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Telecommuting can produce real savings, but employees are now reluctant to cut the cord. Should companies do it for them?
Doug Bartholomew, CFO IT
March 15, 2004
As a CFO in these still uncertain economic times, imagine saving $3,000 per employee per year. And lopping $71 million off your real estate bill. Oh, and how about a 4 to 12 percent boost in employee productivity?
Sound good? Those are some figures thrown around by advocates of telecommuting, or, as some prefer to call it, teleworking. While the numbers may be optimistic, they do suggest that working from home isn't just good for commute-weary employees but for employers as well. But properly equipping a remote employee is more complicated than you might think, as is deciding whether the investment truly pays off. More vexing still may be the issue of who should take the lead in pushing for—or pushing back on—work-from-home arrangements.
Not everyone agrees on just what constitutes a teleworker. The International Telework Association & Council defines one as an employee who works at home, at a client's office, in a satellite office or telework center, or on the road at least one day per month. Even restricting the definition to an employee who works from home at least one day a month, there are 23.5 million teleworkers in the United States. Using research firm IDC's more-conservative standard of three or more days per month yields a population of 8.7 million telecommuters.
However these workers are defined, their numbers are increasing, at least by some measures (as with the total population, growth rates vary depending on how teleworker is defined). To be effective from home, they typically rely on a computer, often a laptop that travels back and forth from home to office; an Internet connection, preferably broadband and not dial-up; a telephone; maybe a fax machine; and, increasingly, a growing range of corporate-based software applications that can be accessed from home.
Also close at hand, of course, are family members, pets, and maybe the plumber, coming sometime between 10 and noon. With distractions, obligations, and temptations in abundance, productivity is bound to suffer. Isn't it?
Not necessarily. Most corporations with large numbers of teleworkers report productivity increases, not declines. "A number of companies fear their workers will be at home with their feet up in front of the TV, and that's just not the case," says IDC analyst Merle Sandler. "You can put measures in place to see if employees are actually producing what they are expected to produce."
Four companies that employ large numbers of teleworkers—Cigna, Hewlett-Packard, AT&T, and Sun Microsystems—report both jumps in productivity and savings on office space. In the current fiscal year, Sun reported a $71 million reduction in, or avoidance of, office-space expense due to teleworking, according to Eric Richert, vice president of the company's iWork Solutions Group, in Newark, California. At AT&T, telework director Joseph Roitz reports that the extra hour of work gained each day by telecommuters last year translated into a $148 million operational benefit. And Cigna's 6,000 "E-workers" delivered 4 to 12 percent more output than office workers doing similar work, not to mention the $3,000 per employee the company saved on reduced office space, according to Lynne Kelley-Lewicki, Cigna's team leader in charge of integrated work strategies.
Much of the productivity gain stems from having an office across the hall from the bedroom. At Sun, employees channel more than half the time they would have spent commuting back into their work hours (working an additional 1.8 hours for every 3 hours formerly spent in transit).
And telecommuters tend to keep closer track of their time spent on the job. "People working flexible hours are actually driven more by time management than anyone else," says Paul Hart, finance director at Microsoft UK, a 2,000-employee unit of the $33 billion U.S. software giant. "They know they've got a certain number of hours in the day to get a job done, and they can arguably deliver better results than people who actually work [in the office] five days a week."
But the biggest savings come in real-estate costs and related office expenses. "It's enabled us to gradually shrink the footprint of our work space," says Debby McIsaac, director of work-life programs at HP. At Cigna, departments may get less real estate than they request, on the assumption that the company's flexible work program will reduce the need for space. The company admits that savings require savvy management, because often leasing or buying decisions have been made without telework in mind.
For years, companies with telecommuters have moved toward so-called hoteling—providing employees with access to offices and meeting rooms that can be used as the need arises but are not occupied full-time. Offices tend to be underutilized at least two-thirds of the time. "With lunch hours, sick days, nights, weekends, and travel, the actual office-space usage for most offices is about 30 to 35 percent of the time, and office-space sharing enables companies to increase their usage of one of their most costly assets," says Gil Gordon, president of Gil Gordon Associates, a telecommuting consultancy in Monmouth Junction, New Jersey.
The trend is so pronounced that office-design firms and furniture makers now tackle it with flexible cubicle and room partitions and furniture that can be moved and reconfigured to meet a variety of needs throughout the week. A recent study of real-estate trends conducted by the Urban Land Institute and PricewaterhouseCoopers LLP cited hoteling and telecommuting as factors contributing to the current weak demand for office space. And today, one-quarter of new homes include a room specifically designed to be used as a home office.
The savings from telecommuting are so appealing, in fact, that some corporations have set up formal programs to manage teleworkers as efficiently as possible. Typical is Sun's iWork, a three-tiered program designed to provide the necessary infrastructure to support its increasingly mobile and distributed workforce. The company divides its workforce into three categories:
Yet, despite the savings, the formalized programs, and widespread predictions following September 11, 2001, that companies would welcome a more-decentralized workforce, telecommuting is far from booming. By IDC's count, there are actually fewer telecommuters today than there were four years ago. "The telecommuting trend was going gangbusters at the start of the decade, and we were forecasting a strong growth rate, predicting 11 million telecommuters by 2004," says IDC's Sandler. "Still, telecommuting is definitely a trend that is here to stay."
