Why Are Companies Going Back To The Office?
|Return To The Office: News & Data Center
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The data shows that people want to work from home.
Pew researchers found (in a 2022 survey of 10,237 U.S. adults) that…
- 60% of workers with jobs that can be done from home say they’d like to work from home all or most of the time when the pandemic is over.
- Among those who have a workplace outside of their home, 61% now say they are choosing not to go into their workplace, while 38% say they’re working from home because their workplace is closed.
Companies are still pushing a return to office (but failing).
Kastle System’s “back-to-work barometer” shows across its top 10 US cities that office occupancy stands at just 40%. In other words.
Here at Buildremote, we reported in March of 2022 that only 3 of the Fortune 100 had declared a full return to the office for all employees.
People want to work from home but companies are still pushing for a return to the office. So… why are companies returning to the office at all?
So, why are some companies going back to the office? Incentives.
Charlie Munger said, “Show me the incentive and I’ll show you the outcome.”
It’s not that they are more efficient or have happier employees or a better company culture in the office. Here are the incentives that are pushing management teams to return to the office.
Companies have leases
Commercial leases typically run from one to 10 years and big office spaces could run much longer. Therefore, most companies currently have multiple years left on their leases in which they’ve committed to pay for years of space.
Leaders that are pushing for a return to office are suffering from sunk-cost fallacy where they continue a behavior as a result of previously invested resources.
- If you have 10 years left on your lease and tons of money tied up in office space, then you think the office is best.
- If your lease luckily ran out during COVID, then you likely reduced your office space or got rid of it altogether to go fully remote.
Companies own their buildings
Some companies own their buildings which would come with all of the sunk cost biases that companies face with lease.
However, there is an additional incentive here. Companies view their office space (real estate) as a valuable, appreciating asset for the company. If they choose to go fully remote, they are admitting that their asset is experiencing impairment during a time where office space could drop significantly in value.
That’s hard to admit to yourself as a management team, so companies would rather return to the office to prop up its value than admit its asset has become a liability.
Companies have outdated operating systems
If your management team relied on physically seeing people at desks as a way to measure success, then remote work was significantly worse of an experience for your company.
These companies don’t actually manage the output or value brought by employees at their companies. They just manage on feel, in-person status reports, and time-at-desk. Those do not correlate to success for the business, but it’s a common way to operate.
If that’s how you operated as a company, switching to remote work in 2020 must have been a disaster. No longer do managers feel useful or know what people are doing. This was never a good way to operate, but remote work made it seem worse. Therefore, you’d blame remote work for shortcomings that were already there.
Your income is tied to commercial real estate
I noticed a trend with banks in my return to office research. All of the banks in the Fortune 100 have returned to the office in some capacity – hybrid or full. Why?
Think about it. The banks lend to companies that own commercial real estate. If they were to admit to themselves that the office is no longer useful, they’d be admitting that billions of dollars they’ve underwritten are worthless. They are incentivized to say that office space is still valuable, so they return to it.
Remote work is not an option when you make money from commercial real estate.
What will happen to the office from here?
Most companies will attempt a hybrid work model like Google has so far, but that will lose steam. It’s the worst of both worlds.
- You are still stuck hiring locally (within driving distance), so your talent pool is greatly reduced
- At any given time, you have staff working from home so you have to default to Zoom meetings (ie. remote work from the office)
- You’re still paying for your second biggest expense (office space) when it could go away completely
- Your employees still have to face a commute multiple times per week only to work virtually once they arrive
Next, smart companies will go fully remote.
- They’ll hire talent anywhere and end up with a superior team, potentially for less cost
- They’ll cut the cost of office space and be able to use the budget elsewhere
- They’ll have happier employees
Remote companies will beat out hybrid companies (which already beat out fully in-office companies).
