Episode 169: Unmasking Common Myths Around Remote Work (Interview with Nick Bloom)
In this episode of the Digital HR Leaders Podcast, join host David Green, and guest Nick Bloom, Professor of Economics at Stanford University, and Co-Founder of WFH Research, as they explore the dynamic world of hybrid and remote work.
Throughout the conversation you can expect to learn more about an in-depth analysis of the historical trajectory of remote work, the pivotal lessons learned during the pandemic, and the lasting impact on the way we work.
The key points covered in this dynamic conversation include:
The historical trajectory of remote work and the direction it was heading before the pandemic;
The transformative impact of the pandemic on work, unveiling the biggest working-from-home experiment in history and the essential lessons learned during this period;
The current state of remote, hybrid, and in-person working, exploring the key trends and developments that are shaping the post-pandemic world of work;
Common myths and misconceptions surrounding remote and hybrid work;
The benefits of remote and hybrid work, both for employees and companies;
Insights into the sentiment of executives regarding the future of remote and hybrid work;
Guidance for business and HR leaders in developing, measuring, and evolving their remote and hybrid work policies.
This episode is a comprehensive exploration of the multifaceted world of remote and hybrid work, providing valuable insights and perspectives that will influence the way we work in the years to come.
This episode is brought to you with the support of strategic workforce management tool, eQ8. To discover more about eQ8’s innovative solutions, visit: https://eq8.ai/Insight222
[0:01:17] David Green: At the recent UNLEASH World show in Paris, a panel of CEOs concurred that hybrid work is now a core component of the employee value proposition. Research conducted by our guests in this episode of the Digital HR Leaders podcast finds that working from home is stabilising at about 25% of days, a five-fold jump versus 2019. My guest in this episode is Professor Nick Bloom. Nick is Professor of Economics at Stanford University and perhaps the world's leading authority on working from home. With over 20 years of dedicated research on this topic under his belt, Nick has not only co-founded the widely referenced wfhresearch.com, but has also taken his expertise to the TEDx stage, consulted with numerous CEOs and companies, and has been featured extensively in national and international media.
In this episode, which we recorded ahead of Nick's recent session at the Insight222 Global Executive Retreat in Colorado, you can expect to gain a comprehensive understanding of the history and trajectory of remote work. We'll uncover the pivotal lessons learned during the pandemic and examine their lasting impact on the way we work. We'll also explore the current landscape of remote, hybrid and in-person working, and debunk some of the most common myths. We'll discuss the evolving sentiment of executives regarding the future of remote and hybrid work, and Nick will offer valuable guidance on how companies can develop, measure and evolve their remote and hybrid working policies. Nick will provide guidance on how best to survey employees on hybrid and remote working policies and practices, and we'll also tackle the thorny issue of compensating fully remote workers and explore Nick's research on the four-day work week. So, without further ado, let's get the conversation started as Nick shares his career background and path into the world of remote and hybrid work.
Nick, welcome to the show. Before we get started, can you give a brief introduction to you, your background and your work?
[0:03:25] Nick Bloom: Yeah, thanks very much for having me on. So, you can hear I'm British, I guess we're both British. we're both Brits in America. I came over to Stanford University about 20 years ago in 2004, I have been working on a number of things, particularly working from home, throughout that period. To be honest, work from home was kind of quiet. It was not a big topic until March 2020, and then it just exploded. And all I've been doing for the last three, three-and-a-half years is talking to managers, talking to firms, collecting data, running projects, and I'm sure we'll get into that. But my world right now feels very much focused on how to make this work.
[0:04:03] David Green: Yeah, and it's such a big topic. I mean it's a big topic that we're talking about today and tomorrow at the retreat really. So, as you said you've been researching working from home for 20 years. So, let's start with a quick history. What was the direction of travel in relation to working from home and how work was changing prior to the pandemic?
[0:04:20] Nick Bloom: So, it was slow, so we pulled together different databases, actually the historic American Time Use Survey, and the American Time Use Survey going back to 1965. So, incredible but true, there was some working from home in 1965. It's hard to know how much of it was farm workers and farmers, but it was 0.5%. And what you see from 1965 up until 2019, it's growing. It's actually doubling every 15 years, but the base is really low. So, I'm 50, my parents both worked from home a bit in the 1980s, so that's the era of pieces of paper, it's kind of horrible; 1990s, personal computers, it's not a lot better; 2000s, you get the internet; 2010, you get Zoom, Teams, cloud computing. So, by the time we get to 2019, we have most of the basic technology we have now, but we're not doing it that much. It's about 5%, 6% of days.
