Businesses without offices – is this the way forward?

April 12, 2017

Office-less working. Working from home. Telecommuting.

Whatever you call it, it’s definitely on the rise. For employees today, work is often seen as an activity not a place, and organisations of all sizes are scrambling to accommodate for fear of becoming uncompetitive. For some businesses this approach has been hugely successful – leading to productivity, morale and retention gains while reducing costs.

For others, the story is very different. 

It’s a fine balance, and entrepreneurs looking to start or grow a business in the UAE and beyond should take note. 

Attitudes to teleworking

The tech revolution is changing the workplace. Cloud-based storage and apps, smart devices, web-based communication software – all these developments are empowering virtual working. At the same time, global attitudes towards work are changing. Numerous studies testify to a shift in priorities; for example, the extensive PricewaterhouseCoopers (PWC) report NextGen: A Global Generational Study, published in 2013, notes that employees today ‘aspire to a new workplace paradigm that places a higher priority on work/life balance and workplace flexibility’. For many, the study observes, ‘work is a “thing” and not a “place”’.

In accordance with these attitudes, many organisations are shifting away from traditional place-specific work and opening up to working from home. Gallup research found that in the 20 years from 1995 to 2015 the percentage of the US workforce that had tried telecommuting rose from 9% to 37%. The 2012 CQR Telecommuting report announced that the percentage of US employers allowing their staff to telecommute almost doubled from 34% to 63% in the seven years to 2012. These figures still represent little more than a dipping of a toe in the water, though: the average number of days worked from home in the Gallup poll was just over two per month, while CQR found that only one third of employers allowed some workers to telecommute regularly.

Gallup research found that in the 20 years from 1995 to 2015 the percentage of the US workforce that had tried telecommuting rose from 9% to 37%.

Nonetheless, some organisations have fully embraced remote working and that number is growing. For the past three years, recruitment website FlexJobs has compiled a list of the organisations that allow most or all of their employees to work entirely from home. The list grew from 26 companies in 2014 up to 125 in 2016. These organisations span a range of industries (from marketing to not-for-profit) but businesses in the HR, technology and education sectors are most represented. 

Putting teleworking into practice – real-world success stories

Automattic Inc, the web development company that created WordPress, is a great example of how a completely distributed workforce can work. Automattic employs 548 telecommuters from 53 countries speaking 76 languages. Its office-less approach is clearly working, as Automattic was valued at USD 1.16bn in 2014. PWC too is known for offering global opportunities for telecommuting, amongst other flexible working policies that include job sharing, flexible hours and secondment.

Many other businesses are experimenting with telecommuting without going fully office-less. Github, for instance, actively encourages its 400 or so employees to work whenever and wherever they want – but retains its headquarters in San Francisco for senior management and any other teams who would like to use the space. Guthub also has a handful of smaller offices and co-working spaces worldwide, providing a physical space for teams to gather.

Uptake in the UAE might be slower than in the US and Europe, but office-less working is having its day here too. A poll of 10,000 Middle East employees by job site Bayt.com found that 47% worked in an organisation where telecommuting is actively supported, and 72% of respondents regarded working from home as beneficial to both employer and employee.

According to the Teleworking in United Arab Emirates study, the preference for full-time teleworking is prevalent among married women, while men tend to favour part-time teleworking. The major takeaway, though, is that only 33.1% of all respondents prefer not to telework at all. 

Office-less business – lessons for the entrepreneur

Remote working clearly has benefits. As far back as 1998, Personnel Psychology published a study exploring the impact of virtual office teleworking versus traditional work. The study’s findings – that virtual offices can have a positive impact on productivity, morale, work/life balance and flexibility, while reducing expenses – have been echoed repeatedly since. In 2014 Harvard Business Review carried a study by travel website Ctrip, which trialled home working for half its call centre workers for nine months. Testing the hypothesis that the company would save enough money on overheads to outweigh the expected decline in productivity, Ctrip actually found that home workers increased productivity by 13.5%. Their attrition rate fell to half that of the traditional office workers too, and they reported big increases in job satisfaction. Ctrip also reported savings of nearly USD 2,000 per employee through the trial.

