The modern workplace in a not so remote future
November 17, 2021
As we approach the two year mark of COVID-19, there is little doubt of the impact this pandemic has had on how employees and managers think about life in the office. The onset of COVID-19 revealed that many businesses were ill-equipped to deal with going completely remote, investments in technology soared, and platforms Zoom, Teams, Slack and Webex became household names. In the early days, predictions from experts ranged from a revolution in our working lives to a return to normal within months. Individuals were quick to adapt by either buying homes, sometimes far away from the city, or renovating to create their own office space at home.
Managers and business owners were faced with answering new questions: how do you assess remote workers’ productivity? Who is liable if employees injure themselves at home? How late in the evening is too late to reach out to your employees? Now, with a significant portion of the developed world fully vaccinated and able to return to working from the office, we find that many of these questions are yet to be answered. However, we are starting to see some trends.
The peak of working hours spent at home in the United States (US) was over 60% in May 2020, a significant increase from less than 5% pre-COVID-19. It is estimated that current working hours spent at home are over 40%, indicating that the “remote-first” philosophy is still alive and well in many parts of the labour market. Numerous academic studies on the matter of productivity concluded that productivity was either equal or better when working from home, although the definition of productivity differs from one study to another. A survey by Statistics Canada found that roughly half of the remote workers reported completing as much work from home as they previously did in the office, and another third reported they got more done. One explanation for these results is that it is easier to focus on tasks at home than in the noisy office, where distractions can be plentiful. Another explanation focuses on the benefits of technological tools on teams’ coordination and effectiveness.
There is a risk, however, in having workers self-report on their productivity, as feeling more productive does not necessarily mean they actually are. Studies that did not rely on surveys often found mixed results. For example, in many cases, the increase in total productivity was the result of an increase in hours worked, which, is often not sustainable in the long term and might have other impacts on quality of life. In other pieces of research, the increase in productivity for standardized tasks increased, whereas innovation and more creative tasks were penalized due to a lack of interaction and exchange of ideas. Indeed, observers have noticed that virtual work led people to be “siloed” and interact mostly with a small group of their peers, compared to individuals working in the office. This reduction in contact among networks led to many inefficiencies that are not as easily noticed, but are just as damaging to the quality of output in environments that require a more creative and collaborative approach.
One of the more impactful downsides of working from home that many young professionals are not fully realizing yet, is related to career development. It is much more difficult to move up the corporate ladder without the in-person coffee chats or getting to be known around the office, and no amount of Zoom meetings with your supervisor can compensate for this. The counter-argument that promotions will be based more on merit and the work done as a result of work from home is idealistic at best. While output and knowledge of the business matters, managers tend to prefer promoting people they want to work with, therefore people who are not able to market themselves well will be penalized. Considering that many people who finished school in the last year and started their first job have yet to meet their colleagues in person, one can wonder if they will face the same long-term hurdles in their careers as recent graduates faced during the 2008-09 recession.
Given the current state of the labour market, employees seem to be holding the bigger end of the stick for now, and “remote-first” is likely to stay for some time. It is difficult for management to request that employees go back to spending 1-2 hours commuting every day when some of them are already getting unsolicited job offers from competitors and talent is difficult to attract. Working from home is now a perk and not a small one either. A widely thrown around number is that the average employee views being forced back to the office full time as being equivalent to a 5% pay cut. For companies already dealing with material and labour inflation, not forcing their employees back to the office is an easy way to retain and attract talent without exorbitant salary increases.
Now, going back to the usual question: how does Global Alpha get its exposure? We aim to obtain it through a few different angles.
IWG (IWG LN)
We have previously written multiple commentaries about IWG. IWG is a global leader in flexible workplaces with a portfolio of over 3,300 locations across 100 countries and known for its many brands, including Regus. Before COVID-19, the flexible office businesses only had a 5% market share, which is estimated to almost double over the next five years. The company saw its share price suffer at the onset of the pandemic, but has since then been lauded by investors as a strong play on the reopening and a true beneficiary of the modern hybrid workplace post-COVID-19.
Mimecast (MIME US)
Mimecast is a cloud-based platform that offers email security solutions ranging from targeted threat protection to large file sending services and data leak prevention. Mimecast benefitted significantly from the move to working from home as companies were looking to invest to modernize their cybersecurity architecture, and should continue to benefit as the corporate world has to strike a balance between work from home and on premise.
The push and pull we describe above between employers and employees is likely to outlast the pandemic by a long shot, and the resulting hybrid model will bear some difference to the pre-pandemic corporate model. Already, hot desking reservations are becoming the norm across bigger companies looking to downsize or optimize their space given their workforce will not return to the office full time in the near future. The standard 9-to-5 will become less standard as people are now set up to work from home and will have more leeway in making their own hours. Others will realize they need more human contact or a better split between work life and home life, thus will go back to spending a majority of their working time in the office. One thing is for sure: remote-only is not the new normal.
Have a nice day.
The Global Alpha team