Home Editors' Pick “Net better Off?” Why companies should scale new, tech-based flexible work practices

“Net better Off?” Why companies should scale new, tech-based flexible work practices

September 26, 2022

By Jacques Bughin, Sybille Berjoan and Yuhui Xiong

By 2022, Shopify, a well-known global next-generation e-commerce platform had secured a perennial flexible work arrangement scheme across its entire workforce, centred around the possibility of working from home (WFH). MyRyan is another HR -based programme built by Ryan, a global tax firm, which allows their employees to work remotely from anywhere. Accenture, home to two of the co-authors, has an effective flexible work policy, with nearly 100 per cent of employees working remotely.

For employees, at least in part, working from home is seen in the same light as that of companion research, which found that work welfare is closely linked to meeting six fundamental human needs through work.²

But despite the large quantity of management books on the value-added of giving responsibility and freedom to workers³, the harsh reality is that there are only a few Shopifys and Ryans among the many companies stuck in the old Taylorism-like paradigm of work organisation. There, workers have often been assigned to a specific rigid posture in a hierarchy which in turn provides the orders for a job done full-time and on-premises.

One peculiar expectation of new work organisations was remote work, but this has failed to scale as fast as anticipated. Looking at the period pre-COVID, WFH was limited, used by barely 15 per cent of the European population.⁴ The COVID-19 pandemic obviously boosted WFH out of necessity, because of lockdown rules. Forty per cent of workers were working from home in both the US and Western Europe in the first months of the pandemic, or more than twice the level pre-crisis. But it remains to be seen whether WFH will stick as the “new normal” or was just a tactic for coping with the pandemic specificities.

The failed launch of new, tech-based work organisation

One reason for poor usage of new, flexible HR practices may have resided in the ambiguity of the true productivity benefits of flexibility, as well as the risk of technology substitution for the workers. Regarding productivity growth, it is fair to say from a variety of academic studies that the productivity change from the WFH boost during COVID-19 was at best neutral. For example, studies had shown that only a minority of UK workers could complete as much work during the first wave of the pandemic as during pre-COVID. In Japan, a study by Morikawa (2020) suggested that WFH productivity was only two-thirds of the level achieved at the workplace in Japan. Similar analysis for Europe suggests a material productivity gap attached to WFH during the pandemic, whereby people welcome the public financing of work, but without fulfilling their part of the social contract to remain as productive as before the pandemic.

Technology, on the other hand, may have had a bad press, especially because its current form, digitisation, has too often materialised in job restructuring, and especially during major economic crises, when workers suffer the most.⁵ A powerful study conducted by Jaimovich and Siu (2020) has, for example, demonstrated that the secular decline in routine employment, which has been visible for about 50 years, is in fact a set of long stabilisation periods, corrected at each recession by a permanent employment loss, with more firms embracing major automation.

During the first wave of COVID-19, automation boomed. Investment in robotics to replace workers’ tasks under lockdown also increased by more than 20 per cent during the pandemic in the US (Chernoff and Warman, 2020).

New-tech work practices rebooted (the COVID-19 sequel)

The best-performing firms in terms of revenue growth were 30 per cent more likely to have a holistic well-being approach to human resources.

But something may perhaps have changed during the pandemic. Instead of digitisation being leveraged mostly/only as efficiency response to crises by companies, digitisation has also brought major support to a workforce in fear of being contaminated on-premises, and has made companies conscious that HR practices must indeed evolve.

A lot of surveys in the first wave of the COVID-19 pandemic have referred to the “FOG” syndrome (for “fear of going back to work”) as a new psychological challenge for workers. This challenge was sufficiently material that active labour participation shrank by more than 10 per cent in 2020 alone. And with the stabilisation of the pandemic, firms have also seen that people were not necessarily coming back to work, calling for a solution of the dilemma of better welfare for workers and better productivity.

Some of us have already extensively studied the importance of flexible forms of work and workers’ well-being through worker surveys leading at the end to a virtuous cycle of labour productivity.⁶ In this mirror research (see sidebar), which directly focuses on the view of large multinational firms, we find that some companies are cracking the code and turning the dilemma into a strategic advantage.
Here are the main findings.

Turning tech-based practices into a strategic advantage

New, tech-based work practices can be productivity-enhancing.

In general, the difference between using and avoiding fully flexible work has been associated in the last three years with 3.1 points of extra revenue growth annually. This is rather a large productivity gain, equivalent to about one-third of the revenue growth observed among multinationals, that is linked to the use of flexible work practices.

