The Value (And Cost) Of Working Away From The Workplace

by Erik Priezkalns / Nov 17

The meaning of the word ‘workplace’ has become fluid like never before.  Instead of representing a specific building, it has come to represent wherever the worker is when they are doing their job.  Is having a remote workforce a benefit or a cost?  Like so much in business, the answer may depend on what you count as a benefit or a cost, and how you count it.

Even a junior accountant should be able to identify the impact of mobile working on basic cash costs.  Benefits to the business are measured in reduced overheads related to the dedicated corporate buildings.  Some examples would include: reduced rents as the business can operate from smaller facilities; reduced expenditure on furniture, fixtures and fittings as staff need fewer desks; reduced costs for heating and lighting; and a reduction in ancillary costs like physical security.  On the flip side, the business bears the extra cost for the equipment, services and support that enable remote working.  This will include at least the laptops and handsets needed for the job, the cost of the telecommunications services to connect people, and the hardware and software to support remote connection.  Incremental costs like laptops and cellphones need to be netted against savings in desktops and desk phones.  It may also be necessary to assess the cost of going beyond the minimum needed for remote working.  For example, the company may pay for or subsidize the purchase of furniture for home offices, the provision of printing and photocopying equipment or services, and the increased use of mail.  Over the last few years, the shifting balance in basic cash costs has encouraged a trend towards mobile working.  Equipment and communications costs are falling whilst technology keeps getting better.  Meanwhile, traditional costs associated with buildings, like electricity, look set to keep rising.  However, not all of these trends need continue as before.  For example, a recession will likely lead to reduced commercial rents.  Whatever the trends, a business needs to look at more than just the basic cash costs when evaluating whether to change its working patterns.  Though these are easiest to measure from an accounting perspective, they will not tell the whole story of how remote working impacts the business.

All businesses need to manage their risk, but few businesses factor risk into their assessment of the costs for mobile working.  This is unfortunate.  Risk is hard to evaluate, but that is why it should be evaluated.  Mobile working can greatly change the dimensions of risk for a business.  For example, there may be less risk of an interruption in business with a distributed workforce.  A distributed workforce may be able to continue unaffected when a central location is rendered inoperative due to a fire or flood.  This in turn may reduce costs related to insurance or to business continuity planning.  On the other hand, there will need to be adequate planning and investment in backup resources for communication and access to common data and applications, in case access to the primary resource is interrupted.  There need to be contingencies for every eventuality that may affect the remote worker, from the loss of a server at a given location to the need for redundancy throughout network connections.  Distributed working will often mean remote access to data, with an implied security risk.  Poor security risks both corporate espionage and the legal and the reputation damage caused by any violations of customer confidentiality.  To offset this requires an up-front and ongoing investment in security to deny access to unauthorized users and minimize the impact if data is lost.  For example, data models should be designed to limit the need for staff to work with remote copies of sensitive data.  Robust and secure protocols are needed for transmitting information.  Because laptops and memory sticks will inevitably be lost or stolen from time to time, encryption should be used to prevent the exploitation of the data stored on them.  Ignoring these preventative steps only increases the danger of that the business will be more severely and adversely impacted sometime later on.

Legal and regulatory responsibilities relating to mobile working are closely allied to the costs and benefits associated with risk.  Obligations vary from place to place, but any employer should carefully consider the potential for being held liable for what their employees do, and for what happens to them.  Remote working may change this dynamic.  For example, if an employee has a car crash whilst using a corporate cellphone, can the company be held liable?  Having a corporate policy that bars use of cellphones whilst driving may be a cheap and simple way to reduce the liability, but it may not be effective if, in practice, the company expected their employee to drive and take calls at the same time in order to meet deadline pressures.  Offering staff hands-free kit for their cellphones might be a better investment in the long run.  Remote working may also make it easier for employees to steal and abuse corporate resources, whether using the internet and other communications services for personal reasons or stealing commercially sensitive data by simply taking a laptop.  The company should seek to limit its liability in all the situations where mobile working may exacerbate the potential for misuse of corporate resources.  Similarly, businesses need to research their obligations for providing staff with a safe and healthy working environment, even if they work away from the office.  Again, it is worth noting that a legalistic or accounting approach to evaluating these costs may not be adequate to really assess the impact on the business.  Obligations may vary, and businesses may have differing views on whether these obligations impose a fair or unfair burden upon them.  Underneath the legal jargon, however, there will likely be some worthwhile motivation that the company should consider when assessing its own interests, as well as those of its employees, government and the community.  For example, what is the cost to the business of losing a valued employee in a car crash?  Is it desirable to have employees to be working from a home office that is not adequate as a working environment?  Putting a value to these considerations is much more difficult than the basics of bean counting, but no less important.

