Is the office era over? The surprising truth about working from home

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James Liang pulled a ping-pong ball from a red box and saw that it was marked in Chinese with the word “EVEN.” He looked at the plastic sphere in his palm and smiled. In a way, the future was written on it.

It was 2010, and Mr. Liang, an unimposing man in a black zip-up sweater, was standing in a standard-issue conference room with grey lighting. He was the founding chief executive of Ctrip, China’s largest travel agency, a $5-billion company with 16,000 employees and a Nasdaq listing.

Now, with the help of that ping-pong ball, Mr. Liang was taking a gamble. The word “even” on the ball represented a group of about 125 call-centre employees with even-numbered birthdays, who had agreed to take part in an experiment. The evens would work from home, four days a week, for nine months; the odds would remain in the office. Their bosses would see who was more productive.

This was a surprisingly novel idea. Although working from home was increasingly common around the world, thanks to cheap laptops and more reliable broadband, there was no solid consensus about whether it, well, worked. The common fear was that people would “shirk from home” – lured by the triple sirens of bed, couch and fridge. But no one had properly tested it.

In stepped Mr. Liang. He was studying for a PhD in economics at Stanford and, along with professor Nicholas Bloom and a group of researchers, he discovered not one, but two surprising things.

The first was that, through nine months, the working-from-home group was much more productive than the office group – by 13 per cent. Workers were spending less time getting tea or going to the bathroom, and were able to process more calls in the quiet of their domestic setup.

But the study found something else unusual, though it wasn’t trumpeted at the time. Although the home workers were more productive, the group wasn’t content. At the end of the experiment, Ctrip asked whether the volunteers wanted to continue working from home or return to the sociability of the office. Half of them asked to return, despite having an average commute of 40 minutes each way through the bustle of Shanghai. “Loneliness was the single biggest factor,” Dr. Bloom says.

Managers had long assumed working from home was a concession that would placate employees at the expense of efficiency. Now, Ctrip was saying the opposite: It was great for productivity and lousy for morale.

Related: Developers vow to keep building skyscrapers, even as tech firms ditch their offices

Today, millions of office workers around the world have been thrust into a bigger, hairier version of the Ctrip experiment, as the COVID-19 pandemic has brought the work-from-home revolution to maturity almost overnight. Again, those stuck at home report widespread feelings of stress and isolation. But as productivity holds steady and real estate savings beckon, many executives say this revolution will be permanent – that the hegemony of the office is over. A growing list of companies, including Twitter and Facebook, have seen what Ctrip saw and announced that a far bigger share of their employees will stay out of the office even after the public health crisis has passed. Banks such as Barclays and BMO have predicted similar shifts to remote working. So has Shopify, which in early May briefly became Canada’s most valuable company and recently declared itself “digital by default.”

The decline of the office will have a dizzying array of consequences, from the design of cities to the way we parcel out our days. But perhaps the most significant implication has already been suggested by what you might call the Ctrip Paradox. In a reversal of everything we thought we knew about working from home, bosses like the arrangement more than their employees. How they navigate this divide – and whether they can find common ground – will have a huge impact both on the corporate bottom line and on middle-class well-being in the postpandemic era.

It feels, Prof. Bloom says, like “trying to study the history of the Earth before and after a huge meteor strike.” Put another way: He now has a much bigger test group on his hands.

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Bosses have learned three things about remote work during the pandemic, and they like each one more than the last.

The first revelation is simply that, logistically, it works. One fear about shifting to a work-from-home culture is that it would lead to operational chaos: missed meetings, spotty WiFi, games of broken telephone (both figurative and literal).

Instead, even companies with tens of thousands of employees are finding that the IT infrastructure is holding up and so are lines of authority. Workers are responding to their e-mails and joining Zoom calls at approximately the right time. Everyone is always reachable.

Consider what Stephen Schwarzman, CEO of investment giant Blackstone, told an earnings call in April. Stay-at-home measures have revealed, he said, that physical proximity doesn’t matter very much anymore. One of his funds had a big due-diligence meeting on Zoom with something like 150 attendees, and “everybody was pretty adjusted and cool about that,” he said. “I’d like to suggest that something quite interesting is going on.”

What struck Mr. Schwarzman as a revelation in April is now widely and matter-of-factly accepted as the new normal. It’s an incredible reversal, since as recently as February, the idea that you could function day-to-day without an office was considered laughable, especially for large, knowledge-driven organizations such as banks.

“This crisis has been quite amazing in accelerating the change in how we work,” says Helena Gottschling, chief human resources officer for Royal Bank of Canada. “If you asked me six months ago if we could have moved 70,000 of our employees in a matter of weeks, I would have looked at you, like, ‘Uh … no.’ But we have.”

