In the last year, most of the white-collar, professional world has become used to remote working. Professionals are now familiar with video-conferencing solutions, and the technical hitches or comic on-camera incidents these often entail. It has been accepted that most businesses can work productively and efficiently away from the office hub. And many workers are enjoying being freed from the grind of their daily commutes.
It is interesting to reflect on what would have happened had the pandemic struck just ten years ago. Would the lack of home broadband bandwidth have permitted the same lockdown strategies? Or would business have been brought to a standstill? Perhaps it is more relevant to consider whether working patterns will have been permanently changed when the pandemic is finally tamed or will business revert back to its old routines and practices?
A permanent shift
Where many businesses were once sceptical about working-from-home practices, these have been normalised by the pandemic and the general consensus believes flexible or agile working will be here to stay. A Gartner survey of 317 CFO and senior finance chiefs, found that 74% of organisations planned to move some workers to home-working permanently1. Moreover, a global research study of workers by Lenovo, found that 63% believed their productivity was higher with home working2.
While the prospect working from home, or adopting a hybrid working pattern of splitting time between home and office might appeal to many, it is not suitable or even possible for all.
A one-sided opportunity
Many jobs, by definition, can’t be performed from home. Workers in industries such as ‘bricks and mortar’ retail, hospitality and construction have to physically be in their place of work – as does, of course, the healthcare profession. And there can be a significant economic divide between workers who can and cannot work from home.
McKinsey3 has found that the potential for remote work is concentrated among highly skilled, highly educated workers in a handful of industries, occupations, and geographies, suggesting this represents around 20% of the workforce. Whereas more than half of workers have little or no opportunity for remote work, even in developed economies.
Even after the threat of the pandemic has receded, this scenario risks exacerbating society’s wider inequalities.
Creating new ground rules
Even for those who are lucky enough to be enabled to work from home, the haste with which remote working was introduced means that more considered ground rules would need to be introduced if this is to become a more permanent option.
Workers need to establish routines that avoid endlessly being side-tracked by domestic diversions and chores – some of these distractions, such as home-schooling children, should disappear once wider lockdowns are ended. At the same time, businesses need to ensure their employees retain a fair work/home life balance by making sure work requirements do not bleed into time that would historically have been away from the office. French workers have the right to switch off business communication outside of agreed working hours; workers elsewhere will need to agree such boundaries with their employers.
Worryingly, the pandemic has started to reverse some of the progress made towards equality in the workplace, with women being shown to have taken on a greater share of domestic and childcare responsibilities4. Employers and governments alike will need to monitor this situation post-pandemic to ensure this trend remains short-lived.
Location, location, location
The trend for home working, at least partially, is set to be a permanent shift. Partly, as it better suits workers’ lifestyles, but also because employers have realised it can save them a considerable amount of money. Global Workplace Analytics estimates that US employers could save more than $500 billion a year by incorporating more remote working through reduced office costs, increased productivity, lower absenteeism and staff turnover5.
While some exotic locations are offering themselves as remote work hubs, for example Barbados captured headlines with its offer to allow people to stay in the country and work abroad for up to a year. In all likelihood, a hybrid structure will become the norm where people are mostly based at home, but visit the office a few days a month.
While this agile set up may not permit international remote working, it does allow for longer commuting time if people are no longer expected to be in the office five days a week. Total Jobs reports that 43% of Londoners said that flexible working would now encourage them to move out of the city area6. The same is happening in the US. According to McKinsey, the average rental of a one-bedroom apartment in San Francisco has dropped by a quarter last year compared to 2019 as the bulk of tech companies announced a permanent move to home working7.
The decline of the city
Most historic changes in living habits take decades, for example when the industrial revolution shifted agricultural workers into factories, allowing time for the surrounding infrastructure to keep up. This time measures to curb the pandemic were introduced rapidly, meaning many business areas emptied almost overnight.
The knock-on effect of prolonged remote working has been profound, with businesses set up to support the office worker seeing a sharp decline in profits or failing altogether. People, understandably, have been reluctant to take mass public transport and once bustling city hot spots are now more like ghost towns.
With office space likely to shrink and many bricks-and-mortar retailers closing down, the commercial property sector is facing an existential crisis. Economic growth and innovation have tended to thrive where similar businesses are clustered together. Over the long term this is unlikely to change, but where mega-cities – such as London, New York and Paris – are expected to recover over time, this is likely to be at the expense of lesser cities.
The role of offices is likely to change in this new normal of hybrid working. The trend for open-plan office spaces was often not conducive to focused work due to noise, distractions and a general lack of privacy; such tasks would now be better performed at home.
However, many have argued that creativity has been stifled in the remote working environment. Bank of England chief economist, Andy Haldane, commented that “exposure to new and different experiences – sounds, smells, environments, ideas, people – is a key source of creative spark… Homeworking can starve us of many of these creative ingredients.”8
Going forward, offices will need to be reimaged as places where people come to be creative, build a sense of common purpose and enjoy an affirming sociability. This means the look, layout and scale of offices will need to be radically transformed. Open-plan spaces are likely to be reconfigured to provide more meeting areas, but also quiet spaces for those who are unable or prefer not to work from home.
The management challenge
Prior to 2020, very few people had experience of managing virtual teams and this has presented a real challenge for managers. Working relationships require lots of interaction. In a face-to-face environment an individual’s progress can be monitored in person and the well-being of a team member is easier to assess. When contact is restricted to virtual platforms, that often don’t facilitate less formal discussion, it is much easier for a manager to miss vital clues. Consequently, it is unsurprising that Harvard Business Review (HBR) reports 40% of managers have low self-confidence in their ability to manage workers remotely.9
Aside for this being ripe for a new slew of management training – delivered online of course – it has also resulted in a significant uptake of online employee management software. Such tools can measure metrics such as the amount of time spent on a task, breaks taken, web and app usage and even deliver a screenshot of the employee’s computer. However, there is a fine line between the monitoring of an employee’s productivity and overall surveillance.
A workplace revolution
The pandemic has sparked an abrupt shift in workplace practices that are unlikely to be unwound. The adoption of new technologies, changes to urban geography, overall lifestyles and the nature of offices and business management have been nothing short of revolutionary.
This revolution delivers multiple opportunities for investors. Consumption habits have already been impacted, as evidenced by the accelerated switch to online retailers, and technology continues to be disruptive in the form of AI, automation, cloud computing, data analytics and the financing of the infrastructure that these require, in the form of telecom towers and data centres. The development of renewable energy generation and energy transition will also play a major role in these opportunities with the move towards a more sustainable and green economy.
At BNP Paribas Asset Management we believe that any kind of change produces opportunity. We know the post-pandemic investment landscape could look very different, especially in sectors exposed to remote-working change. Our team of experts specifically focuses on Disruptive Technology and Consumer Innovation to help investors benefit from the massive shift in the investment landscape prompted by the switch to remote working. By looking beneath the surface of these developing opportunities we aim to find the best prospects for our clients.