Will Relaxed Rules About Hybrid Work Improve Productivity and Performance?

For much of 2021, the Great Office Return was expected to climax in the fall. But thanks to the delta variant of the coronavirus, many organizations’ office-return plans were paused, postponed, reconsidered, or discarded. Some returns have marched (or lurched) along. Others have been put off to 2022. Throughout the uncertainty, leaders have had to grapple with what to tell employees about work-from-home arrangements.

Headlines have blared about workers leaving companies that have stringent in-office requirements and trading required office time for permanently remote or hybrid arrangements. Research has shown a dramatic gap between executives and nonexecs in their respective appetites to return to the office.

Clearly, it’s a live wire of a question: Will relaxed rules around physical presence in the office affect employee productivity and company performance? This was the issue we asked our panel of strategy experts worldwide to address this month in the MIT SMR Strategy Forum.

Disagree

A number of panelists think productivity and performance will suffer as a result of relaxed rules. They raise concern about the value of interactions, both planned and unplanned, in a shared workspace. Ashish Arora of Duke University says that remote work may make it “difficult to sustain collaboration and may hurt culture.” Tim Simcoe of Boston University writes, “It will take longer for new hires to acclimate, and creativity will suffer from fewer serendipitous interactions.” Olav Sorenson of UCLA notes that “people employed in jobs that require creativity or intensive coordination still benefit from the unplanned and frequent interactions of being at work in person.”

Disagree

“While relaxing the rules about physical presence may meet workers’ desire for more flexibility, it risks hampering face-to-face interactions, which have been found to play a fundamental role in fostering innovation and productivity. Employee productivity and firm performance may suffer as a result.”

Annamaria Conti

HEC Lausanne

Agree and Strongly Agree

Nearly half of respondents (just under 47%) agree to some degree that relaxed rules would improve productivity and performance. Many note the time and cost savings of reduced commutes. “Working from home saves long hours spent on commuting and reduces wasteful signaling by staying inefficiently long overtime hours in the office,” writes Monika Schnitzer at Ludwig Maximilian University of Munich. John Van Reenen of the London School of Economics and Political Science notes further financial savings: “Frees up expensive office space.” Increased employee satisfaction was another common theme.

Strongly agree

“As the old saying goes, different strokes for different folks. Anecdotal narratives suggest that introverts thrived being at home and were more productive, while extroverts suffered the lack of social interactions. By allowing employees to self-select into the environment that best suits their needs and style, employees will be more productive and, at the risk of veering outside of economics, happier!”

Steve Tadelis

University of California, Berkeley

Neither Agree nor Disagree

A good number of respondents (37.5%) neither agree nor disagree, pointing out uniformly that, well, it depends — a viewpoint shared by experts across the spectrum of agreement. It depends on the employee, the organization and its culture, the task at hand, and even the passage of time. Juan Alcacer of Harvard Business School writes, “This is an area where a one-size-fits-all approach is dangerous. Some tasks will benefit from more flexibility on physical presence; some won’t.” Yael Hochberg of Rice University echoes that sentiment: “For some types of employees, this is emphatically true. For others, not necessarily.”

Some panelists think it’s too early to know for sure, or too complex to assess accurately. Shane Greenstein of Harvard Business School says that the pandemic work-from-home situation was “a forced experiment” and that “experts have not settled on generalities to explain all the variety.” Short-term and long-term effects, some panelists note, may differ.

Neither agree nor disagree

“I think the effects will differ in the short run versus the longer term and for established employees versus individuals newer to the organization. In the short run, there are some efficiency benefits. However, over a longer period, the lack of interaction with colleagues, particularly more-spontaneous, unplanned interactions, will likely hurt innovativeness. Also, new employees are likely to find the socialization process as to ‘how things are done around here’ more challenging in a world of remote work.”

Daniel Levinthal

University of Pennsylvania

Where do we go from here? Caroline Flammer of Boston University suggests, “The challenge is to strike the right balance in finding the most effective work arrangement depending on the specific activity.” Bocconi University’s Alfonso Gambardella notes that “relaxing the rules means that firms (and employees) can choose how to optimize this trade-off.” To achieve a balanced trade-off, each element of the equation — each activity, each task, each employee, each organization — may require an arrangement tailored to its specific circumstance.