As CEOs mandate office returns, mounting evidence suggests fewer upsides

Leadership

Need fresh ammo to persuade your boss they shouldn’t make office returns mandatory? Two new studies suggest remote work not only lures more diverse and experienced candidates willing to trade higher pay for flexibility—but that office mandates don’t appear to boost financial performance, hurting job satisfaction instead.
Commuters walk through the morning bright sunlight in Grand Central Terminal in New York City on March 11, 2019. (Photo by TIMOTHY A. CLARY/AFP via Getty Images) AFP VIA GETTY IMAGES

Those findings come from recent research by the University of Pennsylvania’s Wharton School, which found remote job postings drew significantly more women, underrepresented minorities and qualified applicants, as well as a separate study from the University of Pittsburgh that is getting widespread attention and found that office mandates from CEOs did not boost the financial performance of S&P 500 companies where they had been implemented.

After years of CEOs sharing their opinions about why they believe people should return to the office, more rigorous academic and economic research is surfacing about the actual effects of post-pandemic remote work on diversity, corporate performance, employee satisfaction and productivity.

Last week, for instance, new research from the Federal Reserve Bank of San Francisco found that there has been neither a big boost nor a big decline in productivity growth since the shift to remote or hybrid work when the pandemic began.

While there is pre-pandemic research about remote work, it often applied to smaller groups of workers before the practice became common, says Mark Ma, a professor at the University of Pittsburgh who co-authored one of the studies.

“It’s not so clear whether findings based on those workers could be applied to the general population,” Ma says.

But as the sample of companies with office return mandates has grown, and in light of academia’s long publishing timelines, more studies are finally making their way out into the world.

Kate Lister, president of research-based consulting firm Global Workplace Analytics, says that CEOs who want people to return to the office tend to claim remote work “reduces productivity, impedes culture, reduces engagement and impedes innovation.” But “more and more research shows that’s absolutely false.”

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In the Wharton paper, which has been accepted for publication in the journal Management Science, professor David Hsu found that changing job postings to have “remote” status meant they received 15% more female applicants and 33% more applications from underrepresented minorities, underscoring what many companies have said they’ve seen anecdotally: Remote work boosts diversity, and draws candidates who might not otherwise consider certain jobs.

The study, which analyzed companies’ daily job posts on the hiring platform Wellfound, also found a 17% increase in applicant experience for jobs marked “remote.”

Hsu says remote roles receive more qualified applicants because workers further along in their careers often understand what they want out of work and have personal obligations such as families to care for that require more flexible work arrangements.

What’s surprising, Hsu says, is the research’s scope, adding the study looked at upwards of half a million job applications. “It’s not some selected, small corner survey,” he says.

Meanwhile, Hsu’s research also found that candidates are willing to take a 7% salary cut, on average, if it means they can work remotely.

Candidates, says Hsu, are placing “really a disproportionate value on this level of flexibility.” Just as “people value vacation time, health benefits and so on, these individuals value the ability to have remote work.”

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Sara Sutton, founder and CEO of remote job platform FlexJobs, says new research like Wharton’s emphasizes the importance of flexibility. Remote work “is a huge opportunity to play a role in breaking down barriers” and boosting diversity, she says.

In the University of Pittsburgh study, meanwhile, researchers found that office mandates do not appear to help companies’ financial performance, but may make workers less satisfied with their jobs and work-life balance.

Ma’s study examined 137 S&P 500 companies that implemented return-to-office requirements, comparing the average change in financial performance following the mandate’s start with similar companies over a similar period.

It found that firms with mandates did not see boosts to their financial performance during subsequent quarters, when compared to those that don’t have a mandate.

In contrast, Ma says, the launch of a mandate appeared to prompt declines in job satisfaction ratings for the company on Glassdoor.com, as well as declines in employees’ ratings of work-life balance.

“There is no difference [in the financial market value of the firm] before and after the mandates,” says Ma. According to their results, “return to office mandates do not help firms perform better, which is inconsistent with what managers are trying to say.”

One other interesting pattern in his research, Ma says, is that when the firm’s stock price in the previous quarter was more negative, the probability that the firm would introduce an office return mandate was significantly higher.

The study also found that male CEOs and chief executives who are more powerful—measured by a CEO’s total compensation compared to his highest paid C-suite peers—were more likely to implement mandates.

Whether or not such new studies—or others that are sure to continue surfacing—will change leaders’ views is yet to be seen. Ma says he believes it’s unlikely many chief executives will reverse course.

“The CEOs who have already doubled down [on RTO] will not backtrack,” he says.

Many, says Lister, are “legacy CEOs [who] don’t want to change,” she says. “In spite of surveys and research, they just believe what they believe.”

This article was first published on forbes.com and all figures are in USD.

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