Line of Inquiry: Michael Gibbs on the Costs of Remote Work

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My whole career has been trying to collect weird datasets using personnel records from companies. It’s usually confidential. Usually the answer they give is “No, you can’t have it,” and so forth. So the biggest challenge is just getting datasets like this.

We wanted to look at the effect of remote work on employee innovation. As a second thing, though, we also were able to look at three different work regimes: working from the office, working 100 percent from home, and hybrid, a combination of the two. So this is actually the third of three studies, all done with data from an Indian company called HCL Technologies.

The first one we published in 2017, and that was a study of employee innovation. They have an employee suggestion system, and I have a former student who’s a senior executive there, and he very kindly provided us access to the data for that. And then we were set up to develop a field experiment with HCL in which we were going to provide training to a randomly selected group of new employees on concepts about social networks, and so forth. And we were gonna track their formation of social networks over time, and we’re gonna tie that to the employee suggestion system, with the idea being hopefully they form stronger networks, more effective networks, and they were more innovative.

Had this beautiful design all set up to launch in March 2020 in India. Of course, that didn’t happen because in March 2020, HCL, like the rest of the world, went into lockdown, and all the employees were sent home. So we couldn’t travel to India. We couldn’t do training in person, and so forth and so on.

So we already had a working relationship with them. We had already negotiated to get certain kinds of data from them, so the second study came out of all of that. And what we did was we just pivoted. We said, “OK, you went from working in the office to working at home. Let’s look at employee productivity in the working-from-office period, and compare that to the working-from-home period.” And we found a dramatic decline in productivity, something like 15–20 percent of employees . . . They still performed as well as they did in the past, but it took them longer to get their work done.

And we found a shrinking of their networks. They communicated with fewer people, and they spent more time in certain kinds of meetings. Once that study was published in 2023, we asked, “What might we do next?” And essentially this third study combines those two. We said, “OK, we have data from you on the working-from-office period, working-from-home period. You’re now in a hybrid period. Can we collect some more data for the third period in the different work mode, and tie that to data from your employee suggestion system?”

We had already found that productivity fell dramatically in the working-from-home period compared to working from the office. But there are many other reasons to be concerned about remote work. In particular, innovation is something that many are mentioning, CEOs are mentioning. Ironically, in January of this year, the CEO of Zoom, of course, the online meeting company, started mandating that employees go back to the office because he was concerned about a decline in innovation at Zoom.

So we thought, “Let’s ask them to provide us with innovation data, the employee suggestion data. And we can now do it from three work modes: We have the working-from-office period, before the pandemic, the working-from-home period, during the pandemic, and then the hybrid period that they’re in right now,” which, of course, almost every organization is struggling to figure out to what extent should we allow people to work at home or work at the office.

The other challenge is, the first study we did on innovation was a randomized experiment, which the company had run, but we couldn’t randomly assign people to live in a pandemic. So this is not an experiment, which is sort of the gold standard for teasing out causality. So for that reason, we need to be a little bit cautious about interpreting the results. But I think the results are quite stark in the productivity study, and they’re quite consistent and suggestive in the innovation study as well.

Now, I’ve been talking about some of the challenges of this study, but I also wanna say that there’s some benefits to this study. In particular, we have richer data than researchers can usually get for a company because of our close working relationship with the executives there. But most importantly, I think, we have data on actual innovation of employees since they have this robust employee suggestion system, which they’ve had for 15 years, maybe, and which their leadership thinks is very important to the company. We’re looking at real innovation as opposed to survey questions where we ask people to suggest an idea, or a lab experiment at a university. That’s the kind of method that is usually used to study creativity and innovation, because it’s almost impossible to get data on innovation in a work environment.

