The Old Office is Going Extinct. Here's What the New Normal of Work Looks Like

​The world of work has been turned on its head. And we now have proof that the relentless, five-days-a-week grind in the office is the worst option for knowledge work schedules, according to a recent meta-analysis by Nick Bloom at Stanford University, the top academic expert on flexible work models.

In the past, full-time in-office work was the unchallenged norm­–the default modus operandi for businesses worldwide. However, the COVID-19 pandemic became a game-changer, forcing organizations to experiment with work-from-home and hybrid work models. To everyone's surprise, these alternatives not only worked but also outperformed the traditional model in many ways.

Research indicates that work from home is stabilizing at about 25% of days, a five-fold jump compared to 2019. It's a colossal shift. Picture this: If full-time in-office work was a giant, hulking dinosaur, then the pandemic was the meteor that caused its extinction. The survivors? Hybrid and fully remote work models, the adaptable organisms of the new world of work. Now it’s about choosing one of the two.

The hybrid advantage

Hybrid work models thrive in environments that benefit from both in-person collaboration and quiet, individual work. These environments often involve professionals and managers, who are mostly graduates and higher paid. Businesses in tech and finance sectors, where employees can execute their tasks from virtually anywhere but also gain from face-to-face brainstorming sessions, are ideal candidates for the hybrid model.

Four key factors give hybrid work an edge over in-office work: productivity, happiness, rent, and talent.

Productivity

Hybrid work isn't just a feel-good factor. It delivers results. It's like a productivity-boosting superfood for businesses. Research indicates that an organized, flexible hybrid model is 1% to 3% more productive than a fully in-person model.

Why? Two words: concentration and commute. With hybrid work, employees get quiet time for focused "deep" work and save hours on commuting. It's like having a secret sauce that supercharges your employees.

The key, as I tell my clients as I help them figure out how to implement hybrid work models, is having employees commute to the office only for the activities that can be most productively completed in the office: intense synchronous collaboration, nuanced conversations, socializing and team bonding, and on-the-job training and mentoring. You can do these activities remotely, but it takes more time and effort, lowering their productivity.

By contrast, other activities are more productively done at home for the large majority of employees: focused head-down work, asynchronous communication and collaboration, and videoconference and phone meetings. The latter activities typically take up anywhere from 70-90% of a typical employee’s workday. Thus, it’s incumbent upon companies and managers to minimize the commuting time of their staff by squeezing the activities most productively done in the office into the minimal number of days possible. That way, staff get to be most productive by not wasting time, money, and stress on commuting.

Happiness

No one enjoys a monotonous five-day-a-week office routine. It's like being stuck in a time loop where every day is Monday. In contrast, hybrid work is like a breath of fresh air.

Bloom’s meta-analysis shows that it's equivalent to an 8% pay raise in terms of employee happiness. Imagine getting a raise without dishing out a single extra dollar. It's like finding a secret shortcut in a marathon.

Rent

Let's face it: Office space isn't cheap. It's a significant drain on the company’s finances. By allowing employees to work from home for a part of the week, businesses can significantly reduce their space costs, which are typically about 10% to 20% of labor costs. It's like downsizing from a mansion to a cozy, cost-efficient home without losing any comforts.

Talent

One of the most persuasive reasons to adopt a hybrid work model comes straight from the horse's mouth. Employees, the lifeblood of any organization, have expressed a strong preference for hybrid work, making it a powerful tool for attracting and retaining talent. Why is hybrid work such a crowd-pleaser? It's all about choice and flexibility. Hybrid work offers the best of both worlds: the convenience and comfort of working from home, coupled with the social interaction and collaboration of the office environment.

Consider a recent experiment with over 1,600 engineering, marketing, and finance professionals. The study found that the ability to work from home reduced quit rates by a staggering 35%. Moreover, the power of hybrid work to improve retention is not limited to a particular age group. While younger employees have shown a preference for more in-office time, older employees are more likely to favor home-based work. A hybrid model caters to both preferences, making it a universal retention tool.

