WFH or RTO?

But at Tesla, which he also runs, some reports have suggested the WFH policy isn’t ironclad. And when President Trump signed an executive action directing federal workers back to the office, he included a loophole that department and agency heads can make exemptions they “deem necessary.”

In research being done that informs this debate, one highlight is the nuance of it: What suits one company or situation might not suit another. If there’s any other consensus building among researchers, it’s that for most companies with employees who are able to do at least some of their tasks away from the office, a hybrid model may be optimal for workers and managers—and firms’ bottom line.

The effects on productivity

When offices shut down, some researchers were busy at their own homes. Stanford’s Nicholas Bloom and Steven J. Davis (the latter was at Chicago Booth at the time) are two prominent economists who started gathering data pretty much immediately, along with others including Jose Maria Barrero of the Mexico Autonomous Institute of Technology.

Starting in May 2020, they set up the monthly Survey of Working Arrangements and Attitudes, and they’ve continued to gather data ever since. (For more, read “Are we really more productive working from home?”) Their project, WFH Research, now includes a Global Survey of Working Arrangements, distributed in more than two dozen countries. Their data have informed dozens of research projects and findings.

In the United States alone, the share of full workdays spent at home skyrocketed from approximately 7 percent in 2019 to nearly 60 percent in spring 2020, before leveling out at about 28 percent in 2023, per research from Barrero, Bloom, and Davis. About 40 percent of US workers now work from home at least one day a week, the study finds.

A WFH report gathering data from August to October 2024 notes that 61 percent of the US workforce is considered “front-line employees,” largely people who didn’t graduate from college, hold lower-paid positions, and must go into work every day. (Most Amazon warehouse workers, who provide on-site physical labor, fit into this category.) Meanwhile, 25 percent of workers—largely graduates and higher-paid professionals—can have a hybrid schedule. Just 14 percent—those with specialized roles such as IT support, payroll, and customer service—are fully remote. Research by Davis finds that IT employees overall spend the most days at home, followed by finance and insurance workers.

In the early pandemic days, from July 2020 to March 2021, nearly 60 percent of the 30,000 US workers responding to the Survey of Working Arrangements and Attitudes said they were more productive at home than they had expected to be, and only about 14 percent said the opposite. Barrero, Bloom, and Davis projected that the WFH trend would increase productivity in the US by 5 percent compared with pre-pandemic times. Only about one-fifth of this gain might show up in typical productivity measures, which failed to adequately capture the amount of time saved because of less commuting, they argued.

But there were competing views. A study by Booth’s Michael Gibbs and University of Essex’s Friederike Mengel and Christoph Siemroth analyzed worker data from high-skilled employees at India-headquartered HCL Technologies, one of the largest IT companies in the world. Their research finds that productivity (defined as output per hour worked) from April 2019 to August 2020 decreased by up to nearly 20 percent, even as hours worked increased. At home, people had more distractions and spent time trying to coordinate communications rather than productively communicating, they note.

“Productivity was most affected by what we called focus time, which was a measure of how much time you were working without any interruptions from texts and emails and Zoom meetings,” says Gibbs. “You need focus time, whether you go to the office or you are at home. And some people are terrible at that at home.”

Bloom points out that, in the early days of COVID, it was harder to measure productivity because people were sent home during a chaotic crisis period that wasn’t normal for them or for their bosses: “We learned that if you rush everyone home during the middle of a pandemic, productivity can drop.” Now it’s possible to study more well-managed, consistent remote-working models, he says.

He also acknowledges that asking workers directly about their own productivity in the Survey of Working Arrangements and Attitudes was a subjective exercise and that it’s fair to be skeptical about what people report back about themselves. Indeed, as Gibbs points out, if workers enjoy the WFH option, they may simply say they are more productive even if they are not. Bloom says that he and his colleagues now typically use randomly controlled trials to measure productivity.

Another factor to consider is that workers often think about productivity differently. Managers and economists might calculate it by looking at how much work someone gets done in an eight-hour day, while employees might think instead of the total amount of time worked—which grew, in many cases, thanks to the time they saved in commuting and grooming.

The watercooler and innovation

Innovation is a related area of study and one that has been an increasing concern of CEOs globally, according to Gibbs, Mengel, and Siemroth. They claim that WFH models eliminate the kind of spontaneous communication—so-called watercooler conversations—that can foster collaboration and innovation.