Then in 2019, bang, we get this explosion in 2020, and then ever since then it's been falling. And the last year of 2023 has kind of flatlined. My prediction is the Nike swoosh and eventually it's going to go back up again. But certainly, the last three years fell, but now, the last year, we are flat. The return-to-office trend is over.
[0:05:32] David Green: So, we can almost call it the new normal then?
[0:05:34] Nick Bloom: It is the new norm, yeah. I have this discussion over and over again. We've now seen nine months of just flat data, so I think we're pretty confident to see it's the new norm.
[0:05:43] David Green: Okay. So, let's talk a bit more about the pandemic and the impact it had. Obviously it led to the biggest work from home experiment in history. What were the main learnings from the period; and what will be the lasting impact do you think on work?
[0:05:56] Nick Bloom: I think the biggest learning is, work from home works. So, if you go back to 2019, which is really not that long ago, the saying, "Shirking from home, working from home or working remotely, remotely working", people were very cynical, take-up rate was really low for most organisations. You may have one or two people work from home, but they're normally on some special side deal they've cut. Now 2019, you've only got to go through three years now to 2023 and it's completely different.
So, it's absolutely standard, it's part of the big three now benefits, which you have health care, pension and work from home, and people go through them and I talk to recruiters and they say, "This has got to be part of the package, you've got to pay 10%, 20% more". So, that is permanent, so now I think the thing is just to accept that's permanent. It will evolve a little bit going forwards. Any revolution, think of the steam engine, the electric engine, the computer, the internet, it takes time to filter through. AI is going to be a slow process, but it's certainly a permanent revolution. I think the dust is settling and so in my mind, that's one of the big silver benefits, the silver cloud out of the pandemic, in the sense that pretty much everything else has been truly awful.
[0:07:07] David Green: Yeah, and I guess once people experience it, both from an individual level but also from a managerial level, it's like, "Okay, people actually are working, they are getting stuff done and they are collaborating. Maybe it's sometimes better to collaborate face-to-face, it depends on different things, I guess". And leading on to where we're going now, I guess, some are referring to the post-pandemic world of work as the hybrid era. Where are we now with remote, hybrid and in-person work, and you talked about it kind of flatlining over the last year; what are the main trends that you are seeing around this?
[0:07:40] Nick Bloom: Yeah, so I'm going to be an economist and give you numbers here.
[0:07:43] David Green: Good.
[0:07:44] Nick Bloom: So, with the podcast as a presentation pack, you can download millions of numbers, but here's one number I like a lot, which is if you look at the US labour force, so people aged 20 to 64 that have $10,000-plus of earnings in the last year, 60% of these are fully in person, so the largest block are fully in person. Who are they? They're like McDonald's, food service, security, transport, manufacturing, healthcare, etc, people who because of clients or equipment or materials have to come in every day. There's another smaller group about half the size, this hybrid. Hybrid is probably everyone listening, is everyone pretty much in our world, almost all Stanford University students, MBAs. These are people who classically would be coming in Tuesday, Wednesday, Thursday, work from home Monday, Friday. I would say much like ice cream, there's no one flavour of ice cream, but vanilla. Vanilla ice cream is probably about 20% of sales. Tuesday, Wednesday, Thursday in the office is like that for hybrids. It's not the majority, it's the most common.
Then there's the third group, which is fully remote. Fully remote itself has two flavours. One is fully remote for college grads, so coders, pretty high-end people. They don't come into the office week-by-week, but they do seem to meet up every six to eight weeks. So, they might meet every other month in Barcelona or New Mexico. or something. And the other half of fully remote is people that just never meet. They're like on call centres on hourly pay, or on data entry and stuff, that's hiring them per hour per person. That's really -- there is a continuum spread. The biggest group by count is hybrid at 30%. They are definitely the biggest group by wage bill, because they're about 50% of the wage bill because there's so much more hourly pay.
[0:09:33] David Green: And you're actually producing every month, is it wfhresearch.com, if I've got that right, every month, of data that you and your colleagues are collecting on a regular basis, so you're actually able to talk about the pattern that we've seen over the world, all the way back to when you started studying this, but particularly since the pandemic, month by month, so that flat line is clearer than you expected. And you talked about maybe a swoosh of it going up as well. And why do you think it will be the Nike swoosh?
