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Telecommuting can help boost productivity and morale -- if you work out the management challenges first.
John Xenakis, CFO Magazine
October 1, 1997
It takes Sue Sachdeva, CFO of Koss Corp., a Milwaukee-based manufacturer of stereo headphones, less than a minute to commute to work most days. That's because she telecommutes from her home in Houston, 1,200 miles away from corporate headquarters in Milwaukee — an arrangement that's been in effect since the finance executive relocated to Texas in 1994.
"I'm still in my 'office,' and as available as I ever was," insists Sachdeva, who manages her nine-person finance department using a fax machine, a phone, and a desktop computer with a modem that connects to the server at headquarters. "But now if someone has a question, instead of walking over to my office, they E-mail me or pick up the phone." The availability of such technology, adds Sachdeva, has also reduced her stress load, since she can now manage home and work issues as they arise. "Before telecommuting," she says, "I didn't feel I was doing justice to either front."
Sachdeva is one of 11 million Americans — up from 8 million in 1995 — who work for their employers outside the corporate office at least once a month, according to Telecommute America, a public/private association in Washington, D.C., that promotes this alternative work style. A few, like Sachdeva, are full-time telecommuters, but most are full-time employees who telecommute one to three days a week. In addition to working from home offices, a substantial number of remote workers operate out of "virtual offices," meaning they can work anywhere because their offices exist totally electronically. Still others practice hoteling, whereby they share a dedicated office location with other employees.
The growth of these different concepts of remote work has been facilitated in recent years by the advent of powerful laptops and high-speed communications technologies. In addition, today's tight job market, coupled with onerous commuting conditions in some of the hottest markets (for example, Silicon Valley), has made employers more willing to accept alternative working arrangements. In fact, one in four Fortune 1,000 companies now has a formal program in place for employees who regularly telecommute either part time or full time, according to a July KPMG Peat Marwick LLP study. And that number is expected to double within the next three years.
Still, what makes telecommuting work is a source of great debate. Champions of the concept laud the flexibility it affords employees and point to numerous examples of increased productivity for companies. Yet making the decision to launch a telecommuting program should not be taken lightly. Says Joseph Parente, manager of KPMG's telecommuting practice, "The hype days of telecommuting are over. Companies need to realize that without some forethought and careful management, telecommuting has the potential not necessarily to fail, but to not live up to the successes promised." For telecommuting to work, adds Gil Gordon of Gil Gordon Associates, a telecommuting and virtual office consulting firm based in Monmouth Junction, New Jersey, "it has to be institutionalized, with ongoing training, monitoring, and measurement. It can't just be the program du jour."
Much of the problem managers face in launching a telecommuting program is that "they don't have any guidelines to deal with what is essentially a new way of doing business," says Leslie de Pietro, coordinator for the University of Michigan's Family Care Resources Program, which is devising telecommuting policies for the college's Information Technology Division. While telecommuting often starts for the convenience of the employee — Sachdeva, for example, asked to telecommute after her husband was offered a promotion in Houston — formalizing it requires the proper executive support as well as carefully worked out parameters, says Parente.
Take the question of who should telecommute. At Motorola Semiconductor Products Sector, the Chandler, Arizona-based division of the electronics giant, telecommuting started in 1993 with a pilot program of 30 people and has since grown to 500 active telecommuters. Ed Tynan, senior program manager, explains that "people who work with materials are not eligible. But the program works in most other areas, including purchasing, finance, engineering, documentation, and marketing." In fact, 20 out of 80 people in the finance department are currently in the program.
Controller Ann Lopez believes the telecommuting arrangement — which is practiced to some degree by everyone in her five-member accounting staff — works best with individuals who understand the importance of accessibility. "Dennis [financial analyst Dennis Fedele], for example, has an ISDN [integrated services digital network] line and a pager. If I need him, I call him on the telephone, and whether I'm calling his office or his home doesn't make a difference." Sachdeva adds that certain jobs, such as finance, are perfect candidates for telecommuting, since so many tasks can be quantified in terms of time. At Koss, for example, the standard close takes two days. If the target is missed, she says, "my presence is felt."
