Why Working from Home Is a “Future-Looking Technology”

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Are offices outdated? One company found a work-from-home policy increased its bottom line. | iStock/Izabela Habur

Working from home gets a bad rap. Google the phrase and examine the results — you’ll see scams or low-level jobs, followed by links calling out “legitimate” virtual jobs.

But Stanford Graduate School of Business professor Nicholas Bloom says requiring employees to be in the office is an outdated work tradition, set up during the Industrial Revolution. Such inflexibility ignores today’s sophisticated communications methods and long commutes, and actually hurts firms and employees.

“Working from home is a future-looking technology,” Bloom told an audience during TEDxStanford, which took place in April. “I think it has enormous potential.”

To test his claim, Bloom, with co-researchers James Liang, John Roberts, and Zhichun Jenny Ying, studied China’s largest travel agency, Ctrip. Headquartered in Shanghai, the company has 20,000 employees and a market capitalization of about $20 billion.

The company’s leaders — conscious of how expensive real estate is in Shanghai — were interested in the impact of working from home. Could they continue to grow while avoiding exorbitant office space costs? They solicited worker volunteers for a study in which half worked from home for nine months, coming into the office one day a week, and half worked only from the office.

Bloom tracked these two groups for about two years. The results? “We found massive, massive improvement in performance — a 13% improvement in performance from people working at home,” Bloom says.

Two reasons led to that uptick: First, people working from home actually work their full shift. In the office, people might be delayed by traffic, take a long lunch with a colleague, or leave work early to let a repair person in. They are less likely to be on the clock for the full workday.

Second, Bloom says, people at home are able to concentrate better. “The office is actually an amazingly noisy environment. There’s a cake in the break room; Bob’s leaving, come join. The World Cup sweepstakes is going. Whatever it is, the office is super-distracting.”

Also, his study found that resignations at the company dropped by 50% when employees were allowed to work from home. “Not only do the employees benefit (by working from home), but the managers benefit because they can spend less of their time painfully advertising, recruiting, training, and promoting.”

Bloom says the experiment led Ctrip to roll out a work-from-home option to all its employees. The company reported that it made about $2,000 more profit per person at home, Bloom says.

Bloom hopes this example helps kill the negative stereotypes of working from home. “For employees, they’re much more productive and happier. For managers, you don’t have to spend so much time recruiting and training people. For firms, you make far more profit. For society, there’s a huge saving of reducing congestion, driving times and, ultimately, pollution.

“There’s not much to lose, and there’s a lot to gain,” he says.