It is wise to avoid generalizations about where people work best.  Whilst many managers can offer anecdotes to support their opinions, an anecdote is not the same as scientific evidence, and many managers will be guilty of looking for examples that reinforce their existing prejudices.  In an office, there may be the potential for easier and more straightforward contact with colleagues, and it may be simpler to keep an eye on what people are doing.  On the other hand, conversations by the water cooler may add nothing to productivity, and an employee may be quietly sat at their office desk but only pretending to work.  There can also be many distractions at home.  Even being on a client’s premises may be unproductive, especially if the client fails to provide an adequate environment, or if client staff are guilty of causing regular interruptions to work.  Tools to monitor staff behavior, like internet usage, are equally relevant wherever the worker is, although this kind of activity will not prevent workers determined to “goof off”.  Ultimately, to assure productivity requires a commitment to manage by objective, and to the regular communication about progress between staff and line management, wherever they both are.

Some jobs, like sales or consulting, necessitate a workforce that is mobile and spends a large amount of time visiting clients or traveling between them.  There are obvious advantages to providing staff employed in these fields with technology that improves communication and enables greater productivity.  The staff will also appreciate any advantages, if it allows them to use their time more effectively.  If a few hours on a plane or train can be spent finalizing a customer’s report, that can make it easier to hit deadlines whilst freeing time for home and family.  Similarly, the time saved not journeying to the office for routine administration tasks can be used for either work or play.  With roles that already necessitate work away from a fixed base, the trend to mobile working generates no additional fears about lack of supervision.  However, the benefits of using technology will generally be smaller, as most of the cost savings that can be attained through having a distributed workforce will have been realized already.  The potential advantages in mobility are greater when offered to staff who traditionally work in an office environment.  At the same time, there is a greater fear that the loss of supervision will lead to reduced productivity.  If mobile working is to be extended further, the challenge is for the business to find new and more sophisticated ways to monitor productivity.

Good management of each individual employee will help get the most out of a workforce, but that may not help with deciding whether greater mobility is an advantage.  In a larger company, with many employees doing essentially similar tasks, one sensible approach is to conduct a trial where mobile working is offered only to a small group.  Senior management can closely scrutinize the productivity of the trial group, whilst also learning lessons about the technology used and the impact on the employee’s attitudes, approach and lifestyle.  At the end of the trial, management can decide whether the experiment was a success and should be rolled out more widely.  Trials will not be suitable for all companies, though.  In small businesses, management should hopefully be able to anticipate the likely impact on each individual employee, but should also be ready to quickly adapt their approach, or roll back their mobility program, if glitches are found or productivity falls.  In businesses where people perform a wide variety of differing tasks, it makes sense to pioneer mobile working practices with those departments that already spend most time away from the workplace, such as the sales team.  On a similar basis, it may be more appropriate to first offer mobile working to individuals with more creative jobs, as there will already be an expectation that these people need to be productive without being closely supervised.  In contrast, if the jobs being made mobile are relatively routine, it is worth first ensuring that there are already adequate measures of productivity before the ability to directly supervise staff is lost.  One way for management to review their own measures of performance is to consider how they would calculate pay if staff were paid on a piecework basis, or what key performance indicators would be included in a contract if the jobs were outsourced.  Whatever activity is being made mobile, an incremental approach is often wisest, even if this slows down the realization of benefits that can be measured in cash.  Experiences learned from a limited rollout will help put a value on factors that are intangible and hard to predict.  This experience is very useful for accurately forecasting the impact of further extensions of mobile working.

