Chapter 2
10 MIN READ

The Business Perspective

Hybrid work from the business perspective has manyfold angles: Human resources, finance, ESG or an operational lens. In this chapter, we'll have a systematic look from the perspective of these different corporate functions.

On a general level the transition to Hybrid/WFA seems to be highly attractive, if done the right way - 62% of European business leaders reported that hybrid working makes companies more profitable. Without going into detail, it seems that the transition to hybrid work / WFA becomes turns out to be a rather business critical move. Of course, the benefits of WFA cannot be achieved by simple cancelling office lease contracts and hoping that employees will find their way and organize themselves with less space. Hope has never been a good strategy. The process of moving to hybrid needs to be carefully planned for and managed. This has given rise to a new Job profile, the “Head of Hybrid Work” or “Head of Work-from-Anywhere". The person owning this role should lead the organizational transition to a hybrid work environment in a strategic and methodical manner, with the goal in mind to preserve existing company culture and engage new talent. As the pandemic is getting into a more manageable, less emergency-type phase, the future work model can be planned and implemented. We'll have a look at what seems to be important from HR, Finance, ESG and Operations perspective.

HR / Employer perspective

Competition for talent is huge. Therefore, the potential advantages of hybrid work from an employer’s perspective are highly relevant in two points of view:

Employee retention

Hardly a day goes by without another study proving that a callback to the office is a valid reason to change employers: In a survey by consultant agency Grant Thornton LLP of more than 1,500 U.S. workers, 79% said they wanted flexibility and 40% said they would look for another job, if they were forced to be at their desks full time. 55% of employees say that whether or not they can work flexibly will impact if they will stay (Gartner). 46% of employees say they’re likely to move because they can now work remotely (Microsoft 2021 Work Trend Index); Remote opportunities are more attractive to diverse applicants (Microsoft 2021 Work Trend Index). The list could easily be continued. (see “interesting links” box)

Remote/hybrid benefits

“My physical health has never been better. I can manage my time in a way I have never been able to do before, my commute to work has given me back 3 hours per day back into my life and I use to it be more physically active and physically present with my family.”

This quote summarizes well what employees see as advantages of not going to the office - which office will be attractive enough to match "3 hours per day back into my life"? "Being able to work anywhere and having the office only as a choice is more crucial than free fruit or a football table in the company building." (Jens Weller, Managing Director of Toplink). Forcing employees to the office after having "tasted" remote will result in a HR disaster. Overall, many have adjusted to working from home and are now experiencing more benefits than they were in October 2020. For example, 50% say they have more time to exercise (a 19% increase from before) and 51% say they feel less stressed (a 22% increase). Women, in particular, are experiencing the benefits, with 48% saying they have more time to exercise (a 27% increase) and 56% saying they feel less stressed out (a 30% increase) before. Not having to commute remains the #1 benefit at 52%, but is a drop from the previous 60%. (Ten Spot survey, see links box). Which of these benefits a company is able to offer heavily depends on the hybrid model offered (see "Hybrid Work Models" section). The more flexible the model, the better the above cited benefits can be realized. Being able to offer a maximum of hybrid work related benefits will become a critical tool for employer attractiveness.

Talent anywhere?

"Companies should take these needs, which involve a completely new work culture, very seriously. Otherwise, they may find it difficult to attract young and innovative employees in the future."
- Nelson Taapken from EY.

Worse, they might not only find it more difficult to attract talent, but due to an increased "outreach", you may find yourself with new competitors in your "local HR market" - because with hybrid work, there is no more local HR market. The Wall street journal published a remarkable feature about startups from Denver losing their best talents to the Silicon Valley tech giants (see readings box). And of course, thanks to the global 'rankingmania', there's already a ranking for the best work-from-anywhere cities. The most important HR potential of Hybrid Work for companies lies in the expansion of the search radius for talent. If new employees no longer have to come to a fixed physical office (every day) but can work from home, the search can be significantly expanded geographically. Limitations in the future are more likely to lie in country-specific conditions; an "international payroll" is often uncharted territory for smaller companies. As already explained in the context of benefits, the possibilities for expanding the talent search also depend on the hybrid work model selected: With two or more fixed office days, for example, there must be a certain geographical proximity of an employee to a company location; with the completely flexible model, this aspect plays a subordinate role. This is particularly important with regard to the employment of "digital nomads" or employees that would like to work permanently from a remote location.

Different degrees of flexibility

Flexibility isn’t just about the choice of working from the office or home. It’s about having choice within those settings, as well. The term flexibility relates to place and time as well as collaboration mode. According to EY's study from May 2021, a good 80 percent of respondents want complete flexibility in working hours. Enough data has been presented on preferences regarding place. Flexibility with respect to work modes (e.g. synchronous vs. asynchronous) is yet another element. The "Hybrid Work Models" section will further detail the different options.

Risks of poorly planned hybrid work

The partial return to office from a full remote scenario might create challenges to specific groups of employees and thus threatens to reinforce social inequalities and jeopardize companies’ diversity, equity, and inclusion (DEI) efforts. Adapting child care patterns for instance to a new hybrid work scenario might take time despite all the flexibility the model offers. Calling back specific groups of (lower-level) employees to full in-person work while higher ranks can choose within a flexible WFA scheme can create tension. Hybrid work / WFA policies that have validity for all employees are a potential solution (see "Policies" in "Legal Side of Hybrid Work" section below). When planning the transformation towards hybrid make sure to:

To summarize it: You can increase your attractiveness as an employer by giving your employees maximum autonomy over when and where they work in your particular industry. This can help you find, retain and motivate the best talent. At a time when competition for talent is huge, creating an organizational structure that doesn’t include the employees’ preferences can result in turnover, as employees leave for greater opportunity and engagement, and it becomes increasingly difficult to attract ideal candidates. The "Default digital" or "Dynamic hybrid" model (see section "Hybrid Work Models" below) seem to offer the most autonomy in terms of workplace and therefor best align with HR goals of keeping and attracting talent. A closer look at the more operational side of HR will be given later in the Hybrid Employee Journey section. The introduction of a hybrid work model bears many potential business benefits; organizations that can successfully navigate these benefits will most likely enjoy a competitive edge.

