Jordan: This week, The Big Story will mark three straight months of producing the show from our basements and our home offices and kitchen tables and closets. So, I mean, hooray for us. That is a full quarter of a full year. And if I had to guess, I’d bet that it’s at least that long again before we’re really back making the show in our comfy little studios in downtown Toronto.
But whether it’s this fall or not until 2021, whenever we get a vaccine or whenever the province that we live in figures out how to get the COVID-19 numbers down and keep them down, going back to the office will eventually be an option for us and just about everybody else lucky enough to have a steady office job.
However, if you ask the experts, there is no way that the office will mean what it once did. There’s no way all of us will return to the office five days a week, nine to five every day. First of all right now, and for the immediate future, that’s just unsafe and unnecessary, but also we’re learning a lot during this time.
We’re learning who really needs the office and who doesn’t. Who is more productive from home and who can’t be, who works best at what time of day and on which days of the week. And as we all try to figure out who goes back when, or if in some cases, if anyone goes back, ever, each company will have a choice to make, a few of them have already made it.
The knowledge that they’ve gathered over the past few months might inform some of it. But these months have hardly been under normal conditions. So what do we know about remote work and productivity when there isn’t a pandemic? Has anyone studied this, and how do they measure productivity outside of the workplace?
What does the ideal makeup of a workweek look like if you remove the office as a fulltime must, for everyone?
Well, I am glad you asked.
I’m Jordan Heath-Rawlings and this is The Big Story. Nicholas Bloom is a professor of economics at Stanford university. He’s also the co-director of the productivity, innovation and entrepreneurship program at the National Bureau of Economic Research in the United States. Hi Nick.
Nick: Hi, good morning.
Jordan: My first question for you is tell me what we know about productivity and working from home in normal times. Cause you’ve done studies on this.
Nick: Yes. So I looked at working from home before COVID and youre right to ask about normal times. Cause during COVID working from home is actually pretty horrible. But before COVID I actually ran what’s called a randomized control trial. So we persuaded a large Chinese firm called Ctrip, which is like a travel agency. It’s like their version of Expedia. In fact, it’s quoted on NASDAQ, it’s worth $15 billion. So it’s a really huge company, and they wanted to rollout working from home in their Shanghai headquarters to save an office space. And we worked with them to persuade them to set it up as a proper experiment.
They took a thousand people that have volunteered and they randomized them on even and odd birthday. So they just drew a ping pong ball from an urn and it said even, so everyone that was even got to work from home for the next nine months and the odd were the control and they stayed in the office.
So we wanted to investigate it very much in the same way that the FDA would analyze or investigate new drugs.
Jordan: And what did you end up finding?
Nick: Well, there were three key findings. The first was kind of amazing actually, the firms view was, look, you send people to work from home, they’ll save a bunch of office space, but they’re just going to goof off. So the fear was they’d watch the Chinese version of Oprah Winfrey or play computer games or start their own business or something like that. But in fact, they found that productivity increased by 13%, which is enormous.
So these people were making telephone calls, taking bookings. So you could measure that productivity really well. And a 13% increase that’s like a whole extra day a week. I mean, that was huge and astounding to the whole team involved in this. And in fact, even more impressive is at the end of the nine month experiment, we allowed people to choose whether they stayed at home or came back into the office.
And what you found that is, there are a bunch of people that basically didn’t like working from home. They said they were lonely. Yeah, it’s very depressing. Or they fell victim to one of the three great enemies of working from home, the bed, the fridge or the television. And so they said, look, it just doesn’t work for me.
And they wanted to come back into the office. So if you looked at those who remained, their productivity, those that liked working home increased by over 20%. So before COVID with good conditions, so no kids, proper working internet, your own room, working from home, can generate an enormous productivity increase.