Inevitably, this discovery has changed the way corporate boards think about office space – as in, even after the health crisis is over, they won’t need as much of it as they once did, because employees won’t need to come in to the office as often as they did before. And it’s not just in Silicon Valley, which invented the technology that makes all this possible. Physical distancing aside, an ease with working from home is now the default position for a big slice of corporate North America.

Ms. Gottschling believes a “very large percentage” of RBC employees would continue working remotely postpandemic, though she was wary of handing out a specific number. That’s no doubt in part because of the unwelcome attention directed at Bank of Montreal after its head of HR, Mona Malone, told Bloomberg it expects anywhere from 30 to 80 per cent of its employees to continue working from home at least part-time once the outbreak subsides. “We thought it was critical that we were in the office to make something happen,” Ms. Malone said, “and what we’ve proven through this is that’s not actually the case.”

Éric Bédard, managing partner for the Quebec operation of the global business-law firm Fasken, says he’s been “amazed” by how well his team has fared without a physical workspace, despite the copious paperwork and regular face-to-face conversations usually required at a law firm. He now believes working from home will play a bigger role at Fasken. “It’s going to be a mix,” Mr. Bédard says. “But the mix will be different, and it will be different permanently.”

The logistical success of this experiment has unlocked the second delightful business surprise of quarantine: real estate savings. If you can run a tight ship without all the fuss and expense of a ship, why not sell the ship (or at least a couple decks)?

No one is more eager to downsize than those coxswains of the bottom line, chief financial officers. A PwC survey in early May – just two months into the lockdown – found a quarter of CFOs were already planning to reduce their firms’ physical footprint. A similar survey by consulting firm Gartner in April found that 75 per cent of CFOs planned to move more employees to remote work permanently.

Initially, at least, the math looks unforgiving for defenders of the office, says Brian Kropp, chief of research in the Gartner HR practice. “As a rule of thumb, to have an employee come into the office, it costs about 20 per cent of their salary,” he says. “Even if employees are 5-per-cent less effective, that’s still a better return on investment.”

The third lockdown bonus for executives is that, rather than being slightly less effective, many of their employees actually seem to operating at a higher level. In other words, individual productivity hasn’t slowed down the way many expected – and, in some cases, it has increased. This was almost unimaginable before the pandemic (unless you happened to read the Ctrip study).

Jimmy Etheredge, North American CEO for the massive professional services company Accenture, says productivity at the firm was actually up in March and April, compared with January and February. Many of his clients are having similar a-ha moments. “When I talk to them," he says, “there’s no question this is going to change forever where they need to be investing in real estate, where office space is needed, and how they’re going to enable people to work from home effectively.”

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If the boardroom is suddenly all-in on remote work, what about the other side of the equation: workers themselves?

There were plenty of reasons to think they’d love it. The ability to work from home, at least for a day or two each week, has typically been offered as a perk – a way to avoid a wretched commute through rush-hour traffic, which, not surprisingly, was found in a 2019 research overview to put people in a crummy mood. It’s expensive, too: Transportation to and from work costs an annual average of nearly $10,000 in some Toronto suburbs, according to the Canada Mortgage and Housing Corp.

The office itself, meanwhile, has rarely been seen by workers as a garden of delight, whether it’s the dreary, soul-crushing cubicle-farm version or the modern open-plan variety, with its constant barrage of distractions that make it almost impossible to work for more than 15 minutes at a stretch.

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But now that we’ve been ejected from our desks, there’s evidence we’re getting nostalgic for them. The newly minted German website IMissTheOffice.eu – which simulates familiar workplace sounds such as the water cooler, the printer and that colleague who insists on humming, but can’t carry a tune – isn’t the only evidence of this. Surveys point to a growing disenchantment with working from home. Global architecture and design firm Gensler recently asked about 2,300 workers in a range of industries about their experiences of remote work during the pandemic. Just 12 per cent of them wanted to continue with it full-time, while 44 per cent wanted to get back to the office or were undecided. The rest preferred the idea of working from home on a part-time basis.

Gensler, which designs office buildings, might be expected to arch a skeptical eyebrow at the durability of remote work. But there are other signs that workers are keen to get back to the office. Even as Facebook CEO Mark Zuckerberg told the Wall Street Journal that up to half of his employees are expected to work from home by 2030, he admitted that just 20 per cent of them are enthusiastic about doing so long-term. By contrast, more than 50 per cent of Facebook employees “really want to get back to the office as soon as possible,” Mr. Zuckerberg said.

So what is it that people miss about the 9-to-5 office grind? Again, there have been three major revelations about the value of office life.