Of course, a very large proportion of companies have used WFH and other practices during COVID, but the difference between the bottom and top 25 per cent of firms still leads to 1.3 points of difference in annual growth, or more than 15 per cent of shareholder value premium.

A lot of surveys in the first wave of the COVID-19 pandemic have referred to the “FOG” syndrome (for “fear of going back to work”) as a new psychological challenge for workers.

We have further analysed whether flexible work practices were only due to the pandemic, in which case they may be only tactical, and organisations may revert to the old work practices when pandemic has fully disappeared, and despite workers expressing their preference for remote working, etc. The evidence is that two-thirds of the effect of WFH on revenue growth was already apparent pre-COVID, and the effect of WFH is highly persistent. What COVID-19 has triggered is a broader race to experiment with those practices; but the best companies were already mastering those practices with productivity advantages. Those companies simply used COVID-19 to scale those advantages further.

Three ingredients help to crack the code for better productivity

The best companies are making flexible work practice a success by augmenting HR practice with adequate complementary capabilities. The first two of these that we find really drift the productivity up are not people-related; they are organisational and technological support.

Among organisational practices, the best companies have developed new leadership behaviours across all types of work practices, built new community rituals, supervision, and coaching to best engage workers in a hybrid form of work. Needless to say, these companies are some of the most agile and innovative, and are applying these capabilities into every corner of their operations, including work practices.

Likewise, we find that those companies with more flexible HR practices are not only more digitally mature than their peers, but have more consciously invested in specific, new technologies to support more flexible WFH practices, rather than for efficiency. This includes a large suite of tech-based enterprise collaboration tools.

But one other important aspect of productivity gain is when companies “put humans at the centre”. We see that the best companies are making a conscious mindset shift towards considering workers as an efficient factor of production, to be a source of cooperative talent with management, especially if they feel part of a cohesive and meaningful culture.

We have built up an index of human care, based on how workers crucially felt that their emotional and relational creativity were taken into account in their daily job.⁷ We have found that this caring index has as much weight in predicting new tech-based employee usage and revenue uplift than technology.

A recipe for everyone?

One might argue that the above recipe may have different levels of success, depending on company features, workers’ mix of tasks, and many others. For example, it cannot be denied that a large proportion of tasks may not be ready to be performed remotely (Dingel and Neiman (2020), Boeri et al. (2020))⁸, or that productivity is often enhanced by frequent and close team interactions, which may limit the potential of WFH (Battiston et al. (2017) and Etheridge et al. (2020)).

Still, if our analysis shows some difference by industry or country, the positive returns of flexible work practices remain large for any sector, and the key differences are really among how companies are successfully engaging at scale for this beneficial HR transformation.

This HR transformation is a step to take in the war for talent, and will need to include all technologies, such as AI, which also may lead to an important skill shift, as highlighted elsewhere by one of the authors.

About the Research

The research is based on an executive survey of more than 4,000 multinationals stratified so as to be representative of the industry mix in the US, the main European countries, and China. Company performance for 2021 was expected to be 9 per cent revenue growth, with a margin of about 10 per cent. The COVID-19 pandemic has radically changed work practices. One-third of companies report less than 10 per cent of workers using flexible work practices before the pandemic. This shrank to only 10 per cent by end of 2021. Still, only 2 per cent of companies by the same time report that three-quarters of their workforce use flexible work practices. The best-performing firms in terms of revenue growth were 30 per cent more likely to have a holistic well-being approach to human resources. Relative to other performance drivers, such as innovation, agility, etc., the well-being of the workforce drives performance especially in sectors such as software, health, and automotive. We use regression techniques to assess how the difference in performance by industry can be linked to the use of tech-based practices of work, controlling for business segments, company size, and location. We use an error-correction model to separate structural versus short-term effects linked to COVID. A performance link between flexible work practices and human resources well-being practices has been confirmed by machine learning techniques (Random Forests) leading to a predictive accuracy of more than 80 per cent.

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About the Authors

Jacques Bughin is a professor of Management, Chaire Gillet of Management Practice, at the Solvay Brussels School of Economics and Management at Université Libre de Bruxelles (ULB) and, among others, a former Director of McKinsey and of the McKinsey Global Institute. He advises Antler and Fortino Capital, two major VC/PE firms, and serves on the board of multiple companies.

Sybille Berjoan leads the Accenture Research European team and drives the European Thought Leadership agenda.

Yuhui Xiong is the research manager of the Economic Modelling and Data Sciences team in Accenture Research. She is responsible for driving and developing data-driven analysis for thought leadership projects.