As part of its cost–saving measures under new owner and CEO Elon Musk, Twitter has closed its Seattle offices and directed staff to work remotely, despite Musk‘s previous statement that remote staff are merely “pretending to work“ and his ban on remote work when he took charge in early November. His change of heart is likely due to the expenses associated with the Seattle office, including rent, as well as services such as cleaning and security.
What explains his shift in attitude? Apparently, it‘s the expenses associated with keeping the company‘s Seattle office open, including rent plus services like cleaning and security. Musk — a strong disbeliever of remote work — recognizing its cost-saving potential displays the future of remote work for the U.S. economy. This disproves the idea that a recession will spell the end of remote work, as the labor market’s downturn will give managers the power to demand that their staff come back to the office. Because many personnel prefer to work remotely and most executives want their personnel in the office.
Backstory:
Elon Musk recently sent an email to staff of Twitter, informing them that they were no longer permitted to work from home unless given explicit permission by him. This decision follows a similar pattern from Musk‘s other companies, Tesla and SpaceX, and is a reversal of the work–from–home policies implemented by Twitter‘s founder and then–CEO Jack Dorsey. Although this move has been met with criticism from industry insiders who believe it will negatively affect recruitment and employee engagement, the author disagrees and believes that Musk is right in this decision, although for different reasons.
Recession leads to a decline of remote work?
Yet, the truth is that the repercussions of an economic downturn on teleworking are more intricate than just leverage from a moderating labor force. Naturally, it is correct that employers have more influence during a recession. On the other hand, they must concentrate on optimizing the output from their staff.
During periods of economic expansion, executives have the latitude to choose based on their individual inclinations and hunches. Yet in a downturn, they need to be stricter, depend on data, and make choices that benefit the company financially — like Musk picking remote work to save cash. This attention to fiscal prudence helps remote work flourish.
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Evidence reveals that remote work is more productive than in–person work, making it an essential way to reduce costs due to increased efficiency. Stanford University found a 5% higher level of productivity from remote workers in 2020, which had grown to 9% by 2022. Additionally, employee monitoring software revealed similar results, with remote employees being more productive than those in the office.
While collaboration and innovation may be weaker in a remote setting compared to an office setting, this can be remedied by employing effective practices for collaboration and innovation in remote settings, just ask us – we can help you with that. Evidence also suggests that greater worker autonomy and flexibility can lead to more innovation, and remote work provides workers with autonomy. Additionally, remote workers tend to accept lower pay in exchange for remote work options, which can result in cost savings for businesses. A survey of 3,000 workers at prominent firms found that 64% would opt to work from home permanently rather than receive a $30,000 salary increase. Furthermore, companies that offer remote work may benefit from lower cost–of–living expenses, as they can hire from locations with lower living costs both within the U.S. and abroad.
Even in the midst of an economic downturn, businesses still need to hire new staff when existing employees depart, and the current labor market is unusually tight. Remote work can be a boon for recruitment, as a Morning Consult survey found that over 60% of respondents would be more likely to apply for a job that offered remote work options. Furthermore, employee retention can also be improved by flexible work arrangements, with the ADP Institute finding that almost two–thirds of respondents would consider leaving their job if it required full–time office work. A study from the National Bureau of Economic Research showed that a hybrid work schedule, which combines remote and in–office work, can increase retention by over a third compared to a fully office–centric approach. The Biden administration has also taken note of the benefits of remote work, and a Cisco survey of federal government employees found that 66% prefer to work remotely more than half the time, with 85% of respondents saying it enhances job satisfaction.
Hard Times for inflexible executives
As the fiscal advantages and efficacy of remote labor become more evident, more traditionalist executives will recognize the advantages of allowing their staff to work remotely either full– or part–time. Nevertheless, this shift may be difficult for these heads due to cognitive dissonance, the difficulty of harmonizing opposing information such as their own inclinations and the financial advantages of remote labor. Furthermore, traditionalist leaders battle to acclimate to novel employment models due to cognitive biases, which can hinder judgement in multiple facets of life. The most capable executives are open to changing their minds when faced with new facts, whereas less proficient leaders may succumb to confirmation bias, searching for facts that validate their pre–existing assumptions, or the ostrich effect, disregarding unfavorable facts about the world. That’s why even the hardliner Elon Musk changed it mind. As a result, firms with inflexible leaders will lag behind more adaptive organizations, and these executives will eventually be replaced by those who embrace remote labor.
