Back to the Office

Amazon.com is the latest in a series of companies to insist that employees Return-To-Office (RTO).

Some claim that Amazon's motives (and by extension, any company that requires employees to work in the office) is really a means of reducing their workforce. The idea is that employees would rather leave the company than work in the office, and enforcing office-based work is a convenient way to get employees to leave. (Here, "convenient" means "without layoffs".)

I suspect that Amazon (and other companies) are not using RTO as a means to reduce their workforce. It may avoid severance payments and the publicity of layoffs, but it holds other risks. One risk is that the "wrong" number of employees may terminate their employment, either too many or too few. Another risk is that the "wrong" employees may leave; high performers may pursue other opportunities and poor performers may stay. It also selects employees based on compliance (those who stay are the ones who will follow orders) while the independent and confident individuals leave. That last effect is subtle, but I suspect that Amazon's management is savvy enough to understand it.

But while employers are smart enough to not use RTO as a workforce reduction technique, they are still insisting upon it. I'm not sure that they are fully thinking though the reasons they use to justify RTO. Companies have pretty much uniformly claimed that an office-based workforce is more productive, despite studies which show the opposite. Even without studies, employees can often get a feel for productivity, and they can tell that RTO does not improve it. Therefore, by claiming RTO increases productivity, management loses credibility.

That loss of credibility may be minimal now, but it will hang over management for some time. And in some time, there may be another crisis, similar to the COVID-19 pandemic, that forces companies to close offices. (That crisis may be another wave of COVID, or it may be a different virus such as Avian flu or M-pox, or it may be some other form of crisis. It may be worldwide, nationwide, or regional. But I fear that it is coming.)

Should another crisis occur, one that forces companies to close offices and ask employees to work from home, how will employees react? My guess is that some employees will reduce their productivity. The thinking is: If working in the office improves productivity (and our managers insist that it does), then working at home must reduce productivity (and therefore I will deliver what the company insists must happen).

Corporate managers may get their wish (high productivity by working in the office) although not the way that they want. By explaining the need for RTO in terms of productivity, they have set themselves up for a future loss of productivity when they need employees to work from home (or other locations).

WFH and the real estate crisis

Over the past decades, companies (that is, employers) have shifted responsibilities (and risk) to their employees.

Employer companies replaced company-funded (and company-managed) pension plans with employee-funded (and employee-managed) 401-k retirement plans.

Employer companies have shifted the cost of medical insurance to employees. The company-run (and company-funded) benefit plan is a thing of the past. Today, the hiring process includes a form for the employee to select insurance options and authorize payment via payroll deduction.

Some companies have shifted other forms of risk to employees. Restaurants and fast-food companies, subject to large swings in demand during the day, have shifted staffing risk to employees. Instead of a steady forty-hour workweek with eight-hour shifts, employers now schedule employees with "just in time" methods, informing employees of their schedule one day in advance. Employees cannot plan for many activities, as they may (or may not) be scheduled to work in any future day.

In all of these changes, the employer shifted the risk to the employees.

Now we come to another form of risk: real estate. It may seem strange that real estate could be a risk. And it isn't; the risk is the loans companies have to buy real estate.

Many companies cannot afford the loans for their buildings. Here's why: A sizable number of companies have allowed employees to work from home (or locations of their own choosing), and away from the office. As a result, those companies need less office space than they needed in the past. So they rent less space.

It's not the tenant companies that have the risk of real estate loans -- it's the landlord companies. They made the loans and purchased the buildings.

But risk is risk, and it won't take long for landlord companies to shift this risk away from themselves. But this shift won't be easy, and it won't be like the previous shifts.

A building has two (or perhaps more) companies. One that owns the building (the landlord company), and a second (the tenant company) that leases space within. (The owner could be a group of companies in a joint effort. And a large building could have more than one tenant.)

But notice that this risk has two levels of corporations: the landlord company and the tenant company. The landlord company has employees, but they are not the employees who work in the building. Shifting the risk to them makes no sense.

The employees who work in the building are employees of the tenant company, and they have no direct connection to the landlord company. The landlord company cannot shift the risk to them, either.

Thus, the shift of risk (if a shift does occur) must move between the two companies. For the risk of real estate, the landlord company must shift the risk to its tenant companies.

That shift is difficult. It occurs not between an employer and employee, but between two companies. Shifting risk from employer to employee is relatively easy, due to the imbalance of power between the two. Shifting risk between companies is difficult: the tenant company can hire lawyers and fight the change.

If the owning company is successful, and does manage to shift the risk to its tenant company, then one might assume that the tenant company would want to shift the risk to its employees. That shift is also difficult, because there is little to change in the employment arrangement. Medical benefits and pension plans were easy to change, because employees were receiving something. With the risk of building ownership (or more specifically the risk of a lower value for the building) the employee is currently receiving... nothing. The have no share in the building, no part of the revenue, no interest in the transaction.

Savvy readers will have already thought of other ways of hedging the risk of real estate loans (or the risk of reduced demand for real estate). There are other ways; most involve some form of insurance. With them, the landlord company purchases a policy or some other instrument. The risk is shifted to a third company (the insurer) with payments.

I expect that the insurance option will be the one adopted by most companies. It works, it follows existing patterns of business, and it offers predictable payments to mitigate risk.

Sometimes you can shift risk to employees. Sometimes you can't.

