In this second guest interview in our series, we spoke to John Riordan, a Non-Executive Director at Otonomee, one of the world’s first purpose-built, remote first, outsourcing companies (BPO). In this post, we explore why remote and hybrid work are here to stay.
What do you see as the next big trend in remote work, and how can companies prepare for it?
Fully remote work will remain an essential element, but in my opinion, it's unlikely to get above 20% of all work days.
And why do I think that?
Well, firstly, you shouldn't really listen to the headlines.
We've seen all of these return-to-office mandates in recent months, which would lead one to believe that all big companies are demanding this full return to the office. But I would urge people to remember that a command does not necessarily mean that it will be met.
We've heard this demand for five years in a row.
Now seemingly everybody's coming back to the office, but the underlying data does not show that.
The seminal research in this space is WFH Research by Nick Bloom, Jose Maria Barrero, and Steven Davis. They've been tracking days worked from home for the last twenty years using a survey called The Survey of Working Arrangements and Attitudes (SWAA).
So let's have a quick look at the facts.
- 13% of US workers are working fully remotely
- 26% are operating in a hybrid work arrangement
- 61% are working full-time in an office or place of work
This shouldn't come as a huge surprise, given that approximately 45 to 50% of all employees need to be at their location to work, e.g., nurses, doctors, teachers, manual laborers, and roles in the hospitality sector.
Looking at those working remotely, the figure has plateaued in and around the 13% range. And in my opinion, that's not going to move much, perhaps by no more than two to three percentage points up or down in the next five years.
Hybrid is where the growth is, and that's also where the churn is happening, and it's where the rhetoric and the angst are currently focused.
There was a really interesting report recently from Unit Space. It's an annual survey of employers’ and employees' views on their physical workspaces, published in October 2024 as Restrictions to Resilience, Global Workplace Insights. They surveyed more than 10,000 people, and the report offers a pretty good insight into workplace sentiment as well as a portent of things to come.
There are three key findings in the report.
Firstly, it reported that we're moving towards the center.
The report highlights what they refer to as the meeting of the minds between employers and employees around the topic of hybrid working. And the report's main finding is that an acceptable middle ground is being found. The theme is that we need to strike a balance between concentration and connection, where both stakeholders want to develop workplaces that work better for everyone.
That common ground is on the second point, which is hybrid. That's beginning to settle down, generally around three days in the office and two days at home, depending on the region.
This is borne out by all of the data from WFH Research. The data indicates that hybrid working typically equates to three days in the office and two days at home.
While there continues to be some scaremongering about mandates and the requirement to be back in the office, overall, we're seeing less of that actually in reality. The other interesting part of that is the saber-rattling is primarily happening with larger companies. But what's not happening is, it is not being followed through, because the same companies are issuing the same exhortations every year. So clearly, people aren't listening, and they're trying to win the headlines, because they're not winning. They're not winning in that they're finding it difficult to recruit people who are looking for a little bit more flexibility.
And what we're also seeing happening is a trend back towards what's referred to as “hushed hybrid”, where the top performers are threatening to leave and smart companies are very clearly empowering their senior people to make side arrangements. This shouldn't be a surprise to anybody. These existed back 10 years ago, when companies wanted talent, and that talent wasn't willing to move to the location where the company was. There were side arrangements in every company.
We're now heading back to an arena where top talent or indispensable talent has a point of leverage on leadership. That will always be the case, and it should be.
But another aspect of all of this, the third aspect, is what I refer to as different strokes for different folks. You know, one significant advantage of returning to office for some people is the return of the human connection.
And you know, people who promote this return to the office agenda believe that connection increases productivity and collaboration. However, reports and surveys find that it's not as straightforward an assumption as people think. Some employees who work from home find being back in the office can be quite distracting. So while yes, it fosters face-to-face collaboration, it does come with more distractions. It does come with limited space options and the element of noise you get in a busy office environment.
So what's happening here is there's difficulty in finding a place to do what's referred to as concentrated work, or deep work. People are coming into the office to have meetings, face-to-face interactions, collaboration, and brainstorming. And what people are finding is that the office facilities as configured many years ago don't necessarily have the construct that's required for there to be a significant element of deep work and a significant element of collaboration.
What's happening in this arena of office space is there needs to be a continued evolution in the post-COVID workspace, where office space needs to be reinvented to fit the purposes of both deep work and collaborative work.
That's the key point, that the type of work here is quite important, particularly for those people working on laptops that are, you know, carving out a workspace at home that is quiet with no distractions.
Commuting to an office gives them the benefit of face-to-face interaction, but if they're unproductive for the day because they're not able to focus or concentrate, we need to reimagine the physical layout of these offices to reflect the changes.
