Shirking From Home? Telecommuting Proves Its Value

A study shows that home-based workers are more productive and satisfied but suffer a “promotion penalty”

The essentials

In a study that looked at the productivity and satisfaction of call centre employees who worked from home versus the office, researchers found that the productivity of telecommuters increased by 13 percent. On the other hand, their rate of promotion was slashed by 50 percent. It was estimated that the company would save approximately $2,000 per year for each employee working from home, says John Roberts of Stanford Graduate School of Business. Roberts presented his findings at the Queen’s School of Business Economics of Organization Workshop.

On the polarizing issue of telecommuting, the lines have been drawn. On one side are organizations such as Yahoo, which ban staff from working from home, thinking it makes them less productive and inhibits collaboration. On the other are organizations such as Telus or Virgin, whose founder, Richard Branson, says “choice empowers people.”  

Telecommuting is an emerging workplace issue in many industries. According to the latest figures (2008) from Statistics Canada,11.2 percent of Canadians work from home at least once a week, while 23 percent of professionals or managers telecommute. 

The value of telecommuting, however, has been hard to pin down. Adding welcome rigour to the debate is the first randomized study that looks at how working from home actually affects employee performance, work satisfaction, turnover, and promotion rates. The findings, presented in June 2013 at the Queen’s School of Business Economics of Organization Workshop, point to potentially big gains from telecommuting, though at the expense of workers’ career advancement.

John Roberts of Stanford Graduate School of Business presented the findings at the Queen’s workshop on behalf of co-researchers Nicholas Bloom, James Liang, and Zhichun Jenny Ying. Their study was conducted in conjunction with CTrip, a travel agency based in Shanghai, China, that employs 16,000 people. 

 In the study, which took place over nine months, 249 CTrip employees in the call centre were chosen to take part; half were assigned to work from home while the other half remained in the office. Both groups used the same information technology equipment and performed identical work, so the only variable that differed between the groups was work location.

The researchers found that over the course of the nine months, the productivity of home-based workers increased by 13 percent, thanks to a nine percent increase in number of minutes worked and a four percent increase in productivity per minute. The telecommuting group also reported higher levels of work satisfaction. In the process, it was estimated that the company would save approximately $2,000 per year for each employee working from home.

On the other hand, the study also revealed a darker side: the rate of promotion for the telecommuters was slashed by 50 percent. Researchers speculate that this was due to less on-the-job training from team leaders and the phenomenon of “out of sight and out of mind.” “We heard anecdotal evidence for this from employees and managers during focus groups and interviews,” says Roberts. Regardless of the cause, he says, “it’s clear that working from home comes with a promotion penalty.”

The power of choice

The study had an unintended consequence for CTrip and its employees. The learnings from the experiment were so compelling that, once it was over, the company opted to allow its employees to choose where they worked. As it turned out, more than half of the employees involved in the experiment – both the telecommuter and in-office groups – changed their minds about where they worked best.

Those who had tried telecommuting but felt they were unsuited for it returned to the office, while those who enjoyed the quiet work environment of their homes enjoyed even higher productivity when they were not randomly assigned to it. When employees were given the choice of where to be based, productivity gains shot up to 22 percent from 13 percent. 

“One of the most interesting aspects of the experiment was the learning process for both the firm and the individual employees on the costs and benefits of working from home,” the researchers write in their paper. “Both groups were initially unsure about these, because no other Chinese call center had ever offered this option before.”

The researchers were curious as to why CTrip did not offer the telecommuting option earlier. One reason, they learned, was that senior managers did not want to risk their careers on a workplace innovation. 

The other reason relates to the “free rider” problem. As the researchers note, “CTrip believed that the private benefits of home-based working would be short-lived, as rivals would copy the scheme and use it to drive down commission margins in the travel agent market, while the costs of experimentation would be borne entirely by CTrip.”

Kenza Moller 

Smith School of Business
Goodes Hall, Queen's University
Kingston, Ontario
Canada K7L 3N6

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