Why Companies Want You Back in the Office
According to study after study, working from home offers some big advantages: more efficient workers, less staff turnover, higher quality work, and it’s cheaper for both the business and its employees. So, you might be scratching your head wondering why so many companies are pushing hard for people to come back into the office.
The truth is, for a lot of employees, the days of working from home are starting to fade as they get called back.
Before the whole COVID-19 situation, high-tech companies were already looking into the good stuff about remote work. One peer-reviewed report from a NASDAQ listed company (they didn’t say who it was) did a test run. They randomly split their call center workforce in half: one group worked from home, the other stayed in the office.
The folks who got to work from home saw higher customer satisfaction, handled 13% more calls, and had 50% less staff attrition. Now, that last one is a really big deal for call centers, which usually have a tough time with lots of people leaving their jobs.
A follow-up study looked at workers in more different jobs, including people in finance, marketing, and software development. This study checked out staff working full-time from the office against staff on hybrid schedules (mixing home and office). The results were similar. The hybrid workers were 8% more efficient at their jobs and had turnover rates 35% lower than the staff who were in the office full-time.
If businesses are trying to get the most out of their workers, the research seems pretty clear: more work from home equals better results.
Working from home is also cheaper for the company itself. Businesses that insist everyone comes back to the office have to pay more for things like utilities (electricity, internet), maintenance, and security. These are costs workers would happily cover themselves if they could work from home.
It doesn’t make much sense, does it? Companies usually jump at the chance for better results for less money. But in this case, there are actually four main reasons why more and more companies are demanding their staff return to the office.
Reason 1: Financial Squeeze and Quiet Layoffs
The first reason is that, frankly, a lot of companies aren’t doing great right now. Interest rates are high, and investors aren’t just throwing money around like they were back in 2020. Companies need to cut costs.
The biggest and most regular expense for most companies is their employees. If a business isn’t getting as much work as usual, cutting staff (laying people off) can look like a smart business move. If they can cut expenses as much as their revenue has dropped, they might be able to keep profits up and keep the shareholders happy. Plus, if a business is making less money, it often means there’s simply less work to do, so they don’t need as many people anyway.
But here’s the problem: officially laying off staff tells the market the company is struggling. This can hurt the share price, make it harder to get new business, and even make it tough to hire new people later on. Nobody wants to work for a company that seems to fire people randomly, and customers might be hesitant to work with a company that looks like it’s about to fold.
So, what do companies really need? A way to reduce staff numbers without making formal, public layoffs. Business leaders have seen the studies. They know that forcing people back into the office naturally leads to higher staff turnover. And in this situation, that’s exactly what they want. As one perspective puts it, sometimes a company has to make a decision, state their policy (“you have to return to work”), and be okay with the fact that some employees will decide they can’t work for that company anymore under those terms.
Big investment banks like JPMorgan and Goldman Sachs, which have seen less revenue because there’s less corporate deal activity happening, are examples of companies forcing all their staff back full-time. Their official message focuses on how important face-to-face time is with clients and colleagues.
However, senior bankers at both firms, who often talk about how much harder they worked when they were younger analysts, sort of let the real reason slip when journalists asked them about the decision. A senior manager at Goldman reportedly told the Financial Times that Goldman does not want to hire people for whom the most important thing is how many days they have to spend in the office.
This plan could backfire, though. Unemployment is still low, and good employees can usually find a new job easily. So, managers using this strategy have to be careful, or they might end up only keeping their worst employees. Getting rid of staff this way, without bad press, is just the first reason.
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Reason 2: The Real Estate Problem
The second reason companies are pushing for people to come back, despite all the benefits of working from home, is their exposure to real estate that’s basically becoming useless. You hear people saying, “You have to come back to the office!” and sometimes it feels like it’s all just a big push to keep the commercial real estate market from crashing.
The value of office buildings has dropped significantly as more people work from home. This is a big problem for companies that own or are heavily involved in that market. About 30% of major public companies in America actually own the office building where they have their main headquarters. This real estate is a major asset listed on their balance sheet. Think about Apple Park in Cupertino; it cost five billion dollars to build. That’s a huge investment, even for a company like Apple.
Investors watch closely to see how well companies are using their assets. A big building sitting empty isn’t doing anything to make money for shareholders. So, there’s pressure on company leaders to sell these unused assets.
But here’s the catch: company executives trying to sell an office building right now would likely have to sell it for much less than its estimated value on their balance sheet. Taking that kind of loss would look bad for the CEO, especially when it’s time for the board to decide their bonus.
Instead of selling an unused asset and taking a hit, a better move for a CEO is to make sure the asset is being used. If an office is full, company leaders can argue that the money tied up in the building is justified because it saves them the rent they’d have to pay if they didn’t own it.
Most big companies actually rent their offices. This can put even more pressure on them to get people back inside. Office leases are usually much longer than home rentals. Office spaces often start as just empty concrete shells, and the building owner and the tenant have to agree on how the office will be built out to fit the company’s needs (fit out). The typical cost for fitting out a high-rise office after the main structure is built is between 500 per square foot. If managers want their offices to look like the fancy ones in TV shows like “Suits,” it costs even more!
