If work from home is here to stay, what are the implications for individuals and companies?

Society's collective Work-from-home (WFH) experience has traced a curious path. What started as a welcome convenience during a time of great uncertainty, quickly progressed to a state of high anxiety as people struggled to balance an incessant stream of video conferences, homeschooling and domestic chores amidst the soul-crushing isolation of societal lockdown and home confinement. 

However, for those in IT and other digitized occupations that can readily be done from anywhere, online life has been highly productive, with business proceeding mostly as usual. Indeed, in many industries, the lack of significant business disruption — ​as $90-per-square foot offices​ have stood vacant — has not gone unnoticed by executives. Last month, ​Morgan Stanley's CEO said​ the Coronavirus lockdowns have demonstrated that the company can operate with “much less real estate," adding that:

We’ve proven we can operate with no footprint. Can I see a future where part of every week, certainly part of every month, a lot of our employees will be at home? Absolutely.

More recently, the perma-WFH trend has gained momentum in the tech industry as companies extend, some indefinitely, WFH policies, including:

• Amazon extending​ optional WFH until "at least October 2."
• Microsoft allowing WFH​ for all but "essential" workers through October.
• Salesforce giving all employees the option to work from home for the rest of 2020.
• Google also extending WFH​ through the rest of 2020, although in a ​memo to employees, CEO Sundar Pichai​ said that the company is studying new policies for remote work and employee relocations, concluding that "ultimately these insights will lead to more flexibility and choice for employees as they consider how to work in the future."
• Zillow likewise making WFH​ universally available through the end of the year with its ​CEO tweeting​, "My personal opinions about WFH have been turned upside down over the past 2 months. I expect this will have a lasting influence on the future of work". 
• Twitter saying​ that employees can WFH permanently if they wish.

Saying goodbye to the office

Of all the WFH announcements, none was more significant than Facebook's. After initially extending WFH through December, Founder and CEO Mark Zuckerberg decided to make remote work and area-adjusted salary schedules part of his long-term HR strategy. ​In an interview​ following a live stream announcement to employees, Zuckerberg said (​emphasis added​):

We already announced that people can remote work through the end of 2020 if they want. And if COVID is still prevalent, it’s possible that that extends beyond that. But on a long-term basis, we’re going to let people request to work permanently remotely. ...

W​e’re going to be the most forward-leaning company on remote work at our scale.​ We need to do this in a way that’s thoughtful and responsible, so we’re going to do this in a measured way. But I think that it’s possible that over the next five to 10 years — maybe closer to 10 than five, but somewhere in that range — I think ​we could get to about half of the company working remotely permanently.​ 

Here's how Zuckerberg arrived at his 50% number:

• Internal Facebook surveys showing that 20% of employees are "extremely or very interested in working remotely full time."
• A further  20% that are somewhat interested in remote work, most of which Zuckerberg thinks will shift to the "likely" camp after their pandemic lockdown experience.
• Subtract about a quarter of the total, or 10 points, to account for people whose job doesn't facilitate remote work or who ultimately decide against it.
• Add new hires from remote recruiting, which Facebook is accelerating, accounting for another 20% of the company over the next five to ten years.

A new ​online survey from the social network and job information site Blind​ indicates that Zuckerberg's 50-50 number is a good guess. Blink found that almost two-thirds of respondents from three tech-heavy locales, the Bay Area, New York City and Seattle, would relocate if allowed to work remotely. Indeed, about 14% said they would leave the country if possible.

Assuming that Facebook-style permanent relocation isn't an option, Blind then asked how workers would like to balance WFH and in-office time after the crisis abates and offices reopen. At the extremes, about 15% said they would never go to an office, while a similar number would come in every day. A plurality, 44%, would only commute one or two days a week with the rest going in three or four days a week. In aggregate, many companies could find their offices more than half empty most of the time after the crisis abates.

Blind also broke out responses to the relocation question by company. As the following chart illustrates, A majority of employees in most high tech companies would like to relocate, but relatively few would leave the country.

A ​separate study by Moody's​ attempted to quantify the ​areas most likely to see migrations in and out​ in a post-COVID world. As summarized in the following table, areas gaining employment are mostly smaller and mid-size, lower-density metropolitan areas with major universities and close access to outdoor recreation spots. Areas at risk of losing population are mostly large or economically depressed cities.

Many factors complicate the remote work decision

Before our collective WFH experiment, many managers perceived that the home environment posed too many time-wasting, productivity-sapping distractions and temptations. The assumption was that left to their own devices, people would slack off to the detriment of schedules and organizational cohesion. 

According to employee surveys, such fears are unfounded, with one finding a mere 1 percent loss of productivity and another claiming that remote work is more productive than being office-bound. Such self-reporting, which is akin to asking a teenager how much school work they'll get done while Mom and Dad go out on the town, is always suspect. However, in this case, employee reports are probably not far off since they mirror the more significant vote of confidence by executives reviewing their operational results and loosening WFH policies. Indeed, many are coming to see remote work as a long-term financial benefit. 

As Morgan Stanley's CEO indicated, companies could reevaluate their real estate footprint in light of a reduced office workforce. While a lower office population might be offset by reduced density, should physical distancing restrictions persist, cutting the number of office workers in half could reduce a company's space requirements by 25 percent or more. For an enterprise leasing a million square feet at an average of $50 per square foot, that's at least a $12.5 million savings per year.

If the Blind survey and Moody's analysis are correct and remote workers relocate out of expensive urban hubs to areas with lower costs of living — primarily due to housing — companies could also save on salary adjustments. Indeed, Zuckerberg really got people's attention when he said that those choosing to change locations might face lower salaries to reflect a cheaper cost of living, cautioning those that might try to game the system that "There'll be severe ramifications for people who are not honest about this.” Although the salary adjustment might alter some people's remote work decisions, presumably any adjustments are economically neutral and leave employees with the same amount of disposable income.

Companies could also save on office perquisites, which in the case of many Silicon Valley firms can be quite extravagant. The reduced spending on espresso machines and sushi bars will be partially offset by any home office allowance companies choose to a lot. For example, Pichai committed to "giving each Googler an allowance of $1,000 USD, or the equivalent value in your country, to expense necessary equipment and office furniture."

My take

As I wrote at the outset of the COVID crisis, the disruption to social and business routines was likely to break through bureaucratic friction and instigate many changes that would be impossible in normal times. The almost immediate adoption of remote work and the mostly successful results of our collective WFH experiment will precipitate increased adoption of remote work as a standard option for an increasing number of jobs. While the technology industry is paving the way, other sectors with a preponderance of office workers, programmers and other jobs that don't require one's physical presence will soon follow. 

It is impossible to predict how such a grand social experiment might play out. Still, it seems likely to increase an organization's geographic diversity, thereby opening the talent pool for many positions. Perma-WFH should also improve job satisfaction for those that can balance work and personal life when one's home is both castle and office, however, it won't suit everyone. While offices might get small and less dense, they aren't going away.