Last October, Dan quit his job at Amazon. He’d been looking to leave for a while; he was bored and unsatisfied. But then one morning in mid-September, a memo from the very top tipped him over the metaphorical edge.
“Hey team. I wanted to send a note on a couple changes we’re making to further strengthen our culture and teams,” the now infamous note from CEO Andy Jassy started. Buried in the tenth paragraph was the real zinger — a line that made Dan, who’d been working in New York City, want to smash the phone he was reading the memo on: “We’ve decided that we’re going to return to being in the office the way we were before the onset of Covid.”
Today, about four months after not exactly kissing Amazon goodbye, Dan is much happier. He works mostly remotely for a tech startup. A few times a month he has in-person meetings with colleagues in a co-working space. Asked whether more money might’ve convinced him to stay at the Seattle-based tech behemoth, he laughs. “I actually would’ve settled for less if it meant I didn’t have to go in every day,” he says. “I just don’t see the rationale for them being so controlling.”
Dan’s sentiments may feel like a common and perhaps tired chorus in many stories that have been written and re-written about the return-to-office kerfuffle: Workers got used to a new way of working. Now they’re mad that the old management guard is snapping back to its old management ways.
But one thing that struck me about Dan’s story was the money bit. He told me he was literally willing to pay for the privilege of working from home. If that’s true, then who else might be willing to do so, and for how much? How much cash might shareholders be unwittingly sacrificing because of CEOs’ return-to-office mandates that may or may not be shoring up productivity?
Giving up a quarter
Last month, three academics from Harvard Business School, the University of California, Los Angeles and Brown University published a working paper that to a large extent answers precisely these questions.
“Our findings indicate that, on average, individuals are willing to forgo approximately 25% of total compensation for a job that is otherwise identical but offers partially- or fully-remote work instead of being fully in-person,” the scholars wrote.
The study’s sample of 1,396 workers only comprises individuals working in the tech industry. But it is nonetheless a valuable proxy for what might be going on elsewhere in the labor market. And it shows something else interesting. The trio analyzed existing wage differences between remote and in-person work. “Given the strong preference for remote work, a compensating wage differential would be expected, where companies offer a premium for in-person positions,” they wrote. “However, our data indicate that the average compensation for in-person roles is, on the contrary, slightly lower than that for otherwise identical remote positions.”
In other words, employees who may give up a good chunk of their pay to work from home might actually be getting paid more than those who are schlepping to the office. So much for companies fulfilling a fiduciary duty to shareholders.
Data-driven?
I put this notion of missed value to some academics and other experts, one of whom is Anthony Klotz, a professor of organizational behavior at University College London’s School of Management.
Klotz, who’s perhaps best known for predicting a major Covid-related labor market shift and coining it the “Great Resignation,” said what’s baffled him about return-to-office mandates is that the messaging around them rarely includes a clear business case.
Many of the companies ordering staff back to offices full-time are among the most data-driven and technologically sophisticated in the world, he explained. And don’t forget, he added, we’re “in the era of analytics guiding business decisions.”
Yet what are we seeing? Mostly, it’s memos and announcements that use anecdotes and observations rather than factual evidence to justify decisions. “Business leaders certainly have the right to fly in the face of employee sentiment and published evidence. That’s their prerogative,” said Klotz. “But if they want to do so and still retain the trust of their employees, they have to offer a compelling ‘why?’ And no one is doing that when it comes to RTO.”
To be clear, if CEOs were paying attention to the body of evidence on this topic that’s available and growing, they’d be hard pressed to ignore one recurring conclusion. “Hybrid work is a win-win-win for employee productivity, performance and retention,” wrote Nicholas Bloom, a Stanford economist and one of the leading researchers on work-from-home policies, in commenting on a paper published in June last year.
“If managed right, letting employees work from home two or three days a week still gets you the level of mentoring, culture-building and innovation that you want,” Bloom added. “From an economic policymaking standpoint, hybrid work is one of the few instances where there aren’t major trade-offs with clear winners and clear losers. There are almost only winners.”
The cost of trust
Many of the people I spoke to about the push-pull of company demands vs. worker desires mentioned — or at least alluded to — the importance of trust. When there’s a disconnect between what companies and what workers want, trust can quickly wane and this also can prove very expensive for employers.
Klotz mentioned that one of the most robust findings in organizational psychology is that people react more positively to decisions by leaders (or less negatively, in the case of unpopular decisions) if these decisions are accompanied by compelling evidence that the decision is both fair and based on a sound business case.
So if employees understand and trust the rationale for a CEO’s decision, they’re more likely to be able to get behind it. If they don’t, any number of things could happen. They might quit. They might drag their feet. Is a disgruntled in-office employee who feels like their boss doesn’t trust them really a more valuable asset than a happy employee who feels trusted enough to sometimes work from home?
On this note, Wes Adams, co-author of "Meaningful Work," reminded me that “autonomy is one of the strongest predictors of whether an employee deems their work to be meaningful or not. “For many employees,” he said, “a rigid return-to-office policy signals a lack of trust more than a commitment to culture.”
Zach Mercurio, author of an upcoming book called "The Power of Mattering" and a senior honorary fellow at the Center for Meaning and Purpose at Colorado State University, echoed this. Referring to the research showing that workers are willing to forgo pay for not working in the office every day, he noted that this is evidence of a “shift from transactional to transformational relationships between workers and their organizations.”
He added that the evolution of the world of work, and the emergence of new avenues of income, has resulted in people having more choices when it comes to where and how they want to make a living. “With more choice comes more discernment, and with more discernment comes an increasing focus on how people want to feel,” said Mercurio. “Simply exchanging wages and perks for labor and motivation won’t work in this new market.”
In the end, even if CEOs aren’t currently doing the math as it relates to their workplace policies, they may be forced to in the not-too-distant future, said Zuhayeer Musa, co-founder of Levels.fyi, a website that helps users compare compensation figures and that helped collect data for the working paper on compensation.
“Essentially employees have always voted with their feet opting for the perks they prefer. For example, as this study shows, significant amounts of talent who prefer remote work will join remote-friendly firms, so other companies will be forced to adapt to compete for that talent,” he added. “In some ways, it is simply supply and demand.”
Indeed, if nothing else, basic economic theory should resonate with the old guard of corporate management. Sure, it’s all about trust and autonomy and feeling empowered and doing meaningful work. But as ever with capitalism, it can also be boiled down to two simple things: dollars and cents. Depressing as it might sound, it may really be just as simple as that.