Analyzing the activity of nearly 50,000 employees between 2018 and 2021 at HCL Tech, the researchers examined measures of innovation from workers who saw their work arrangements change twice over the course of a few years. Originally in the office full time, they worked from home for a period in 2020, and then ended up on a hybrid schedule as the pandemic abated. As is typical of many people who can work remotely, all the employees in their study were at a high professional level—virtually all of them had college or advanced degrees in engineering, and their work involved cognitive tasks and collaboration.

HCL has always encouraged its workers to see innovation as a key part of their jobs. To foster this environment, it created an Idea Portal, an intranet that allows employees—either individually or with colleagues—to submit ideas that could benefit the company or its clients. The ideas are then evaluated by their direct supervisor and, if approved, a panel of the company’s executives. If the panel greenlights an idea, a client then rates it on a scale from one to four (with four being the strongest), providing a measure of the idea’s quality. The client ultimately implements the idea or rejects it.

HCL sent its data on employee innovation levels to the researchers, who examined both the number and quality of employee ideas. They find that innovation can suffer when employees work from home, although there are key differences between fully remote and hybrid, as well as the quantity versus the quality of ideas.

The quantity of employee-generated ideas didn’t decline when comparing in-office to fully remote models, according to the research, but it dropped 22 percent when employees transitioned to hybrid work.

Hybrid complicates communication in a way that simply working from home does not, the researchers write. If everyone is working from home, employees are no longer having spontaneous conversations in a lunchroom or around a colleague’s desk, but they are all in the same chat rooms and video meetings. Their channels of communication are standardized, whereas in a hybrid model, quite often some employees are at the office while others are online at home. With different forms of communication happening among employees, connections and consistency are lost, and fewer ideas are generated, per the researchers.

In hybrid work, the number of ideas declined more from women than men. The researchers suggest that this could be related to the childcare and housework duties that women are more likely than men to take on.

A 2024 HR survey from Gartner, a management consultancy, provides some context: “Women disproportionately face greater schedule complications and significant monetary costs related to caregiving responsibilities.” For women respondents of the survey, the intent to stay at their current companies was 11 percent lower among those whose employers had implemented strict RTO mandates. Being able to work from home at least some of the time is a positive for women because they can more easily balance child-rearing and other tasks, yet it can also lead to more distractions due to those responsibilities.

But in the research by Gibbs, Mengel, and Siemroth, when it came to the quality of ideas submitted, innovation dropped in the WFH period, but not in hybrid. The probability of an idea being accepted by the executive panel was nearly 7 percentage points lower for those submitted by WFH employees compared with those that came from workers full time in the office, and the probability of the idea being shared with a client was 9 percentage points lower. If the client did see the idea, the probability of it receiving a rating of three or four was about 19 percentage points lower.

The quality effect for hybrid work, however, was not statistically significant—there was no positive effect, but no meaningfully negative one either. Even though hybrid workers produced fewer ideas than when in the office or fully remote, their ideas were just as good as in the office and better than when remote.

‘WFH is here to stay’

For managers who miss being surrounded by direct reports, the data produced by Gibbs, Mengel, and Siemroth might seem reason enough to summon employees back. After all, why risk any loss in productivity or innovation?

Because employees like being away from the office, writes Stanford’s Davis in an essay in which he declares, “WFH is here to stay.” He maintains that many workers, particularly US employees, have been pleasantly surprised by their ability to be productive at home. Despite the challenges of being remote, the work-life balance—created by the lack of a commute and the ability to be present for family and work from any location—is a strong motivator.

And some companies such as Stockholm-based Spotify, which allows its workers to choose how much they want to be in the office, have highlighted how allowing flexibility demonstrates trust in their employees. Spotify chief human resources officer Katarina Berg, in an October 2024 interview with the United Kingdom–based publication Raconteur, said, “You can’t spend a lot of time hiring grown-ups and then treat them like children.”

Despite the well-publicized RTO mandates from Amazon, among others, data also refute the case that management dislikes WFH. Prior to the pandemic, Davis and Bloom launched the monthly Survey of Business Uncertainty, in consultation with the Federal Reserve Bank of Atlanta, which asked business executives for their thoughts about the year ahead. In July 2023, respondents from 500 companies indicated that they anticipated at least modest increases over the next five years in both WFH and hybrid models at their own companies. Meanwhile, respondents to the Survey of Working Arrangements and Attitudes have reported that through remote work, employers have also experienced improvements in recruitment and retention, along with a reduction in the need for office space, which in turn cuts overhead costs, Davis notes.

