March 29, 2013
March 29, 2013
National Chamber Foundation
It was the memo heard ‘round the world—or at least on the blogosphere. Marrissa Mayer’s Yahoo!, in a bid to reboot its bottom line, announced a ban on telecommuting. To be precise, an internal memo was leaked to an online news site. What was meant to be an internal directive quickly became a pundit rallying cry.
The memo kicked up a firestorm by directly targeting telecommuting, a practice that’s been embraced by tech apostles and social activists alike. But as Rebecca Greenfield at The Atlantic Wire said, “Chill out, Marissa Mayer’s work-at-home memo is not about you.” On one level, this decision was simply about Yahoo! and its future. On another level, it was a statement about productivity inside today’s companies. It’s on this last point where the real debate should be had.
Every company should be striving to better itself, and it’s the job of corporate leaders to figure out how to be as productive as possible. Michael Schrage pointed out in the Harvard Business Review that the memo “reflects a data-driven decision,” and I think he’s right. Marissa Mayer’s old employer, Google, generates 160% more revenue per worker than Yahoo! does. Some number crunching by Ben Waber at Quartz found that Mayer’s ban on telecommuting could generate around $150 million in more revenue every year. It may have seemed like a no-brainer then to insist on some big changes to work practices, especially considering that it’s not that unusual for Silicon Valley firms to insist on more in-office time. The point remains: Banning telecommuting was a decision by Yahoo! and for Yahoo! alone.
Let’s step back though and consider just how popular telecommuting has become. At least 10% of the U.S. workforce spends at least a day at home doing work, while 4.3% regularly work from home. Internationally, roughly 7% of those polled across 24 countries worked full-time at home. And the number of employers who allow telecommuting has doubled since 2005.
Technology seems to have changed the workplace permanently. A universe of electronic tools, from email to video conferencing, has allowed for communication to occur instantly from anywhere in the world. Seemingly everything you do while physically at work can be done just as well from home. For those used to the trappings of cubicles and long commutes, it’s an enticing thought.
Recent studies appear to confirm that telecommuting is not just interchangeable with the physical workplace, but better. By foregoing the cost of maintaining a physical workplace, Cisco found over $200 million in savings by allowing for telework. But it gets better, since workers seem happier and more productive when not required to work according to rigid times and places. A recent study by Nicholas Bloom and others of a large Chinese travel firm found that the employees who worked from home were up to 13% more productive and handled 4% more calls per minute, while also being more satisfied with their work and less likely to leave their job.
Case closed, right? Not so fast—the case for telework is not a simple one. Forty-three percent of respondents to a recent survey admitted to watching TV or movies while working from home; others confessed to doing chores or cooking dinner while “at work.” More worryingly, it appears that the telecommuters are subject to the old saying of “out of sight, out of mind” when it comes to promotions. The Chinese travel company cited earlier found a 50% drop-off in promotion rates relative to job performance for its at-home workers. The loss of influence is particular profound among high-tech companies. A lack of communication may compound this effect; according to Quartz, “remote programming groups were 8% less likely … to communicate about critical software dependencies.” These are particular troublesome findings for both long term workforce development and in-house knowledge sharing.
Let’s define our discussion then: We are talking about full-time telework in a high-tech company, Yahoo!. Occasionally working from home or, in the case of the prior study, manning a call center is not the situation we are discussing here. What truly should be discussed is how effective full-time telecommuting is for a company that thrives off of creativity and shared ideas. As Ed Glaeser recently said, “Humans can function perfectly well at home, but our greatest gift is the ability to borrow knowledge from the people around us.”
Our current debate about telecommuting misses the key point: Being in close proximity at work ultimately translates into greater productivity and innovation. Yahoo’s memo starts with this very premise, stating that “speed and quality are often sacrificed when we work from home.” Company workplaces, while often maligned, are meant to be engines of raw human talent. We are more productive as workers when we are concentrated together in pools of human capital, and even more so when that resource is deployed in knowledge-intensive work. On the flip side, working from home, even with all of the technological gadgetry available to us today, still means a degree of isolation. And as Glaeser goes on to point out, “Spatial isolation means intellectual isolation from the experiences and ideas that circulate in office buildings and flow in client meetings.”
The connection between proximity and productivity has been well-established at the city level, where a doubling of density has been found to boost productivity by anywhere from 2% to 28%. The effect is particularly profound in areas with lots of smart people; the rapid sharing of knowledge and ideas in turn doubles the growth in productivity, according to a study by the New York Fed.
Proximity offers the same benefits at the company level. Putting knowledge workers together reduces the barriers to communication (which are especially large for more complex work) and allows for greater knowledge spillover. There are ideas in the air that can only be grasped by those close enough to touch. Knowledge upon knowledge, compounded by interaction and exchange, becomes the fuel for innovation and growth.
In rejecting telecommuting at Yahoo!, Marissa Mayer consciously chose the productivity that proximity brings. Working from home can and should remain a supremely viable option for companies and workers across the country. But telecommuting is just that: An option, not a solution.
It’s time to get to work.
Stay up to date with the latest political news and commentary from Oregon Business Report through daily email updates:
Prefer another subscription option? Subscribe to our RSS Feed, become a fan on Facebook, or follow us on Twitter.