Usually, the building owner pays for this fit out, so they want to make sure the company renting the space will be paying rent for a long, long time. That’s why office leases are so much longer than home leases.
Companies that signed these long leases before COVID hit are still paying rent every month for space they aren’t using, and they can’t easily get out of it. Many managers have decided, “Well, if we’re paying for it, we might as well use it.” The cost savings of working from home disappear if the company is still paying full price for an empty office building.
A 2022 report on office space by Robin Powered surveyed 247 companies. It found that only 11% of companies were fully using their office space. 46% were using less than half, and another 46% said they planned to reduce office space within the next year. But doing that is hard with those long-term leases.
One of the only things left for some companies is to actually default on their leases to try and force a negotiation with the building owner. Some perfectly healthy companies have started doing this just to get rid of a major ongoing expense.
Banks are also heavily involved with office buildings. For example, 3.8% of Wells Fargo’s loans are secured against commercial office space. That’s a huge $37 billion in loans, which is about a quarter of the company’s total value (market cap). Banks are really feeling the pressure to keep offices the normal place of work. If companies keep defaulting, banks will have to write off a lot of those loans, which means big losses for them.
Reason 3: Managerial Power and Old-School Culture
The third reason companies are pushing people back is the power that being in an office gives managers. As the job market shifts a bit, employers are starting to say, “We’re still hiring, but we need you on site, in place.”
Some managers, honestly, don’t have a whole lot to do besides looking important and standing over their employees. It’s easy to fill the day with pointless tasks and micromanagement when everyone is right there in the office. It’s much harder to do that stuff online.
Senior managers making the call to bring people back are also generally more comfortable with in-person work than online work. The older “soft skills” of business, like a firm handshake or small talk by the coffee machine, just aren’t as relevant online. Senior managers, especially those nearing the end of their careers, have spent most of their working lives learning and using these skills. For many, it’s how they climbed the ladder in the first place.
These traditional, formal managers are now dealing with a new work culture: team meetings where someone might be in their bathrobe, and a co-worker’s cat walks across the screen.
Professional office culture is a powerful tool managers use to get the most out of their staff. People often stay late at the office partly because they know sitting at their desk hours after everyone else has left looks good. It shows their bosses they’re willing to make sacrifices for their career. If you’re working from home, you don’t get the same kind of visible recognition for working late, because you’re already sitting at home anyway.
A big driver for getting promoted in the past has been the perks that come with senior corporate roles. If you came into work every day and sat elbow-to-elbow at a shared desk in a noisy, open-plan office with no privacy, you’d probably work extra hard for a promotion if that promotion meant getting your own office with walls and enough space to stretch out without annoying your neighbors.
Studies by McKinsey, the Incentive Research Foundation, and Princeton suggest that non-cash incentives have a bigger long-term impact on motivation than just extra money. So, even though we all say we’d prefer the cash, the science indicates otherwise. The research points to four reasons why non-cash incentives work better:
- They’re visible every day: You see the executive’s private parking spot, their large office, or their personal assistant getting them coffee every time you go to work. If the company just paid them more money instead of these visible perks, you wouldn’t see their big house or retirement savings, so you wouldn’t be as motivated by their success.
- They’re easier to talk about: If you get your own corner office, it’s easy to brag about it. Talking about a large salary increase is still a bit of a taboo, which company management is happy to maintain. So, people can boast about their new office more easily than their big bonus.
- Money becomes the new normal: While people say they want more money, that higher income quickly becomes their expected standard. Do you remember your exact salary from 10 years ago? Probably not. But you probably remember where you worked.
- People like recognition: Simple things like having your face on the wall as “Employee of the Month” can go a long way.
Most of these non-cash rewards need some kind of physical presence – they work best in a physical office. Working from home makes a job feel more like just a transaction – you do the work, you get paid. It makes roles easily comparable; why do the same job from the same desk for less money?
Also, since most of these perks go to senior managers, they are more likely to want to return to the office themselves and, therefore, make the decision for everyone else to return. A study of 10,000 workers in the summer of 2021 found that 44% of executives who primarily worked completely remotely during the pandemic said they wanted to come back into the office every day. Compare that to just 17% of their employees who said the same. It’s just nicer to return to a comfortable office that you oversee than it is to go back to a shared desk where you might get micromanaged.
Managers are people too, and they tend to react more strongly to negative news than positive. A manager is more likely to remember that one employee who played video games at home all day instead of working than they are to remember the hours saved by cutting out commutes for their whole team, which leads to small, steady improvements. When surveyed, most managers believed working from home hurt their team’s output, even though the data showed the exact opposite.
The use of employee monitoring software jumped by 66% in the fall of 2021. Even with workers returning to the office, managers, on average, have remained more suspicious of their subordinates. Collecting employee information and finding underperformers is one reason companies are so focused on data these days, but it’s not the most profitable reason.
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Related Content
If you want to find out the most profitable reason companies are obsessed with your data – how they’ve turned your information into a trillion-dollar account and how they plan to cash it out – you should check out another video I made.
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