Additionally, Davis argues that the WFH trend has led to considerable innovation, at least in the areas that support it. “We can expect videoconferencing technologies and remote-collaboration tools to continue improving at a rapid clip, reinforcing the shift to remote work and remote meetings over the next few years,” he writes.

How much working from home is favored also depends on where you live. The 2023 Global Survey of Working Arrangements, with data collected in April and May of that year, reveals that WFH rates were highest in English-speaking countries (at an average of 1.8 days per week) and lowest in Asian countries (0.9 days). One of the key factors in whether a country is more likely to embrace WFH is its individualism, per research from King’s College London’s Cevat Giray Aksoy, Barrero, Bloom, Davis, and others. Countries such as the US and Canada, which prize personal ambition and independence over collective goals, are more likely to value WFH than countries such as China and Korea. (The researchers cite a widely used measure of individualism and collectivism developed by the late psychologist Geert Hofstede.)

But while WFH may indeed be a permanent fixture of the labor market, that doesn’t mean a fully remote schedule is ideal. Booth’s Ayelet Fishbach is an expert in motivation, and her research finds that the presence of others can positively influence worker morale in many situations. “People go to work to satisfy three basic needs: resources, personal growth, and social connection,” she says. “When people work from home, they miss out on personal connection, which can increase feelings of loneliness and social isolation.” (For more, listen to the Chicago Booth Review Podcast episode “Why are workers so disengaged?”)

If a company has workers who are on a fully remote schedule, she says, they should compensate with some guaranteed in-person interaction. This could mean retreats, conferences, or a requirement to have some face-to-face meetings, particularly for mentors and mentees, she says.

Making hybrid work

Many of these strands point back to hybrid work. While his research highlights some of the challenges associated with it, Gibbs says, “Hybrid is far preferred to 100 percent remote work.” Researchers and other experts should even consider changing the language used in this debate, he argues, saying to jettison the term WFH “because, for most people, it’s going to be hybrid.”

“For most managerial or professional jobs, hybrid generally is the best option,” Bloom agrees. “There’s definitely a reason for coming in person. You get better mentoring, better innovation. You can build culture.” But this can be accomplished while giving employees flexibility. “By the time you get to three days a week in person, it’s not clear that you’re getting a lot extra from coming in on days four and five.”

This is what Bloom finds in research with Chinese University of Hong Kong’s Ruobing Han and Peking University’s James Liang, which featured a six-month randomized control trial from 2021 to 2022 of about 1,600 employees of Chinese technology company Trip.com, with whom Liang is associated. A control group worked at the office five days per week, while another group worked in the office three days and remotely for the other two days.

A hybrid model had no effect on revenues or productivity, the researchers find, but it improved job satisfaction and reduced quit rates within the company by one-third. The quit-reduction rate was highest for nonmanagers, female employees, and workers with long commutes. And the performance of hybrid employees—measured by grades given on skills including development and innovation, promotions received, and the number of lines of code written and uploaded each day—matched that of workers in the control group.

By the end of the experiment, 395 managers had revised upward their views on the effect of hybrid working on productivity. Before the experiment, managers believed that a hybrid model would have a net negative effect on productivity (-2.6 percent, on average). After the experiment, their view was that the model would have a net positive effect on productivity (up 1 percent).

One key to this, says Bloom, is that the hybrid employees were all on the same schedule—in the office on Mondays, Tuesdays, and Thursdays, and then remote on Wednesdays and Fridays.

This aligns with Gibbs, Mengel, and Siemroth, who find that mandating specific in-office days can help companies tackle the innovation challenges that come with hybrid work. It can be hard to plan meetings and other important communications around sometimes-haphazard schedules.

Companies can at least schedule regular online meetings that everyone must find a way to attend, or require that specific teams working closely together on short- or long-term projects be in the office on the same days, the researchers maintain.

And they write that if employees must be on different schedules, public calendars can make it easier for them to connect when needed. Businesses can also make an effort to develop better internal systems that help employees meet new colleagues and share information, even if they cannot meet face-to-face. Over time, the researchers write, companies that adopt hybrid and even fully remote models can learn and do things to improve innovation.

The research by Bloom, Han, and Liang emphasizes the importance of regular reviews to help ensure productivity and high performance for employees who aren’t always at the office. At Trip.com, a performance review consisted of formal assessments from managers, coworkers, direct reports, and, if applicable, any customers with whom the employees dealt. All assessments were then reviewed by employees, collated by managers and the HR department, and discussed in meetings between the manager and the employee. This was a process that took several weeks, “providing a well-grounded measure of employee performance,” the researchers note.

