Work From Home vs Return-to-Office Long-Term Impacts

How serious is this issue for our long-term economy?  From McKinsey’s report titled Empty spaces and hybrid places: The pandemic’s lasting impact on real estate^[ii]:

• Office attendance has stabilized at 30% below its pre-pandemic norms.
• Untethered from their offices, residents have left urban cores and shifted their shopping elsewhere. Foot traffic near stores in metropolitan areas remains 10 to 20 percent below pre-pandemic levels.
• In a moderate scenario that we modeled, demand for office space is 13 percent lower in 2030 than it was in 2019 for the median city in our study. In a severe scenario, demand falls by 38 percent in the most heavily affected city.

In addition, Morgan Stanley says commercial real estate will crash harder than during the Great Financial Crisis, and that no sector will be immune to the fallout. Capital Economics says office values are unlikely to recover by 2040. Goldman Sachs saw commercial real estate’s future this way:

“The potential for disruptions to U.S. commercial real estate activity from a pullback in small bank credit availability is substantial, unaided by the fact that the segments most dependent on bank financing—offices and retail properties—are also facing the strongest risk of functional obsolescence.^[iii]”

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Further Reading: The Truth About Who Will Work From Home

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What 60 MINUTES Got Wrong in Its Report

The wrong part of Sunday night’s report was 60 MINUTES indicated the root cause of this current-and-to-become worse economic catastrophe was the pandemic which drove many workers into makeshift home offices on the fly. While that latter part is true, the real cause is that CEOs cannot demand that workers return to the office because our current workforce shortage gives employees unprecedented power to say “no”.

Had the pandemic occurred ten years earlier, CEOs would say “return” and employees would readily comply. Not so during our 30-year shortfall of workers on every level.

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Further Reading: Confirmed: Mandated Return-to-Office = Higher Turnover

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Workforce Facts as We Know Them Now

For starters, about 40% of the US workforce could actually perform their jobs from home.^[iv] This means that those workers are not tied to equipment or people such that they can perform their jobs from anywhere. The remaining 60% must work in a specific location and therefore cannot work from home like those who work in factories, schools, or for many in healthcare.  This brings to mind the popular holiday season joke, that Rudolph told Santa the reindeer wanted to work from home.

Presenting these data in percentages disguises their importance. Our Bureau of Labor Statistics tells us that about 168 million are working today, meaning the aforementioned economic impact of those who could potentially work from home exceeds 67 million people. Pre-2020, the great majority of these folks were working in urban centers while also dining and shopping there. Not so much now which leaves a lot of downtown diners looking for noon-time customers.

Early on during the pandemic, the Wall Street Journal surveyed a group of CEOs about their work-from-home and return-to-work preferences. Let’s use the acronyms WFH and RTO going forward. I’ll paraphrase from memory the one quote that jumped out the most:

“You can’t tell me that a kid graduating from college will learn as much from his dining room in his first three years as he would by walking up and down the halls of our office.”

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Further Reading: Two Things I Can Predict About Working From Home

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Supporting this quote, here are three widely-reported numbers that clarify CEOs’ positions regarding RTO^[v]:

• 90% of companies plan to implement RTO policies by the end of 2024.
• Nearly 30% report they will threaten to fire employees who don’t comply.
• Just 2% say they will never require employees to return to work in person.

That push appears to be working as fewer than 26% of US households still have someone working remotely at least one day a week, a sharp decline from the early-2021 peak of 37%, according to the two latest Census Bureau Household Pulse Surveys.^[vi] The key phrase though is “at least one day a week”.

But before moving on, let’s step into a 2020 time machine and recall the number of journalists who reported that chief financial officers would be quite happy for workers to continue working from home so they could cut back on those hefty commercial real estate bills. Those days and those predictions are long behind us.

