Longer-term, though, there will be some resettling and re-thinking how culture is built and maintained.
For the economy
Remote work is great for the economy, until it’s not.
Commercial real estate could plummet
In any major city, tens of thousands of people work every day in high rise commercial towers. If even 25% of those employees went remote, the entire building could become insolvent. Then there are second-order impacts on local retail inside those commercial buildings losing valuable foot traffic. Even further, restaurants in the area lose a semi-captive clientele.
Startups lose a key talent advantage
Flexibility has always been a bargaining chip for startups trying to lure top talent from ‘clunky’ old corporations or ‘bloated’ tech giants. If every large company starts making remote work a staple form of employment, young startups that can’t afford top-tier salaries and benefits may not be able to draw killer talent as easily.
Events could collapse
A large part of the events ecosystem is people who are already out and continuing their days by going to an event. If people work from home, the “I’m already out” excuse disappears. While virtual events will surely become more popular, the downstream economic impact of fewer major in-person events - catering, onsite event staff, facilities management, hospitality for travelling attendees, etc. - could take a massive hit.
Remote is viable and may even be preferred, but it’s not infallible
There’s no denying remote work’s opportunity. Not only has it been academically studied, but large companies like InVision have proven it can scale. Now, millions have been forced to try it and many are finding that they like it. But it is not a silver bullet for cost savings and increased productivity. For remote work to work across the entire economy, we need to take the negative aspects seriously and put plans in place to mitigate the issues before they become downstream crises.
