Economy

Summer is over. Will everyone now go back to the office?

Goldman Sachs boss David Solomon has long been a critic of homeworking, describing the pandemic-related shift once as “an aberration”. This week he called time on the practice, scrapping most of the bank’s remaining Covid-19 restrictions for US employees in a bid to get as many as possible back into the office.

For more than two years companies around the world embraced remote work and hybrid home-office arrangements as infections surged and the death toll escalated.

But as summer comes to an end in North America and Europe, some of the biggest companies are making a concerted push to get people to return to the office. They range from electric carmaker Tesla, whose boss Elon Musk has demanded employees to be back at their desks 40 hours a week, to tech giant Apple and fitness company Peloton, which are both pushing for at least three days a week. 

It is not the first time big business has tried to reverse the shift to homeworking. In the autumn of 2021, and even 2020, companies developed plans to initiate a broad comeback to eerie office buildings, only for new waves of infections to leave managers wary of butting heads with staff at an intensely fragile time.

This year is different, however. With people generally less fearful of virus spread, many bosses believe conditions are now as close as they are likely to get to pre-pandemic times. With US Labor Day approaching and school terms starting across Europe, some executives are getting impatient and are taking a harder line.

According to one executive headhunter, business leaders are experiencing “do-gooder fatigue” — in reaction, in part, to the greater focus on employee wellbeing during the pandemic. “The feeling is, we need to get back to business.”

Tesla boss Elon Musk has demanded employees are back at their desks 40 hours a week © Yichuan Cao/Sipa USA via Reuters

This could, however, lead to confrontations with staff who have grown used to remote working, have different expectations about work-life balance and are now weighing up the costs of going back to the office as inflation surges.

“People want to come into big cities to socialise, see friends and go to cultural events. But, for work, many people will say they can do it better at home,” says Ann Francke, chief executive of the Chartered Management Institute, a professional body in the UK. “The pandemic forced people to ask . . . ‘Do we really need to organise work in this way?’” she adds. “This irks CEOs.”

That makes the coming weeks a critical moment for the future of the office — but also for all the industries that revolve around office workers, from the commercial property sector to sandwich shops and gyms.

“Hybrid work is here to stay,” Enrique Lores, chief executive of HP, which sells printers and laptops, said last week. The expected recovery in the company’s commercial revenues had been hit by the slower-than-expected return to workplaces and it now expects the office market to recover to only 80 per cent of its pre-pandemic size. 

“I don’t know any company that has decided, or convinced their employees, that they need to be back in the office five days per week, every week of the month.”

For some employees — especially the less well paid — the pressure to return is also now wrapped up in the cost-of-living issues that many are grappling with, from higher energy bills if they stay at home to the expense of travelling to and from the office and childcare.

The conundrum for workers was laid bare on Blind, the anonymous professional network. “If they’re forcing us to commute, shouldn’t they offset costs for us?” wrote one person posting about their company’s return-to-work policy. A second questioned the legality of mandates to push office working. “What happens if you refuse to return to office?” asked another.

A worker at US salad chain Sweetgreen
US salad chain Sweetgreen has blamed “a slower-than-expected return to office and an erratic urban recovery” as it cut its full-year sales forecast © Adam Glanzman//Bloomberg

The three-day model

Since the start of the pandemic, how someone chooses to work has been a personal decision for many office workers. Even for those chief executives who are not desperate to get everyone back into an office, the coming weeks are an opportunity to lay out formal policies on what the future of work will look like.

Some chief executives have emphasised the importance of face-to-face interaction for team work, company culture and junior employee training. But in many cases the explanations they have given about why the office is important have been vague.

Stephan Scholl, chief executive of Alight Solutions, a cloud-based technology and services provider, says he had been reluctant to make office days compulsory. “If you ask for three days a week, you need to be able to explain why. To what end? This is what is frustrating about some of my peers.”

“There is not one right way of working,” says Ethan Bernstein, an organisational behaviour expert at Harvard Business School. When everyone had to work at home full time it was easy for managers, as there was no other option. It is the hybrid model that is proving more difficult because of the endless ways work can take place. “This is a moment, yes, in trying to define what hybrid means,” he says. However, as there is little data to help companies chart a path, that often means the preferences of some — likely senior — staff will drive how a corporation behaves.

Amanda Cusdin, chief people officer at software group Sage, says that “human connection is still the most important thing” in many workplaces, especially for the 2,000 people the company recruited during lockdown who wanted to build connections.

