In Praise of the Office | Peter Cappelli

Why Employers Are Rethinking Hybrid and Remote Work

Dan Loney: The pandemic changed the way that many of us think about work. We were able to be successful in our jobs working from home. But as we move farther away from the days of the pandemic, more jobs have a hybrid component in them — three to four days a week in the office, and maybe one to two days a week working from home. But there are issues that pop up when you look at hybrid or remote work. Peter Cappelli is a professor of management here at the Wharton School, as well as director of the Center for Human Resources. He’s also co-author of a new book titled In Praise of the Office: The Limits of Hybrid and Remote Work, and he joins us right now to discuss the new book.

Peter, let’s start out with the importance of doing a book like this, especially right now.

Peter Cappelli: There’s a practical reason, and there’s a bigger reason. The practical reason is lots of employers — and by the way, employers, in case we haven’t noticed, have all the marbles here. They control everything about how we’re going to work. Many employers did not want to stay remote or hybrid. They wanted to come back, and they expected to. But the problem is, they never quite told anybody that.

Surprisingly, in 2022, surveys of employees said they understood why they would have to come back to the office. Eighty eight percent, it was a huge proportion. But if you wait five years, people start to get little irritated if you ask them to come back. So, employers now are rethinking whether they wanted to keep this arrangement, which they never really stamped and approved, partly because they’re seeing productivity issues and partly because in hybrid places they’re just finding nobody’s coming in. I think that’s the practical issue.

There’s a conceptual issue that concerns me more generally, and we’ve talked about this at least once before. There’s been this drift over time toward management of employees being worse and worse and worse and worse and just cutting, cutting, cutting. We’re seeing this on lots of things now. But there’s a kind of belief that is growing in influence that you really don’t have to manage people. They don’t have to be together, they don’t have to be in an office. You don’t do anything for them, really. Just tell them what you want them to do, and if they don’t do it, fire them. There’s 100 years of research showing that’s not true, but lots of people want to believe it. That’s another reason for doing this book.

What Is the Value of Working in the Office?

Loney: What has been lost by not having employees in the office five days a week? That inner office connection is probably part of this.

Cappelli: I think it’s not clear you lose anything with four and a half days in the office, but human contact and connection matters, and we’ve known this for 100 years of research. Some of it is we’re engaged and we’re committed to the people we work with, not the logo on the building, especially now, because those just flip all the time. It matters for those reasons.

We also learn a lot from each other. If we have a good workplace, we help each other in various ways. We solve problems a lot faster. When we have conflicts, they don’t escalate the way they can if you’re doing it by email. So, there’s lots about the way work gets done in offices that maybe wasn’t so clear to us before, because we never separated office work from an office structure. But now we’re trying to do office work without an office structure, and you can start to see how some of these problems are popping up.

Loney: What about something like career advancement? If somebody is out of the office a couple of days a week and maybe doesn’t have as much of a daily connection to the office, might there be an issue there as well?

Cappelli: There were about 25 years of serious research about remote work before the pandemic, and it was all about the circumstances you’re describing. That is, you got some people in the office and a few who are not in or not in very often. The way hybrid is playing out, this is maybe more likely than we would think. Even though we have anchor days, people aren’t showing up for them. If you’re in the office, the prior evidence was overwhelming that you got ahead, and if you were not, you didn’t.

Everything was worse work-wise for you. You didn’t get promoted as often. Your wages were lower. Your engagement was lower. Your commitment was lower. Your turnover was higher. If you have to choose and you are going to be the outlier at home when your colleagues are in the office, just expect it may be worth it for you, but your career is likely to take a hit.

Loney: What about for new employees? One of the stories we’ve heard a lot in the last few years is kids coming out of college, going into the workforce have developed this expectation that hybrid work is how they are going to work their career.

Cappelli: Yeah, they might think that. I always ask their parents. When you get a group of people in a room for executive education and other things, many of them are big fans of hybrid. But I ask them, “If your kid had a choice of going into the office or working remotely, what would you tell them?” And virtually everybody says you should go to the office, right? Because, particularly when you’re beginning your career, you don’t know much that more experienced people take for granted.

Like, how do you get along with people? How do you know when you’re not irritating somebody, when you’re trying to get help from them? How do you read the boss’s emotions, then get a sense informally about what’s going on, what the priorities are? The gossip that helps you understand why somebody got fired that you’re never going to see in a memo, right? You only learn that stuff if you’re there, face to face.

It’s important to remind ourselves, everybody who is saying how wonderful it is to be hybrid are people who began their careers not hybrid. They began their careers in offices where they learned all this stuff. I’m not in an office now. I’ve been at Wharton for 40 years. I got a pretty good idea how the place works. Doesn’t hurt me that much. It probably does hurt my junior colleagues that I’m not there more often. I should confess I’m on sabbatical now, so I’m not required to be in the office. But that’s a big issue, a generational divide. Senior people don’t want to be there, they don’t need to, but junior people need them there.

Loney: This goes a little bit to another topic that you and I have talked about: workplace culture and how valued that component has become for the office. Even before the pandemic, it was starting to really gain in value.

