Where Does Innovation Happen — at Home or at Work?

yahoo_buildingYahoo CEO Marissa Mayer touched off an intense nationwide debate on work-at-home policies last week when she announced that all employees who work remotely will have to move back to company offices beginning in June. Wharton experts say that Yahoo stands to both gain and lose from the new policy.

“Speed and quality are often sacrificed when we work from home…. We need to be one Yahoo, and that starts with physically being together,” Jackie Reses, who leads Yahoo’s human resources department, said in an internal memo to employees that was published on All Things D. Yahoo’s revenues are now trailing at an annual run rate of $4.9 billion, nearly a quarter short of its 2009 revenues of $6.46 billion. The New York Times noted that Yahoo’s move is part of Mayer’s strategy to get the company she has run since last summer “off its deathbed and make it an innovator once again.”

According to Wharton marketing professor Cassie Mogilner, “Time is a personally meaningful and connecting resource, much more so than money.” Mogilner studies happiness, focusing on the role of time and money. “Yahoo is correct that having its employees spend face-to-face time with each other will foster greater camaraderie, and that more time at the office will make people more absorbed in their work.”

Yet, with its new policy,Yahoo is also communicating that it doesn’t value work-life balance, and is looking for employees “for whom the scale clearly tilts towards work,” notes Mogilner. “They are thus looking to attract and to retain employees who share this set of values, [and are] willing to pass up talent who value balance in their lives.” Being called back to the office also means Yahoo’s remote employees must now face a morning and evening commute, which causes mostly “negative emotions in people’s daily lives,” she adds.

Yahoo’s case that having all employees working from the office fosters greater speed and efficiency has some validity, but such decisions need careful consideration, says Ravi Aron, senior fellow at Wharton’s Mack Center for Technological Innovation and a professor at Johns Hopkins University. He identifies three types of workplace encounters that could potentially result in innovation. One is the “serendipitous encounter” where workers run into each other at the water cooler or elsewhere, although Aron notes that those meetings are typically “very short and shallow.”

The second type of interaction arises out of “constant collaboration,” where workers need to “share the same context and have shared [objectives],” according to Aron. Those circumstances are not usually possible if people are working from home, he adds. The third type of interaction is through “intent and design,” where two or more people need to work together. “A lot of innovation happens this way,” he says. The flip side, however, is that workers in such settings tend to spend most of their time on autopilot, focusing on routine work like operations and maintenance. “Should everybody come to office when only a small group of people need to innovate?” he asks.

The Yahoo story touches on larger issues relating to how work is performed in the modern business landscape, Aron says. He notes that “fourth screen” devices like tablets — which incorporate the “display” feature of a television, the computing power of a desktop or laptop and the communication aspect of a smartphone — are enabling “near complete mobility and portability.”

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