The hidden high cost of return-to-office mandates

We all know by now that many business leaders want their employees to work in the office instead of at home. But most don’t understand why.

And we know that many employees want to work from home instead of the office. And most don’t understand why, either.

As a result, we have a standoff at many companies where corporate leadership is imposing return-to-office (RTO) mandates, and employees are resisting.

It’s time for everyone to really understand what’s driving the standoff.

Why employees hate RTO mandates

The conventional wisdom says that the COVID-19 pandemic, which forced companies to embrace full-time, work-from-home (WFH), gave employees a taste of remote work. They liked it. And that stiffened resistance to RTO mandates.

The well-known reason many employees prefer WFH policies is increased schedule flexibility, better work-life balance, and less time spent fighting traffic on the way to and from the office.

But there’s another factor at play: money.

Prices vary by region. But in general, since the beginning of the pandemic in 2020, the cost of living has risen dramatically for employees: annual mortgage payments have grown by more than $3,500; the price of a car has risen by about $10,000; and the cost for groceries has increased by around 10%.

The direct additional cost of working in an office for employees is higher, too: Gasoline costs more than it did in 2019; annual child-care costs have increased by more than $1,000. And inflexible RTO policies requiring normal business hours impose even more child-care costs, as arrangements often have to be made for kids to be picked up and dropped off at school.

To put that into perspective, one report notes that it costs employees the equivalent of a month’s grocery bill to return to the office.

RTO mandates don’t represent a return to normal. They represent the imposition of new high costs for employees already feeling the pain of inflation. (Even though it has subsided somewhat, prices remain stubbornly high.)

Not only are employees required to sacrifice flexibility, work-life balance, and valuable time. They’re now expected to pay for the privilege.

Here’s another point to consider. While flexibility and work-life balance are somewhat squishy and vague, the literal financial costs to employees are directly measurable in dollars.

Why many business leaders want RTO mandates

Researchers at the University of Pittsburgh’s Katz Graduate School of Business studied the reasons for, and impacts of, RTO requirements. They looked at S&P 500 companies with RTO mandates and tested the three major justifications for those mandates: 1) higher productivity; 2) better company performance; and 3) company values.

The researchers also collected job satisfaction and other data from Glassdoor to see how RTO mandates affect both employees and managers.

The results were eye-opening.

The researchers found that companies with RTO policies were more likely to have had poor prior stock performance, and more likely to be led by “male and powerful CEOs” seeking to “grab power back from employees through RTO.”

RTO polices were also found to be used to scapegoat employees working from home for bad company performance.

Counterintuitively, they found that tech companies are more likely to demand RTO. Very intuitively, they found fewer RTO mandates at companies with high competition and places with longer commute times.

The results weren’t one-sided. Many employees, they found, agree with RTO mandates and feel that living and working in separate places improved work-life balance.

Interestingly and unusually, the researchers looked at the impact of RTO mandates on companies’ financial performance. They pointed out that improving employee productivity is a major justification for RTO policies, while measurably lower employee satisfaction is known to reduce productivity. In a nutshell, they found that RTO mandates don’t significantly affect productivity or company financial performance in either direction.

Why RTO mandates are risky business

The best data to date shows that the reasons and justifications for RTO mandates are largely misguided. Such mandates do not generally lead to higher productivity, better performance or improved corporate values in the short term.

It also shows that the reasons and justifications for WFH are largely real and serious. Remote work does improve schedule flexibility and work-life balance, and it saves employees a lot of time and money.

In other words: Forcing employees to work in an office doesn’t benefit companies, but does harm the lives of employees — at least in the short term.

More to the point: Most companies cannot show actual monetary benefits from RTO mandates. But most employees can show actual and significant monetary costs from RTO mandates.

In essence, these kinds of mandates represent a transfer of wealth from employees that their employers don’t even benefit from.

Here’s what’s missing from the calculation: The long-term impact of RTO mandates could be catastrophic for businesses.

The thing you need to know is that employees unhappy with RTO mandates aren’t likely to tell you. In a recent survey, more than a third (38%) of employees believe it’s a “red flag” to complain about RTO policies. And they’re right: More than half of managers (56%) agree.

You’ll find out they were unhappy when they quit and go to work for your more flexible competitor. The result: a slow bleeding of high-performing employees, millennials and women.

In other words, to impose RTO is to implement a policy of gradually reduced overall employee performance, increased difficulty in meeting gender inclusion goals and undermined efforts to groom the next generation of corporate leaders.  

So proceed with caution. The benefits of RTO mandates are probably nonexistent. The costs are likely to grow over time.

Copyright © 2024 IDG Communications, Inc.


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