[0:10:06] Nick Bloom: Yeah, so to start off, all economists love to show off about their data. You know, the time that they get really excited, it's like race horse owners and their races, economists in their data. So, we discovered in May 2020, the pandemic was just this completely new thing. The federal government, statistical agencies were not equipped to deal with this. They're great, I work a lot with them, but they cannot turn on a dime. So, we set up the monthly Survey of Workplace Attitudes and Arrangements, we surveyed 10,000 Americans, we refined it, it's a pretty good survey now. The census finally got their act together in September 2022, about two-and-a-half years later. They have a bigger sample but their numbers totally align with ours, so I completely trust our numbers. So, we have those two, they each come out monthly, we have about 50,000 a month collectively. And what we've seen is, the last six months, there's been a complete flattening off.
Interestingly, the third data source I like, a very different location, is Kastle swipe-card data. So, every time you go into the office, you have to swipe to get in, and these office swipe cards are just set up, so pretty sophisticated. They can tell your first time in and your last time out. And so they look at if that's more than a couple of hours, that's defined as a day, or more than four hours, whatever you want. That is running at about 50% of pre-pandemic levels and it's also totally flat. So, it looks like 2023 is the flat bit of the Nike swoosh. As you said, we've declined because people have gone back to the office, we've flattened out for the last year. What's going forwards? Well, there's two things driving this big boost and this is really important for managers, particularly senior managers looking five ten years out.
So, one is technology size effects. So, there's a classic in economics going back at least to Schmukler saying, "Look, if there's a market for technology and that market gets a lot bigger, suddenly firms rush in and try and make new technologies to make money from that market". And if loads of firms rush into this market to say, "Hey, we can make some money out of it", the rate of technology progresses rapidly. And work from home is totally this, it's the prime example. The number of people who work from home has gone up fivefold, plus a lot of them are pretty high earning. So, every hardware firm, software firm, venture capitalist, startup I speak to, I live in the valley, it's like, "This is a gold rush, let's get in". And so, there's been an explosion of new products and new software coming to service this market. I'm already starting to see it from holograms to virtual reality headsets to laser cameras, all kinds of incredible stuff.
I was in Zoom with Eric Yuan a few months ago, and Eric was saying, "Oh, we have these secret labs working on all this stuff". And I said, "Well, what's in these labs? I was hoping you might tell me all the secret stuff". And he was like, "Well, I can't tell you, it's a secret. But there is this one thing we're hoping, which is you put your hand into the screen and your hand comes out the other person's screen", and I was like, "Really? Is that true? That can't be right", and he just laughed at me and then moved on. I was like, I don't know, there's so much stuff going on in these firms.
[0:13:07] David Green: He's teased you!
[0:13:08] Nick Bloom: He's teased. And there's something like that happening. So, five, ten years from now, work from home will be much better. I predict, for example, those kinds of Star-Wars-type holograms, so you can holographically plot people up, will exist. I've seen certain firms already starting to work on them. So, that is one driver. The other driver is cohort facts. If you look at new businesses now, they're kind of businesses that are run by 30-year-olds, maybe 40-year-olds, and maybe have 50, 100 employees, maybe 5 startups. They are they are much more remote, and we see that very clearly in our data. The thought is, as these firms mature, some of them go bankrupt, but others for sure will grow and do well and grow into tomorrow's big firms.
You're going to be seeing 5, 10 years from now, young 50-year-old CEOs that are kind of the next pin-up CEOs, who are going to be making the media, and be saying, "Oh, work from home works well for us, we've been through our trajectory", and all of the employees and all of these companies doing the same.
[0:14:06] David Green: Obviously, you're collecting data every month on this, and there's a lot of myths around remote and hybrid working. What are some of your favourite myths on this topic and what does the data say? Because obviously, there are a few companies that are outliers. They get a lot of press when the CEO makes a statement, but actually the norm, as you said, the data is flatline. So, what are some of the favourite myths that you've heard and maybe have as data?
[0:15:23] Nick Bloom: Let's think. One myth would be, every CEO wants to get their firm back to the office. So, I'm going to put CEOs into two types. There is a sort of cartoon character CEO. So this is, you know, in the cartoon, maybe muscles are riffling, their life is their work, they just ace at everything, they may be the school athlete, they've had job after job they've just done all the way through, all they do is work. They are so successful, so hardworking. Elon Musk or someone like that has to fall into this category. Maybe Jamie Dimon, maybe David Solomon. They are just super-successful CEOs.
Those folks, they just see their life as work. It's really hard to get inside their head. They are working 100, 120 hours a week. Every day they work, I presume they're having a bath they're thinking about work, they're biking they're thinking about work, they're in an Uber they're thinking about work, they're probably falling asleep thinking about work. I'm not sure. They're thinking about work while thinking about another work. Not surprisingly, these people tend to be much happier in the office, and they find they're happier when other people are in the office with them. So, this group is calling for a full office return, driven more by their own personality than those around you.