Then we reach the complete turning of the remote work revolution. Every job that can be done virtually will be done that way. The cost of office space will crater. Cities that adapt will attract remote workers, but ones that don’t will die. Middle managers (the ones that sit in offices and watch people work) will go away as asynchronous companies with great remote operating systems will make them obsolete.
Then, that majority of people who said they want to work from home forever will get their wish at the same time companies take a leap forward in efficiency and employee happiness.
Hear from Buildremote contributors: Why are companies going back to the office?
I laid out my argument above – that the triumphant return to office is driven exclusively by sunk cost and poor incentives. But that’s just my opinion. I asked my list of Buildremote contributors – you can sign up to become one here – for their takes. I received over 100 responses and shared the most insightful ones below.
Trust (or lack thereof)
“Employers have a natural skepticism about the productivity of someone who works from home because they can’t monitor that person 24 hours a day, seven days a week. A boss in an office can creep up on you, watch you from their window, or walk up to you and converse with you to ensure you are on task.”
– Alice Eve of Cicinia France
“Companies innately have some distrust of whether or not their employees are productive working at home. This occurs because they can’t monitor them as they do in their on-site time. The decision-making process will be disturbed and the managers will struggle to read the body language of their employees to study them. Also, the managers always want their employees to socialize and build a work culture, but remote working will not make it effective in doing so.”
– Dan Farrant of Hello Music Theory
Older Decision Makers
“Some companies will try to go back to the way it was pre-COVID if they have older decision-makers and an older employee base. Demographics matter here. Our openness gradually declines over time. That means it becomes harder to make changes as we age.
– Joe Kevens of B2B SaaS Reviews
“Like many other companies, we went remote at the pandemic’s peak but reversed these changes and called our employees back to the office. A big reason for this was to reinforce and nurture our company culture. There had been a noticeable decline in creativity and spontaneity that made our company a buzzing hub of talent with low turnover rates and high on the innovation scale.”
– Joe Coletta of 180 Engineering
“Instilling a company culture is a definite challenge in a remote work environment, especially if you’ve never met many employees in person. Going back to the office means invaluable interpersonal face-to-face interactions and the opportunity to foster company culture. It allows for companies to understand who they’ve hired and how they are fitting into the company’s ethos and assess whether they need to make changes.”
– Simon Bacher of Simya Solutions
“When everyone’s working in the same space, office culture creates itself (for better or worse). Leaders can influence a culture, making it more ‘vibrant’ and fun, by creating social connections. This is much harder to do when fewer people are together in the same place. It can be done, but it takes creativity and intention, and a different skillset that many leaders haven’t developed; they haven’t had to, when in-office was the default way of working.”
– Alan Edwards of Undercover Recruiter
Company Culture (but misguided)
“Unfortunately, many companies are returning to the office because they lack the confidence and knowledge to team build virtually. These employers view virtual work as a temporary emergency maneuver rather than a sustainable long-term option. Having successfully run a remote company for half a decade before the pandemic, I can attest that cohesiveness, creativity, and culture are not exclusive to in-person work. Leaders need to embrace new approaches and methods and commit to intentionally building community and connection in online offices instead of declaring the task impossible and reverting back to tradition.”
– Michael Alexis of TeamBuilding
Sense of Belonging
“A sense of being part of a group is an important part of finding happiness in a community. Being part of a group does not automatically engender feelings of belonging; rather, it is a result of having a shared sense of social identity. Your colleagues at work are more likely than your yoga mates or investing club members to make you feel like you’re part of a larger community.”
– Michael Hess of Code Signing Store
“There is nothing that matches in-person collaboration and going back to the office is the only realistic way to make that happen. In-person collaboration also creates more interpersonal relationships between employees, which makes work feel less like work.”
– Chloe Choe of Off Hour Hustle
“If you work in a creative field where employees feed off of each others’ ideas and goals, physical proximity can play a large role in enhancing this. Sometimes, technology can create a barrier to communication. Whereas, when teams work together in an office, there are higher chances of spontaneous discussions and an influx of innovative ideas. Furthermore, it helps managers become more actively involved in the progress of projects and the execution of these ideas.”