Here is a summary of the most recent research findings:

• Employees who can WFH strongly prefer to do so.
• These preferences vary though by age and income as older and higher-paid workers would rather avoid the office altogether, while younger workers want at least occasional social connection.
• While hybrid scheduling is trending strong, there is no magical days-in/days-out winning formula.
• WFH vs RTO productivity and innovation data mostly favors RTO, though some detailed data has uncovered that overall productivity has been slipping for years prior to COVID-19.
•  CEOs’ bias that employees RTO vs WFH might be exceeded by the biases of their own managers, many of whom don’t trust that employees are actually working from home.
• Employees like WFH because of schedule flexibility, increased work/life balance potential, and WFH saves money on commuting, clothing, and more.
• But employees also face disadvantages that are not so obvious such reduced opportunities for their own professional development as well as women facing more subtle discrimination based on assumed childcare distractions.
• RTO mandates have negatively impacted turnover and recruiting, especially among those companies that have changed policies from “WFH is good” to “WFH is no longer permitted”.
• CEOs are varying between carrots and sticks to drive RTO, potentially including that those employees who appear onsite more frequently will be rewarded with more pay and promotions.
• While most CEOs will push for more RTO, newly-developed technologies will make WFH easier and more productive.

And not to be overlooked, Unilever which owns Dove, Axe and other products reported a 15% surge in deodorant sales that coincided with the RTO push^[vii]. That’s good news for all of us.

So the punchline here is that our current and projected-future workforce challenge is the real cause of the commercial real estate crisis…as it will also be for the additional struggles colleges and universities will face as companies continue to down-grade job requirements by eliminating the mandate for college degrees.

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There has never been a better time to implement fresh solutions to retain your best workers. Write me: DFinnegan@C-SuiteAnalytics.com or connect with me to have a one-on-one conversation on ways you can get started today on your journey to improve your employee retention and engagement.

[i] The report was broadcasted on CBS on 1.14.24

[ii] https://www.mckinsey.com/mgi/our-research/empty-spaces-and-hybrid-places

[iii] The quotes from Morgan Stanley, Capital Economics, and Goldman Sachs appeared in https://finance.yahoo.com/news/morgan-stanley-says-commercial-real-202952701.html

[iv] https://www.pewresearch.org/short-reads/2023/03/30/about-a-third-of-us-workers-who-can-work-from-home-do-so-all-the-time/

[v] https://www.cnbc.com/2023/09/11/90percent-of-companies-say-theyll-return-to-the-office-by-the-end-of-2024.html

[vi] https://fortune.com/2023/10/16/remote-work-hybrid-return-to-office-rto/

[vii] https://fortune.com/europe/2023/10/27/unilever-deodorant-personal-care-hygiene-wfh-return-to-work/

The post What 60 MINUTES Got Wrong About WFH Commercial Real Estate Crisis appeared first on C-Suite Analytics.

The forced work-from-home in 2020 and 2021 has led to dreamy work situations for white-collar employees but total drudgery for employers…to the point that we now have two additional immediately-recognizable acronyms: WFH for work-from-home and RTO for return-to-office.

From the employee side, WFH represents options…for when and how to work, for easier child and elder care, and even for which state to live in. For employers, the combination of WFH + RTO = higher turnover, worse recruiting, and for-certain-resulting lower productivity. New reporting tells us this:

• 42% of companies that have mandated RTO saw a higher level of employee turnover than they had anticipated.
• Almost one-third of companies found recruiting got worse.
• And 76% of employees said they would leave if their company forced them to RTO.
• As a final kick, nearly half of candidates said they would reject roles if there is no flexibility.[i]

From the start, forced WFH looked like trouble for employers who had zero choice but to permit it during those pandemic months. One of few expected upsides was that money would be saved via reduced office space, assuming workers would remain at home. And while true for some companies, those non-renewed leases are having a massive negative economic impact on our cities which has yet to fully hit home. And city-based hotels and restaurants are feeling the same whack.

But if there was another employer win from WFH, I can’t see one. Turnover is up and Gallup tells us employee engagement is down for the first time in a decade, saying this specifically about WFH:

The largest decline in employee engagement was among those in remote-ready jobs who are currently working fully on-site — this group saw a decline of five points in engagement and an increase of seven points in active disengagement. It’s worth noting that exclusively remote employees saw an increase of four points in “quiet quitting” (aka not engaged in their work and workplace).[ii]

Some Predict CEOs Will End WFH

Fortune published a recent report predicting CEOs are running out of patience with WFH, citing the following reasons[iii]:

#1: Remote work is bad for new hires and junior employees.

