Commercial real estate, computer hardware, catering, utilities, cleaning staff, supplies and physical security are just some of the costs eliminated when employees work from home.
On July 22, I hosted a panel for Tehama’s Digital by Default Summit on the costs and potential savings associated with remote work.
One of our panelists was Susan Richards, managing partner of numbercrunch inc., which offers outsourced CFO services for small business clients. When asked if she would consider ditching the traditional office, based on numbers alone, she had an illuminating answer.
“As a managerial accountant by profession, I probably would,” Richards said. “But all the companies that are bragging right now about how much they’ve saved during office closures as a result of the pandemic are fooling themselves.”
“It’s like bragging about water weight lost at the beginning of a diet.”
Get strategic about remote and hybrid work
Companies that have been forced into remote work during the pandemic may have experienced some early wins. But those in it for the long-term gain and cost savings will realize that, to be sustainable, it’s not as simple as having employees doing the same work in the same, old way using traditional tools and technology. Adopting a permanently remote workforce requires significant investment in other areas of the business.
It’s expected physical distancing requirements will be in place for the next two to five years. Average per employee occupancy has been reduced from an average of 211.4 sq. ft. in 2009 to 17.6 square feet in 2017, with a move toward more collaborative, open-concept workspaces. Employers need to consider how to retrofit offices to ensure employees can maintain six feet of distancing, a costly undertaking.
A recent survey by HR consulting firm Mercer highlights that 70% of companies employing knowledge workers will prioritize the implementation of remote or flexible working environments in 2020.
Remote work requires a long-term strategy that considers myriad factors:
- Company culture – creating cohesiveness among staff without catered lunches, stand-up meetings and on-site events.
- Organizational behaviour – firms with employees working remotely must embrace goal-oriented work, with built in accountability measures, like Agile.
- Technology – relying on traditional hardware, such as VPN technology and secure laptops on a limited network could create costly security and productivity issues.
- Collaboration – ensuring your remote work strategy functions across various teams and departments, and melds seamlessly with clients and partners who may not be so quick to ditch physical workspaces.
A transition to a sustainable remote and hybrid work structure requires complete realignment of investments and strategic priorities.
Weighing the costs and savings of remote work – Five key areas
When developing a cost-benefit analysis of creating sustainable, long-term remote work capabilities, consider these top five areas:
1. Commercial real estate
A study released by Deloitte in May found more than half of U.S. construction firms suspended commercial real estate projects, while three-quarters of investors postponed investment plans in the sector.
Shedding real estate, as companies have seen recently, can lead to big and immediate cost savings. Beyond the lease, other occupancy costs disappear, such as the need for on-site security, cleaning staff and supplies, utilities costs and employee transit subsidies.
Computer firm Dell claims it saves $12 million dollars annually by allowing employees the flexible option of working from home, or roughly $11,000 per employee per year. Most of this in real estate costs.
Savings: Rent, building security, insurance, cleaning staff and supplies, on-site catering, transit allowance.
Costs: Stipend for employees to subsidize utilities, internet, home office space and supplies.
Strategic considerations: Reimagine real estate as shared spaces, designed for hotel desking, physical collaboration and events. Carefully analyse the cost of stipends, legal and tax implications of having employees working at home, and experts you may need to engage to work through the details.
2. Employee productivity
Long commute times, technology advancements, and the new gig economy have all been drivers of a growing trend toward remote work over the past two decades.
Many knowledge workers are sick of the traditional 9-5, knowing they can do their job at home, with fewer interruptions. Gallup’s 2017 State of the Global Workforce Report tells us that 85% of workers in 155 countries are disengaged with their work, contributing to reduced productivity and performance.
A Global Workplace Analytics summary of 4,000 studies on Agile workplaces, on the other hand, shows how remote work can be an incentive:
- More than two-thirds of employees want to work remotely
- 80% consider working-from-home a job perk
- More than one in three (36%) would take a pay cut if telework was an option.
Savings: Increased productivity due to fewer distractions, reduced watercooler time, less absenteeism and lateness.
Costs: Implementing a system like Agile or results-oriented work to allow employees to work at their own pace, frequent training and skills upgrades, while accepting that employees may work flex schedules to accommodate childcare and other personal pursuits or ambitions.
Strategic considerations: Not all employees are productive at home. Workers with dependent children, those in small spaces or living in unsafe environments may need a physical work location separate from their home. Certain job functions may also be more suited to on-site group work.
3. Access to the global talent pool
Data firm, Pythian, has fostered a globally distributed workforce since it was created two decades ago. The Ottawa-headquartered firm has offices in New York, London and India, but even before the pandemic lockdown had 70% of employees working remotely.
Without the confinement of geographical boundaries, Pythian is able to source the best talent anywhere in the world, wherever there is a internet connection.
“Not only do we save on relocation costs and office infrastructure, but we find the best people for the job, wherever they live in the world.” Keith Millar, president of Pythian.
For 70 per cent of companies surveyed by HR firm Mercer, attracting talent from the external market was an driver of employee compensation.
Savings: Competitive salary incentives and signing bonuses required in a tight, geographically-confined labour market, relocation allowances and office infrastructure.
Costs: Focused recruitment efforts, technology, standardized virtual onboarding and training.
Strategic considerations: Firms that have had in-office work structures as their default position will need intel on nuances of labour markets in other parts of the world. Defined roles, language considerations and cultural understanding play a role.
4. Efficiencies in the cloud
Firms currently relying on patchwork technologies, such as secured laptops, VPNs and limited networks will find their biggest challenge to a smooth transition comes down to technology investments.
If your business is considering moving fully remote, (or implementing a hybrid workforce), Tehama’s highly secure Virtual Office as a Service (OaaS) platform is the fastest, easiest and most secure way to deploy virtual workers. Enterprises can instantly create virtual offices, rooms and virtual desktops in the cloud, anywhere in the world.
Savings: Reduced need for IT infrastructure, managed laptops, and software licensing. Tehama controls the firewalls, storage, and end-user computer infrastructure, along with security and access policies all in one place.
Costs: Tehama’s on-demand virtual rooms and virtual desktops include infrastructure, maintenance and security functions and can scale as the company grows.
Strategic considerations: For organizations going remote, security is the biggest hurdle. A solution with built-in compliance controls, (eg. SOC 2 Type II), multi-factor authentication and zero-trust networking isolation prevents breaches and abuse, and reduces risks associated with lost or stolen devices.
The pandemic and resulting lockdowns have severely limited travel and on-site collaboration. Companies have been forced to pivot quickly to determine new rules of engagement around prospecting, including how to conduct meetings and conferences. For employees, onboarding and training is a particular challenge.
Virtual experiences likely won’t replace in-person collaboration entirely, but firms can find savings if they spend their travel dollars strategically going forward.
“In some circumstances, I’ve become closer with my clients,” said Pythian’s Millar during our panel discussion.
Millar noted how a high-level, 27-minute meeting may have required extensive travel and time away from the office, whereas virtual meetings can be less formal and take more time.
“Now it’s just a click away and, although you’re not physically there, there’s been some real camaraderie that’s come out of this.”
Savings: Travel and accommodation, conference and training facilities, productivity, opportunities for more frequent relationship-building and contact.
Costs: Investments in digital platforms for collaboration, online marketing, content and communications tools.
Strategic considerations: In an overcrowded digital space, companies must determine how to stand out from the crowd. Employees may require training in online engagement with clients and prospects. Consider how to offer services to clients that may not have remote work as a default position.
Watch all Digital by Default sessions on-demand here!