Chicago Booth Review Podcast Does Hybrid Work, Work?

Michael Gibbs: The benefits of some work from home are just so huge for employees in terms of work-life balance, mental health, avoiding the commute. Now, that we have the technology, we all know this thing called Zoom exists, we know how to use it, we've all got the proper equipment at home, we can use it, but it's just not as effective as in-person work.

Hal Weitzman: In September, Amazon announced the end of hybrid work saying it wanted employees in the office five days a week. To many, it seemed like the end of an era with management having concluded that hybrid work just doesn't work for them, even if employees like it.

Welcome to the Chicago Booth Review Podcast where we bring you groundbreaking academic research in a clear and straightforward way. I'm Hal Weitzman, and today we're bringing you the second of my conversations with Chicago Booth's Mike Gibbs who's conducted quantitative research on the effect of remote work. Amazon is not a pioneer. In much of finance in other sectors, the era of remote and hybrid work is already over, but many organizations are reluctant to follow and continue to offer their workers hybrid arrangements. So what do the data tell us about hybrid work? And are we heading away from hybrid?

Okay. Mike Gibbs, welcome back to the Chicago Booth Review Podcast.

Michael Gibbs: Good to be back.

Hal Weitzman: Now, last time we had a fascinating conversation about what happened during the pandemic with people being in person, then people being remote, this amazing natural experiment that happened that economists loved, I guess, the idea that there was this global pandemic, at least in the sense that you could study it and what effect it had on people's working behavior. And now we're in this kind of wishy-washy after post-pandemic world where many companies are struggling with how to deal with their workforce, what form of hybrid work works.

So last time we talked about fully remote, we talked about being in person and you talked about being in person, being more productive, leads to greater productivity, people do the same amount of work, but in less time, and it leads to more innovation, more great ideas come up. What effect does hybrid work have on innovation?

Michael Gibbs: So to get to that question, I'm going to have to turn to the third paper, which my collaborators and I have done using data from HCL Technologies.

Hal Weitzman: And just remind us a bit about that company. What do they do?

Michael Gibbs: Yeah. They're one of the world's largest IT services companies based outside of Delhi in India. They work with many large corporations. Microsoft, for example, is a client. Some years ago they had a new CEO who pushed them to change their strategy to become more innovative, more partners in collaboration and innovation with their clients, higher profit margins than business process outsourcing at call centers and things like that. And it was very successful. Part of that set of initiatives was an employee suggestion system.

The first study we did, which I discussed in our earlier podcast, was looking at the employee suggestion system and an experimental incentive that the company added to that. And we found it increased innovation. And then the second study we did was when the pandemic hit, we started collecting data from the company on employee productivity. We also collected retrospective data on productivity of those same employees before the pandemic hit. And we found a dramatic decline in productivity when employees were working essentially a hundred percent from home. Now that the pandemic is largely-

Hal Weitzman: Just as a reminder, so the dramatic decline you're talking about meant they did their work but just took longer to do it?

Michael Gibbs: Yes. I would say two hours more per day or something like that.

Hal Weitzman: Right, right, right. Sorry. Carry on.

Michael Gibbs: So we recently published a third study, which combines those two. So we went back to the company and said, "Can we collect data from the employee suggestion system, but through three work modes, the working from office period before the pandemic, the pandemic when they're working purely from home, and then the hybrid mode they're in now?" And then we compared employee innovation in these three work modes. So you look at the same employees and in different work modes, and you try to figure out what's the effect on innovation.

Now, we're measuring innovation in two broad ways. The first is the number of ideas that an employee suggests per month, but more interesting than I think is the quality of ideas because we don't want just a lot of silly ideas. Quality, we've measured a couple of different ways. The idea has to be approved by the supervisor, then by a panel of senior executives and in many cases by the client as well. So we have several different measures of quality of the idea, but I think being accepted by the panel of senior executives or the client are very, really good measures of quality of ideas.

