Coffee induced enlightenment: Notes on the impact of remote work in your company

A few weeks ago I was invited to try a cup of perfectly brewed French Pressed Costa Rican coffee, smuggled from a small award winning farm in the town of Naranjo whose product is not available for sale to the general public even in its own country (reserved for export and wholesale only). My host was an old colleague from my days as a broker in the financial services industry, who prides himself in being the ultimate connoisseur of the finest best-kept secrets money can buy… And he sure knows how to get them.

He’s now a very successful Senior VP at a prestigious and well-known investment banking firm, mid forties and extremely proud of having just reached his tenth anniversary with the company. Hours on the job have been long and harsh (you can tell by his prematurely old face), barely leaving room for family and leisure, but his future in the company is rock solid, he’s well en route to becoming Managing Director in the next couple of years and the money just couldn’t be better. He’s a powerful and influential man that can treat himself to all kinds of eccentric toys and devilishly little pleasures. He’s a guy that gets what he wants.

But this time around he was telling me all about his frustration and impotency with one situation that is surprisingly escaping his grasp. The top performing associate in his team, a woman in her late twenties and a complete rising star that has been with the firm for only two years and is already being considered for a promotion to VP sometime in the next twelve months, just recently handled her resignation to her immediate supervisor.

Not wanting to loose this incredible talent the company had invest so much on and convinced that she was leaving because one of their competitors had beat them to that VP promotion and a well deserved salary increase, he called her to his office ready to make an offer she couldn’t refuse: a 10% raise effective immediately, double bonus at the end of the year and the commitment that she would be promoted to VP within the next six to nine months, which of course will come with a substantially larger paycheck. And in case she played hardball, he was ready to throw in a very nice company car as an extra benefit.

After patiently listening to him regurgitate the obligatory lecture that came with the offer regarding the huge mistake she was making with this decision, she went on to express her most sincere gratitude adding how humbled and flattered such an offer had make her feel, but still decided to decline because her motivation actually had nothing to do with money… She was leaving because of her daily commute to work; she just couldn’t handle it anymore. She explained that commuting time had been taking a toll on her physically and mentally and she had come to the conclusion that the quality of her work was starting to suffer due to her lack of energy and diminished motivation, so the best thing for both her and the company was to part ways.

She admitted that when the job was offered to her she was quite aware that traffic was gonna be a challenge considering the bank’s office building was in the middle of the city’s downtown area, but figured that moving to an apartment only 12 miles away from work would do the trick. Amazingly enough, though, that 24 miles round trip turned out to be a whooping 60 minutes commute each way every day. Not a surprising result considering that according to Waze’s Driver Satisfaction Index 2016, which analyzes driving experience in 38 countries through a single numeric score that goes from 10 (satisfying) to 1 (miserable), our home country Costa Rica received a score of only 3.95 (the worst score on the list went to El Salvador with 2.85 and the best one to the Netherlands with 7.54… The United States received a score of 7.22 making it the 3rd best country on the list).

Can you believe this kid?”, he said to me, “Who throws away a promising career out the window just like that because of commuting? We all have to deal with that every day! It’s normal! What kind of attitude is that?

Well my friend, first of all I’ll tell you what you’ve got here: you’ve got yourself a millennial!”, I replied, “And luckily for ya, it looks like she’s thinking about how the deterioration of her work/life balance is actually screwing any kind of value she can ever hope to add to your team… Which is probably the most honest and valuable attitude you can get considering you’re obviously clueless about how this is jeopardizing the sustainability of your mid/long term productivity goals”

“And second… Man, two hours a day commuting is just BRUTAL whether you are a millennial or a founding member of the Rolling Stones!… That’s more than an entire additional working day per week, 65 days in a year, 33 months in the next ten years… Heck that’s more than what your employee is ever gonna get for vacation time!”.
San José, Costa Rica — Rush hour (expect to spend an average of 5 minutes per mile commuting to work)

I continued to make the case that the millennial generation’s priorities and work ethics, whether we agree with them or not, are just quite different to our own generation’s and the sooner he understands how the better, because by 2020 millennials will form 50% of the global workforce so his talent pool is going to shrink dramatically if his company can’t learn to attract and retain them… It became obvious real fast that this isn’t a dilemma they’re gonna be able to solve by simply throwing money at it.

