Leadership & Management

Researchers: Flexibility May Be the Key to Increased Productivity

A study reveals that working from home boosts employee happiness and productivity.

October 09, 2012

| by Kathleen O'Toole


Across the industrialized world and across employers, there are huge variations in what Stanford economics professor Nick Bloom calls being-nice-to-people practices. These are policies that try to address the fact that men and women in today’s workforce are often struggling to balance their work and family responsibilities.

The French have reduced the legal work week to 35 hours. The Australians have added paid parental leave of 18 weeks for the primary caregiver of newborns. The United States requires larger employers to offer unpaid leave to employees with seriously ill family members. Some companies allow some workers to decide when and where to work, but flexibility is not generally the case, according to a 2010 report on work-life balance by the U.S. President’s Council of Economic Advisors. What many employers would like to know, says Bloom, is whether more flexibility in working arrangements would hurt or help the company’s profitability and competitiveness. In a new study with three colleagues, he found solid evidence at one company that allowing workers to work from home produced a large productivity boost as well as happier workers.

The study was conducted over 10 months at CTrip.com, a billion-dollar NASDAQ-listed company based in Shanghai. Bloom and coauthors — business school economics professor John Roberts; economics department graduate student Zhichun Jenny Ying; and business school doctoral alumnus James Liang, a cofounder of the company — compared the productivity of call-center workers who worked from home four days a week with workers performing the same work from rows of office cubicles.

CTrip’s home workers were more productive. An analysis showed they answered more calls and worked more hours because they took shorter breaks and used less sick leave. The home workers also reported being happier than the office workers, and fewer of them quit. Retention of quality workers is important to keeping company recruitment and training costs down, so Bloom calls it a “no brainer” for CTrip to offer a working-from-home alternative to other workers. In this case, the average home worker saved the company about $2,000, nearly as much as his or her annual salary.

Bloom cautions managers and policy makers who would substitute flexibility with requiring workers to work from home. The home workers in the study were randomly selected from a larger group that wanted to work from home. While the mean productivity and happiness of those who worked from home was greater than for their office-based counterparts, the home workers’ productivity varied substantially, with a few not doing as well from home. And when the experiment was over, almost half of the workers who had worked from home chose to go back to the office despite the added cost of commuting. In interviews with researcher Ying, these mostly young workers on the low end of the wage scale indicated they were lonely. At least in this case, Bloom says, flexibility for workers to work where they prefer to work is critical to retention.

There are many potential implications from this experiment, say Bloom and Roberts. By positioning the company to roll out remote working to far-flung regional offices, the experiment shows how the advent of mobile computing might lead to more regional income equality and less pollution and traffic in crowded cities, as well as better family and community life.

“If people can work where they live, they are going to live in different places,” Roberts says. “The CTrip employees, many of whom come from rural China and have come to Shanghai to find work, would much rather be at home in the villages and working from there. We interviewed them and they want to do that.” Flexible work, then, may not just be a gain for particular employees or companies, but potentially for society.

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