Hal Weitzman: And just as a reminder, these ideas came through a suggestion box

Michael Gibbs: Kind of, yeah. They're an IT services company. They set up their own app on their intranet, and they've had this suggestion system going for probably 15 years or more. Thousands and thousands of ideas have been suggested over time.

Hal Weitzman: Okay. We talked last time about how they experimented with incentivize giving, I guess a cash incentive for ideas that made it through this system. Have they kept that going?

Michael Gibbs: They have. Originally, when they experimented, they didn't share the data with us and they did some rough analysis in Excel and concluded there wasn't an effect. But when we got the data, we used better statistical methods. We controlled for confounding factors like demographic characteristics and so forth. We found that the incentive was having a dramatic effect on improving the quality of ideas and the propensity of employees to try to suggest ideas.

When they saw this research, they decided to put the incentive back in and to do so for the entire company. And that was published in 2017. And that incentive plan is still in place to this day. And my former student who's a senior executive there reports that they're very satisfied with it.

Hal Weitzman: So tell us what happened with hybrid work. Well, first of all, maybe you can tell us what does hybrid work mean at this company?

Michael Gibbs: Hybrid work means that you are able to work from home several days per week, but you're expected to come to the office as well.

Hal Weitzman: Do they stipulate how many days a week you're supposed to be in the office?

Michael Gibbs: No.

Hal Weitzman: Oh, interesting. So it could be one.

Michael Gibbs: It could be. We tried to discern if there was a formal policy and we were unable to find one. I think it's going to be team dependent. And this was pretty early in. We were looking at the first five or so months of hybrid work. And by now they've probably experiment and learned and changed their policies somewhat. But no, it was pretty much up to the team or up to the individual. But you're expected to be working at the office at least sometime.

And we know when you're working at the office because they provided swipe in data for employee IDs. We know exactly what times you're there on what days. So what happened? So again, we're comparing innovation in the working from the office period, in the working from home period during the pandemic and in the new hybrid period after the pandemic.

What we found is compared to working from the office, pre-pandemic, innovation suffered in both working from home and hybrid mode. In working from home, what we found is employees suggested approximately the same number of ideas as they had in the past. Now, this is another example of something I mentioned before. They were meeting their numbers during working from home, but it was taking more hours per day.

So I suspect what we're really seeing if we would measure this with hours of work is that quantity of ideas fell. But I can't prove that. I suspect that's the case because we know productivity fell. But what we can say for sure is during-

Hal Weitzman: You mean the quantity per hour?

Michael Gibbs: Yes. Thank you. But what we can say for sure is the quality of ideas fell significantly during working from home. So employees are still coming up with ideas, but they're just not as good quality. And then during the hybrid mode, the evidence is a little bit different. What we're seeing is the quality of ideas is similar to what it was in the pre-pandemic period, but the quantity of ideas is lower.

Now I should say finding statistical effects on quantity and quality of ideas is very hard. These are very noisy data, and these are not very common events. So the fact that we're finding anything is...

Hal Weitzman: So they were coming up with fewer ideas. They are coming up with fewer ideas in hybrid mode, but they're better ideas.

Michael Gibbs: Than in working from home, but not then when they were working just from the office.

Hal Weitzman: Right. So we haven't quite recovered where we were.

Michael Gibbs: Exactly.

Hal Weitzman: But we're better than where we have been the past few years of being out of the office.

Michael Gibbs: Yes.

Hal Weitzman: Okay. And how do you account for that?

Michael Gibbs: The main thing that we found in our data is that when teams coordinated their schedules better, they didn't suffer decline in the number of ideas. So we know when people are going into the office, when they're working from home, and we just measured the extent to which people on the same work team were at the office on the same days, during the same hours or not. And to the extent that there was disparity in this, the teams did not appear to be coordinating their work schedules well, that's where we saw quantity of ideas falling.

Hal Weitzman: Okay. When we talked about this last time, the more that people are together, the better ideas they have. That's right?

