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The headlines are prominent in the business press—commercial real estate is battling a massive decline, and companies are bringing reluctant staff members back to the office. The trends of the last few years are changing, but are they changing for the right reasons?
According to JP Morgan, commercial real estate vacancy rates in the U.S. reached 19.3% in 2023. Coupled with high interest rates, the market for buying, building, and renting these spaces is depressed.
Meanwhile, many professionals are making a flexible work environment a priority. Last year, the U.S. Census Bureau reported that the number of fully remote workers had tripled since 2019. Data from McKinsey & Company indicate that 58% of workers can work remotely at least one day a week. Further, 87% of workers who have the choice to work remotely take advantage of the option.
The era of the hybrid work environment is underway.
In 2020, my company began surveying business leaders to better understand their perspectives on this topic. At the high point in 2021, 26% of leaders expected on-premise work to return to pre-pandemic levels. Continuing through 2022, more than 63% of leaders expected on-premise work to decline.
In 2023, we saw a dramatic change, with half of respondents expecting a return to pre-pandemic levels.
That change is dramatic, but the question we must ask is, “Why are companies making such a dramatic shift at this time?”
Two primary factors appear to be influencing this change. The first is the simple fact that companies are responsible for large chunks of unused office space. There’s a perception by leaders that if they have it, they should use it.
The second and more important issue is that companies have seen a productivity dip from their virtual employees. More specifically, that dip is with teammates who have been primarily virtual throughout their time with the company.
Is there a soft benefit to working face to face that helps employees become more productive? Productivity data would indicate as much. How much face time is needed to achieve the desired level of productivity?
Some level of change is necessary.
Managing a 100% virtual or a 100% on-premise organization is well understood. Effectively managing a hybrid environment is different. Here’s a standard industry scenario:
A company establishes a policy requiring two days in office, three days remote, no anchor days, and a flex schedule that allows employees to create their own schedule. The nature of this approach results in people showing up to the office without purpose and no guarantee that the people they want to collaborate with are in the office. Office meetings are often conducted behind closed doors. With the ability to set their own schedule, few employees are in the office on Mondays or Fridays. Unsurprisingly, employees begin to question why there is a mandate.
So, how do we solve these issues?
First, the process for onboarding employees has to change. Over the last five years, most companies have evolved where and how they work, but they haven’t significantly changed their onboarding process.
According to Qualtrics, 28% of employees are leaving their new job within 90 days. These professionals cite issues such as feeling out of sync with the company’s culture or mission, not understanding their impact, and discovering their responsibilities were not as advertised. In other words, they did not connect with their colleagues and the mission during onboarding.
Second, companies need to step away from “mandate days” and start to focus on “magnet days.” In other words, give employees a reason to be in the office and work face to face with colleagues. That might mean face time with their leader or collaborative working sessions.
For this to be successful, the office space needs to be configured to encourage collaborative work. A farm of cubicles and individual offices is not the answer.
A company might decide to set an expectation that teams are in the office 20% of the time, but rather than focusing on which days they are in office, leaders focus on what they are accomplishing when they are there. For instance, teams can set aside a period when they’ll be working on budgeting and strategic planning together. Another period might be focused on brainstorming and launching a large new project. In both scenarios, the face-to-face interaction among team members is valuable and understood by team members. Meanwhile, leaders will be able to further establish culture and productivity expectations.
Navigating these changes is difficult. What is clear is that a one-size-fits-all approach does not work. While there is consensus that employees can be productive wherever they work, there are some aspects of the job that are best done in person. This is a reality not lost on most professionals. Therefore, a well-thought-out and designed hybrid approach will likely be a viable solution for many organizations.