Remote work’s edge

Fully remote work is the undisputed champion when it comes to cost-effectiveness. It's the business equivalent of a well-oiled, fuel-efficient machine that delivers maximum output for minimal input.

Fully remote work models are the holy grail for businesses looking to maximize cost savings. They're particularly beneficial for roles that can be performed entirely online and don't require frequent in-person interactions. Think of roles like IT support, payroll, and other specialized roles that are often outsourced or contracted.

Real estate overheads

First, let's talk about office space. With a fully remote work model, you don't need one. Compared to the 10-20% decrease in office space for hybrid work, this is a 100% decrease on the budget line that’s typically the second-most expensive for service-oriented companies: office rent.

Think about it. No rent or mortgage payments. No utility bills. No office maintenance or cleaning costs. No expenditure on office furniture or equipment. It's like moving from a high-maintenance luxury vehicle to a self-sustaining electric car. The savings are not just significant­–they're game-changing.

Lower wages

In a fully remote model, you're not just saving on office costs. You're also cutting down on your wage bills. You're no longer restricted to hiring talent in high-cost areas. You can recruit from across the country, or even globally, where the cost of living­–and wage expectations­–are lower. It's like sourcing your products from a low-cost manufacturer without compromising on quality.

And it's not just about hiring from lower-income places. It's about accessing a global talent pool. You can find the best fit for your company without being restricted by geographical boundaries. It's like having a key to a global talent treasure chest.

Flexibility and scalability

Fully remote work offers incredible flexibility. You can scale up or down without worrying about physical office space. Need to add more people to your team? No problem. There's no need to worry about finding larger office space or moving to a new location. It's as easy as providing your new hires with access to your online work platforms.

This flexibility also extends to employees. They have the freedom to work from anywhere, which can lead to higher job satisfaction and improved work-life balance. It gives employees a happiness booster that could lead to increased productivity and loyalty.

The trade-off: Productivity

Research shows that while fully remote work is more cost-effective, it lags behind the hybrid model in terms of productivity. There are benefits to face-to-face interactions that can't be replicated in a fully remote environment. Casual office conversations, in-person team collaboration, and the camaraderie developed among employees who share physical space are all elements that can boost productivity and are often missing in a fully remote setting.

In essence, the fully remote model is not without its trade-offs. However, for businesses that prioritize cost-effectiveness and can find ways to maintain productivity in a remote setting, it presents a compelling option. It's about understanding your business needs and striking the right balance between cost savings and productivity.

The ideal fit: Hybrid v. remote work

The decision between hybrid and fully remote work largely depends on the nature of your business and the specific roles within your team. It's all about finding the right fit.

Technological advancements are also a crucial factor in determining the choice between hybrid and fully remote work. With the market for WFH products having increased fivefold, new WFH technologies are being rapidly developed. Better audio-visual equipment, virtual reality, holograms, and efficient scheduling software are making both hybrid and fully remote work more appealing and efficient.

There's no one-size-fits-all answer. Whether a hybrid or fully remote model will be most beneficial depends on various factors, including the nature of your business, the roles within your team, and the specific needs and circumstances of your employees. It's about understanding your unique needs and making a choice that best supports your business goals and your employees' well-being.

Having helped 24 companies figure out their flexible work models, I can say that over 90% (22) chose a hybrid-first model. Only two chose a remote-first model, a research institute and an IT company, both of which had less of a need for frequent collaboration and depended more on finding and retaining the best individual talent.

Full-time in-office work, once the reigning champion, is now the weakest link. The future belongs to hybrid and remote work. Hybrid is the rising star that combines better productivity and cost-effectiveness than in-person work. Fully remote work, on the other hand, while less productive than hybrid or in-office work, offers the best return on investment with its cost advantages for companies that don’t require intense collaboration.

The message is clear: adapt or perish. It's time to definitively say goodbye to the traditional full-time in-office model­­­­–and embrace the flexible work revolution.

This article was written by Gleb Tsipursky for Fortune and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.