Many recent headlines claim that an upcoming recession will mean the end of remote work. That’s because of a cooling labor market, giving executives more power to force employees to comply with their demands. And while surveys show that the large majority of employees prefer to spend most or all their time working remotely, most executives want employees to be in the office.
However, what the headline authors miss is that in a period of economic growth, the comfortable bottom lines for most companies gives traditionalist executives significant leeway to default to their intuitive personal and selfish preferences and intuitions for in-office work. Once a recession hits, executives will need to show more financial discipline. And there’s no question that a focus on profits over personal preferences will benefit remote work.
Extensive evidence shows that remote work is more productive. A Stanford University study found that remote workers were 5% more productive than in-office workers in the summer of 2020. By the spring of 2022, remote workers became 9% more productive, since companies learned how to do remote work better and invested into more remote-friendly technology. A new study from the National Bureau of Economic Research (NBER) found that productivity growth in businesses widely relying on remote work grew much faster than industries where in-person contact is needed. Indeed, one of my clients, Applied Materials, a tech and manufacturing Fortune 200 firm, gained a substantial boost in team productivity in the form of collaboration and innovation from remote-first techniques such as virtual asynchronous brainstorming.
Remote workers are willing to work for less money. Another NBER study found that remote work decreased wage growth by 2% over the first two years of the pandemic, since employees perceive remote work as an important benefit.
Likewise, remote work improves retention. Nearly two-thirds of respondents (64%) to an ADP Institute survey reported they would consider looking for a new job if forced to come in full-time. And flexibility ranks only behind compensation for job satisfaction in a Future Forum survey. Thus, because over 85% of its employees preferred full-time remote work, one of my clients, the Jaeb Center for Health Research, decided to adopt a home-centric model to improve retention.
Further financial benefits stem from decreased need for office space and associated expenses such as utilities, cleaning, and security. An NBER report found that regions with more remote work experienced the biggest decline in demand for commercial real estate and consequent rents. Indeed, both Amazon and Meta recently announced halts to office space construction projects because so many of their employees worked remotely. Of course, the most forward-looking organizations will still invest in office space for their employees: namely, their home office. One of my clients, the University of Southern California’s Information Sciences Institute, provided a wide range of home office technology and furniture to its staff to improve their productivity. It’s a wise investment even in a recession.
The cost savings and productivity improvements associated with remote work, combined with less leeway for personal preferences due to the discipline imposed by the recession, will result in more and more traditionalist executives supporting their employees working remotely most or all of their time. The best leaders are courageous enough to change their minds when the facts change. More timid, second-rate leaders fall into confirmation bias, the tendency to look for information that confirms their personal beliefs. They also suffer from the ostrich effect, denying negative facts about reality. As a consequence, their companies will underperform in comparison to more flexible companies, and such leaders will eventually be forced out for denying reality, and replaced by more savvy leaders who endorse remote work.
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Dr. Gleb Tsipursky helps tech and insurance executives seize competitive advantage in hybrid work by driving employee retention, collaboration, and innovation through cognitive science as the CEO of the future-proofing consultancy Disaster Avoidance Experts, and authored the best-seller Leading Hybrid and Remote Teams: A Manual on Benchmarking to Best Practices for Competitive Advantage.
