Productivity, Organizational Structure and Work-From-Home

Recently, there has been a great deal of discussion about the effect of the pandemic on productivity. Has the shift in work, especially the increase in work from home (WFH), boosted productivity? Will a return to the office lead to more or less productivity? Or, to put it another way, will the return to the office enhance or degrade the key intangible asset of organizational competence?

Articles by David Rotman at MIT’s Technology Review, Heather Long in the Washington Post, and Neil Irwin in the New York Times paint a positive picture over the overall trend in productivity.

But, as Chip Cutter points out in the WSJ, companies are struggling with how to reopen the office that is not disruptive. 

The answer to the productivity question depends on the interaction between organizational changes and new technologies. Most of the productivity optimism is based on an expectation of continued deployment of advanced technologies, specifically artificial intelligence, machine learning, automation, and robotics. But experts such as Erik Brynjolfsson have long argued that concomitant organizational changes are need for deployment of these technologies (for example, see here and here).

For the most part, these changes in organizational structure are needed to take advantage of the productivity-increasing features of the new technology. The classic example is the change in factory layouts due to the shift from steam-driven belt and pulley system to individually electric engine driven machines.

But equally important is the role of a shift in work organization in facilitating the acceptance of new technologies. The pandemic-induced forced shift to WFH seems to have broken down barriers to the deployment of digital technologies. As a recent large survey of companies by Barrero, Bloom, and Davis concludes, “the pandemic created the conditions for coordinated experiments with WFH in networks comprised of firms, customers and suppliers, yielding lessons and know-how that were hard to acquire beforehand. In sum, the pandemic swept aside inertial forces related to experimentation costs, biased expectations, and coordination within networks that had previously inhibited remote work.”

The challenge facing companies now is how to harness these productivity drivers. Can they take advantage of the window of opportunity of lower barriers to technological change and use the WFH experience to create the new organizational structures needed to operationalize the new technologies? Or will forcing workers back to the office reimpose the pre-pandemic organizational structure and negate any organizational learning?

My guess is that we will see a mixed result. We are in the middle of a huge social experiment. Researchers, managers, and workers will need to monitor the experiment closely for lessons-learned and new “good practices.”

As a side note, I find the ongoing discussion on the impact of the elimination of the work commute on productivity to be somewhat confusing. It has been argued that the shift to work-from-home has raised productivity. For example, the Barrero et al. survey cited above concludes that WFH will increase productivity by 4.8%, half of which is due to reduced commute times.

But this is a case of working longer, not working smarter. Official productivity measures do not include commuting time as work time. Adding in time previously spent commuting increased the total number of hours worked. Working more hours presumably increases production (the amount of work you get done). This does not necessarily increase labor productivity (as measured by output per hour). And if the result of working from home doesn’t lead to a measurable increase in output (a distinct possibility for office work), then productivity actually goes down (more hours, same output). Also, any reduction in commuting time is a one-shot improvement (assuming that the number of people working from home does not continue to increase) and may be reversible (as workers are required to go back to the office at least part-time). And of course, it does increase company profits if workers are not paid more for those extra hours – and likely they are not (more output due to more hours for the same amount of expense).

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s