Then there's a second set of CEOs, which is the remaining 99.9%, who are most other CEOs you know, who are ambitious, are very high performing, but also are maybe married, have kids, an outside life, a hobby. And they want to work hard, and in their ideal world we come in four days a week, but they get that their employees work from home one day a week, and that's helpful for productivity and recruitment. And they're on the more in-office end of most companies, but they're not these hard arses that want in five days a week. And so classically, I end up talking to a lot of these places, whereby the CHR will say, "Three days a week is where we find the evidence", the CEO says four, there's often some negotiation hammered out, but at least that's not five. And at least it may be three one week, four one week, three one week, four one week, something like this. Or four, but we have two weeks a year, first two weeks of July, and it's really quiet anyway, where everyone gets to work from home.
[0:17:35] David Green: The executive thing is interesting, isn't it, because you recently published, or co-authored an article, that was in the Harvard Business Review, and actually you published some data around executive sentiment about the future of remote and hybrid work as well, which actually suggested that they think it's here to stay?
[0:17:53] Nick Bloom: Yeah, I mean we have multiple surveys. One is with the Atlanta Fed and the Chicago University and Stanford University, and it's called the Decisionmaker Survey, a Survey of Business Uncertainty. We survey about 1,000 CEOs a month. These are people who've painfully cultivated up, they know particularly the Atlanta Fed, they're friendly with Stanford or Chicago. We get them on the phone and eventually get them on this very short online survey. You should think of these as CEOs or CFOs typically on 200- or 300-person firms. They're not like -- Elon Musk is not here. I doubt it, I've not looked at his company, but I'm pretty sure he's not there.
[0:18:30] David Green: You might not get him to complete the survey!
[0:18:32] Nick Bloom: Yeah, exactly, I think he's too busy. But probably the guy doing the shoe shine in the airport isn't here either. So, what do we ask these guys? We asked them, "Where will work from home be in five years from now?" pre-pandemic, "Where is it now? Where is it in future?" What you see is work from home pre-pandemic is really low. So, work from home pre-pandemic goes up to now about 4X, there's a big jump up, we all know that. We wanted to get our norms set up. We then ask them about five years from now, and there's a small further rise. And most individuals report an increase. They're like, "Why? This seems amazing. Surely the CEOs are calling for back in the office".
When you go talk to them, they see things like, "Look, I'm going to make a business here, I have to make money. My business is focused on profits and growth, and offering employees hybrid and taking two or three jobs that could be done in person, that could maybe be done fully remotely, as a way to save space, save hiring, I can hire that person in Mississippi rather than the Bay Area, I can hire people I couldn't otherwise get into two or three days a week. We introduced this [I don't know] four weeks a year all remote in the summer. That's been great for getting new grads", just a whole load of things that they suddenly said, "Just without this, I'd have a third less employees". So, they're very practical, they're very much, "I don't have a personal social view on this, it's not like I socially support it yes or no". They normally don't like it, so they normally quite like to be at home on Friday. But their big thing is just making money, and it turns out work from home makes money for companies.
[0:20:02] David Green: Yeah, and as you said, some of the benefits are that opportunity, maybe hire that person with those specific skills that maybe isn't in New York when that's where your company is located; as you said, they might be in Mississippi, but they might really want to work for the company, they might have really specialist skills that they can bring and help you effectively be successful. So, obviously most of the people that listen to this podcast, they're HR professionals, a lot of people analytics professionals as well, and we'll talk a bit more about the people analytics professionals in a minute. But what guidance would you offer to business and HR leaders when it comes to developing, measuring and evolving their hybrid and work-from-home policies?
[0:20:39] Nick Bloom: Great question, so let's see, I've got three or four. So, one is in terms of office design. It's slightly different, and then I'll come back more direct to your question. So, I would design the office to be set up to support more meetings. So, if I think of Stanford campus, we have all these libraries. No one's going there to get books out but loads of people are using it. That's an individual person workspace. That's actually probably not the kind of workspace you need a lot of in firms; you want instead meeting spaces and this could be a meeting space. You could put some cover around it, you could make another one here and another one in the other corner. This whole area can make five or six meeting places with partitions so that you wouldn't get too much sound pollution.
Another thing would be Zoom booths, so glass-side booths so we could put up a ton of them in here, so I can take the zoom call here and I don't disrupt others. Conference rooms, etc, so making it a place whereby people come in for social work. They feel like, "When I'm in here, it's good to connect with colleagues and co-workers".
In terms of the three to-dos, the first is the importance of performance management. So, pre-pandemic you could manage a firm by managing by walking around. So, if I'm standing up walking around, I can tell, David, you're at your desk working because you're here, typing away. Excel's in front of you, Word, something like this. All your heads behind your back are watching Champions League, or --
[0:22:06] David Green: How do we know?