In the realm of modern management theory, it might be possible to interpret this question about the benefits of mobile working as really being about the motivation of employees.  For example, it may be that mobile working is expected to lead to improved results because of better staff retention, more flexible working hours, and a better balance between the pressures of home and work.  None of these advantages should be assumed.  Even if there are many positive reports about the advantages of mobile working, management are well advised to assess their digital nomads within a complete context of management data, including measures of financial performance, workplace productivity, and employee satisfaction.  Experience has shown that there is not always a correlation between how employees perceive their productivity and their actual level of output.  This means that management should resist the temptation to measure their digital nomads differently from others in the company, as the different measures used may obscure the impact of remote working.  Whilst listening to employee feedback about mobile working is important, it is just as important to ensure traditional performance indicators remain in place.  That said, there are a number of potential factors which may lead to net benefits for the company, some of which have been alluded to above: reduced travel, increased flexibility, and better staff retention.  The extent to which these affect the bottom line will depend on the circumstances of the business.  For examples who receives what benefits from reduced travel?  Is it the company (fewer parking places), the employee (less money spent on gas) or both sides that gain by eliminating the commute?  Does the increase in employee flexibility also lead to better customer service, or are customers sometimes adversely impacted?  When looking at retention, is the company is retaining its best people, or just the people that gain the most from remote working?

When all the numbers are collected, there is one final rule when trying to gauge if dispersing the workforce has a positive ROI.  Do not rob budget from Peter to pay for Paul’s department.  In other words, do not move numbers around on a spreadsheet and only look at the ones that give the answer that was originally expected.  It may seem obvious that mobile working will help the business to reduce some of its overheads, like utilities, but those benefits will soon evaporate if unhappy employees expect more in their pay packet to cover increased domestic bills.  Ignoring the change in business risks that comes with a fundamental change in work patterns could ultimately cause the business to go under.  Time is money, and staff may be very positive about their increased flexibility, but have clear measures to ensure they really are doing as much work before.  Even if the worker response is good overall at the beginning, be careful to identify any individuals who are exploiting the change for selfish reasons.  Over time, slackers may breed jealousy amongst their hard-working peers, causing demotivation to spread.  Even if there are no slackers, be clear on how you know that and how you can communicate that to your (newly-distributed) team, as the suspicion that a colleague is not pulling their weight can be as damaging to morale as the reality.  Employees may get a benefit from the time saved in commuting, but be wary of the reaction that can be caused if this saving in time is entirely consumed by ever-larger workloads.  Finally, you probably will get more from your people if they like and appreciate each other, and for that to happen they will need to meet in person from time to time.  When first moving to mobile working, you can rely upon the relationships that already exist, but as new people join, you need a different approach to building a team ethic.

In the end, to measure the ROI on your digital nomads, you measure the inputs and outputs of your business, and understand how remote working changes them in many ways.  There are the straightforward and regular cash costs, the costs as calculated in terms of probability and risk, and the human costs.  Balance all the pluses and minuses against the products and services being offered.  Is quantity and quality going up overall?  What is the feedback from your customers?  Are you hitting or missing more deadlines than before?  Avoid generalizations, and take small incremental steps towards making a workforce more mobile, measuring the impact on ROI as you go along.  Of course, it will hard to separate the impact of mobile working from the many other factors that affect corporate results, but looking only at the numbers that are easy to measure may point the business down the wrong path.  Every employee is a unique individual.  Some will respond to mobile working better than others.  If you really want know the ROI of dispersing your workforce, first know how to measure the ROI of every member of your team.  Once you can do that, deciding if you should mobilize your workforce is easy.

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