Article by James Montgomery

A sideways look at economics

As I write this post, I must admit that I’m doing so in extreme comfort. I slept an extra hour and a half; I had my breakfast at the kitchen table while I checked some emails; and I’m infinitely more relaxed in my joggers than I am in my jeans. This isn’t because Fathom’s dress code and working environment has become extremely lax in the last few months. Rather it’s because I’m working from the comfort of my own home. Over the course of my very relaxing breakfast, I began thinking, why can’t I do this more often? At Fathom, the answer is perhaps because most of our work only gets done after long, impromptu, face-to-face chats with colleagues, where countless ideas are bounced around from one to another. However, the question that those against working from home tend to raise is: can you really be that productive out of the office?

A recent study by Professor Nicholas Bloom of Stanford University, carried out in conjunction with the NASDAQ-listed Ctrip,[1] a company that employs 16,000 people, suggests that you can. Bloom ran an experiment where a group of employees was split into two: one group was told to work from home four days a week, and come in to the office one day a week, for nine months; while the other group was in the office in Shanghai Monday to Friday, 9 to 5 as Dolly Parton would say! His study found that there was a 13% increase in productivity among the employees that worked from home. Of this, nine percentage points was attributed to working longer hours, with the remaining four percentage points reflecting higher productivity per hour. The study also found that those who worked from home had a higher level of job satisfaction, more positive psychological attitude scores, and a job attrition rate more than 50% below that of their less fortunate colleagues forced to traipse into the office each day. Closer to home, there is some evidence that UK employees are becoming more productive as a result of the work from home boom. According to a YouGov survey, highlighted in the chart below, by an admittedly narrow margin, managers felt that work produced at home was, on balance, of a higher standard than that produced in the office.[2]

pros and cons of working from home

However, we should be wary of jumping to conclusions. The subjects of Bloom’s study were call-centre workers, with a job that required little more than a working phone line and an internet connection. In a job that involves number crunching, a company-provided laptop, lacking the grunt of the machine one is used to in the office, may end up hindering productivity. And who knows, productivity may fall to zero when frustration at seeing one’s laptop repeatedly freeze grows so large that the object is thrown out of the window! Nevertheless, it’s an interesting finding that begs the question: if workers are happier and more productive working from home, should working from home be less stigmatised, if not actively encouraged? There is evidence that this is happening in the UK, with the number of people working full-time from home rising sharply from 0.9 million in 2008 to more than 1.5 million in 2018.[3]

Bloom’s study got me thinking: why would people be more productive at home than in an office environment? A survey of 2000 employees in the UK, the US and Australia carried out by Ring Central[4] provides a few clues. They found that unscheduled meetings were the primary cause of workplace disruption, cited by close to half of those surveyed. In fifth place was idle chit-chat with colleagues, which was a problem for around a quarter of respondents. Working from home allows employees to cut out such distractions, perhaps leading to higher productivity as a result.

Offering a more flexible working environment may also benefit employers. According to a paper published in the Journal of Political Economy, the typical Uber driver, who perhaps enjoys the most flexible of all working environments, would require a pay increase in excess of 50% in order to induce him or her to give up that freedom for a more rigid working pattern.[5] This may be an extreme example, nevertheless a 2017 study found that, on average, employees would be willing to give up close to 10% of their pay for the option to work from home.[6] And with fewer employees in the office at all times, companies could introduce a ‘hot desking’ policy, requiring less office space. In central London, where Fathom is based, this would significantly reduce overheads. It is tempting to conclude that there is scope for employers to offer staff greater flexibility, in order to cut operating costs and improve profits!

If employees are more productive, and employers are saving money, why doesn’t everyone work from home, at least some of the time? There are likely to be a number of reasons, varying from a fear of ‘missing out’ on the part of employees, to a lack of trust on the part of employers. Perhaps more pertinent, though, is that while working from home may confer private benefits, it is not without its social costs. It is quite possible that the productivity improvements found by Professor Bloom do not tell the whole story. Given the ability to plan your workload, it seems perfectly plausible to me that, individually, you can be more productive when working from home — there are no irritating phone calls to answer, no last-minute meetings to attend, and so on. But what of those left in the office? They would lose access to part of a vital network within the company — you! In a well-run organisation, with an effective workforce, the physical presence of every individual at their place of employment ought to confer positive network externalities. You may feel that your personal productivity suffers when you get dragged away from your desk to discuss some pressing matter or other, but the productivity of the company as a whole is improved — otherwise those last-minute meetings would not happen! In focusing on the impact of one’s own productivity when working from home, one may be missing the bigger picture.

So, what is my conclusion then? Working from home undoubtedly has its benefits for the individuals involved, with more time in bed, and all the comforts of home. It may even benefit the employer, through higher productivity — though beware the risk of externalities — and lower wage costs. I must admit, I have just noticed that I’ve been writing for over an hour uninterrupted, and it is now gone 6:00pm! But the evidence of a more productive workforce is not so overwhelming that other factors can be ignored. And ultimately, a company like ours thrives in a collaborative environment that is impossible to re-create using the web! So, after all that, it looks like I’m heading back to the office…

Happy Friday!

 

[1] Bloom, N. (2015) ‘Does Working from Home Work? Evidence from a Chinese Experiment’, The Quarterly Journal of Economics, Volume 130, pp. 165-218.

[2] Findings by YouGov omnibus.

[3] Statistics from the Office for National Statistics.

[4] From a paper by Ring Central,  ‘From Chaos to Zen, How app overload is reshaping the digital workplace‘.

[5] Chen, K., Chevalier, J., Rossi, P., Oehlsen, E., (2019) ‘The value of Flexible Work: Evidence from Uber drivers’, Journal of Political Economy, Volume 127, No. 6.

[6] Mas, A., Pallais, A., ‘Valuing alternative work arrangements’ (2017), American Economic Review, Volume 107, pp. 3722-3759.