Cappelli: Yeah, for sure, employers at the top have recognized that’s something they’re supposed to do is build the culture. When we say culture, we really mean, what are the rules unstated that tell you how you’re supposed to behave and what’s important? You learn those rules by watching. Seeing who gets rewarded for what, who gets in trouble for what. What do the senior people do? What do they seem to value? It’s not the sheet of paper that comes around and says, “This is our culture.” Those things are all aspirational and they all kind of say the same thing. But it does matter if people understand the same unwritten rules about how things are supposed to work, and you can’t learn that if you are remote, at least not the way things are operating now.

Loney: But we do occasionally see companies calling back employees full time. Is the expectation that it’s going to continue that?

Cappelli: There’s a stunning survey done by KPMG this year where they’ve surveyed C-suite people, and that 83 percent, I think, say they expect everybody to be back in the office within three years. Are they right about that? You know, these forecasts are rarely very accurate. But there doesn’t seem to be any uptick in push to get people out of the office.

And by the way, for people who think this is all just about cynical managers, if they were really cynical and just cynical and cost conscious, it’s way cheaper to not have an office, right? It’s way cheaper to just push everybody out and send them home and try to get things done, because you save all that office space overhead costs. The fact that they’re not doing that means they must see some kind of value.

What Is the Future of Hybrid and Remote Work?

Loney: But are there scenarios where hybrid is maybe the best option for an individual employee?

Cappelli: Well, for sure, for employees. This is why this is so politically charged. For employees, many of them have built lives around hybrid work arrangements. Unfortunately, they’ve also built lives around the lack of enforcement of hybrid arrangements. Like you have anchor days, but nobody’s expecting you to be there, and nobody’s enforcing them. You adapt to that, and then you’re all irritated when the companies do start enforcing those rules.

This is mainly what our book is about. You could get a lot of the advantages of in person and not have everybody there four days or five days a week, but you have to be a lot more purposeful about it. If employees are only there two days a week, and by the way, it’s not going to be the same employees all the time now, because companies have shrunk their office space. They can’t even get everybody back at once. If that’s the case, and I’m a new employee, it’s going to take me a long time to figure out even what my peers and bosses are like as people, and that all has a cost.

You could speed that up, but you have to be purposeful about it. You could speed up social interactions, but you have to be purposeful about it. So far, the problem, and one of the motivations for this book, is that we haven’t been purposeful. We’ve basically assumed that people who are in remote and hybrid are really just the same as they were in the office, and it’s not.

Loney: How do you expect to see this play out over the next several years ahead?

Cappelli: Yeah, I try not to make predictions, because I’m rarely very good at them. One thing which is quirky, though, we have an equilibrium. That view, which we hear a lot, is just the equilibrium keeps changing. Employers, and particularly human resource people, you see this a lot, really, really want to fit in with what everybody else is doing. And right now, quite unusually, we have a big variety of practices across organizations. Is that going to be stable? Are employers going to grow used to the fact that what they’re doing is not what everybody else is doing? I don’t think so.

After Amazon announced [at] the beginning of this year they were bringing everybody back, there was suddenly an uptick of other big companies doing the same thing. When Jamie Dimon announced that not only are they bringing everybody back, but they’re building a new building suited to everybody being in the office, ears perked up around Wall Street, and that started to shift there, too. I don’t think it’s going to be stable, but I also don’t think that by next year everybody’s going to be back in the office, either. I think it’ll be a years-long change exercise.

Loney: When a new employee gets an offer and it includes a hybrid component, how do you think they should view the offer and how they should view going into that job?

Cappelli: What I would say is, to some extent, nobody will prevent you from being there more than the anchor days. But if you’ve got an organization that, say, it’s hybrid, but it’s only two days a week, and you ask them, “How is that determined?” Well, every local manager gets to decide, which is often the case, I would, other things equal, not go. Because even if you’re going to go in, people are not going to be there, and you won’t get the benefits of being there.

When you’re beginning your career, you need to meet people, you need to learn, and you’re going to learn by watching and asking questions. That’s really hard to do if it’s not face to face. So, if you think it’s not going to work, even if you can go in, unless other people are there, it’s not going to help you.

Loney: How do you hope that this book resonates in the workplace moving forward?

Cappelli: I hope what would happen is that employers take this more seriously. That is the question: We want to be hybrid. How can we do it better? And will they be willing to do that? I don’t know. To be honest, I’m not the most optimistic person. But it requires effort and time from the senior people in the companies, and I guess the trend I’ve been seeing over the recent years is that they’re less and less interested in hands-on management, and more and more interested in being the kind of outside boss who’s cutting deals, is doing M&As, is working on finance, and the inside of the organization doesn’t have a lot of direction, you know? This will take a lot of direction to make this better.

Now, maybe there’s a way to delegate that. If you have a chief operating officer, for example, maybe there’s a way to delegate that. By the way, human resource people do not volunteer for this job because if they give it to you, you don’t have the power to execute it, you’re just going to end up looking bad. So, it can’t be delegated to lower-level people. It can’t be delegated to people who don’t have power. And it’s not going to work if you let each little group decide what they’re going to do. You’re quickly going to get a race to the bottom, because nobody wants to be the bad guy, telling their employees they’re the ones who have to come in.