Office mandates don’t help companies make more money, study finds::Three years after the coronavirus pandemic sent people to work from home in record numbers, U.S. employers are still struggling to get people back to the office.
Companies likely lose money with more workers in the office. More electricity, more water, more supplies. More unhappy employees, more tired employees, more good employees looking elsewhere for WFH jobs.
Probably sunk cost fallacy with the lease. Building is paid for, why not use it and also be better able to micromanage your drones?
In many cases they don’t even own the building!
The leases are often very long term like 5-10 years. So they are locked into paying for the building or risk hurting the company’s credit lines. So in a sense, they have paid for the building use. Which I think was OP’s intent, since they mentioned the lease.
Sure but leaving it empty until the loan expires is still cheaper. My point is, in most cases it’s not the company’s problem if the building they have their office in loses value because it’s empty and no one wants to renew their contract, so why force employees to go back?
You’re right, and you’re pretty much describing the sunk cost fallacy as well.
They probably don’t save much money that way though. You stop have to keep the place warm enough and clean enough to prevent mold and frozen pipes. Many are in bigger buildings with cleaning, maintenance and security contracts.
I suspect as dumb as it is, the moronic managers still think micro-managing makes up for the 5-10% cost of employees there (might even be less in some offices). And as said before, they usually at best break even, while alienating the smarter employees who go find wfh jobs.
Yeah my language was imprecise, thanks for clarifying.
The implication is that when those leases come up over the next few years, office space will be cleared out, and we’ll see companies give up on return to office mandates. We’ll have a glut of commercial real estate to rezone and convert into residential apartments (either total rebuild or remodeling the existing space, depending on the building). Work from home should settle into a constant rate, perhaps even slowly growing as more workers come to expect it.
I see so many light thinkers arguing that this is all about real estate. Jesus fuck.
As a manager, I can tell you it’s not about management. None of us asked for return to office. In fact the vast majority of managers at my company have been pushing back hard, which is the only way we got a hybrid schedule. It really comes down to being all about real estate, local taxes, optics, C-levels stuck in the old ways of doing things and wanting to return to “the good old days”.
I don’t give a crap where my employees are working as long as they get shit done and can reply during business hours when shit hits the fan.
Management are just a bunch of pawns. I write this as a manager. It’s about the assholes at the top wanting to control other people’s lives.
They are holding bags that they want to get rid of before they need to accept the capital losses after assuming office real estate would be a sure bet and then the world changed in March 2020.
Enlighten us then, keeper of secret wisdom.
Fucking look up “sunk cost fallacy”.
Yup. I’m content with my usage. You want to elaborate and contribute or keep vagueposting?
Looks like a classic sunk cost fallacy to me. They pay that money no matter if the offices are filled or not.
It’s also to do with the fact that most research looks at company profit. But if you follow the paper trails, most of the high level managers that insist on return to office are investors on commercial real state ventures and/or funds that invest in these downtowns and office spaces. It’s bad for the company, but it’s good for their personal wallets. The authoritarian high is a plus.
But management makes all the decisions and having everyone physically accessible to their need for control makes them feel better.
Yep. I’m all about denouncing profit motive, but authoritarian motive is probably the worse force.
Forcing people back to office, firing thousands of tech workers… Yeah I don’t see why people don’t love working for these guys. Nobody wants to work!
Let’s all go to the office for the “collaboration” and team spirit. We are all a family here. :)
The Musk tells people to sleep on the factory floor, that’s how much he cares about people.
Amazing how when the argument is coming from the bottom up you have to have evidence, facts, numbers, etc. But when it comes from the top down “just knowing” and “a feeling” is more than enough.
Or how they always ask for feedback from people down the chain only to ignore it when taking decisions!
I see your company also had a townhall, which moved to an anonymous Q&A that doesn’t answer anything but softballs!
Workplaces are tiny fiefdoms where the people who make the goods don’t even get a vote.
Its an open secret that middle managers are trying to save their asses.
Every middle manager I know is openly opposed to forced RTO. It’s a huge pain in the ass from a policy enforcement perspective because, in their enthusiasm to make sure people are taking it seriously, they’ve decreased managers’ discretion for attendance. Now employees have to take a sick day if they can’t come in, even if they’re perfectly capable of working from home (eg a software dev with a broken ankle), or else have to jump through multiple hoops with HR.
I actually kind of like my office. It helps that I have an actual office to myself of course, but I do like the ability to put together a quick hallway chat or grab a room with a whiteboard and even just appreciate the higher bandwidth of communication I can get when physically present. But I also want to allow people to work from home if they’re having a TV delivered or if their kid is sick.