In-depth, regular performance reviews for hybrid employees are a win for everyone, Bloom says. Managers don’t feel pressured to watch every keystroke of their employees, ensure they are on Slack at every moment, or worry about “mouse jiggling”—that is, simulated keyboard activity designed to make it look like work is getting done.

For their part, employees tend to dislike feeling micromanaged, and surveillance software can destroy trust between them and their employers. A 2021 study by a team of researchers that included University of Wyoming’s Chase E. Thiel finds that such surveillance may lead to increased employee misbehavior, as a diminished sense of agency fuels what he describes as “moral disengagement via displacement of responsibility.”

“You really don’t want to use surveillance software, because people absolutely loathe it,” Bloom says.

As further evidence, the professional services firm PwC surveyed more than 20,000 US business leaders, chief HR officers, and staff, finding that hybrid workers were the most satisfied. Its 2024 report says that they were the most content of all employees, including when it came to feeling a part of the company’s culture. “The idea that being on-site all day every day is necessary to establish and sustain a strong culture is a myth,” the report states.

In PwC’s survey, 74 percent of hybrid workers said they felt engaged, and 76 percent said they felt they belonged within the company culture. This compared with 72 percent and 74 percent for full-time office workers, and to 63 percent and 68 percent of fully remote workers.

Additionally, 83 percent of hybrid employees felt well compensated, as compared with 75 percent of full-time onsite employees and 77 percent of remote workers. Finally, 90 percent of hybrid employees said their company culture “promotes community, collaboration, inclusion and belonging.”

The ongoing Survey of Working Arrangements and Attitudes also finds that employees like hybrid work approximately as much as they would like an 8 percent raise in pay.

Avoid a brain drain

Even companies such as Amazon are going to cave on being in the office full time, at least for the highest performers, Bloom predicts.

“If you’re in AI, you’re fielding multiple offers, particularly once you’re earning half a million dollars a year. Probably there’s not enough money that Amazon can pay you in order to stay” if you can no longer have a flexible schedule there, he says. The result is that you and others like you will leave. “They’re going to have heavy attrition from the best teams and highest performers.”

This may inspire a sort of “Swiss cheese” version of enforcement in which middle managers, concerned about performance and brain drain, won’t want to apply in-office rules to their best employees. Ultimately, in the spirit of equality, these managers may allow less-crucial members of their team to work a day or two from home.

“The only way to enforce the new rules is to say to hundreds, thousands, tens of thousands of managers, ‘This five-day thing matters more than performance. So don’t worry about hitting performance targets. We care more about getting people in.’ And that just makes no sense for the business,” Bloom says. Ultimately, companies care most about the bottom line, he says—therefore hybrid is likely the model most will adopt over the coming decades.

In the study of Trip.com by Bloom, Han, and Liang, hybrid work reduced the employee turnover rate by 35 percent. Given that each person who quit cost the company approximately $20,000 in advertising for new hires, interviewing, recruiting, and training, a hybrid model that didn’t damage productivity and reduced turnover by one-third was cost saving.

“Hybrid is so profitable,” Bloom says, adding that its profitability can serve as a counterweight to CEO opinions about the primacy of in-office work. “I always tell people who prefer WFH, ‘You should be thankful that America’s a capitalist economy, because capitalism is actually your friend.’ In capitalist economies, what is profitable sticks.”

CEOs of large companies may argue that imposing return-to-office mandates can improve productivity, which can boost a company’s bottom line. But the mandates instead lead to declines in employee satisfaction while having no meaningful effect on the company’s financial performance or market value, according to University of Pittsburgh PhD student Yuye Ding and Pitt’s Mark (Shuai) Ma, who analyzed data from 137 S&P 500 companies that announced RTO mandates. The findings are consistent with the idea that companies may use such mandates to both reassert control over their employees and scapegoat them for financial performance that is suffering for other reasons, Ding and Ma write.

If a company announces that it’s going from fully remote to hybrid, it should soften its language so affected employees don’t feel so alienated, Gibbs recommends. “Communicate that we are losing our sense of community, our innovation—and these things are important to us,” he says. Companies need to explain that they believe it’s crucial for the employees’ own professional development to be present sometimes, and it’s important for the sake of collaboration, but also “that we want you to have the better work-life balance that remote tools allow us to have.”

And for the companies that are calling everyone back in full time, Gibbs suspects they may ultimately rethink that strategy. Over the next decade, he says, in many occupations, “hybrid will be the expectation.”