We're not going to go back to a world of an open-plan office that looks like an industrial farm of desks. We're not going to get back to that, but nor are we going to a similar space with a bunch of phone booths. I think there's going to be a fascinating era for the next couple of years, and the one aspect that is incredibly difficult to predict will be the impact of technology. If you look at the past five years, we've all become incredibly competent at using multiple platforms, multiple video conference platforms, for a variety of different things.
Just draw that line a little bit further over the next five years, and you're going to see significant growth spurred on by technological advances. Nicholas Bloom, a Professor of Economics at Stanford argued that at the very start of the pandemic, the amount of innovation that's going into this space was exploding. In the first three months post-March 2020, The US Patent Office has had an enormous increase in patents that were filed in the broader remote workspace that takes a while to come through the system.
As a result, I think we're going to see a continued evolution in technology, and that evolution will impact space allocation. So, we're at a very early stage in how office space is going to change.
On the flip side, if you're sitting on real estate that's related to commercial offices, you're seeking to sweat the asset, rather than wanting to invest in retrofitting offices. So that is likely to represent a counterweight to the innovation in this space.
When you see Commercial Real Estate people, happy with office occupancy rates of 40 and 50% you kind of shake your head and think, “Hang on a second”. That's essentially an enormous waste of capital.
How many companies that have started up in the last 10 years have gone into a bunch of investors with a plan that includes office space?
It's an ever-dwindling number.
I think we have to be smart about this.
We will always need office space. There will be a need for collaboration.
Will it be a fractional space where you're sharing with other people? Possibly.
Will it be a significant winding down of the space allocations of a company that would have started in 2010? Possibly.
What advice would you give to someone leading a business who is currently insistent on an exclusively in-the-office model and is hesitant to adopt remote or hybrid work for their companies?
I would say go and inform yourself.
And the best way to go and inform yourself is to lean into some aspects of the research.
1. The first one is data. The best source of data related to this topic is the WFH Research.
This data goes back to the 1960s so you can see the growth of remote work over time.
The Flex Index is another data source that comes out weekly and is accompanied by commentary and has strong academic rigor behind it.
2. My second recommendation would be to lean into other voices.
Some industry groups are trying to make sense of where remote and hybrid work is going. For example, The Future of Work Alliance (Disclosure: John Riordan is a member), which is based in the US, has about 45 to 50 people in the space spread across a number of different continents and industries.
Grow Remote, is another body, which is well known in the remote work world, with a focus on trying to encourage as many people as possible to plant roots in their local community. So there are voices that I would encourage people to listen to, particularly if your starting point is one of disagreement.
3. The third aspect is to look at some companies and the performance and behaviors of companies that have taken that remote-first approach.
- Some of them are pretty big.
- Some of them are small.
- Some of them are well known.
- Some of them are not so well known.
Take Nvidia, one of the biggest companies in the world, it is 100% remote.
Similarly, Intuit, the financial software company, IBM, Otonomee, Johnson and Johnson, Atlassian, Zapier, Indeed, HubSpot, Shopify and All State Insurance are also all-remote.
Allstate recently sold its HQ for about a $19 million loss, but I'm sure they didn't care about that, because since 2020 when COVID kicked in, Allstate has cut its spending on offices from almost $400M to $138 million, so they have made a significant savings on their COVID office basis. They dropped from 12 million square feet to about 4 million square feet. And interestingly, they have seen a stock price increase of 77% and they're now at an all time high. I'm not for one second saying it's because of what they've done from the real estate perspective, but there's a significant amount of future proofing there. So If you want to simplify the benefits of remote work for executives, this is the case study where a well-known company has cut a major expense to get a cost advantage. They have also hired people ‘from anywhere’ to take a labor advantage. And they have been true to their purpose and their roots because insurance people are in every community in the US.
The other area, that has been under a significant challenge in recent weeks, has been the whole area of diversity. Companies with a diverse employee body have done better historically, and the mandates towards returning to the office we have seen in the last couple of weeks reverse many of the trends in diversity, equality, and inclusion. Mandates are shown to negatively impact women and ethnic minorities who are more likely to quit over flexibility and office mandates.
Anything that drives down the number of women and the number of minorities in the workplace will bring a level of sameness. And nobody wants a return to the male-dominated, pale, and stale type office spaces of the 50’s and 60’s. And that's potentially what we're peering at.
About John Riordan
John Riordan is Chairman of Quintas Capital, based in Cork. He joined the Otonomee board in 2022 and retired as Director of Support for Shopify in 2021. He has also served as Chairman of Shopify International Ltd.
John is also a board member of Grow Remote and The Sanctuary Runners, serves on the Irish Rugby Football Union Commercial & Marketing Committee, and is an advisor or board member of several start-ups and scale-ups, including Otonomee.
About Otonomee
Otonomee is one of the world’s first purpose-built, remote first, outsourcing companies (BPO) that provides partner companies with outsourced sales and customer support solutions.