The standard, now rote, response from everyone up to the director level is pretty much “I know, it sucks. But it’s policy, and if you don’t do it there’s going to be consequences that I will not be able to handle for you.” They may put a happy spin on things for newsletters, but from where I’m from it’s seen as a legacy from an older culture running at the level of VPs and above who don’t have a direct hand in operations.
Nah. Middle managers would prefer to wfh, too. No one wants to lose 2 hours commuting.
I would rather have my team happy and working well rather than bitching about a crappy commute. I don’t enforce the organisation’s WFH rules on my team
And also just laziness. It takes more effort in leading a remote team and initiating intentional communication instead of doing the good ol’ drive-by management and let communication and coordination up to “your in the same room, you figure it out”.
It’s much harder to hide corruption when everything is being recorded!
As an anecdote I work in a 20 person team and we hardly have any managers nor meetings. I honestly haven’t even seen many of my coworkers I work with daily but we all keep loads of records from boards, to RFCs to traditional docs and wrap that all up with daily stand-ups. We’re incredibly productive.
Remote is amazing when done well and I don’t see how any CEO could say otherwise with a straight face. It saves so much money that all the “connection” gaps can be easily filled in with team building and workations and other events.
It is the future, well its already the present but many haven’t caught up to it yet.
The argument I see in articles is engagement. Remote workers are less likely to give feedback and are less loyal to the company they say.
I’m not sure remote work is responsible for that. There have been enough meetings where everybody in the office just nods along and loyalty went out the window after layoff waves became normal.
Although there is a camaraderie that is easier to build in office that keeps people around a bit longer, office politics also erodes that goodwill.
Companies themselves are responsible for less loyalty to the company. If a company doesn’t take care of their employees they never deserved their loyalty to begin with.
As someone who has been remote since 2020, I can definitely say I have far less loyalty to my employer than I did before. But my feeling is that I had far too much loyalty before, not that I don’t have enough now.
My quality of life has nothing but improved since going remote, and I can only hope that opportunity grows for more people in the future.
Its not about money. It’s about power and control. Corpos only care about one thing, and thats power. What good is money if you can’t use it to lord over someone?
It’s several things.
- They believe people work better when they have team mates around them
- They believe there are synergies from water-cooler conversions
- They believe managers need to see their staff to know they’re working
- They believe people in the office are best for teaching new starters
- They believe that since they are paying so much for office space it would be a waste to not use it
Probably more than that.
Some of it’s true.
They don’t understand what it costs. They don’t understand that people resent having to commute to do the same work they could have done at home.
I used to have a manager that would micromanage everyone and come and stand behind you and make comments usually asking why you weren’t working on X. X was always something other than what you were doing, he was never happy.
Now he can’t do that anymore. Unsurprisingly productivity increases when an overbearing idiot can’t stand behind you.
Yeah that’s a good answer. A part of the problem is management not understanding that not everyone payroll is an extroverted, type A person. Most folks will actually be more productive if they can fuck off to walk the dog or fold some laundry in the middle of a work day.
It all boils down to the psychology of asscunts lording over us slobs.
I think return to office mandates are silly. Regardless, it’s more about maintaining the office market values, right? So basically need to accept that’s where things are going and that will inevitably happen.
I’m not an economist, so I don’t know the full implications of it all, but I know things will be in for a ride.
I don’t know how this property values thing just became accepted knowledge, but it’s nonsense. Most companies don’t own their own office space, and for the ones that do, it’s a cost centre they’d prefer not to have on the books.
I’ve also seen absolutely no evidence that this is a factor in their decisions, and you’d expect at least one CEO to let the truth slip if this was the case.
And yet people keep parroting it.
Commercial leases are not always a 1 year lease though, like an apartment. They could be in a 10 year lease so I think it’s still valid a lot of times. Obviously there are also additional factors but some companies are still stuck paying for a building they can’t use.
Sunk cost fallacy. This is not difficult to grasp. The money is gone regardless of whether people are in the building.
It’s parroted because it’s correct. It doesn’t matter if companies own the building or not, because leases are often on 7 or 10 year terms–sometimes more. They’re stuck paying that and associated baseline heating, electrical, etc. costs.
That’s exactly how the Sunk Cost fallacy works. CEO’s don’t let it slip because nobody wants to admit they’ve fallen for a fallacy; that’s assuming they recognize where they’ve gone wrong in the first place.
Conversely, look at what evidence they’re providing that return to office mandates are better. Lots of vague statements about “ideas coming out of random encounters in the hallway” with no actual evidence to back it up. It’s certainly none of the reasons they provide, so we should go looking for others. Sunk Cost of real estate fits their behavior pretty well.