[0:22:07] Nick Bloom: -- you're flirting with a colleague on the other side of the partition, or I endlessly see you in the bathroom taking your phone with you doing who knows what. So, managing while walking around turns out to be the best way to tell what's going on often in the office. I'm wandering around, I'm walking, I'm seeing what people are doing. That's like five out of ten; it's okay. I wouldn't claim it as great, but it's something.
Now, if you have employees that have worked from home, you can't do that, so what do you do? What you turn up to having to do is manage, rather than evaluate inputs, you evaluate outputs. So, evaluate outputs, giving 360 reviews, performance reviews, have you met your targets, etc. And when you move to that, it's a win/win for employers and employees. For employers, like managers, you're my manager, so I need to meet these eight tasks. I am relatively indifferent how you do it, just get on with it this week. I deliver, you're really happy, it's good, my deliveries are there, their quality is there, everything's fine.
I on the other hand, if I play golf, they say, "Look, I'm going to do that, but I'm going to play golf Tuesday, Wednesday, Thursday morning, because it's quiet time and I'm going to make up for it by working in the evenings". So, I get to make more use of flexibility. So, fact one is like much more performance evaluation systems, so more managing outputs rather than managing inputs, so that's one. We're seeing a big drift towards this already.
Fact two is more, the camera's on in Zoom calls. So, if you have to have Zoom calls and maybe some people are travelling or some are at home, I think it's important the camera's on. Our data, we've asked managers and employees the same questions, "How do you feel about how your engagement is whether you have your camera on and off; and how do you feel others' engagement is with their cameras on and off?" and it's completely symmetric, it's amazing. All four times you get, people having cameras on are much more engaged, so nobody's under any illusions under this; when you have a camera off, you're probably doing something else, and everyone's like, "I'm doing it, you're doing it, we all know it, there's no nothing to hide here" so it would just be a norm.
[0:24:05] David Green: The days of conference calls without video.
[0:24:08] Nick Bloom: Yeah, I think that's gone. I get it if you have 200 people, then you don't all want it on and then that's a broadcast. That's like watching TV, a town meeting. But if you're having kind of, I don't know, 30 or less and you want contact from the audience… And then the final thing is software to help firms in terms of offices and organisation. So, in the last few years there's been a growth of companies that are basically marketplaces for office space.
So, to give you an example, Strava is the thing that does run tracking and bike tracking, and I know their CEO because he actually weirdly used to have my job ages ago as an Assistant Professor at Stanford. It's like an office two doors down the road from me, and he quit academia and started his own company. And recently, he started working at Gable, which are one of three of these desk management software companies. What he did is he said, "We're going to close down the Denver office, we don't have enough people going there". But for folks who want to work in Denver, you go on to the Gable website and you just get an office. Gable's like Expedia; they just have hundreds of offices, tons of them. You look at them, the price, and you have an account and you just pull one off. He said it's really useful to do this for Strava because they can tell which locations you can close down, get rid of offices; which locations maybe everyone's getting offices and actually need offices and should open them up. There's others, there's Upflex, there's LiquidSpace, you know. And from my time at McKinsey's, always look at three when you're procuring these things.
Another issue is desk organisation. So, there are companies like Eden, Kadence, Scoop that help you organise where people are. Like if I'm coming into work, it's really valuable to know whether you're coming in or your colleague. So, if I can open up a portal and say, "Dave's coming in, I'm going to come in, and if not, I'm not". So, again, it's not super-complicated, but it's worth getting this up and running. So, yeah, those are the three big things I focus on.
The other thing that's interesting is, so a lot of people are using spreadsheets, they're just using kind of low-tech spreadsheets like, "Write your name on if you're coming in on Thursday". So, the downside to that, it doesn't alert me. I may actually set up an alert, "Is David coming on Thursday? If so, let me know"; (a) the spreadsheet doesn't alert you that, (b) it doesn't alert you that maybe David and X in particular, who I really care about, are coming in; that's my team that are coming in.
The other thing is, more and more companies now are saying, for senior leaders, "I get that you don't need to go in the office three days a week". There are a number of senior leaders, I see this a lot with law firms, the partners do not need to be in every day. In fact, they hardly need to be in at all. They know their clients, they've had their clients for 15 years, they know the law really well, they have a beautiful home office, they're really well-connected, there are all the lunches and they're going out, they're just often not going into the office, they're going from home into the lunch place and back for office. They're like, "Why do I go into the office just to sit around with a bunch of junior associates?" And the answer is mentoring, because the juniors, they learn off the seniors.