So that was the first key finding. The second was, the workers actually really loved work working from home. So quit rates halved. So CTrip was seeing turnover of about 50% a year, which is very standard for the U S for Canada, for UK, Australia, et cetera. But the working from home employees, their quit rates dropped to 25%, which for the firm was an enormous upside, cause they didn’t have to go through all the painful training and retention. And then the final finding was promotion rates unfortunately dropped for the working from home employee. So controlling for performance, they dropped by about a half. So rather than getting promoted every five years on average, they were getting promoted roughly every 10 years on average.
Jordan: So if that’s what happens when you run just a random experiment during normal times, what would the pandemic change about those results or change about the process even?
Nick: The Covid pandemic is horrible for working at home. I’m sure your listeners are aware of this, but there’s like four big problems with it.
So one is kids. I have four kids, uh, and you know, I hope not, but like any second, my four year old may like burst into the room. And so she repeatedly comes in. Her nickname for me is, doo-doo, so she’ll come in and say like, doo-doo it’s time to play, or I’m bored, or you know, let’s bounce around.
And she’s very cute so it’s hard to say no. But the number of people I’ve spoken to who have kids running around the place. Every firm I’ve spoken to before, I did lots of research over the years. No firm would allow you to work from home with kids. It is a total no-no.
Whereas now, I know in the U S that something like 60% of wages are earned in households with kids under the age of 18. So I’d say about half of us have kids at home.
Jordan: Listen, the reason we’re recording this right now is because it’s my daughter’s nap time. So I will be quiet.
Nick: Yeah. I don’t know if you heard it earlier, but my wife and my two daughters just came in through the front door.
So one is kids. The second is just facilities. I’ve been running surveys, but something like 40% of Americans are not able to have their own room to work in, and of them about a half of them are in their bedroom which really isn’t great.
I mean, for anyone that’s working in their bedroom, it’s a pretty depressing existence, and the other half are in like shared rooms and living rooms. So that’s another big issue. Computer equipment, in fact, I’m working on my backup laptop, cause my main laptop I dropped coming in from the garden and it smashed. So the second is facilities.
The third is choice. So I mentioned in cTrip, and in fact from Gartners from current Americans and Canadians, that roughly only 50% of people actually want to work from home. And a large reason is only about half of us can work from home. So if we look across the job spectrum, office jobs for folks like us, like researchers or journalists, et cetera, it’s fine.
But for a lot of jobs in retail, factories, dentists. Various people that can’t. So that’s a problem. And then the final issue is on full time. So before COVID, working for full time is extremely rare. So if you look in the US it was only 2% of people did that. And having spoken to a lot of them, it was like weird things.
So they’d say, you know, my wife she got a job in Cleveland, I wanted to stay with my current employer. So we moved, but I decided to move working from home. It was basically total outliers. Whereas now we’re all cooped up at home for five days a week. So as a result, working from home under COVID is not great.
I don’t want anyone to take the inference that this isn’t great and don’t do it cause post-COVID that I think it could be fantastic. It’s just right now is pretty unpleasant.
Jordan: So well, that’s kind of why we wanted to talk to you because right now, you know, it’s been two months approaching three. And we’re nowhere near post COVID, but kind of settling into the new normal that everyone talks about. And it looks like a lot of people will be doing this if not for many more months, then for even longer than that. And if somebody is looking at that situation and let’s say they do have those four challenges that you mentioned. How do they wrap their heads around making that transition? Do we know anything about what would make it easier for them?
Nick: Yeah, so a few things. One is we’re gonna see a huge long run increase in working from home. So just to give you some numbers, before COVID about 5% of working days were spent at home. During COVID it’s now about 40%, and post COVID, having surveyed thousands of firms, they’re looking at something like an average 20%. So working from home, it’s going to go up about four fold. Post COVID I think it’s not going to look anything like it is now because one, there won’t be kids around. Well, the kids will go back to school.
Two: we’re going to be able to schedule and organize ourselves a bit better to have our own rooms, get proper equipment. And third, I think the key thing is it’s going to be part time. So the tips and advice from talking to lots of HR managers and firms is you want to look at something like Monday, Wednesday, Friday, I’m in the office.