The ideal arrangement for the telecommuter, however, "is to do the intensive, heads-down task work at home and to come into the office to do the teamwork or training [aspect of their job]," says Gordon, adding that "electronic tools will never be a perfect substitute for being there in person sometimes." That's especially the case for managers. Lopez, for example, telecommutes only two or three times a month. And Sachdeva flies to Milwaukee twice a month for meetings and any other on-site business.
Once a company decides which employees can telecommute, there are numerous practical matters involved in setting up a telecommuting program. For example, does the potential candidate have a dedicated work space at home? Have adequate child-care arrangements been made? Does the company want the telecommuter to observe core working hours? At management consulting firm Watson Wyatt, for example, telecommuters are required to work at least from 10 a.m. to 4 p.m.
In addition, legal issues have to be addressed, such as how much control employers can exert over the working conditions inside an employee's home, and whether the employer is liable in the event of a home accident. De Pietro, for example, explains that at the University of Michigan, "our primary issue was to set up a safe and ergonomically well-designed work area. We didn't want employees to just set up a computer on the kitchen table." To guard against that, de Pietro's group has published a booklet on telecommuting policies that includes everything from the proper number of smoke detectors to instructions on how to fill out a workers' compensation claim.
Then there is the matter of expectations. KPMG's Parente points out that it is necessary to measure the goals of telecommuters rather than hours worked. Traditionally, managers manage by "line of sight," he explains. But with telecommuting, managers need to be "retrained to focus on goals and objectives rather than hours worked." At Motorola, for example, "we have set quantifiable goals and objectives for years, measured by quarterly reviews," says Tynan. Specifically, the company measures productivity in terms of the telecommuter's job — how many lines of code are written per week, for instance, or how many pages of documents are edited during a similar time period — against set goals. Such standards have allowed the company to measure a 12 percent average increase in productivity among telecommuters since the program's inception. Says Tynan, "The revenue generated by this productivity increase more than offsets the costs, even for an individual's first year."
Finally, a successful telecommuting program has to take a long-term view, according to Gordon. "It's a no-brainer to set up a pilot program," he says, but companies are often ill-prepared to expand telecommuting beyond that. At many companies, he explains, allowing 15 to 20 people to telecommute works fine, but when the program is rolled out for 75 to 100 employees, companies often realize that their computer and telecom infrastructures can't handle the capacity. Parente recommends developing a comprehensive business case that shows the payback and the benefits before moving beyond the pilot stage. "Developing such a case allows you to secure and retain the resources and commitment from senior management that is necessary to expand the program," he says.
A Cost-Effective Solution?
Much has been made of the low cost of telecommuting, but there is still a price. Says de Pietro, "It's going to end up costing [business] more rather than less [to set up a telecommuting program]. We would be foolish to ignore the fact that we are buying laptops and equipping home offices with ergonomic furniture."
A study by Pacific Bell of its telecommuting program, for example, which involves at least 25 percent of its 12,000 salaried employees, estimates that the cost of at-home equipment for participants, including computer, fax machine, and printer, is about $4,000 per employee. If the employee already has a home computer, the price tag may be only a few hundred dollars for software, but could range as high as $5,000 to $6,000 if the employee requires a high-end computer with special equipment.
Costs at Motorola are similar, according to Tynan, but going down. Back in 1993, he says, the costs to implement the telecommuting program averaged $6,487 per employee. This included a number of one-time costs, including computers, fax machines, and telephone lines. With the price of computers and ISDN service declining, that figure has dropped to $3,739. Costs after the first year average $1,440 per telecommuter, mostly for linking the telecommuter's computer to the company's network.
Much of the savings from telecommuting is supposed to come from real-estate costs. But as it turns out, one of the thorniest decisions involved in launching a telecommuting program is whether to maintain corporate offices for telecommuters. At the University of Michigan, the task force determined that offices should not be eliminated. "We ruled that out from the beginning, because we didn't want people to feel that this was just a cost-saving measure," says de Pietro. "We thought people would be very suspicious of something like that. If someone is doing this three to four days a week long term, we may ask them to share office space, but that would be only after we reviewed the situation."