Remote work and employer credibility

Companies (many of them) want employees to return to the office. Employees (many of them) want to continue working from home. There is a danger here, because managers and workers are looking at different things, and that difference can lead to a loss of confidence and even a loss of credibility.

Managers see little reason to delay returning to the office. (This was before the latest wave of Covid from the "delta" variant.) A common reason given is to "improve productivity". There may be some gains with people working in an office, but the argument is lacking. I suspect senior managers, knowing that the accountants are looking at expenses, know that they risk losing buildings and office space. (If the office is empty, why continue to pay for it?) But let's go with the "improve productivity" argument.

Employees feel differently. They think that they are more productive working from home. Not having commutes in the morning and evening help this perception. Shifting back to the office means that employees will have to wake earlier, drive (or take the bus) to the office, possibly pay tolls or parking, and then make the same trip in the evening. They lose perhaps two hours each day to the commute. Their productivity drops, as they would be doing the same work but in ten hours, not eight.

So when managers say "everyone must come back to the office" and employees ask "why" and managers say "for productivity" there is a definite discrepancy. Employers may see a modest gain in productivity (and a possible reduction in expense as they cancel contracts for conferencing software) but employees see a large decrease in productivity (due to commute times) and an increase in expenses (gasoline, transit fare, tolls, lunches). Employees also have to wear nicer clothes -- no more t-shirts and torn jeans!

I suspect that few senior managers are considering the change from an employee's point of view. Most probably think that "going back to work-in-the-office" is easy, as employees were doing this prior to the Covid-19 pandemic.

I also suspect that few employees are thinking in terms of economics, and instead simply have the feeling that work is better and more productive with "work-from-home".

The discrepancy about productivity remains, whether we analyze it via numbers or via emotions. And that discrepancy is a problem. Employers claim that "work in the office" gives better productivity, and employees thing "work from home" gives the better productivity. When senior managers call workers back to the office and claim "higher productivity in the office", employees don't believe them.

The worst position a management team could take is probably the position of "we can't operate with employees in remote locations". That is patently false, as the company has been doing just that for more than a year.

But the softer "improved productivity" argument also has problems. Employees don't see it that way, and once employees don't believe one thing senior managers claim, they start to question everything that senior managers claim.

I think that managers can avoid this loss of credibility. I think it is managers that must take steps to avoid the problem, not employees.

First, managers must recognize that they are asking employees to shoulder the costs of commuting to the office. They must also recognize that while employees were willing to bear these costs prior to the pandemic, they did not have to pay them while working from home, and asking them to come to the office means paying those costs again. The change from work-from-home to work-in-the-office is not cost-free to employees.

Second, managers should recognize that some employees are more productive while working from home, and working from home can be an effective way to contribute to the company. Some employees may welcome a return to the office, and may be more productive there. That does not necessarily hold for all employees. If managers care about productivity, they will work with employees and craft policies that maximize productivity.

Third, managers must recognize that business relationships, including employer-employee relationships, are built on trust. They must act in ways that establish and nurture that trust. They must maintain credibility. If they don't, they face a significant loss of productivity, either through attrition or through apathy or even hostility.

It's nice to think that we can simply go back to the way things were before Covid-19. The world has changed, and we cannot go back. We must move forward, with the knowledge that the work-from-home has given us.

Lessons from the 2020 pandemic

In the middle of the 2020 pandemic, we can look around and see that many companies have shifted from "work in the office" to "work from home". (Many companies, especially retail, restaurants, movie theaters, and entertainment venues, have closed completely, with no ability to work from home.)

For those companies that have made the change, we can look and wonder why they did not make this change earlier. While some companies offered limited "work from home" opportunities (and many companies offered nothing), the pandemic has forced companies to change. Why the sudden change?

Some observations:

Shifting from "work in the office" to "work from home" is possible when the infrastructure is present. The automation of work, starting with PC-based word processors (in the 1980s) and continuing with networks (in the 1990s) and then connected networks and high-speed internet in the home (in the 2000s) all allow remote work to occur. But even with the infrastructure in place, office culture held that face-to-face interactions and work in the office was better than work from home.

Allowing your entire employee base (or a large percentage of it) is easy when a government order closes your office and forbids employees from working in it. Some work, even the small amount that gets done when working from home, is better than none.

Allowing your workforce to work from home is also easy when all other companies -- especially your competition -- are allowing their employees to work from home. Being "part of the crowd" reduces the risk (or the perceived risk) of such a change. With all companies making the change, the risk reverses: the oddball is not the company that shifts to "work from home" but the company that remains in the office.

Changing from "work in the office" to "work from home" is also easy when all of your employees make the change, instead of a few chosen workers. The typical approach to change (small pilot programs with a few employees) sets up the dynamics of "chosen" and "not chosen" employees, which can create resentment among the "not chosen" employees. When all employees shift to "work from home" it is clear that there is no favoritism and that "work from home" is not a reward for good behavior.


The change from "work in the office" to "work from home" did happen, for many companies, quickly and easily. Much of that ease of change was from the risks, or rather the change in the risk profile. The technology was in place, other companies were making the same change, all employees (or as many as practical) were involved, and the government was issuing orders that made "work in the office" impossible.

Looking forward, will companies shift back to "work in the office"? I suspect that the office culture of face-to-face interactions still holds, so that will pull managers towards a "work in the office" arrangement. In the other direction, no company wants to be first, especially when the risk of COVID-19 is still present. The decision to shift from "work from home" to "work in the office" will not be an easy one.