After some debate and retrospection on the worthiness of our own personal sacrifices as professionals in the corporate world (which I left behind 7 years ago to pursue a career in the much more flexible startup landscape), he conceded that a long commute can indeed become a desperate spirit-crushing martyrdom and he could see why millennials might want to avoid that like the plague. But added with frustration that he might then be condemned to having a staff of old-timers only, as solving traffic congestion or changing a city’s collapsed transportation infrastructure is something he can’t offer his employees (such heroic antics are better left to the likes of Elon Musk). So I figured it was time for me to pay him back for that delicious coffee and give him the million dollar advice that just might help him solve his millennial-talent retention dilemmas: “Did you ever consider allowing her work remotely?

Well, it turned out she had actually propose that herself a few months before to her immediate boss and the answer had been a rotund no. My colleague explained that allowing her to work remotely was not an option because the firm had never done anything like that before, they had no controls or procedures in place to manage it, plus if they extended that benefit to one person they would have to offer it to every other employee that requests it and that was too big a risk, as they had no idea if working from home would actually affect productivity because of people not being on a distraction-free environment. But in the end it boiled down to this: “It’s just something that kind of goes against the proven best practices in our business”, he added, “I know the world is moving in that direction and we might sound a bit old-school for saying this but we don’t want to risk messing around with what works… If it ain’t broken, why fix it?

I argued that even though their system may not look broken right now it is most certainly at risk of loosing competitiveness real fast as millennials take over the workspace, but he did make a good point on regards to the necessity of having some hard data to prove productivity will not be affected and to measure all the additional benefits that could be obtained through a remote work program. Goods news is that’s an easy fix, as the company can achieve this by simply committing to a controlled pilot with a small group of employees, so that they can test assumptions first and then rollout the initiative to all other eligible positions.

There’s actually a very enlightening study from 2014 conducted by Stanford University where they did that precisely with a company called CTrip (China’s largest travel agency, 16.000 employees, NASDAQ-listed) that had very similar dilemmas to those of my colleague’s firm. For nine months they monitored productivity effects and financial impact of a work from home program for 249 randomly selected service sector workers. This scientific approach allowed them to measure the efficacy of the practice before deciding to roll it out to the rest of the company. So I proceeded to share some of the key findings with my friend to further motivate him on the validity of remote work as a solution for his talent retention challenges:

  • By making sure that both remote and office based workers had the exact same equipment, conditions and workflow levels for an unbiased comparison, they were able to determine that productivity increased by 13% during the study. This was a result of remote employees working longer shifts, taking fewer breaks and requesting fewer sick leaves.
  • After the pilot, they offered this possibility as a voluntary option to the rest of the employees. Those who weren’t initially selected for the test program could now decide to go remote if they wanted and those that actually preferred to work at the office could remain there. Productivity rose to 24.6% due to the effect of this voluntary choice.
  • Quality of the work was measured separately to determine whether the increased in quantitative productivity would have some sort of tradeoff effect. There was no difference in the quality of the work performed at home versus at the office.
  • The attrition rate (employees that quit in a year) was 50% for the group that continued to work at the office (which is a normal average for their industry), but for the remote workers that rate decreased to 25%.
  • Increased employee performance, office cost savings and reduced turnover, resulted in total savings equivalent to 42% of each employee’s annual salary.
  • Capital investment per employee based on training costs (equivalent to 6 weeks of employee time), IT equipment and office space allocation was reduced by 48%
  • Employees reported savings equivalent to 17% of their salaries by not having to commute. Also employee wellbeing levels (measured by level of positive/negative attitude and exhaustion at work) increased by 10% actually prior to the rollout (meaning people were motivated by the mere fact of just having the option there).

Rapidly applying these data to the actual financial fundamentals of his company gave my friend a more objective idea of the economics of implementing remote work and the shocking truth of the potential benefits his company may be letting get away by fighting against what is anyway an unstoppable market trend. No traditional way of doing business is worth defending when the tradeoff is simply being left behind in the race for the best talent and, as a result, for your company’s competitiveness.

My colleague brought up one last interesting observation from the Stanford study when we were reviewing its conclusions. Apparently most of the CTrip employees that decided to continue working from the office even after been offered the option of going remote, did so because they didn’t want to loose the value that working surrounded by other people actually brings to their lives.

For a moment there my friend thought he’d got me on that one but I actually had a pretty good solution for him: “Do you think this issue would be resolved if your employees could join and work alongside a group of 75 equally amazing professionals that, just like them, have been given the opportunity to go remote by their employers?… And what if I tell you that they’ll be doing so while travelling the world for a year?

Puzzled and somewhat excited about such a tease, he immediately asked: “What are you up to now, man?!”… So I poured myself another cup of his amazing coffee and said: “Let me tell you about this revolutionary new concept called Remote Year… It is going to change your life…”