Going office-less can also make you more attractive when it comes to talent acquisition. Exceptional growth comes hand-in-hand with exceptional employees, but finding those employee A-listers is a challenge all entrepreneurs share. Remote working unlocks remote workers – potentially exceptional employees who aren’t able or willing to commute to an office. Why settle for the best talent who can come into office when you could have the best talent?

Going office-less can also make you more attractive when it comes to talent acquisition.

In the LinkedIn Global Recruiting Trends 2017 report, 57% of participating businesses cite competition for talent as their biggest business challenge, so broadening the talent pool can only be a good idea. In fact, many would argue that it’s the central idea that drives business success today. Global talent shortages and increased global competition automatically make human resources a global function.

As Professor Bhushan Kapoor of California State University puts it in Impact of Globalization on Human Resource Management, ‘Only those multinational enterprises willing to adapt their human resource practices to the changing global labour market conditions will be able to attract, develop and retain the right talent, and will likely succeed in the global competition.’ The ‘right’ talent is an important phrase. HR should become a global function not only because it widens the talent pool in a practical sense, but also because it allows us to achieve greater diversity, which has definite financial merits.

For instance, McKinsey’s global analysis shows that gender-diverse and ethnically diverse companies are more likely to financially outperform less diverse counterparts, by 15% and 35% respectively. With those figures in mind, it’s no surprise that the LinkedIn trends report predicts that recruiting diversity will become the most important trend in the talent acquisition industry over the next few years. The global growth allowed by office-less working has an important role to play, to entrepreneurs as much as established multinationals. You cannot afford blinkers. Growth happens across borders, wherever your offices are (or aren’t).

A word of caution

It would be a mistake, though, to leap before you look, because these advantages are not the whole story. Take the case of Yahoo. Faced with plummeting profits – in 2012 Yahoo’s operating profit fell by a dramatic 30% – CEO Marissa Mayer decided the culprit was remote working. In February 2013 she banned all Yahoo employees from telecommuting, a contentious move designed to improve collaboration and innovation. Despite dire predictions from almost every side, Yahoo Senior Director of Real Estate & Workplace, Julie Ford-Tempesta, noted only eight months later that ‘employee engagement is up, product launches have increased significantly, and agile teams are thriving’.

Contrary to the experience of Ctrip, Yahoo’s decision to kill the office-less environment seems to have been its salvation. The value of real-world communication should not be underestimated. Studies have found that critical problem solving is more effective when employees communicate face-to-face. The so-called ‘water cooler effect’ can be hard to replicate without an actual shared water cooler.

And while companies like Automattic embrace office-less business, there’s certainly an argument that this limits talent acquisition as much as insistence on tradition does. As Jennifer Dryden, Vice President and Global Head of Real Estate for Northern Trust, can attest that not every employee wants to work permanently from home. Dryden notes that although Northern Trust finds ‘widespread support for flexible hours and remote working patterns’, only a very small number participate 100% in the programme. 

To office, or not to office?

Office-less working is definitely here to stay and entrepreneurs either starting or growing a business in the UAE and wider region must be aware. But there’s a balance to strike. Github probably offers today’s entrepreneurs the most workable example: a foot in either camp. This is a model used often, from smaller companies to supernovas. Microsoft’s Director of Global Workplace Strategies, Brian Collins, advocates ‘balanced workplaces where employees have a choice of work settings depending on their needs’.

Office-less working is definitely here to stay and entrepreneurs either starting or growing a business in the UAE and wider region must be aware.

If you think of flexible working purely as a way to cut costs and increase productivity, you’re missing the point. Telecommuting isn’t about you controlling productivity, it’s about giving control to your employees. Productivity is intrinsically linked to engagement and profits go hand-in-hand with morale. So it’s about granting your employees choice and meeting their needs. As Collins sums up succinctly, ‘Employers who grant autonomy to their employees are higher-performing.’

About the author: Neil Petch, Chairman at Virtugroup
About the author: Neil Petch, Chairman at Virtugroup

With a history of business successes, Neil Petch is well known in the UAE and beyond as a visionary entrepreneur with a passion for helping others establish and grow their own businesses. Neil founded Virtuzone in 2009 and quickly established it as the region’s leading company formation expert, before launching Virtugroup, a holding company that has a wider mandate of supporting startups from establishment; to successful market entry; and all the way through to exit.