There was an article a while back about how RTO brings profits to stores inside the office buildings - gift shops, restaurants, etc. Externally speaking: oil companies. There is a lot of vampirism involved in RTO that is obvious… and far more that’s not.
Iirc a key problem is a lot of these companies used their office space as collateral for loans. They literally cannot afford to have the value of that office space degrade so forcing everyone back into the office seems like the only solution to them.
Nevermind that it’s not a sustainable tactic long term but smart business decisions isn’t something I expect from companies operating with permanent debt anyway.
Good. Hope all these office mandating companies go out of business. No more of people being forced into these mandatory COVID infection labs just to make a living.
It’s about “butts in seats” people.
Big tech companies OWN not rent.
When you OWN an office building, and it is empty, you are LOSING MONEY.
It’s about the real estate, nothing else. Open your eyes
How? How are they losing money not having people in the office? Where is this money coming from?
Explain your reasoning.
I disagree that property value is the main driving force behind return to office mandates, but if they do in fact own their offices, then those offices depreciate in value. They also cost money in upkeep. Gardeners, janitors, window cleaners, security, power, maintenance, insurance. Even if nothing is happening, there are contracts with companies that provide these services. Either they’d have an agreed frequency of visits, or a retainer fee. They have managers that want their employees to make on site visits to justify their jobs. The AC and lights would need to be on for anyone onsite, including security, and that is a lot of power. Offices are expensive.
If nothing is getting done in those offices, then those offices are bleeding money. And if they’re empty and nobody wants to work (in an office) anymore, then you can’t sell them for anything like their old book value. It’s a huge loss.
That said, I suspect it’s more institutional inertia that drives most of this return to office stuff. Managers justifying their existence or just not being able to cope with the new skills they need. Plus selling or ending leases is a job that someone has to do, and you might fuck that up, so you’d rather not make the change. Plus they’ve got the offices now, what if they need them soon? Capitalist companies, especially corporations, are fundamentally conservative entities.
If you buy a car and don’t use it, you’re in much the same situation. You have an expensive thing gaining you no value. At worst that money could be in your savings. I imagine a company could find more productive uses for that capital. (A decent chunk of capital mind you, Google paid about 10% of its annual profit for a pair of offices in 2018.)
Sure, you could sell the car but you’re going to take a loss as office vacancy rates are at what I assume are historic highs (in Canada it’s about 17%).
The more conspiratorial minded may also point out that most CEO level folks or board members are pretty likely to have a lot of their wealth tied into the market, a not insubstantial sum of which is tied to corporate real estate. A significant disruption there could cost those folks and their friends heavily. It’s a little conspiracy minded for me but also not so much so that it feels ludicrous.
Google’s costs go down if they own the building but don’t have to pay for cleaning, lights, toilet paper, paper cups, heating and AC to human comfort, etc. An empty building costs less than a building with people.
Yes, but the costs of those things are mostly fixed. If, say, 20% of the workforce goes into the office because they enjoy working there, then you pay the full cost of cleaning, lights, toilet paper, paper cups, and heating and AC for the entire building, even though it’s not at capacity.
Source: My company is hybrid, but a handful of people decide to go in every day, including three people from my team.
Even if you are correct, then at best, this bullshit “real estate” angle is cost neutral. If it’s cost neutral, how is it a factor in valuation?
It’s “cost neutral” in the sense that the company still pays the same $X to run the office regardless of how many people are in the office. But if it costs $1000/day to heat your office in the winter and only 50% of your employees are working in the office any given day, you’re wasting $500 worth of heating that day.
Looking at it from an overhead perspective, let’s say I have 1000 employees and my heat costs $1000/day. When all my employees are in, it costs $1/employee/day to heat my office. If only half my employees are in, it costs me $2/employee/day. My overhead per employee just doubled.
That’s the unintuitive part. An empty building still needs some basic maintenance, and the financial difference is almost immaterial. Else the building just falls into disrepair and crumbles. The cost of conditioning a building for human use after dereliction is way larger than the cost of keeping it maintained, but the cost of maintenance between empty and full is almost the same. You can keep the AC off, you’re saving that electricity, but you still have to pay for the technician to go there and make sure it is still working, same with elevators, water lines and electric networks. Those things still deteriorate even if not being used. Some things can be mothballed, some can’t.
If some things can be mothballed, then costs go down. Right? Not to even consider the waste of capital that is commuting.
Yes, but not as much as one would think.
I missed your response, my bad, but I think others have touched on the major point with some pretty good analogies, but I will give you a full response since is a valid question. DISCLAIMER: I am a Software Engineer, not a real estate expert, although I was raised by a real estate expert.
