Early into 2024, some key large corporate employers abruptly changed their approach to working from home, which caused me to take note. This blog looks at some fairly recent examples of return-to-office mandates that could be a glimpse of what’s to come.
I’ve previously written about organizations asking employees to return to the office. These previous blogs, written mostly in 2023, the third full year after the onset of the COVID pandemic, could be considered employers asking nicely. They used words like “growing calls” and “encouraging” and included suggestions of “bribing” employees with incentives and other on-the-job perks. One blog, in particular, described the concept of the envy office, a way to leverage office design to entice workers to leave the comforts of their home offices.
Carrot or the Stick
For the most part, these examples of Return to Office (RTO) follow a “carrot” approach rather than a “stick” in terms of motivation. However, according to Kastle Systems, a widely quoted source of office occupancy data, the nationwide average office occupancy rate has remained relatively stuck at around 50%. So it shouldn’t be surprising that after 2024 arrived, some employers resorted to using the stick as the carrot wasn’t getting the desired results.
In January, UPS announced global layoffs of 12,000 management jobs, expecting the remaining 73,000 managers to fully return to the office five days a week starting March 2024. This policy shift followed other large employers like Goldman Sachs and Tesla.
Bank of America had a slightly different RTO twist in January, sending “letters of education” to some employees who had repeatedly failed to meet in-office workplace guidelines despite numerous requests and reminders. The letters warned that future guidelines violations could lead to disciplinary action, similar to moves by Citigroup and Meta, which have been tracking whether employees are adhering to their 3:2 in-office to at-home hybrid schedules.
Finally, Dell announced in February a fairly strict RTO mandate that will penalize workers who opt to stay at home more than a 3:2 hybrid schedule: they will not be eligible for promotion or be able to change roles within the company. These workers, who do not come into the office full-time or at least three days a week on average each quarter, will be considered fully remote after May 2024. The company was clear that the trade-off for remote work going forward would be the loss of career advancement, which includes the ability to apply to new roles.
Why Now?
Why are companies now taking a more aggressive approach to RTO when they spent the previous three years mostly embracing remote work?
Recently released research suggests that working from home (WFH) affects productivity, but the overall literature is somewhat mixed. A National Bureau of Economic Research (NBER) working paper found 18% lower productivity in randomly assigned WFH workers. However, most of this productivity loss was due to slower starts by WFH workers since the researchers found quicker learning with in-office workers.
In addition, workers who prefer WFH are often faster and more accurate but less productive overall than those who prefer in-office work (27% vs. 13% less). However, this is partially explained by additional demands at home (e.g., children and other home care responsibilities).
A separate study by the Katz School at the University of Pittsburgh showed that RTO doesn’t improve financial performance but lowers employees’ job satisfaction. But maybe that’s the point. Some workers at AT&T felt like their RTO mandate was really a push for attrition, a way to save on severance and unemployment—the office they were now asked to report to was overcrowded, often resulting in an early return home due to space limitations.
Alternatively, management experts have suggested that it simply comes down to certain industries and leadership personalities—the Elon Musks and Jamie Dimons of the business world want to return to the command-and-control management model they employed before the pandemic.
In my experience in the corporate world, it’s not the day-to-day work that isn’t getting done with WFH but rather more complicated changes to workstreams that happen over several quarters and years that are suffering. These areas require more hands-on manager involvement.
The focus on managers with RTO mandates at various firms like UPS and AT&T suggests managers are some of the worst offenders when it comes to excessive WFH use. Managers who don’t “walk the walk” by working from home most of the week don’t have much credibility when asking their subordinates to RTO and only breed company-wide resentment and low morale.
Whatever the reasons, it is clear we are now entering the next phase of the post-pandemic work environment.
Implications
Now that we are in the next phase, what are the implications for the labor market in the second half of 2024 and beyond?
I believe we will see the following three trends play out over the rest of the decade:
The Beginning of the End of Extreme WFH
I fully expect to hear of more companies taking an aggressive RTO stance, with hybrid schedules gradually getting watered down in favor of more time in the office. Over time, the labor market will eventually cool, and workers will lose their leverage to dictate their preferred WFH policy to employers.
New work streams and changes to existing ones will require more in-person collaboration and manager involvement, which is difficult to achieve when key workers WFH two or more days a week. So, the popular 3:2 hybrid schedule will gradually give way to a 4:1 schedule.
The Gradual Development of WFH Standards
One of WFH's biggest flaws is its lack of standardization. Without set in-and-out-of-office hours that are applied to everyone, people come into the office only to sit at their desks on Zoom calls with WFH coworkers. This defeats the purpose of RTO and only pushes people back to WFH in greater numbers.
In large companies with many subsidiaries, trying to navigate separate WFH policies results in “chaos,” according to Barry Diller in a well-articulated interview with the finance channel CNBC. While staggering in-office days across a company’s workforce can result in significant office space savings, the trade-off is a decline in collaboration and operational predictability.
Scheduling software can help mitigate the disruption, but a key employee's impromptu “I’m just going to work from home today” can throw a wrench in the scheduling system on any given day.
The Four-Day Work Week is Coming
I believe that once WFH schedules are standardized, the long-term benefit gained for workers will be Fridays off. This will be the compromise between employers and employees for workers losing autonomy over how many WFH days are and what days are WFH days. Fridays, already the most popular WFH day by far, will become a no-meeting/light-duty day for some and a completely off or flexible work-life balance day for most.
While it is unclear what this will mean for overall worker compensation and other paid time off, the trend towards a 4-day work week is already gaining traction. Some companies offer Summer Fridays, a reduced hour, or a totally off policy each Friday between Memorial Day and Labor Day. This arrangement has little impact on productivity since many coworkers are already on vacation this time of year; the groundwork is there to extend this to the entire year.
Final Thoughts
Nothing lasts forever. The pandemic helped usher in the WFH phenomenon, first by necessity and then by preference, but it was bound to be tested as its flaws were exposed. It’s not surprising that four years after the start of the pandemic, large employers are asserting more control through aggressive RTO mandates.
Many firms focus on a strategy to mitigate longer-term productivity losses wrought by excessive WFH use. And it’s a necessary step to get more rank-and-file back in the office at higher rates. By the end of this decade, employers will gladly exchange flexible Fridays for more predictability over their employees’ time in the office the other four days of the work week.
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