The company has decided on a hybrid working model where each team determines the days they are in the office and staff are generally positive that they do not have to work five days a week in the office, she says. “At the same time, no one wants to come back to an empty building, so we need to have a critical mass present.”

In the early stages of the pandemic, bosses focused on physical wellbeing, mental health and flexibility at work so employees could tend to the demands of sick relatives and home-schooling.

People walk through  New York as office buildings still stand largely empty in March 2021
The one-third fall in the value of New York office buildings in the first year of the pandemic heralds a longer-term “office real estate apocalypse” © Spencer Platt/Getty Images

Then, after the rollout of vaccines, many tried to persuade workers back by offering perks — from free lunches and Uber rides to after-work drinks events, massages and employee discounts for local retailers. Goldman laid on afternoon concerts for its staff.

Envoy, a San Francisco workplace platform, now offers a shuttle service, a carpool programme and a $200 monthly commuting subsidy to persuade employees to come in for its desired three days a week. In the office, there are free bagel and fruit breakfasts, “snacks everywhere” and a happy hour once a month, says Annette Reavis, Envoy’s chief people officer, adding that dog owners are encouraged to bring their pets to work so they do not have to pay for dog walkers. “We’re trying to remove some of that financial burden,” she says, “but also build community”.

However, while some employers continue to prioritise workplace benefits, others are taking a harder-nosed approach, which is coinciding with new budgetary constraints as companies prepare for a potential economic downturn.

Even Reavis acknowledges that those who remain at home should be thinking about the risk that managers are more likely to offer promotions and pay rises to the people closest to them. “Proximity bias is real,” she says, “and it’s only going to get worse in the next six to 12 months”. 

The domino effect

Among the industries that depend heavily on filled corporate buildings, executives are watching the next few weeks closely, but many are cautious about predicting a surge in returning staff — especially after some made similar forecasts at the same time last year. 

Sweetgreen, the US salad chain which has two-thirds of its outlets in urban areas, has blamed “a slower-than-expected return to office and an erratic urban recovery” as it cut its full-year sales forecast. Traffic to stores such as its branch at the World Trade Center should pick up after Labor Day, says chief financial officer Mitch Reback, but “we felt that way a year ago, and the world felt that way two years ago”.

Huge shifts in office rents, occupancy and leases have already had a huge effect on office building cash flows, say academics from the NYU Stern School of Business and Columbia Business School. The one-third fall in the value of New York office buildings in the first year of the pandemic heralds a longer-term “office real estate apocalypse” equating to a $50bn cut to the value of New York’s offices and a $500bn blow to the industry nationwide.

A yorkshire terrier in an office in  Ottowa, Canada
Some offices have started encouraging employees to bring dogs to work to avoid dog walker fees © Dave Chan/AFP/Getty Images

Google’s Community Mobility Report, which charts movement trends across places such as offices, clothes shops, Tube stations, pharmacies and supermarkets found that compared to pre-pandemic levels, retail and recreation footfall was still down 26 per cent in the City of London. For the supermarket and pharmacy category it has fallen nearly 60 per cent. Both of these correspond to a 40 per cent reduction in travel to workplaces. 

Yet despite the growing pressure from some bosses, many office workers seem to show little appetite for abandoning new ways of living they are rather enjoying. They are more available to their families, have eliminated hours of travel and found new freedoms through distance from their line managers. 

The most recent report by Advanced Workplace Associates, a consultancy, on global hybrid working, which is based on nearly 80,000 employees across 80 offices in 13 countries, showed that on an average day two-thirds of desks are unused and just over a quarter of people are coming into the offices, with the attendance figure dropping to 12 per cent on Fridays. 

In the US, a new Gallup poll suggests only 22 per cent of the employees surveyed who could work remotely are currently on site for most of the week and more than 90 per cent have no desire to return to full-time office work. Strikingly, the percentage of those currently on site who want to work exclusively from home has doubled since October 2021.

Some employers have already embraced the new reality by advertising fully virtual jobs or even opening up satellite offices to meet now-distributed workforces. 

Industry observers say forcing people back to the office is a fruitless endeavour. The world has changed and companies need to adapt if they seek to retain talent in a tight labour market particularly in the US and UK that, for now, will offer them alternatives if they walk away.

“Employees will just say no,” says Francke. “They know flexible working works and they will resent you for telling them they need to be at the office.”

Additional reporting by Joshua Franklin

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