Working from home (WFH) or hybrid arrangements can dampen employee innovation. According to a study based on data related to nearly 50,000 employees, WFH reduced the quantity of employee innovative ideas, while hybrid working reduced the quality of the ideas.
Having discovered the benefits of working from home (WFH) during the COVID-19 pandemic, notably the improvement in work-life balance, many employees are reluctant to return to the office full-time. One reaction from business leaders is to offer hybrid working arrangements that include a mix of work-from-home and work-from-office (WFO) hours. A team of economists from the Universities of Chicago, Essex, and Heidelberg studied the impact of the three different potential work arrangements work from home, work from the office, and a hybrid of the two on the innovation output of employees.
The data for the study was collected from HCL, an Indian IT company that encourages employees to contribute innovative ideas to its Intranet “Idea Portal.” These ideas can be large or small as long as they benefit the company or its clients. Each idea is first reviewed by a supervisor, who can reject the idea or pass it on to a panel of executives for further consideration; if approved by the panel of executives, the idea is passed on to the client for final approval. If approved by the client, the idea is implemented.
During the period of the study, the company had three different work modes that applied to all employees: 1) before the pandemic, employees worked from the office; 2) in response to the pandemic, employees worked from home; 3) when the pandemic abated, the company adopted a hybrid work arrangement for all employees.
By analyzing the submitted Ideas over time and correlating the ideas to the three different work arrangement periods, the researchers identified the impact of the different work modes on the quantity and quality of employee innovation. The quantity measurement was the average number of ideas submitted per month by employees. The quality measurement was based on three levels of quality: whether ideas were accepted for implementation, whether they were shared with a client, and whether the client approved the ideas (i.e., how the client rated the ideas).
In terms of quantity, employees submitted on average approximately the same number of ideas per month whether they were working from home or working from the office. When employees were working under a hybrid arrangement partly from the office, and partly from home they submitted a significantly lower number of ideas per month relative to the WFH and WFO periods. For example, during the hybrid working period studied, employees submitted 22%fewers ideas per month on average than when employees were working from the office.
The study also showed that during the hybrid working period, variation in office presence among members of teams can significantly impact innovation. For example, one team may have no variation among team members: every team member works 2 days from home and 3 from the office. Another team may have significant variation among team members: some work almost full-time from the office, some almost full-time from home, and others fall at various ratios of office and home. The employees on these high-variation teams contributed fewer ideas than employees on -variation teams. The takeaway: the negative impact of hybrid working can be attenuated if the team members share the same schedule.
In terms of quality, the study showed that the quality of ideas from employees when they were working from home was lower than the quality of ideas submitted by employees when they were working from the office. For example, employees working from the office submitted innovation ideas that were nearly 10% more likely to be shared with the client and nearly 20% more likely to receive a high client rating than ideas submitted by employees during the WFH period. During the hybrid working period, although (as shown above) the number of innovative ideas decreased compared to the number of ideas submitted during the WFO period, the quality did not.
This study shows that working out of the office can impact innovation. While hybrid work reduced the quantity of innovative ideas, working from home reduced the quality of the ideas. That said, companies may want to look at the big picture: the benefits of improved work-life balance might be worth the cost of lower innovation.
In addition, companies can improve innovation from WFH or hybrid work employees by taking steps to overcome the disadvantages of not working from the office. These steps can include:
Michael Gibbs’ profile at the University of Chicago Booth School of Business
https://www.chicagobooth.edu/faculty/directory/g/michael-gibbs
Friederike Mengel’s profile at University of Essex – Department of Economics
https://www.essex.ac.uk/people/MENGE73905/Friederike-Mengel
Christoph Siemroth’s profile at University of Essex – Department of Economics
https://www.essex.ac.uk/people/SIEMR68709/Christoph-Siemroth
Employee Innovation During Office Work, Work from Home and Hybrid Work. Michael Gibbs, Friederike Mengel, and Christoph Siemroth. University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2024-89 (July 29, 2024).
Available at SSRN: https://ssrn.com/abstract=4909536 or http://dx.doi.org/10.2139/ssrn.4909536
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