Tiger's Insights
Jul 10, 2020

Working from home does not save cost in the short term

As working from home has become more pervasive and people have settled into a rhythm, there's a groundswell of opinion that goes something like this:

When you work from home, you have higher productivity because employees don't commute and you also save on real estate, creating a net cost savings for the business.

Like most things in life and in business, it's more nuanced than that. 

Let's start with productivity and commute times

It is incorrect to assume that all travel and commute time should be applied toward additional transactional work, which would then lead to higher productivity. The last 100 days have shown that it's prudent for leaders to build in casual networking time, one-on-one catch-up conversations, and similar activities that seemingly “break the monotony." Without these opportunities to change the pace, home pressures coupled with the continuous flow of work at high intensity and focus levels can drain employees both mentally and physically. In fact, there becomes a higher propensity to feel distracted or in need of a break and a higher risk of burning out.

The sustainability of productivity in a home environment needs to be studied carefully. All the interventions needed to make it run effectively would likely result in the same productivity as in an office environment at best – that's the assumption that should be made.

Now let's get to costs

The most common assumption is that a work-from-home model will reduce real-estate costs. But remember: these costs are not flexible in the short term, so they're still incurred. The question then is whether these costs are eliminated in the medium-to-long term and become a benefit? Intuitively, the answer is yes, although it's simply too soon to tell.

Real-estate costs are not the only costs to consider in the work-from-home environment – IT, InfoSec, and data privacy can become much more expensive than in an office environment. In an office, employees can use the same IT assets to support two or three employees across different shifts. In a work-from-home environment, however, everyone needs their own devices, which means that new assets need to be purchased. Having a distributed workforce means the security of the network must also be distributed. It is easier and less costly to build and maintain a secure network for one location housing hundreds or thousands of employees than it is across tens of thousands of locations, each housing one employee.

All of this doesn't take into account the softer elements of infrastructure such as ergonomic chairs, a reasonable workstation, and all the incremental costs an employee or business has to pay, such as secure, high-quality internet and office supplies.

The even larger question is the kind of homes that people live in, the number of people in those homes, the space they work from, and whether that space is conducive for knowledge work. It cannot be assumed that everyone has an acceptable workstation let alone a private, quiet room at home.

Bottom line: The whole discussion of cost being the advantage of a work-from-home environment misses a far bigger point: working from home provides flexibility as well as an opportunity to access talent that does not want to spend their valuable time commuting to an office or live too far from business operations.

It's the flexibility and opportunity for people to balance their work and personal lives differently that are the biggest reasons to pursue work from home models. Humans like to have choices. When work provides the opportunity to balance going to an office to interact with teams in person with avoiding travel to get work done in a quiet, focused setting, it becomes more than work – it's a passion and a pleasure.

Even if the overall economics are higher in the short term for work from home and at best equal in the long term to the office environment, there is undoubtedly value to be unlocked in the long term.

About the author

"Tiger" Tyagarajan

"Tiger" Tyagarajan

CEO

Based in New York, Tiger Tyagarajan is credited as one of the industry leaders who pioneered a new global business model and transformed a division of GE (formerly GE Capital International Services) into Genpact, a global professional services firm that makes business transformation real.