Imagine you are Apple and own “Apple Park” in Cupertino, California.
Apple does not own the property “out-right”, they have a mortgage on the property and buildings similar to the average home mortgage, but much more expensive. When you “own” the mortgage, it is up to you who occupies the building, which often is done by contract. When you “own” a building for the purpose of giving your own employees a place to work, you often enter in a contract with “yourself”, but most often as a “subsidiary” signing a contract with a “parent company”.
Let’s say that a subsidiary is “renting” the entire building, but also, 90% employees work remotely. Although you, as the subsidiary, are still “paying rent to” the parent company, you as a subsidiary are losing money by paying for an office space that is mainly unused. So sure, it could be said that the parent company “isn’t losing money”, however, the subsidiary is since the office is unused and still being paid for. The subsidiary can’t just stop renting the office, since they are in a legal agreement with the parent company. This pushes parent companies to enact “return to office policies” so that subsidiaries are paying rent on “required office space”. Having “butt’s in seats” also helps with maintaining building value as one can prove “hey look, my office building is in demand”, even if simply artificial demand through subsidiaries.
Most office buildings, especially if for tech, cost in the hundreds of millions depending on location. If you think tech companies buy them outright rather than mortgage them with the company and assets as collateral, that is incorrect.
In other words… If you have a mortgage on an office building with no one in it, the “market” looks negatively upon that, which brings the building’s value down, but not your mortgage payment and interest. Therefore, you are paying more on your mortgage than the value of the building. Similar to buying a car with a car loan, using the crap out of it, and then not touching it for 5 years and expecting it to increase in value. (Car is a bad comparison as 99% of them lose value the second they leave the lot, but is easiest to compare)
This is probably going to be an unpopular comment, but I wanted to present the view in favour of what I call WFW (working from work). I’m sure it’s always going to be different for specific cases, but I do see benefits of WFW. We have an open plan office and a lot of casual conversations between us turn into serious conversations about projects and sometimes they have important outputs. Sometimes you overhear a conversation that you realise you know something about and you make a valuable contribution to it. None of this happens when people are WingFH. I’m lucky enough that my only line report is a hard working person, so I let them WFH probably a bit more than other managers let their reports, but I still like when they are WFW because of the contributions that they make to those conversations I mentioned above.
I’m an introvert, so I totally get the argument of being able to focus better when you’re not surrounded by people and their conversations, but at the same time I honestly noticed that my productivity decreases when I WFH. I’m sufficiently honest with myself to notice that and feel bad about it and this is actually the main reason why I do commute for an hour every day just to WFW, even though our company policy says that we can WFH 3 days a week and my job is 95% desk based.
I think it’s often has to considered for individual cases because as I said, my report does 110% whether they WFH or WFW, but I know from other managers that some of their reports really stuttered and stumbled when they were asked “so you WedFH yesterday, what did you do exactly?”
I’m not trying to say “everyone should stop WFH”, but it seems to me that most of the comments in this post are aligning with “just let your employees WFH!” and I wanted to present the other point of view, from the perspective of a non-senior manager who also has some non managerial responsibilities himself.
Numerous studies have proven that WFH is better for production, morale of the worker, and then the plethora of perks that comes with not having to go to work.
It doesn’t make your point null, but you’re more or less just the exception that confirms the rule.
Don’t you know that personal anecdotal quirks completely override all scientific conclusions for all people, everywhere, at all times?
this is a flimsy argument I keep hearing office- enthusiasts grasp at. there’re other variations to the random, impromptu conversation/not-meeting but they all share the argument that “one may accidentally contribute something to unofficial meetings”.
how often does that happen? is overhearing and joining random conversations a business plan? is this such a common occurrence and the outcomes so beneficial and so pronounced that they balance out the very long list of demonstrable and concrete arguments against working from work, such as time lost in transit and CO2 emissions from the pollution of transit?
if something needs more planning and discussion, or reconsideration, then schedule a proper meeting.
is overhearing and joining random conversations a business plan?
That really made me laugh. No, of course it’s not a business plan. I was just trying to make a point that there are benefits to people being together in the office.
I started going round the bend, feeling even more depressed, and started drinking alcohol again after 5 years of abstinence. Working back in the office (which admittedly is a 5minute drive or 15 minute cycle) helped a lot. What REALLY helped though was the absolute shitcunt of a director retiring and taking his foul thumb off my career path. (Fuck you Phil, I hope you get a horrible disease soon and don’t enjoy your retirement)
I am in complete understanding that most other people who work in offices have differing mileage, both physically and metaphorically.
Fucking Phil.
