Preamble
This blog is about work. How and where we work, and why the discussion generated by these questions is relevant to the future of work. The world of work is evolving. This blog will provide some history and context, highlight the push and pull between employees and employers, and sample some Return To Office (RTO) policy considerations. It’s important enough to repeat: The world of work is evolving. Correspondingly, this blog will try to keep pace.
Confirming and Refuting, Part 3
The COVID-19 pandemic has had an impact on how, and where, many people work. Prior to the pandemic, the vast majority of workers spent 5 days in the office every week. The shutdowns in response to the pandemic forced employees to work from home, or not at all, for an extended period of time. Companies have shared various reasons for instituting their RTO policies and mandating that their employees work from an office location at least part of the time, as we shared in our September 2024 article titled “Why RTO”. In Part 1 and Part 2 of this series on Confirming and Refuting, we looked at a variety of reasons that a company may be instituting an RTO policy. In this article, we’ll look at some additional reasons, typically not provided by companies.
Justify real estate investment / Return to normal
Jamie Dimon, CEO of JPMorgan, when speaking at an event in September 2024, said, “I can't believe, when I come down here [Washington DC], the empty buildings. The people who work for you not going to the office. That bothers me.” Real estate is a big expense for companies. It’s impactful on an employee when they see the empty rows of cubicles or hear the silence of a nearly empty office. Some executives may question why the company is spending so much on rent if the space is not being utilized.
Some companies had the foresight to renegotiate their leases in response to the lockdowns at the start of the pandemic, as evidenced by current office vacancy rates hovering between 20-25%. Not every company had the foresight, and others may not have the flexibility to shed office space. Companies may be in longer-term rental agreements which would incur penalties for early termination. In other instances, the company may be locked in to specific real estate because the location is inexorably linked to the brand or the industry. For example, all of the major investment banks have offices in lower Manhattan, some of the most expensive real estate in the world.
Whatever the reason, companies that maintained a similar level of real estate footprint may have only one course of action: fill up the space by mandating employees return to the office.
Follow the leader
Most industries have a leader, a company that has the highest market share or biggest name recognition. Other companies in the industry may institute a policy that the leader is implementing, for fear of falling further behind the competition. This strategy was evident during the job boom from a few years ago - one company would provide free snacks (or nap pods or on-site baristas or unlimited PTO, etc.), and other companies followed suit for fear of missing out on finding top talent.
In the current economic climate, the trend is occurring in the other direction. The leader in an industry is mandating employees return to the office, and other companies are following suit, for fear of falling further behind the leader in productivity, and eventually market share. Goldman Sachs, the global leader in Investment Banking, is mandating employees back to the office full-time, so JP Morgan, Morgan Stanley, and other investment banking firms are following suit.
Corporate roles are experiencing a similar phenomenon across industries. The motivation is less about fear and more about level of control. If big names like Chipotle and Disney and Salesforce can mandate their corporate employees to be in the office four days per week, then lesser known companies can shift from fully-remote to a three day per week RTO policy and still look more appealing than their competition.
Alternative to layoffs
For most employees and companies, one of the most undesirable corporate events is the layoff. A company that enacts multiple frequent layoffs will lose some of its appeal as a destination for high performing employees. A reduction in headcount does result in reduced cost, despite the unfortunate nature of layoffs.
Imagine this scenario: A layoff-averse executive may ask the question “how can I reduce headcount without enacting a round of layoffs?” While scrolling their news feed, they come across an article titled “Amazon employees are ‘rage-applying’ for new jobs”. And just like that, an idea is hatched: institute a restrictive RTO policy and enforce it vigorously, with the hope that the company reduces headcount via voluntary quitting. In a study of over 1500 employees (of which 500 were in HR), BabmooHR discovered that scenario. The survey found that 25 percent of executives and 18 percent of HR staff admitted that RTO was being instituted to reduce overall headcount through employees voluntarily quitting.
This strategy has two unintended consequences. First, higher performing remote employees may be more comfortable in their ability to land a new job rather than relocating to adhere to the RTO policy, thereby reducing the company’s overall workforce productivity. Second, if fewer employees quit voluntarily, the company may have to institute layoffs anyway, further demoralizing their workforce.
The Bottom Line
Collaboration, innovation, and mentoring seem like logical reasons for mandating employees back to the office. Research and case studies that have shown ways for companies to increase collaboration, innovation, and mentoring even in a fully remote work environment.
Up Next
January 2025: Confirming and refuting, part 4
Citations
Jamie Dimon is bothered by federal employees not working in their D.C. offices 5 days a week, Fortune, September 2024
Angry Amazon employees are ‘rage applying’ for new jobs after Andy Jassy’s RTO mandate: ‘I will not go back’, Fortune, September 2024
The list of major companies requiring employees to return to the office, Business Insider, October 2024
Our Shameless Pitch
Regardless of which work policy your company chooses to implement, The Parking Lottery can help make your employees’ in-office experience more palatable and less frustrating. A more fulfilling in-office experience leads to higher employee retention. It’s also a perk that serves as a differentiator to attract new talent. Contact us for more information.