A post-pandemic study shows that return-to-office (RTO) mandates for employees working from home since the pandemic lowers employee satisfaction without improving firm performance. The study also supports the contention that managers using firm performance as a reason for RTO mandates are using working from home as an excuse for poor firm results.
As the impact of the COVID-19 pandemic continues to recede, should companies that had let employees work from home during the pandemic call them back to the office? Many managers argue that employees in the office are more productive and that working from home reduces firm performance. Many employees counter that eliminating commutes and giving employees more flexibility enhances their productivity, leading to better firm performance.
Research from the University of Pittsburgh’s Katz School of Business argues in favor of letting employees work from home and uncovers some dubious reasons for management calls to return to the office.
The research focused on 137 S&P 500 firms that publicly announced their decision to eliminate pandemic-era work-from-home options for employees. Comparing these focal firms to S&P 500 firms without RTO mandates, the study showed that companies were more likely to require employees to return to the office if they were larger, led by male CEOs with greater power (determined by the proportion of their compensation compared to the average compensation of the top four senior executives), and were underperforming on the stock market.
High-tech companies, companies with significant institutional investors, companies in regions with long commutes, and companies in competitive industries were less likely to issue RTO mandates.
The study’s authors offer logical explanations for some of these results. The more complex operations and greater number of employees of larger firms can explain why they would seek to have employees in the office, according to the study’s authors. Likewise, the inherent flexibility of knowledge work as well as the fear of losing valuable employees can, on the other hand, explain why high-tech companies and companies in competitive industries are less likely to call their employees back to the office. Intuitively, long commute times also favor working from home.
The results of the study, however, also indicate some hidden motivations behind post-pandemic RTO mandates.
First, that male CEOS with greater power want employees back in the office seems to support the contention from many employees that RTO mandates reflect efforts by managers to exert greater control over them, rather than out of any concern for firm results.
Second, it could be argued that firms with a weaker stock performance want employees back in the office because managers believe working from home reduces productivity and lower firm performance. However, institutional investors, arguably as sophisticated in their assessment of corporate human relations as managers, did not believe work from home harmed productivity, according to the study. In addition, CEO ownership of shares in the company, also included in the study’s analyses, did not impact the rate of RTO mandates, indicating that CEOs with a greater personal stake in their companies did not believe that work-from-home harmed firm results.
All these factors led the authors to conclude that concerns about firm performance were justifications used by managers in weaker-performing companies who want to blame poor results on work from home, and power-hungry managers seeking to grab back their pre-pandemic power.
Ceding to such justifications can ultimately undermine rather than improve company performance. Their analysis of the data showed that employee satisfaction decreased when they were mandated to return to the office. Diving deeper into this decreased satisfaction, they found that RTO mandates led to significantly more negative views of the work-life balance in their firms, the firm’s senior management, and the firm’s cultural values.
The study’s analysis of firm performance indicators before and after an RTO mandate is imposed indicates that there is no significant improvement that occurs when employees are brought back to the office further proof that corporate leaders do not have a legitimate economic argument for an RTO mandate. The study was based on an analysis of the companies in the S&P 500, 137 of which had publicly announced their decision to bring employees back to the workplace and were designated by the researchers as the focal RTO companies. Economic data and information about the companies were collected from news reports and other sources. Information about employee attitudes toward RTO mandates were collected from comments from employees on the Glassdoor website.
The core conclusions of this study that employee satisfaction dips significantly and firm performance does not improve after RTO mandates and that productivity and performance rationalizations by managers can mask power-grabbing and scapegoating motivations indicate that any return-to-office decisions must be carefully considered. Is there truly an economic justification for returning employees to the office? Will productivity worsen rather than improve because of employee dissatisfaction? Could your organization lose key employees who can find work-from-home opportunities in other firms? Do managers in your organization have hidden motivations for wanting employees in the office? This study raises important questions that should be answered before any decisions are made.
Yuye Ding’s profile at Pitt Katz Graduate School of Business
https://www.linkedin.com/in/yuye-ding-81a01817b/
Mark Ma’s profile at Pitt Katz Graduate School of Business
https://business.pitt.edu/professors/mark-ma/
Return-to-Office Mandates. Yuye Ding, Mark (Shuai) Ma. SSRN (January 18, 2024). Available at SSRN: https://ssrn.com/abstract=4675401.
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