Michael Gibbs: Together is funny. I do think that's true although I think a lot more study needs to be done to show that. So let me clarify what I mean by that. I think when people are in the same room together. Productivity is higher, collaboration is higher. Certainly teaching and learning is higher. Having taught in Zoom for several years, it was a miserable experience on both sides. And it's great that we're back in the classroom. But innovation can still occur when people are working partly remotely.

I suspect it's never going to be as good as when people are fully in the office. But if people are collaborating with each other, it's important that they find ways to make sure that they have enough time to interact with each other in person ideally, but at least be able to interact to find each other online when they need to. So in other words, coordinating the schedule. So if you and I are on the same team and we both want to work at home two days a week, it'd probably be a good idea if we agree which days of the week we're both going to work from home and we're both going to be in the office.

Hal Weitzman: This is about who you are in touch with, who you are collaborating with. Is it possible to do that remotely if you and I agree that, I don't know, every two weeks, we're going to get together for an hour and force ourselves to come up with some ideas, or would you just think it's something about the remote medium that is an idea killer?

Michael Gibbs: I think it's more the latter. Sure, we can set up times and say, "We're going to be innovative next Wednesday at 3:00." But innovation doesn't work that way. That will help. And it also presupposes that we're already a team of collaborators. What if we don't know each other yet? A lot of collaboration comes from meeting new people. People you bump into. Certainly in academic research. People I meet at conferences or something like that and those things you can't really schedule.

Hal Weitzman: So it's the water cooler talk that we don't get. And then in hybrid, we might not get it, not because people aren't coming in, but because they're coming in on different days.

Michael Gibbs: And yes, so some of it's the water cooler work, the unexpected, unplanned, even meeting new people. And then there's another aspect. So going back to the productivity study, the second of the three studies we did, we found that communication costs were significantly higher when done virtually as opposed to in-person. So people's social networks narrowed the number of people that they communicated with by phone, chat, email, and so forth, narrowed significantly during the pandemic. And that included not just employees within HDL, but their contacts with clients. Customers also narrowed.

And for innovation, social networks are hugely important. And social networks are difficult to maintain in a virtual setting. Other research has shown that virtual collaboration tends to be less effective, it's more costly, and it tends to lead to less creativity and outcomes.

Hal Weitzman: Mike, what about workers whose job is largely individual? We think of call center workers or programmers, people who are working really on their own and aren't collaborating a lot with others in the moment that they're doing their job. How does their remote work affect their productivity?

Michael Gibbs: I think it probably still lowers productivity for many. There's one study of professional chess players. I mean, no one works more alone than a chess player and their productivity fell. Call center workers are an odd group because they often work from home just because they need a telephone in a quiet room and they're literally reading a script and the supervisor can randomly listen in on their phone calls even if they're at home. So it's kind of an unusual occupation.

There are many individual contributors who aren't part of a team and aren't managing other people for sure like coders. And for a lot of their work, they can work remotely. But even there, I would caution that the building of the intangibles, which help you in your long-term career, understanding the career path, working with more senior people who had your job but then advanced to something different and learning from them or just getting insights from colleagues you bump up against in the coffee shop, these things are still valuable. They're just less valuable in some occupations than others.

Hal Weitzman: If you're enjoying this podcast, there's another University of Chicago Podcast Network show that you should check out. It's called Nine Questions. Join professor Eric Oliver as he poses the nine most essential questions for knowing yourself to some of humanity's wisest the most interesting people. Nine Questions with Eric Oliver, part of the University of Chicago Podcast Network.

Mike, so many companies are dealing with this of hybrid work. How many days should they ask employees to come back to the office? How do they even get employees to come back any days at all? How can they incentivize them? Are you getting a lot of companies calling you and saying, "This research seems interesting. What can we do with it? Or how can we learn more about it?"

Michael Gibbs: No, not really. But I mean maybe.

Hal Weitzman: Well, hopefully you will after this episode.