I’m there every week, the same day. So as my team, so that we know we’re together, we can have lunches and meetings and breakout rooms and coffees, et cetera. And then Tuesdays, Thursdays, I work from home. You know, it’s my quiet time. Typically none of the quant report writing or analysis or emails is so urgent. It can’t wait a day. And that seems to work really well. You get to see your colleagues and hang out, but you get to roughly half the number of times you commute each week and you get some peace and quiet. So that’s how I see things heading. Between now and then, as you mentioned, there’s lots of news coverage of Twitter, Facebook, Google, Microsoft, all kinds of companies are gonna roll out, working from home.
And I see that we’ll slowly reenter the workforce. Just for example, Stanford has said in a month or two, they’re gonna allow people to go back into the office, but you have to wear masks and have testing and contacting and daily temperature checks. And so I guess a lot of people won’t want to go back under those circumstances, but slowly we’ll filter back in.
Jordan: Well, when you talk about the office being a part time place, I can see the benefit in that to the workers for sure. I mean, that’s one thing that even our team who were all working from home right now have talked about. But what about the companies that see this as an opportunity, like the one that you ran your study for? To eliminate some of that expensive downtown office space and get their employees working from home. If it’s going to become permanent, what do they need to be doing?
What responsibility do those employers have to the employees that they’re now going to tell not to come back to the office?
Nick: There’s two doors. One is, I don’t think the total amount of office space is actually going to change that much. So coming back to my figures, let’s just go through the numbers. So before COVID we had 5% of days working from home. So 95% are out of home, about half of that’s in the office, half is in other things like shops and factories, et cetera. Post COVID we’re down to 80%. So then you think, so we’ve gone from 95 to 80% of days and it’s of course going to be a drop in the demand for office space, et cetera.
But the other thing to bear in mind is we’re going to have a lot more social distancing and the figures I’ve seen kicking around is something like halving the density in typical offices and that’s going to be a long run thing. And so if you add that halving the density thing, Oh, wait a minute, maybe we’re actually going to need more office space because you know, much, if you think of Toronto and New York and San Francisco, a lot of the downtown is these very tall, dense skyscrapers. And we can’t go back to anywhere near the density we put in because of issues around elevators and mass transit and just toilets and entrance ways.
So I don’t think actually the total amount of office space is going to be changed that much. Cause if we’re going to be coming into work two, three days a week, we need an office and it really doesn’t seem to work, people working from home full time for extended periods. What I think you will see is a move away from city centers to more suburbs.
So kind of a reverse of the focus on skyscrapers and downtowns and back to industrial parks. And if you’ve seen the TV show the office, it looks more like that. And some people like it, some loathe it. But I think it’ll be back to the 1980’s, it’s like back to the eighties and nineties, the rise of the office park and away from a shiny glass towers in the centre of downtown cities that are going to have to really empty out.
Jordan: That’s really fascinating. And I’ll kind of ask you the same question in a bit of a different way then. Cause I’m really interested in the economics behind this. If you’re going to either keep the same office space or move or whatever, but your employees are going to be coming into the office in shifts so that they can be more distant from each other, et cetera, et cetera. And working two or three days from home and two or three days in the office. What do you have to give those employees to keep their productivity high enough for that to be a good investment for you? Do we need to buy them chairs? Computers? Invest a little bit in their rent? Like how does that work?
Nick: You know, again, sure, right now you want to make sure that everyone has laptops and broadbands, and from talking to a bunch of companies, there are schemes. Interesting enough, less in Canada, in the U S and more actually when I’ve talked to firms with employees in developing countries, where they bought them broadband connectivity, and laptops.
I actually talked to a company that had a lot of employees out in the Philippines and Indonesia. And said like, virtually no one has a home computer or broadband, it was expensive to equip them. But by now almost all of us have a computer at home or if not, the firm can get it, it’s not that much money.
So I think getting us set up and working at home is actually reasonably straightforward. And so it’s kind of happening by default and we tend to be more productive. So I don’t think there’s anything the firm needs to, in a sense, compensate employees. Generally, most people really want to work from home part time.