CFO / Cost

In June and July 2021, a figure got prominent in the hybrid work discussion. According to Kate Lister from Global Workplace Analytics, "...a typical employer can save about $11,000/year for each person who works "remotely" half the time." We don't know how much this figure has influenced the numerous large financial institutions and tech giants announcing to move to hybrid work (and reduce space). But we can be certain that the finance department hasn't been excluded in the decision-making process. There are two areas directly relevant from a cost point of view: Office space and mobility. A third dimension will start appearing on the spreadsheets, which is the price for carbon dioxide. It's share in real estate (climatizing buildings) and mobility will increase substantially in the future and thus exacerbate the effects of hybrid work described below.

Real Estate and Office Space

The real estate industry doesn't (yet) buy this logic. Most statements talk about a temporary ditch and expect future growth of the corporate real estate market. Whether that's a dream of real estate brokers or based on hard facts is difficult to say because nothing is said about the time horizon. Given the announcements of large players in industries that are susceptible to hybrid work (e.g. finance, consulting, IT) and the latest studies (74% of Fortune 500 CEOs expect to reduce office space) it seems fair to say that - at least - in the short- and midterm, no growth in space is in sight. Most of the large financial institutions and also many large consultant agencies have announced, that they will provide physical office space for a maximum of 60% of their employees. Whether this will lead in all cases to a downsizing of office spaces isn't yet clear as many companies are planning to transform their offices in order to increase their functional qualities to accommodate new ways of working. One observation can already be made today: The role of the physical office will change and with it the way office space is planned and used. Therefore the "destiny" of the physical office will depend on it’s role in a future work model. First papers propose that the physical office will provide workers with a social anchor, facilitate connections, enable learning, and foster unscripted, innovative collaboration, but it will no longer be a place to carry out routine tasks or meetings. Being clear about the purpose of the office space will be important: what exactly do you expect employees to do in the physical office? What type of activities are going to happen? Which percentage of employees am I expecting to be at the office at the same time? Making these assumptions explicit will help to devise a long-term plan for your corporate real estate.

Source:
Designing the Hybrid Office
74% of Fortune 500 CEOs expect to reduce office space

Mobility: Business travel and commuting

“There will be some things, like business trips, that I doubt will ever come back. I mean, there will be business trips, but less.”

There seem to be at least two reasons why this prediction set up by Bill Gates at a very early phase of the pandemic will materialize:

  1. Employees who make very frequent business trips were surprised during the first lockdown how much less stress is perceived by the elimination of business trips. The unanimous reaction was that in future the assessment whether business travel is necessary would change.
  2. With companies starting to develop new criteria for business trips, a significant reduction in travel budgets can be expected with the shift to a hybrid work model. Internal meetings in most cases don't figure on the criteria list - personal relationship building with clients does.
  3. On top of these personal and financially driven reasons, the Increasingly obvious consequences of climate change acts as an additional brake on avoidable business travel. With CO2 pricing the cost of business travel will increase reinforcing the savings effect of replacing physical meetings with virtual ones . Last but not least, companies supporting employees' commuting will be able to reduce this cost by shifting to more hybrid work. Cost for allowances or vehicles fleet can decrease substantially.

Operational

The experiences made with the Covid-19 pandemic displayed the role of remote/hybrid work for business continuity. What happens if due to an external shock - be it health-related or other (e.g. natural disasters) - the office building infrastructure cannot be used as normal? Companies with high or full remote workers proportions did experience a lot less problems than companies without prior experience with remote work and the necessary technical infrastructure . In search for hybrid work solutions, the objective is to provide minimal friction for employees between the different workspaces. Ideally, a workspace always appears the same to the user, regardless of whether he is in the office, working from home or on a business trip. Companies can thus react more agilely to growth or external events. hybrid work models create the basis for smooth operations without having to modify organizational processes in favor of a business continuity plan every time there is a crisis. Remote working capabilities will become part of a resilient corporate or institutional structure. Certain hybrid work models are not sustainable in terms of business  continuity. If for instance, the company agrees on working from home / the office the same days ("synchronized hybrid") - a currently particularly popular model - in-person office days for all employees won't be an option if disease transmission is an issue. Based on the experiences with the Covid-19 pandemic, companies start thinking about temporary shifts to more remote work as a smart preventive move during the yearly influenza season. Other operational challenges will be dealt with in the more operational sections (HR, Legal, Hybrid Work Models).

ESG

As mentioned above the environmental consequences of daily commuting to work as well as business travel are subject to increasing attention. With climate change induced regulations based on the Paris agreement and the further adoption of the UN's Sustainable Development Goals by companies (e.g. by means of the Global Compact) the role of ESG (Environment, Social and Corporate Governance) becomes increasingly important. As companies start to implement ESG reporting, hybrid work is very certainly on the plus side, as not only the carbon footprint is reduced but also social criteria such as compatibility of career and family or inclusion can be positively influenced by hybrid work.

The introduction of a hybrid work model bears many potential business benefits; organizations that can successfully navigate these benefits will most likely enjoy a competitive edge. So the challenge for managers is to find the right hybrid model for their organization, and make it work.

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