Michael Gibbs: Or not, depending on how I want to spend my time. But yes, I probably will get some. A few months ago, I had been contacted by Amazon Web Services people analytics group, and they just asked me, can you present your research? And I did before it was published, and that was great. It's really interesting to meet a workplace analytics group in a data-driven company such as Amazon.

Hal Weitzman: But I mean, it is a topic that so many companies... You mentioned Amazon, which is recently called its workers about five days a week. It is a topic that so many companies are dealing with, and it's partly right because the workforce is now expects to a certain extent in many, many jobs that they will be hybrid if not fully remote. And those companies that can offer remote work see it as an advantage sometimes. Do you think we're ever going back-

Michael Gibbs: To fully in the office? No.

Hal Weitzman: Well, yeah, as an expectation.

Michael Gibbs: No. Even Amazon, when the CEO announced that policy noted that in the past pre-pandemic, people would sometimes work from home. If you have a child who's sick at home, you work from home and that will continue. But no, the benefits of some work from home are just so huge for employees in terms of work-life balance, mental health, avoiding the commute. Now that we have the technology, we all know this thing called Zoom exists, we know how to use it, we've all got the proper equipment at home, we can use it, but it's just not as effective as in-person work. So we have to trade these things off.

Hal Weitzman: And talking of trade-offs, of course, there's the trade-offs for workers, right? And we talked in the last episode about how many will workers like the idea that they're working from home? And I don't know. Maybe just to play devil's advocate, maybe that's worth a little bit of less innovation. And maybe people would say, "Well, if I get my work done, I don't mind if it takes longer." Because in between that time, I'm juggling picking up the kids and feeding the cats and cooking dinner. And so if it takes five hours instead of three hours, that's fine. I just know that I have to get my work done. But now I'm choosing when to do it, not the employer. What do you think?

Michael Gibbs: Well, if you're the devil's advocate, I must be the devil because I agree with you. Everything is a trade-off. So with these benefits, perhaps it is acceptable to have a little bit less innovation or everything has to be weighed. But that said, we can find ways to do it better and to balance and more. And the calculus is different for different companies and for different people. From the perspective of employees, I think a big question is, are we talking about more seasoned employees who already have worked at the company, they have their network, they have their colleagues, they know what they're doing, they know that they have the relationship with the clients. Or is this a new hire?

As HGL will call them a fresher. Someone new to their career. They don't know the corporate culture. They don't have a social network. They don't know how to operate in office norms. I think it'd be a terrible mistake for someone at the beginning of their career to say, "I'm going to work from home all the time because it's really fun," because they need to invest in their human capital, and it's not as effective when working from home. And as research is starting to emerge, being published by personnel economists and others, we're starting to see evidence for just these kinds of things.

So for example, junior employees who... One study looked at employees where their teams in two buildings, they found that when the teams were all located in the same building, junior employees got more feedback. And this is also true of female employees. These are very nice important things for people earlier in their career to get. Another thing I'll never forget is watching our PhD students during the pandemic as they were graduating the traditional thing as you go to the Allied Social Sciences Association meetings somewhere and you meet people from all over the world, different universities.

But that didn't happen. They weren't getting their chance to be introduced to the profession and to meet all of their colleagues and people they'd be working with for the rest of their careers. And that's got to have set them back several years in terms of building their intangible human capital and their social capital.

Hal Weitzman: That's such an interesting example because some of those meetings, industry meetings are not coming back. I mean, some of those events are now online or they've been replaced by other events because companies can't afford to send people off to Las Vegas for a week of schmoozing and business development, and they feel like it's just as productive to do it elsewhere. So I'm wondering... I hear what you're saying about younger workers and more seasoned workers, but I'm wondering if the way that business is done is actually changing as well as a result of this online experience that we've all had.

Michael Gibbs: It is, of course. We're going to be doing hybrid work, and many of these kinds of conferences will be online. But for some, where the networking is really important to the industry, certainly in the economics profession, it's hugely important. I hope that we continue to have in-person conferences just like we have in-person classes.

