John Sullivan is a professor of management at San Francisco State University.
Employees are often the highest single expense item as well as the most powerful factor influencing a business's success. Executives must expertly manage this asset, so the decision to allow remote work should not be based on emotions but rather on the strategic goals of the firm. If your primary corporate goal is traditional productivity, allowing remote work is an effective option, and a trend that will continue to increase. However, if your goal is to be a fast-moving industry leader and serial innovation firm, then encouraging employees to work on site is a superior approach.
Many executives find the goal of becoming a serial innovation firm more appealing because innovative products have the highest profit margin and market share. Apple and Google, the second and third most valuable firms in the world respectively, as well as companies like Facebook and Amazon, are role models to executives because of their serial innovation track records. If you are one of the handful of firms that must compete with these "innovation machines," you must understand that the data clearly show that remote work has a negative impact on both organizational speed and innovation. And if you are an executive at a company like Yahoo! that is struggling to compete against Google, you must realize that your firm's survival and the job of every employee might depend on beating competitors in innovation and speed. Outside of high tech, troubled retail giant Best Buy recently dropped the Results Oriented Work Environment program (ROWE) that increased productivity up to 41 percent. (Under ROWE, employees used to decide independently whether to telecommute; now they need to discuss it with their managers.)
Innovation is maximized when there is a high volume of serendipitous meetings between workers from different teams and functions. The data demonstrate that increasing informal interactions works because those interactions result in increased collaboration, faster learning and problem solving, more idea sharing, more criticism, and the breaking down of barriers and silos. The interactions also increase excitement and even competition, as coworkers learn through these exchanges that they are not as innovative as their colleagues. Academia calls this collaboration-increasing phenomenon "the water cooler effect."
These interactions must be purposely increased through open office design, sharing food and coffee, riding together on the company shuttle bus, or through fun activities. Facebook, which profits from remote social contacts, encourages employees to come to campus with outrageous perks like a free ice cream and bakery store, a free barbecue shack, and a beautiful campus on the San Francisco Bay. In its early years, Facebook even paid workers $7,000 more each year to live within a mile of headquarters to encourage dropping in.
Having a significant number of remote workers also reduces decision-making speed. One pharmaceutical company found that merely creating an open office environment increased decision-making speed by 45 percent. That is because workers can meet face-to-face and pound out a solution in a matter of hours, instead of using back-and-forth emails or phone calls.
Finally, don't be surprised when you encounter the next emerging collaborative approach known as "coworking," where employees share office space with employees of other firms to increase serendipitous interactions. An approach with which firms like Google are already experimenting.
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