So, another thing it's useful to have in some of these software programmes is something that explicitly measures how many times a senior person is in the office when juniors are around, and kind of has a rough measure of mentoring. So, "Look, if you come in in an office when there's at least five juniors, we're going to give you an extra point of mentoring. Also, that's going to be part of your talent development programme".
[0:27:25] David Green: Many of the people listening to this episode work in people analytics. How should companies best survey employees on hybrid and remote working policies and practices? I know we talked about this a couple of weeks ago when we spoke.
[0:28:31] Nick Bloom: I would have thought it's role means function. So, you can probably flip through a few functions. So, if you are a very deep-end coder, you're generating stuff that's really yourself and right at the end, you develop the product, or doing some marketing campaign or doing product development, it may be you're best off being fully remote and coming in once a month to a company. It may be the firm says, "Look, we want you to live 100 miles from the company, so if something comes up we can call you in. We don't really want you in Argentina, but you can live 100 miles away, and then if there's a problem, we'll call you the night before and you come in that day". And you get to live 100 miles away but you have to be prepared to drop everything and come in the next day.
There's another group of people, I think, who do stuff that doesn't really involve any teamwork, any collaboration, in which fully remote also may work well. I know GitHub, Upwork, etc, have been very focused on fully remote. They tend to, though, require to meet in person every other month. So, even with the remote, you've got kind of a mix of fully, fully remote, and fully remote whereby they've still got to meet up every six months or four months. I have a lot of colleagues at other departments and I Zoom them all the time and I don't meet them in any given week, but I certainly met them three weeks ago. And it's kind of funny, I mean it shouldn't have to happen, but seeing them in person, their height, what they look like, how they move, when they're on Zoom, you slightly project that onto them and you feel like you know the real person, rather than that two dimension.
Then under hybrid, if you have employees that benefit from at least two days a week face-to-face, I would say they're probably best fit from hybrid. And face-to-face activities that are better are working patterns that are training, mentoring, discussion, maybe sensitive staff and mentoring. They're best done in hybrid and it's important that you do that with people in your office.
[0:30:28] David Green: So, listening to what you're saying there, Nick, it seems quite sensible, where possible, for companies to kind of delegate decisions around this to the team level. I don't know, have you seen companies doing that?
[0:30:39] Nick Bloom: Yes, there's a mix. So, I think on the one hand, if teams operate relatively independently, so imagine you're a sales team and there's the Europes and Americas and South Americas and within Europe, maybe you break up Germanic- and French-speaking, etc, that seems a pretty decentralised sales team. So, there's eight people and they are targeting Italy and there's no real reason why Italy team should have managed the same way as the UK team. In fact UK and Italy have got different work-from-home practices, different holiday structures, and so they should be different. So, in that sense, it's perfect.
The sense in which it comes troubling is if you have a matrix organisation. So, in a matrix organisation, what you may find is, "Look, I was on sales, but it cuts right across finance. And finance can't do all my markets and that's connected to engineering and everyone's connected". There it gets higher. There can be options, so some options is doing it country by country, because the people in the matrix you work with most are in your country. Another option can be just having one global pattern. The downside of one global pattern is actually, religious days vary a bit. I see some firms doing a national day. The upside, by the way, in terms of a national day is it's a lot easier to manage and monitor, so just as a CEO.
I talk to CEOs, they find it really hard to know what's going on when they walk into an office, and some offices are buzzing and people are there, and some have no one there, "Well, that's their work-from-home day". It's like, "Well, every day I walk in, there's nobody there", "Well, every day is their work-from-home day. It's like, "Well, I'm walking around, I'm trying to figure this out". So, there is a certain simplicity and ease of execution of everyone having the same day. On the other hand, flipping back, if you choose individual days and it turns out that people don't overlap, and if you're lucky, they overlap in a way that enables you to save a bit of space. Saving space is a kind of afterthought. It's generally unpopular because saving space requires clean desks, which people don't like, it has some security implications that people don't like, etc.
But yeah, in Stanford for example, in that's one of the areas, the IT folks are so remote and so are sharing desks in a way they're not bothered, and they just kind of pick their own individual desk. And by law of large numbers, we found out kind of a bit of a building just empty, and so we're closing it down. So, far from environmental and energy reasons, the thought process is pretty soon we should sublet.
[0:33:11] David Green: Okay, a couple questions, one on pay and compensation, and then one on the four-day week. How should companies pay fully remote workers, because we've seen different companies doing different things around that?