They want a bit more peace and quiet, but they quite like seeing their colleagues. So that I see as kind of the promised land of post COVID, something we’ve long wanted to do, but there’s been other stigma. So before COVID, it’s like, ‘sure working from home or working remotely, remotely working’, that stigma has just evaporated.
I mean, it has disappeared completely. And so post COVID one of the few silver linings out of this is going to be a transformation in a much pleasant and productive way to work, where we’re part in the office and part at home. But as I said, I don’t think that’s going to save a lot of office space, certainly not in office parks, et cetera.
Jordan: I want to go back to your study and your work from the beginning, and you kind of touched on promotion rate. What do we know about what working from home does in the big picture, in terms of who gets ahead, who falls behind, who does get those promotions? Who adapts well and who doesn’t?
Nick: Yeah, I think full time working from home comes at a cost in promotion. So, in Ctrip, we saw promotion rates roughly halved. So they were working from home four out of five days a week. And so the final day they’d all come in at the same time. So that was like the team day when all the meetings would happen.
Even so, their promotion rates halved. But I should say, it’s not obvious why it halved. So we came across three reasons. One is people claim working from home, they’re forgotten about kind of discriminated against, out of sight, out of mind. A second reason is, we heard a bit from the firm. They said, well, look, if you’re working, if you’re working from home, you’re not really around in the office enough to know what’s going on to know about your colleagues, to know they have any issues to properly manage them.
And so actually it’s harder to promote you because you just don’t have the experience. And then the final story we heard, and I visited jet blue, the airline that does a big working from home program in salt Lake city. And I visited several people there working from home, and they said, and they were typically, I should say, a very educated women with young kids. They said, look, I don’t want to be promoted because if I’m promoted, I have to come into the office. So it is true that working from home seems to be associated with low promotion rates, if it’s full time. Again, coming back to this post COVID promised land. I don’t think if you’re in the office three days a week, you’re basically forgotten about.
Particularly if the structure is, most of your team is in on those three days. Cause all of the common events and meetings are going to happen then. On the other two days, you’re around, it’s just the kind of quant days for the group whereby people do their report. So I think part time is fine, but four or five days a week, if you do it and everyone else is in the office, I think that is a problem for promotion.
Jordan: What are we learning right now while we are in this situation about working from home in general or, or what we’re going to take into the future? Like this must be a kind of unprecedented experiment for people who study what you do.
Nick: Yes. I’ve been running incredible numbers of surveys. I’m spending much of my day discussing with people about working from home, looking from data. I guess a couple of big learnings. One is the incredible speed with which everyone has shifted to working from home. And it worked. We went from 5% to 40% in the space of what, three weeks? And I would say it was far from perfect, but most people are able to roughly function working from home.
The second factor is how much people seem to like it. So it’s just looking at surveys right now. We just finished one that closed yesterday of two and a half thousand Americans. And there’s overwhelming enthusiasm to continue working from home. In fact what’s interesting is, I gave you those numbers that currently 40% of days of working from home.
Post COVID, firms are predicting 20%. If you look at what employees are wanting, they’re asking for about 35%. So a lot of employees are wanting to work from home than currently are, but they want to do it part time. So it seems like the vast majority of people their Nirvana is something like two, three days a week in the office, two, three days a week at home. So those two factors, that we can do it so effectively, and that so many people like it, would not have been obvious. Was definitely not the data before COVID, because working from home before COVID is actually pretty rare.
Jordan: What do we know and what are we finding out about the impact of working from home on people’s mental health? And is there any way, if there are negative effects, to mitigate that?
Nick: Yes. I already saw this in Ctrip when you spoke to people that worked from home for four out of five days a week.
And remember they’re in the office for one day a week, and they were going out on the evenings and weekends that they liked. They reported huge levels of loneliness. And those are the people that want to come back in the office. Let’s say some people, older people, the married with kids, we’re very happy with it.