However, companies whose employees work at clients' or customers' offices don't have that luxury, says Linda Russell, senior partner with Toronto-based Telecommuting Consultants International Inc. "If you consider that real estate constitutes your second-largest monthly overhead, right after salaries and benefits, most companies are not in a position to put someone remote and keep a candle burning for them back in the office."
IBM Corp., for example, started implementing an aggressive hoteling program for its field personnel in 1993, and now close to 100 percent, or more than 20,000, of its field employees use such a scheme, according to Andre'a Jackson-Cheatham, the communications software manager in Norfolk, Virginia, who implemented IBM's first virtual office site, in Norfolk. Each field employee has a laptop that he takes with him all the time. Whether he works at home, at a client site, or at an IBM "visitor center" — open environments equipped with individual rooms for customer conference calls or meetings — the laptop can connect to the employee's server just as if he were in his own office.
The financial results have been dramatic: more than $40 million per year of savings in real-estate costs, since 60 to 70 percent of office space in the field organization has been consolidated. According to Jackson-Cheatham, the key to making a system like this work is standardizing hardware and software. "Each employee has an IBM ThinkPad laptop, along with standard connectivity software and Lotus office application software," she says. And every time the employee connects to the corporate server, the laptop is automatically upgraded with the latest version of the software.
According to Jackson-Cheatham, IBM is experimenting with extending this kind of hoteling to staff employees who can telecommute from home, but hasn't done much with it yet. At Pacific Bell, however, hoteling recently became a necessity when one site expanded by 800 employees. "We would have needed 144,000 square feet of space. At $25 per square foot, that's $3.6 million for annual rent," says Emily Bassman, PacBell's director of virtual office development, adding that the first-year costs would have been $9 million, to pay for partitions, furniture, and so forth.
Instead, the company implemented a virtual office scheme. "We just took over an atrium that wasn't being used," says Bassman. There was space for about 100 offices, which were allocated to the new employees by hoteling. "The total investment for the alternative space was $3.5 million the first year and $200,000 after that."
According to Bassman, it was necessary to use an "evolutionary perspective" to cajole people into giving up their offices. "Our culture is very traditional, and part of the perk is getting an office with a door, getting a door with a lock, a bigger office, an office with a window, and so forth. We weaned people from that culture by looking for other ways to recognize them for their accomplishments." Some companies, however, are finding that the virtual office scheme can backfire. Advertising agency TBWA Chiat/Day Inc., for example, based in Santa Monica, California, is returning office space to employees after finding that some employees were storing files in the trunks of their cars.
Despite the potential savings and productivity increases, telecommuting is not for everyone. Some managers fear the impact such programs will have on teamwork and training. And a common concern is that there may be oversight problems. "The big fear is that remote workers will be unmanageable," says Gordon. But, he maintains, "managers who are fearful of not having control of people away from the office probably don't have control over people in the office."
To Motorola's Lopez, however, "Basically, it's an integrity issue. If they say they're working at home three hours, I expect they are working three hours. And I can see from the constant messages and E-mails I get that they are at work." Adds Sachdeva, "I haven't had anybody take advantage of my being offsite. At Koss, we have a hands-off attitude and don't get involved in an employee's work unless we have to."
Still, telecommuting isn't embraced by all employees, either. "One person declined because he had small kids at home and couldn't get any work done there," says Tynan. "But he still uses his computer at home for overnight software runs." And there is always the risk of being "out of sight, out of mind," says Michigan's de Pietro. Telecommuters, she explains, run the risk of being passed over for promotions because they are less visible and do not have the networking opportunities of other employees. "That's why we recommend that telecommuters come into the office at least once a week," she says.
All indications are that telecommuting will continue its phenomenal growth as an alternative work style. One reason is that in such a growth economy, companies are looking for any competitive edge. "Part of our motivation," says de Pietro, "was to recruit the best and brightest people in the technology field in our area. We want creative employees who are responsible enough to work on their own, and we believe that this will help us attract those employees."
