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THIEF Alert: Why Focusing on Location Will Rob You of Productivity

Where Do You Work?

“Where do you work?” There was a time when the answer to that question was straightforward. Covid-19 has given this simple question a new significance, if not a whole new meaning.

Since March 2020, for many knowledge workers, the question “where do you work?” is likely to elicit “at my kitchen table, what about you?”

Indeed, COVID-19 has reignited the debate on where to work. But the conversation is limited.

Firstly, the arguments are all too often one-dimensional. The work from anywhere (WFA) happens solely through the lens of cost. Or work life balance. Or collaboration. For businesses that want to get ahead, these are not either/or options: they are both/and. All these variables matter.

Secondly, the solutions also tend to be polar and anchored in today’s paradigms: you work at home or you work at a workplace. A “compromise” is simply some days doing each of these things. But the idea that companies would invest in infrastructure, working at a fraction of capacity, was probably always going to be short lived.

Finally, the arguments ignore the nature of workers and work. Sometimes the work needs to be communal but sometimes one needs solitude to focus. There is work that is best done virtually, there is work requiring team interaction, and there is work that needs close supervision. Today’s discussion doesn’t sufficiently contemplate the nature of work and workers, and how that is changing.

Why aren’t we taking this time to have that deeper discussion? Emotions complicate these arguments. Frameworks simplify complex dynamics and help manage emotions. Models help identify issues and reflect the various considerations. The goal of this post is not to calculate a single answer to this real dilemma but rather to provide the focus on what matters.

What Matters? What’s always mattered … performance

Work should take place wherever returns are maximized. In the world of knowledge work, the worker, or Talent, is key. Their productivity, collaboration, and application, among other things, determine the firm’s return on the cost of that Talent.

And so, our framework starts with Talent. They impact returns by the skills and experiences they bring to work. Let’s call this variable T. For the firm determining where work should happen, as it relates to T, you start where you start. You have a workforce.

Much of the debate has centered around the impact of the performance of T, when they work outside the traditional workplace. Let’s denote performance as p, and define it as the outcome of:

  • h : the hours I work or time I put in. In general, the greater the hours worked, the more that is produced. Still, each hour may, after a point, bring diminishing marginal returns. We hear of the longer days being worked by those at home.

  • i : the impact of interaction. The impact of interaction attempts to identify the intangibles that are currently causing many to argue that physical proximity is necessary. In our view, this is more complex than that. Interactivity is effective when we need it. This applies to formal connectivity, such as through in person meetings, and informal connectivity, which we might experience at the coffee station. But “interaction” is not by definition good and to be maximized. This must be optimized. Meetings can be effective. Or ineffective. Distractions can be a welcome break… or an interruption.

  • e : my motivation or engagement. It is discretionary effort and application in the service of the result. In general, the more engagement, the better.

  • f : ability to focus on performing. Like motivation, attention to the work is good. More focus is better and distractions or interruptions while I want to be focused are counter-productive.

So far we have outlined a simple model that describes the components that lead to p, that is, performance:

p = T(h*i*e*f)

But to understand Return, you need to recognize that this comes at a cost: the cost of labor and the cost of the infrastructure you provide for it.

What are the infrastructure costs? It's the square footage or footprint. It's the office, but also the car park, and the grounds. And it’s the infrastructure services: the security, the shuttles, the coffee and tea supplies, the cleaners, or the cafeteria staff. Depending on your model, it can be a gym supervisor, the health center, and the creche.

In addition to infrastructure costs, there is the cost of the labor itself. Being removed from physical proximity gives the opportunity for labor arbitrage. Labor arbitrage refers to the opportunity that comes from the cost differential between two similar sets of skills, in different markets. And firms have been capitalizing on labor arbitrage for years. The difference is that previously the arbitrage existed when you moved whole teams of workers. You moved your entire call center to India. Today, arbitrage can exist at the level of the individual.

And so our framework becomes Return = performance/cost, or

R = T(h*i*e*f)/c

The denominator never goes away. Even if people were entirely remote, there’d be costs. But the cost structure changes as your location choices change. Which was our second frustration with the binary nature of today's debate: it's either current, pre-COVID working spaces or remote work. But what about different spaces? But more on that later.. in another post. For now, it is enough to say “space costs". And as a result, Executives at some largest businesses increasingly express an opinion that having staff physically in the office at all times is an anachronism. With the average total annual facility cost in the USA estimated at $16,604 per occupant, is it any wonder.

The model isn’t intended to suggest a precision we would argue is false. Rather, it is intended to promote a holistic conversation; interactions aren't inherently good, or fewer hours aren’t inherently bad.

In determining where work happens, the goal should be to maximize R.

The framework, however, helps us better understand the trade offs that we make. If my employee, forced into the office, is less engaged, R is impacted. However, if working from home results in frequent interruptions, made up for by longer, less productive hours, the rational decision maker might insist on a return to the workplace, regardless of the impact on engagement.

Conversely, the ability to focus without disruption, work hours whose performance hasn’t been eroded by a frustrating commute, and where virtual meetings are as effective - or ineffective - as ever, would always tip the scale in favor of remote work.

And if in the denominator, all other things are equal, the office space is the biggest component, then frankly you will always opt for virtual. Because of its relative cost and the firm’s imperative: to increase returns.

So, what is the space solution that provides for the greatest returns?


By Angela Lane and Sergey Gorbatov

Angela Lane and Sergey Gorbatov work and write about the complex science of human performance and are co-authors of “Fair Talk: Three Steps to Powerful Feedback.” Leveraging Fortune 500 experience gained across four continents, they equip leaders with practical tools for success. This post represents the authors’ personal opinions and not those of their employers or affiliated organizations.

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