The first is around the social aspect of work. Simply put, many of us miss our colleagues, both personally and professionally. “Socializing and company culture is struggling,” says Annie Bergeron, a principal at Gensler. “People miss in-person collaboration. On-the-job learning that you get casually from peers isn’t there.”

The mental toll of isolation is also adding up. Young workers, in particular, often build their social lives around work, especially those who’ve moved to a new city, Gartner’s Brian Kropp notes. The happy-hour culture that sustained many of them is now dead, leaving a contingent of single millennials wallowing alone in their apartments.

The unions that represent white-collar workers can be counted on to rage against the second discovery labour has made during quarantine: Offices were designed for work and homes mostly weren’t. At the office, air conditioning was copious and free. The chairs were ergonomic, and the computer monitors were big and easy on the eyes. Jerry Dias, national president of Unifor, which represents thousands of workers in the communications and service sectors (including journalists at The Globe and Mail), says he’s increasingly concerned about employers passing on the costs of these features to workers.

The new work-from-home reality raises all sorts of questions, Mr. Dias says: Who pays for the computer, the high-speed Wifi and the ergonomic chair? Who sets work hours? Do employees get breaks? What happens if a person working from home falls – will they still collect worker’s compensation? He’s worried the answer to most of these questions will either be “no” or “the worker.”

Discovery No. 3 also riles Mr. Dias, who freely admits he’s “losing it” without meetings and business travel. That sense of the home as a place of calm and relaxation – a sanctuary from the demands of work – is now in jeopardy. And with it, so is the average worker’s tolerance for remote work. “This home is no longer my comfort zone. It’s not the happy place you come back to anymore,” Mr. Dias says. “In the beginning, people were saying, ‘Hey, I could get used to this – I don’t have to battle traffic.’ But if you talk to those same people today, they say, ‘Get me the hell out of here.’”

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In the past 10 weeks, the Ctrip paradox has drawn two diverging trend lines in how employers and workers feel about toiling at home. To a greater extent than anyone imagined, bosses are warming to it, while employees sour on it.

That could result in a few possible scenarios for the future of work, some sunnier than others. The worst-case scenario: companies lock workers out, selling office space to save money and making remote work a permanent policy.

In this reality, any remaining office space would no longer be a place for clock-punching, but more like a centre for occasional team-building exercises. And that could mean lower-status, back-office workers find themselves squeezed out. Accenture’s Mr. Etheredge says the corporate clients he works with are increasingly asking which employees are worth the “precious investment in corporate real estate.”

Other business leaders and analysts believe something like a win-win could emerge from this massive real-life experiment. That’s because they’ve learned something about the pitfalls of work-from-home policies enacted in the early 2000s, when tech companies in particular allowed their employees to stop making their way into the office each day. It wasn’t long, however, before employers such as IBM and Yahoo began yanking their workers back to the office, concerned by a stark drop in innovation and social cohesion.

Even the most diligent watchers of the bottom line have come to realize that, for most companies, face-to-face interaction matters. For reasons that aren’t well understood, but seem connected to the social nature of our species, innovation is driven by in-person collaboration. It has many names: Mr. Bédard of Fasken calls it “walking the corridor.” Ali Rayl, vice-president of customer experience at Slack, calls it “vibing a room,” and Mr. Etheredge calls it “creative collisions.” No matter what name you give it, it amounts to a kind of consensus among business leaders that offices still have value because of the new ideas that flow from spontaneous conversations.

In the end, the most likely scenario is that employees will go into much smaller offices part-time, allowing for face-to-face brainstorming sessions and giving them what RBC’s Helena Gottschling calls “their people fix.” That gels with what Gartner’s Mr. Kropp has found: If it was optional and part-time, a large segment of white-collar workers say they’d enjoy working from home.

Back at Stanford, Prof. Nicholas Bloom – who helped create the Ctrip study – believes he’s found the ideal recipe: working in the office Mondays, Wednesdays and Fridays (to create a buffer with the weekend), and spending Tuesdays and Thursdays at home. Cycling through A and B teams could feed innovation, give workers a respite from the office slog and reduce the need for real estate by half.

As for Ctrip, Prof. Bloom recently caught up with James Liang (now the company’s chair). COVID-19, he said, has been a blow for the company: Not only is travel way down, but close to 100 per cent of its employees are now working from home. But Mr. Liang said the company’s nine-month experiment with remote work has given it a competitive advantage, since managers had so much experience with home-bound employees.

But the aftermath of Ctrip’s grand experiment in 2010 is telling. Excited by the 13-per-cent spike in productivity, Ctrip rolled out a proper work-from-home option at its Shanghai office. About half of those who participated in the original study had volunteered to leave the office. Now, with nine months of experience under their belts, and the taste of loneliness still in their mouths, four out of five workers took a pass.

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