#2: Workers admit that remote work (sometimes) causes more problems than in-person work.

#3: Remote workers put in 3.5 hours less per week compared to in-person workers.

#4: Productivity plummets on days when everyone is working remotely.

I remember two 2021-ish Wall Street Journal articles that nailed the problem. In one a CEO said he could not imagine a recent college grad developing adequately via zoom meetings versus walking the halls with her in-office, more-experienced colleagues. And the other article profiled four employees who had been hired and then quit within six months because zooming alone didn’t help them build relationships with their managers nor their peers.

Yet Employees Have More Power…and Will Continue to Have It Regarding WFH or RTO Decisions

The major obstacle is workers now have the upper hand. That the sheer number of workers across the U.S. cannot meet the demand for filling open jobs, permitting employees to make decisions that severely impact organizations rather than the traditional other-way-around. And the Census Bureau tells us this won’t change anytime soon because our baby boomers are retiring and there just aren’t enough younger workers to take their places.[iv]

The Census Bureau also tells us in the same report that 51% of all new workforce entrants will be immigrants beginning in 2030, and that percentage will increase throughout the foreseeable future. This comes at a time when Americans’ favorable opinion of immigrants continues to go down[v], likely influenced by the continuous streaming of Mexican border stories across TV news as though these are the only immigration examples.

What To Do? Regardless of WFH or RTO or Hybrid, Retention Should be Addressed

CEOs are ultimately deciding their organization’s WFH/RTO strategies, choosing from (1) total WFO, (2) total RTO, or (3) various forms of hybrid scheduling. But among the hundreds of online reports about companies’ decisions, little is said about how those organizations should engage any resulting zoomers in order to retain them…and this is a topic that fits right into our sweetspot. Generic recommendations call for managers to build stronger, more personal relationships with their individual team members, yet those same generic recommendations come up short on how to do this.

As our company has proven for a decade-plus, Stay Interviews provide managers with a structured method to learn their employees’ greatest day-to-day needs and then meet those needs. This specific WFH retention solution is to combine the five Stay Interview questions with skill-building for asking those questions, listening to each employee’s responses, probing to learn more, taking a full page or two of notes, and then building individualized stay plans to retain that employee longer.

Need help establishing retention goals for WFH, RTO, or Hybrid?  
Schedule a conversation with me at DFinnegan@C-SuiteAnalytics.com and we’ll discuss the numbers and needs you should have to evaluate your retention goals. We work with companies in every type of industry to cut turnover by 20% and more by building trust and accountabilities.

The Stay Interview goal is to identify and address work-driven issues versus virtual happy hours and other social activities which fail due to their simplicity, their superficial quality. While helping employees meet their peers virtually is a worthy objective, the absolute most important relationship is the one they develop with their manager…and that manager must have training and tools to lead that relationship.

Improving retention and engagement among WFH employees is a very, very tall task. Training managers to facilitate Stay Interviews on a regular schedule provides the absolute best opportunity to retain and engage them.

[i] https://www.msn.com/en-us/money/careersandeducation/we-re-now-finding-out-the-damaging-results-of-the-mandated-return-to-the-office-and-it-s-worse-than-we-thought/ar-AA1eDefg?ocid=hpmsn&cvid=1c82f1dc40644b398135a3d0e5745381&ei=16

[ii] https://www.gallup.com/workplace/468233/employee-engagement-needs-rebound-2023.aspx?thank-you-subscription-form=1

[iii] https://www.msn.com/en-us/money/markets/bosses-are-fed-up-with-remote-work-for-4-main-reasons-some-of-them-are-undeniable/ar-AA1cyh0l?ocid=hpmsn&cvid=6ab063aa84fa4eb5abcae434f66ef879&ei=18

[iv] https://www.census.gov/library/publications/2020/demo/p25-1144.html

[v] https://news.gallup.com/poll/508520/americans-value-immigration-concerns.aspx

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