[0:33:21] Nick Bloom: Oh, so you've picked the most contentious two topics there. I wrote two op-eds and then put them on LinkedIn, and they spurred like hundreds, maybe by now thousands of comments. So, I'll tell you what the story was, I'm probably blasting my own, telling of it, but I'm not strongly of one mind or another, I just told the story. So, twice in Exec Ed, I had executives coming to me with really the same story, and I'll tell you just one of them but very similar to what she was saying.
So, the first one she says, "Look", she runs a high-tech firm in Europe doing very well, she is covering one country, they have about 20 employees in that one country. In that one country, an employee who's actually one of the top performers has moved from a high-cost, inland city to a low-cost, coastal city that kind of has a resort, and she's like, "Fine, I don't care, the guy's still getting his job done, he's still performing really well, I'm going to lose him from my team". It would be okay except, (a) they got regional pay with that country, and (b) another employee spots this by noticing on his Zoom background that there's some kind of beach and says, "There is no beach in the land", you know, "What the heck's going on?" So, I mean she's stuffed, what is she supposed to do?
On the one hand, she disciplines her highest-performing employee, pisses him off, he leaves, probably annoys his friends as well, maybe destroys her group; or she does nothing, in which case she's basically condoning fraud and the other employee now is festering and no doubt going to cause his or her own problems and the whole thing's going to come down. And I was like, "I mean, you're strapped, you're screwed, this is the problem". Having these hyper local pay systems are causing the manager to become he policeman, and every time employees move, say because their spouse gets another job, their pay scale moves, etc. And so, as I said, it was born out of the pandemic, I get where it came from. The pandemic bore this thing whereby everyone was told, "Look, you're going to keep the pay of the office you've been in full-time, just go away and everything will be fine", but of course people moved and you suddenly find that someone coming from a high-wage pandemic office and a low wage are having to now live next door to each other and they're paid different amounts, it seems really unfair. And so then, they started to move to paying people for where they live.
Ultimately now, when I talk to companies, they are slowly moving to national pay skills. So, national pay skills mean within each country, there's one pay for a job. That would be my support, and that seems to be the majority of you. I ran a big poll on LinkedIn, it's about more than 1,000 people polled and the last time I looked, I would say it was close; local was second, but national was first. After that, my second would be global. Now, depends on the task but if the task is, say, proofreading a document or data entry that really doesn't require local skills, then if you're an American company, it's not obvious why you wouldn't outsource it to Brazil, Philippines, anywhere else.
Now you may say, "Well, you're taking jobs from Americans; an American would do that job". That is true in some ways, but a company's role is not to provide jobs, a company's role is to maximise profits and growth. The investors that own them want them to do that, so I think it's in their fiduciary duty to maximise. They're not there to provide social goods. They do great, but that's not their objective function. And secondly, the US is at full employment. We're actually struggling to find people to fill jobs, so it's not really a problem we're facing, that whoever that is that isn't getting that job probably has ten other ones waiting for them. And you're effectively taking low-skilled jobs out of America and sending them to countries where they're medium-skilled jobs, and actually that's improving development.
[0:37:18] David Green: Yeah. And the other contentious topic is the four-day week, and obviously we're both British, there's been quite a lot of companies actually doing an experiment together around the four-day week. What are your thoughts around the four-day week and where it may go?
[0:37:33] Nick Bloom: So, it's got confused because there are actually four versions of this, and I'm going to call three of them muggle versions, and one of them magic versions. So, why don't I start with the magic version, which I think is hard if not impossible to achieve. I mean like Harry Potter, most of what we read in Harry Potter doesn't happen. A little bit has by now by technology, but the magic version is, we work the same number of hours per day, we work one less day a week, and we produce the same productivity. So, what's required here is that you can be so much more productive, 25% more productive on the four days that you can offset the loss of the fifth.
One way to get at that is to say, "Look, I've discovered that in my organisation, I was wasting a day of completely inactive and pointless activity". Is that possible? Maybe. I don't want to claim that every organisation is efficient, and maybe in the public sector and in not very competitive small industries. Having spoken to managers, certainly managers of competitive, free-market companies, they're pretty insulted and say, "I've never been aware of wasting a day a week. If I did, I would cut it out and be much more profitable". That's the kind of thing government firms do that are just completely sleepy. So, I think you can find firms that will fit the magic criteria, but they're sleepy and it tells you that they were, in advance already, very inefficient and they had vast amounts of slack to cut out.
Now, what about the three muggle versions? They are feasible and actually have quite a lot of appeal. So, number one is what I call "shift sharing". So, number one says, imagine we work let's say eight hours a day for five days a week. We now say we're going to work ten hours a day for four days a week. We're still working 40 hours, we just do it in one less day, we just do four longer days. It's great, some people like it, there's less commuting. On the other hand, some others who don't like it, you don't get to see your kids say at the end of time and stuff. So, I mean it wouldn't suit me, but it would suit some people. Or there's even three hours, three times a day for thirteen hours a day.