The "Headquarters Effect"
At least part of the reason for the drop, according to Sandler, is a change in attitude on the part of telecommuters themselves. During the dot-com boom, demand for workers created a safety net, and employees felt emboldened to push for more-convenient working arrangements. When the economy cooled, says Sandler, "people began to think, 'If I'm not around every day, then maybe I'll be the first one on the chopping block.' "
"We call it the 'headquarters effect,' " says AT&T's Roitz. "Employees want to stay connected to the power center." At AT&T, teleworkers actually get promoted more readily than office workers, says Roitz, because "they get more done with fewer company resources."
The entire 700-person reservations staff of JetBlue Airways works from home, using computers and phone systems supplied by the company. Special software tracks productivity and shows that agents spend 95 out of every 100 minutes fielding calls. The software also monitors the duration of each call and even tracks who hangs up first, agent or customer, giving managers plenty of data to identify problems.
Cigna doesn't get quite so rigorous, but it does conduct semiannual reviews of each teleworker's productivity and has found a 4 to 15 percent gain.
The viability of teleworking clearly depends in large measure on job type. At Sun, where about 15,000 of the company's 36,000 employees are either home-based or flexible workers, one group that's less likely to telecommute is hardware engineers, because they tend to work in teams and depend heavily on the company's technical-support tools. Only about one-third of hardware engineers choose a flexible or home/work option, compared with 65 percent of the company's corporate staff and 85 percent of its sales staff.
What about finance staff? If a recent survey of 85 CFOs in Europe is any indication, finance employees won't be giving up their parking spaces any time soon. Although 80 percent of CFOs said they favored flexible working practices, including working regularly from home, 73 percent of the same group felt it was not "appropriate" for their own finance staff to pursue such arrangements.
Most executives interviewed for this article sidestepped any speculation as to the reason. But Buzz Adams, former CFO of McKesson Water Products and now president of Peak Value Consulting, in Pasadena, California, suggests that it could be simply "the conservative nature of finance types. I think the average CFO might be asking, 'How do I introduce teleworking to a large department of accounts-payable people?' "
Adams, now a consultant specializing in process improvements, says, "I would think that finance and accounting would be among the easiest functions for people to do via telecommuting because you are talking about defined tasks. It's a different mind-set, but once you get over that hurdle, you can save a fortune."
One CFO who has given a thumbs-up, at least in principle, to teleworking is Ramin Khadem, CFO at Inmarsat Ventures, a $463 million satellite telecommunications firm based in London. He says he's prepared to consider flexible work arrangements in some areas of finance, such as procurement, as a means of dealing with the peaks and valleys of the workload and the office-space requirement associated with it. Even so, Khadem is reluctant to embrace the idea whole-hog. "In areas like accounts and payroll, you definitely need to have people around for a solid core of hours," he says.
Whatever policies they set for their own departments, CFOs are often the executives with final say on telework policies for the entire company. Adrianne Court, senior vice president of human resources at i2 Technologies in Dallas, cautions that such programs "entail quite an effort, more than you might expect," and benefit from written agreements between managers and direct reports as to exactly what's expected of teleworkers.
Doug Bartholomew is a writer in Berkeley, California, and former senior technology editor at IndustryWeek.
The costs of equipping a teleworker are highly variable. Many companies, for example, already provide employees with laptop computers, whether they work from home or not, so in those cases, a big-ticket expense has already been absorbed. Cigna estimates a first-year cost of $1,500, but it says the productivity gains cover that expense in just six months.
Surprisingly, although research shows that teleworkers who have a broadband connection to the home are more productive, only 35 percent of employers pay for the more-expensive connection. "Our research shows that when the employer does pay for broadband, teleworkers tend to work full-time from home more often," reports Joanne Pratt, president of Joanne H. Pratt Associates and a telework consultant.
Because it's an always-on, faster connection with the network, broadband enables teleworkers to perform better in virtual work teams, she says. For instance, only 14 percent of telecommuters with a dial-up phone connection sent large files over the Internet, while 36 percent of their broadband-equipped counterparts did so. Broadband is slightly more expensive to install than dial-up, and the monthly fee is about double, according to the International Telework Association & Council.
Besides a computer, telephone, printer, and Internet connection, some companies go a step or two further and provide employees with special software for document-sharing and workgroup computing. Hewlett-Packard, for instance, connects teleworkers with its HP Virtual Classroom, a workgroup software package that enables employees to load content and conduct presentations before as many as 2,000 concurrent online participants.
Behind the scenes, corporate applications do need to be modified in order to be accessed by teleworkers, but most companies already do this to facilitate traveling employees, so the cost has been absorbed regardless of whether the company embraces work-at-home programs. Ditto for security software and procedures: essential, yes, but in all likelihood, already in place.