Hal Weitzman: Right. And you're saying for younger workers, they should be particularly interested in making sure that they're in person, and presumably your advice to companies would be the same.

Michael Gibbs: Yes. And some research suggests that if you offer a choice to employees of working from home or working from the office, you get what economists call adverse selection. Those who opt to work at home tend to be less productive than those who opt to work at the office. So as a young person starting your career, think about the signal you're sending to your employer if you say, I want to work at home a lot as opposed to, "I'm going to be at the office a lot."

Inferences will be made about you whether they're correct or not, and you should weigh those things. And then from the employer's side, you should be thinking about, "With the policies I offer, how does this affect my ability to attract more motivated, high skilled people and to retain them?" And that may be very different for people at different stages of their careers.

Hal Weitzman: One of the concerns about hybrid work is that we would get into a situation where we have a two-tier workforce. What you are describing is kind of a two-tier workforce. Isn't it? The people at the beginning of their careers or at the beginning of their time with a particular company are expected to be in person. But people who, the partners or whatever, the more senior people can basically do what they want. Now, a lot of people would react negatively to that. And it also suggests that if that's the case, then it's maybe not so useful for the younger employees who won't have those gray hairs around to learn from.

Michael Gibbs: Well, if the gray hairs aren't around to acculturate, mentor, train the young people, then they're failing in their jobs with the gray hairs. I'm not saying that the gray hairs, and I have many of those, shouldn't be coming into the office. Maybe they're coming in less, maybe not. But those who are responsible for building the human capital of the company should be keeping these things in mind. Part of their job is to be working in person and with employees. I mean, how are you going to develop a strong corporate culture if we're all on Zoom all the time?

Hal Weitzman: I'm just wondering if we are living in this middle world of hybrid work for the foreseeable future, what do you think companies can do to improve this? You talked about the lack of professional networks and people's... The narrowness of contacts. What can companies do to maybe in an organic way? I like the way you said Wednesday afternoon, we're going to have an innovation session and we come up with lots of ideas. But what is the practical thing that companies can do if employees just get used to being remote at least some of the time?

Michael Gibbs: Mandating that they're in the office a significant amount of time, maybe three or four days a week? I don't know. It's going to depend on the job. Mandating when they're at work. So for example, trying to avoid people working remotely on Mondays or Fridays. Because what does that mean? They're just doing a long weekend. They're less likely, I suspect, to be working seriously on a Friday or a Monday. Importantly, making sure that people who need to work together are in the office on the same days or meeting with clients on the same days.

This is something I've been puzzling about. I teach about performance valuation and coaching and things like that. And how would you do that when you're working with people who are partly remote? And I think the answer is you have to do a lot more communication, including remotely. The economists first instinct is to say, "Okay, with people remote, we should just measure their outputs because we can't observe their inputs." And when you can do that, that's probably a good idea, but you often can't, especially when you're talking about knowledge workers.

So I think the instinct of economists may be wrong here. And what supervisors need to do is spend more time doing coaching and feedback even remotely and working on those relationships because they happen organically and randomly in the office. But you have to be more proactive to the extent that people aren't always in the office.

Hal Weitzman: Well, Mike Gibbs, I'm glad... We are actually recording this on a Monday morning, bright and early. So I'm glad that we are both in the office to record this episode. Thanks again for coming on the Chicago Booth Review Podcast.

Michael Gibbs: Yes, thank you for dragging me in early on a Monday to the office. Thank you, Hal.

Hal Weitzman: That's it for this episode of the Chicago Booth Review Podcast, part of the University of Chicago Podcast Network. For more research, analysis, and insights, visit our website at chicagobooth.edu/review. When you're there, sign up for our weekly newsletter so you never miss the latest in business-focused academic research. This episode was produced by Josh Stunkel. If you enjoyed it, please subscribe, and please do leave us a five-star review. Until next time, I'm Hal Weitzman. Thanks for listening.