Second version of the muggle full day week is part-time pay. So I say, "David, you know what? You have been getting richer decade by decade, because American productivity growth is about 1.5% a year. And if you look back, Keynes and Nixon and various people said, '30 years from now, we'll be working for three days because we'll absorb all the productivity growth'. Why are we still working five? I think you should work four, take a 20% pay cut. With that money, you can still afford more than what you could have bought 10 years ago, 15 years ago. So, just enjoy the productivity through more leisure". And we should be doing that as a society. Actually, as a society we should be doing that. I really don't think all this extra hard work should buy us an even bigger TV, an even faster Ferrari, even faster bandwidth. It's like, I know what we need it for, why can't we just take a day off work? So, I'm in favour of number two.
Then, number three is work from home on Friday, which has become called the four-day week, which is still really working for four-and-a-half days, you're just working a bit more during the week and a bit less on Friday when you're at home. So, 1, 2 and 3 are great, the more the better, requires a bit of flexibility from firms. I'm just worried that they are getting thrown out, as I was saying, throwing the baby out of the bath water, thrown out with the magic version of number 4, which sends prickles up every manager's back when they have to think about it.
[0:41:10] David Green: Well it's great, I think that might be the first time we've had a Harry Potter analogy on the podcast, so that's really good! And, Nick, this is the last question and this is the one we're asking every guest this series. As we approach the end of 2023, what do you think will be the key priorities for HR as we head into 2024?
[0:41:29] Nick Bloom: Yeah, better coordination and monitoring of hybrid work actually. So, for HR, their importance has risen a lot. So, to everyone in HR, it's like an enormous thank you. I've been saying repeatedly to CEOs that because of the importance of performance management and the importance of hybrid, this is really an HR job, you need to put more resources into HR. HR, if it's not already, needs to be an executive role, and in fact maybe space management needs to sit under HR rather than under the CFO, because it links in. So, HR just needs a bigger op. Companies are much more about people and that's the folks that run it.
Specifically, the jobs that I think are hardest is managing hybrid around coordinating the days, which I think software and data collection is going to help a lot, getting them to use desk booking; even if you've got enough desks, then getting the desks book provides information. It's like prices. The market economy thrives off prices. There may be too many of some product, we still want to know the prices to know how much each product is worth. It's kind of like our blood; our information is prices. So for firms, you want desk booking to do the same. And then also, some of all these more flexible tools for closing offices down and using desk aggregators.
Then finally, performance management. So, 360 reviews, 6-month feedback session, 3-month interview. And some of this stuff's uncomfortable, you have to give people bad news. I mean, one of the things about meaningful 360 reviews is if you get bad news, it is not a surprise. Like, a bad performance review is I say, "David, I've got bad news for you". You're like, "What?" and I tell you, "You performed badly, you missed three targets". I mean, you should have known that months ago.
[0:43:07] David Green: Yeah, of course.
[0:43:09] Nick Bloom: So, performance reviews isn't like the shit sandwich, that you just dump it all at them. It's like, "Well, as you've been talking about for a while, here's how it can help you, but be aware that this is a problem. If it doesn't get fixed in the next review, we'll be taking sanctions".
[0:43:21] David Green: Yeah, very good. Well, Nick, I've really enjoyed the conversation. It's a nice hors d'oeuvre for the session you'll be running later.
[0:43:27] Nick Bloom: Exactly.
[0:43:29] David Green: Can you let listeners know how they can get in touch with you, follow you on social media and find out more about the research that you're publishing every month?
[0:43:38] Nick Bloom: Sure. So, the key thing is LinkedIn. I also have a website, called wfhresearch.com, as in workingfromhomeresearch.com. Between the two of them, we post pretty much everything.
[0:43:50] David Green: Yeah, and I certainly recommend any listeners that are interested in finding out more about this topic to actually go down there, go every month and download the latest report. You make them freely available, it's very easy, you click a button and the PDF is there.
[0:44:01] Nick Bloom: I ought to say, it's all freely available, you don't have to sign up to anything, no credit card teasers bill. I mean if you want to sign up a credit card, you're welcome! Yeah, there are no credit card signups, no, you just download it. I mean that's that basically, we're not selling your details.
[0:44:15] David Green: Well, Nick, thank you very much for being a guest on the Digital HR Leaders podcast.
[0:44:18] Nick Bloom: Thanks so much for having me on.