– Igal Rubinshtein of Home Essentials Direct
“Remote work creates a communication gap between employees. Even if team members interact with each other, they might not be in touch with other departments. So, companies are encouraging their staff to return to the offices. As a result, teams can be more functional and collaborate with other departments and even partnering companies.”
– Oliver Hudson of Word Finder
“Working from home isn’t always ideal. When we work from home, we’re often disorganized. In fact, we have more of a routine at the workplace since we’re all in the same place at the same time every day. Coworkers take identical lunch breaks and the day has a clear start and conclusion. Many individuals miss the clockwork regularity of the workplace after working from home.”
– Mike Albrecht of Fresha
“As much as I love hybrid and remote working, transitioning back into the office is something I’m doing a few days a week because I need that structure back. It’s a way of feeling like normal, and like the pandemic is over (even though covid is still very much around). Though I will still be taking advantage of remote working where I can. I’m going back into the office on days when I need to be highly productive.”
– Keith Terrell of Backpacks Global
“Working from home gave employees a lot of flexibility, but it has really affected the outcome and productivity in a negative way. Whether it is because employees need to conform to a structure to be able to work instead of procrastinating, or just because they are affected by the lack of team spirit and encouragement, there’s been a huge demotivation from employees and their productivity has really paid the price. Returning to the office will give us the opportunity to form a work structure, re-introduce work habits and give them the chance to adapt to working more productively within a positive work environment.”
– Zachary Weiner of Finance Hire
“When things don’t go as planned, having a team on the ground that can quickly come up with adaptable solutions is critical for a company’s long-term viability. A face-to-face work environment facilitates the development of new ideas and the acquisition of new knowledge from cross-team collaborations, which might otherwise have gone unnoticed. ”
– Edward Mellett of Wikijob
Need For Socialization
“Humans are social creatures, and we need regular interaction with others to thrive. Working from home all the time can make people feel cut off from the world and leads to feelings of loneliness and boredom. Over time, this isolation can lead to increased stress levels, anxiety, and depression. In contrast, the office environment provides opportunities for regular social interaction, which can help to improve mental health and overall well-being.”
– Caitlyn Parish of Cicinia
“Companies are eager to resume face-to-face office work so that employees can socialize and resume human interactions. This in turn will promote coordination, leading to increased efficiency and productivity.”
– Ankit Batra of Hollyweed CBD
“Proximity deepens cohesion. Bosses want to be with their teams and have the team members with each other in real time. They see the benefits of people developing relationships, overhearing conversations and having impromptu interactions. We are social creatures. And work is a social activity that benefits from that social dynamic.”
– Amie Devero of Beyond Better Strategy and Coaching
“The environment in which you work is essential. It is encouraging to be surrounded by people focused on the same task as you. In office spaces, random chats between colleagues help with growth. Networking with your colleagues may also bring new opportunities to light. And if you get stuck, help is right at the next desk.”
– Patrick Wilson of Skill Courses
“One of the biggest downsides of remote working is, how many ideas are potentially being lost by not having those opportune brainstorms whilst waiting for the kettle to boil, washing your hands, or simply overhearing a conversation? Those brief ‘water cooler’ chats are where bonds are formed, common grounds established and organic ideation is able to flourish.”
– Jessica Munday of Custom Neon
“Speaking from a security perspective, companies are responsible for the safety and security of their employees and their equipment while on the job. In the past this has been easily handled by on-site security, but the work-from-home environment makes it almost impossible to properly provide safety and security to employees without invading their privacy (not to speak of the financial cost it would require). More and more companies are realizing that they could be held liable for incidents that occur in their employee’s homes with the work-from-home environment, which is one major can of worms that prompts employers to move back to an in-office setting.”