So we’re looking at three different work modes: working from the office, working from home, and then hybrid. I should mention, we’re looking at two aspects of innovation: the quantity of ideas that employees suggest and the quality of those ideas. So we know how many ideas people suggest, could be zero, could be many per year, or something like that. But we’re also measuring the quality of the ideas, which is arguably more important. And the way we measure that is: What happened to the idea when it was suggested? The first step in the employee suggestion system is the supervisor evaluates the idea, and they can accept the idea or they can reject the idea. So that’s one measure of quality right there. The second step is if it passes through supervisor review and approval, the supervisor then helps the employee refine the idea, and then it’s passed to a panel of executives, senior executives in the company, who meets every couple of weeks, and evaluates ideas that have been passed to them, and they can accept those ideas or they can reject those ideas. So we have some nice measures of quality.

During the working-from-home period, employees, on average, suggested about the same number of ideas as they had in the past. The quantity of ideas did not suffer. However, the quality of those ideas did decline, and declined significantly. OK, now I’ll just mention as a side comment that’s consistent with what we found in the productivity study. What we found in the productivity study was that people continued to perform at similar levels to when they were working in the office, but it took them more hours per day. So they met their goals; they met their targets. It just took them longer. They were less productive in that sense. And this seems to be the same thing.

“My supervisor’s expectation’s that I’m gonna, you know, suggest ideas sometimes, and I’m gonna keep doing that at about the same level.” But importantly, the quality of those ideas did suffer when everyone was working from home.

So in the hybrid period, compared to working from the office, the findings were a little bit different than what we found for working from home. We found that the quantity of ideas fell statistically significantly in hybrid compared to working from the office, which we had not found from working from home. We also found that the quality of ideas fell, as it did in working from home. However, that was not statistically significant. So in some sense, we don’t have evidence that quality fell, but it is suggestive of a concern about that.

Summing that up, what we see is that innovation appears to have been worse in both of those environments involving some remote work. The decline in quantitative ideas suggested during hybrid led us to ask, “What’s the cause of this?” And we had data on when employees swiped in their IDs, when they went to the office. This is a hybrid period, so we know what days they went to the office, what days they didn’t, how many hours they were there, and we also knew what teams they were in. So what we did is we constructed a measure of the consistency within a team of people being at the office or being at home. And what we found is teams that were less consistent in that process, didn’t coordinate as much when they’re working from home or working at the office, were the ones who had the largest declines in the quantity of the ideas they suggested.

And what does that suggest? That suggests that they’re not communicating as well. They’re not collaborating as well. If we’re all working in the office, we know where to find each other. If we’re all working from home, we know where to virtually find each other. But if it’s hybrid, unless we’re pretty good at being clear: “This is the day I’m gonna be at home. This is a day I’m gonna be at the office,” there’s more confusion about, you know, “How can I find Ray, or Josh, or somebody if I have a question, or I wanna, you know, run an idea by them, or something like that?”

Our study of innovation, and our earlier study of productivity, and a growing body of other research suggests significant reasons why we should be concerned about remote work. Now, there are also very significant benefits to remote work. Those benefits are not really for employers, but they’re very dramatic ones for employees in terms of quality of life, work-life balance, reduced commute time, and so forth. So there’s a trade-off that we have to face. But I think it’s very important to acknowledge that in work contexts, just as in university classrooms, things are more effective where we’re in the same room together.

We communicate better, we collaborate better, and we innovate better—and we’re more productive. When people are in the office, it is easier to have these random interactions. You can go to your neighbor’s door and knock on it, and say, “Hey, I have this problem to solve. I’m trying to figure out. Do you have any ideas about how to solve that?” And they could do the same thing for you. These kind of water-cooler conversations, or Ron Burt would like to call them productive accidents, they’re much easier when we’re all physically located together. They’re harder and were less likely to occur when we’re doing remote work.

And the other part of that is a lot of collaboration, innovation, and ideas comes from people we don’t even know yet. And if we don’t know them, how are we going to find them remotely? So you gotta strike that balance.

Now, the first thing I would say is it’s gonna vary by occupation. There are certain unusual occupations where people work by themselves. Call center workers, they can work at home. It doesn’t matter. But when employees need to collaborate, they need to communicate. They need to innovate. Then it’s more important to make sure that they spend more time at the office, and that they do it at the same time.