If you looked at younger people that were single without kids, they felt very oppressed and lonely being at home. Right now of course, the situation is far worse, cause we’re five days a week without any let out on the evenings and weekends. So early on it was pretty clear, there’s likely to be a tsunami of mental health issues.
And in fact, I was on a panel discussion yesterday with David Katz who’s a professor, a medical doctor in Yale, and was talking about anecdotal evidence that’s coming out already for tick-ups in suicide rates and other mental health issues like abuse, child abuse, domestic abuse.
So, yes, I think that is a big issue. Again, I think it’s why I’m against full time working from home. Cause people get very cooped up and it has all kinds of horrible impacts on both the mental and physical health. So as soon as we can, it would be great to get back to at least part time being in the office.
Jordan: Do you have any recommendations for what people who are experiencing that kind of loneliness and need for connection can do, cause obviously the situation’s probably not changing in the near term. Is there anything about the process of working from home that you can change to help yourself?
Nick: Yes, there’s there’s two or three things you can do that certainly help. So one of them is for a start, trying to convert anything that’s previously a telephone call to a video call. And turning the video on and turning the mute on. But I mean, Zoom, whatever, Google hangout, whatever you use, they don’t work that well in big meetings.
So there’s 20 of you, I wouldn’t say it’s very sociable, but for two or three people, they can actually be pretty good. And they’re not the same as meeting in person, but certainly if you got the video and the sound on, it feels there’s some kind of connectivity. That’s one thing to do. The second is for example, I do that with my research group, zoom is very transactional, try and deliberately set aside a certain amount of time each meeting just to have social discussion. So my research group meets every Friday for an hour, and we used to have a presentation for an hour, but of course people would arrive a bit early and walk out late in that chat.
So now we explicitly start the presentation 15 minutes late, and the first 15 minutes we just go around, each person gives sometimes one sentence, sometimes several sentences about how they’re doing. We’re learning a lot about people’s gardening, their cooking. Somebody is really into puzzles, someone else is telling us about Lego, my weird personal things. I’ve been getting into juggling soccer ball and my daughter’s very into soccer. And in fact, one of my grad students said he just managed to get 500 juggles. That’s great! You know, I’ve been working on it too, but that kind of reconnects.
And then finally, I’ve heard from several managers, they actually try and set out time each day to connect in person with their employees. So I’ve actually again, been doing that with my students, whereby I have a rotor that every other week I spend 20 minutes talking to them individually. And the first part of that again is social stuff, non work stuff, checking their okay.
Even, you know, have you had a haircut? Some of some of this stuff, it seems a bit ridiculous, but I think we have to deliberately force it. Things that will naturally happen in the office. Like you’d notice somebody who has their head in their hands at their desk, or seem really down. Unless you set aside a bit of time on Zoom deliberately to discuss with them, that doesn’t happen.
So we just have to be deliberate about reaching out.
Jordan: Well, Nick, thank you so much for this advice. And I really hope that we get to this Nirvana that you’ve told us exists at the end of this.
Nick: Yes. I mean, it’s the thing that’s holding us all together. I mean, I feel really lonely. You know, I’m married with kids. So I have my family here, but I honestly really miss my colleagues. I’d love to see them. I miss going out. There’s so many people I talk to remotely, I would love to be back at work two, three days a week. Two, three days a week. That’s like enough, you know, I’m happy spending a lot of my time at home, but it feels so cooped up.
But I think that’s where we’re going to head. I think one of the few benefits of the COVID pandemic is we’re just going to have a much better work/life structure once this is over. Which I guess is late 2021 or 2022 onwards.
Jordan: Well, it’s good to have light at the end of the tunnel, so thanks again.
Nick: Thanks Jordan.
Jordan: Nicholas Bloom, a professor of economics at Stanford University. That was The Big Story. If you want more big stories, they are in the same place they always are, on our website thebigstorypodcast.ca. And we are in the same place we always are, I don’t just mean at home, I mean on Twitter @thebigstoryfpn.
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Thanks for listening. I’m Jordan Heath-Rawlings. We’ll talk tomorrow.
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