– Glen of Bhimani
The Personal Office
“Many people do not have a designated work area in their house. Younger employees who live with their parents are sometimes obliged to work from their bedroom. Most individuals can’t dedicate a single area to work, so you’re always sharing a desk with something personal. Most individuals miss having a discrete workstation that doesn’t spill into their personal life.”
– Dan Close of We Buy Houses In Kentucky
Help For The Economy
“Companies are going back to the office to help revive the economy. When employees go to the office, they get to spend more on transportation, food, and other miscellaneous stuff. This then makes money go around more and help boost the economy. This is important as better economy means lower interest on goods, service, and loans. Hence, your company wants you to go the the office you you can help the economy and the company too.”
– Jeffrey Moore of Everyday Power
“You might also get a sense of shared purpose by spending time with coworkers in the office. ‘Goal contagion’ refers to the idea that when you watch the behavior of others, you are more likely to embrace the same goals as they do. Everyone in the office benefits from being surrounded by other workers who are involved toward the same goal. People are more satisfied with their work if they feel close to the organization’s mission. As long as you believe in the organization’s goals, you’ll feel like your employment is more than a means to an end.”
– Robin Antill of Leisure Buildings
“It is worth noting that many workers are returning to the office because of childcare needs. Working parents who use company-provided childcare may find a return to the office a more supportive environment. Contrary to popular belief, work from home may not be a less stressful environment for parents. These professionals often need to juggle home and work life simultaneously, and it may be easier to return to the office and take advantage of on-campus or subsidized daycare rather than chase kids away from Zoom meetings.”
– Michael Alexis of tiny campfire
Hybrid Work Preferences
“Polls and studies have shown that while some professionals would prefer to work remotely 100% of the time, a large percentage of employees find working two or three days a week in-office to be the ideal balance. Many team members miss the sense of closeness and camaraderie experienced in offices and want the chance to meet face-to-face with coworkers from time to time, while still retaining the flexibility of occasional virtual work. For these individuals, hybrid models are a good solution.”
– Carly Hill of Virtual Holiday Party
“Based on what I have seen, I believe that some businesses are attempting to achieve a balance between office work and work that can be done away from the office. Working from home is an excellent way to eliminate distractions and work on projects that require the utmost concentration. Whereas office work is terrific for face-to-face meetings and conversations, and even if it is possible with remote work, there is a specific energy that is present when everyone with the same enthusiasm is in the same room together.”
– James Dyble of Global Sound Group
“If a worker moves to another state for remote work, they might have an additional income tax obligation. On the part of the employer, they may have to pay taxes in both states. This is the case if there’s no reciprocity agreement between the state where the employer is located and the state where the employee lives and works on. Another instance is if the employee moves to another state without telling their employer, both parties will face problems in the form of fees and audits. It’s difficult for employers to keep up with the tax rules and thresholds of each state. They can be held accountable if they don’t meet the requirements set by the tax authorities.”
– Paul Sundin, CPA of Emparion
Help With Day-To-Day Operations
“Companies want their employees to return to the workplace because they require additional assistance with day-to-day operations. When employees are unable to contact consumers because they are away from the office, this might result in a reduction in sales. Companies have the ability to monitor their employees’ work and conduct interviews if they have concerns that something is not quite right now that their workers have returned to the office. Additional reasons include the following: In order to foster better communication and collaboration among workers. To achieve a higher level of productivity. In order to minimize disruptions. A great number of businesses recognize the importance of providing their employees with the ability to strike a healthy balance between their professional and personal responsibilities by providing flexible working hours.”
– Steve Elliott of Restoration1
“The vast majority of companies that worked in-office before the recent lockdowns are going back to the office because it offers superior equipment compared to WFH. With many companies investing tens of thousands of dollars in office equipment, they are finding it difficult to enable such equipment to everyone working remotely. For them, returning to office is a practical, financially sound decision that enables them to use better equipment and do better work from the offices.”
– Chelsea Cohen of SoStocked