In addition, companies are also looking to leverage their current work force. Says consultant Russell, "The success of the new work environment depends on what kind of incremental productivity can be created." All the effort that goes into launching a telecommuting program is well worth it, she explains, "if it results in a reduction in absenteeism, better loyalty, less commuting time, reduced overhead, and increased productivity."
Finally, Parente points out that advances in technology make it possible to offer telecommuting at practically any company. "Telecommuting is no longer a question of do you have the right technology," he says. "It's a question of, Is your organization ready and will your culture support it?"
Not Rocket Science
Telecommuting does not require leading-edge technology. Most telecommuters can get all their work done with an ordinary desktop computer, some form of interactive software, a phone line, and a fax machine. But newer technologies are making telecommuting more mainstream.
The principal enabling technology is wide-area networks and communications. These allow huge volumes of data to be transmitted quickly around the world over an ever-burgeoning infrastructure consisting of everything from fiber-optic cables to satellites. These capabilities make it possible for financial data captured in, say, Uzbekistan to be transmitted instantaneously to a field office in the United States. They also make it possible for a telecommuter's desktop computer to obtain data from a server at the office, at an affordable price.
The delivery of that information has been greatly enhanced, thanks to the latest communications technology known as ISDN (integrated services digital network), a high-speed phone service provided in most parts of the country.
ISDN has two major advantages for the home user. First, a single ISDN line can simultaneously carry a voice telephone conversation and a fax transmission, or data over a modem connection. This means that a telecommuter can have the equivalent of several phone lines at home without any additional wiring. The second advantage is that data transmission and reception is far more reliable and several times faster — 64,536 or 128,000 bits per second — than an ordinary computer modem, which runs at either 14,400, 28,800, 33,600, or 56,000 bits per second.
However, a fancy communications line isn't necessary; an ordinary phone line works fine for most telecommuters, especially those who don't require a lot of data transmission. For those who do, the ISDN service will typically add $30 or more to monthly phone bills, and there's a one-time charge of $140 on average for installation and for a special ISDN modem and accompanying software.
With or without ISDN, most telecommuters can get all their work done with a desktop computer. Still, some telecommuters want a few extra bells and whistles. For Koss Corp. CFO Sue Sachdeva, videoconferencing is key. "We're a small management group, and I talk to my CEO [Michael Koss] every day," she says. "At first, I couldn't see his body language on the phone, so I couldn't tell when he was kidding, for example." Now, however, Sachdeva, Koss, and other employees have little cameras on top of their desktop computers. The result, she says, is that "I can see the people I'm talking to, and it makes me feel like I'm there."
Sachdeva uses equipment from PictureTel Corp., which, along with Intel Corp.'s Internet and Communications Group, provides the top videoconferencing systems. Typical costs for hardware and software are $10,000 to $50,000 to outfit a conference room, plus $100 to $500 per telecommuting employee.
The technology isn't for everyone, however. "We found that videoconferencing has been too costly to be attractive," says Ed Tynan, senior program manager at Motorola Semiconductor Products Sector. "Most of the time, ordinary telephone conference calls are just fine." Instead, Tynan says that Motorola is going to be deploying a different whiz-bang technology, a software-only collaborative system that enhances conference calls and multisite meetings.
True to its name, a whiteboard, or electronic chalkboard, appears on each participant's screen, and allows everyone to see the same documents on the screen and work with them in a live session. Whiteboarding is available in Microsoft Corp.'s NetMeeting software. A similar capability is integrated into Netscape Communications Corp.'s Communicator and Microsoft's Internet Explorer.
A more sophisticated hardware/software capability is available with hardware electronic whiteboards suitable for presentations to audiences in conference rooms. These products plug into the serial port of a computer, and integrate with NetMeeting. They cost from $500 to $3,000, and are available from MicroTouch Systems Inc. and Smart Technologies Inc. Whatever is drawn on the hardware whiteboard also appears on the telecommuters' screens, and the results appear on the hardware whiteboard in the conference room.
Rules for Supervision
Who Should Telecommute?
Source: University of Michigan Telecommuting Task Force Report