News
Innovative Hybrid Work Models
Today’s post-pandemic environment finds many organizations struggling to understand workers’ changing priorities and how best to respond to them. By pursuing methodically implemented pay scale and remote work policies, organizations can better meet workers’ needs, remain competitive in attracting new talent, and be more effectively positioned to thrive in a postpandemic landscape.
Introduction
According to the Census Bureau, over one-third of U.S. households worked from home “more frequently” than prior to the COVID-19 pandemic.1 This number skewed markedly upward with income, peaking at 73.1% for those earning over $200,000 annually. And while many workers have returned to their pre-COVID-19 offices, 2020 has clearly left its mark on the collective U.S. psyche. The workforce now knows it can remain productive regardless of location. This awareness has reshaped employee expectations and tilted the balance of negotiations in hiring talent.
This article will explore the recent widespread adoption of post-COVID-19 work-fromhome (WFH) and hybrid work models, wherein workers split their workdays between home and a conventional corporate office, and the issues this may create in hiring and compensation. The authors will discuss ways to attract and retain talent as well as structure an organization to adapt to this “new normal.”
According to the Census Bureau, over one-third of U.S. households worked from home “more frequently” than prior to the COVID-19 pandemic.1 This number skewed markedly upward with income, peaking at 73.1% for those earning over $200,000 annually. And while many workers have returned to their pre-COVID-19 offices, 2020 has clearly left its mark on the collective U.S. psyche. The workforce now knows it can remain productive regardless of location. This awareness has reshaped employee expectations and tilted the balance of negotiations in hiring talent.
This article will explore the recent widespread adoption of post-COVID-19 work-fromhome (WFH) and hybrid work models, wherein workers split their workdays between home and a conventional corporate office, and the issues this may create in hiring and compensation. The authors will discuss ways to attract and retain talent as well as structure an organization to adapt to this “new normal.”
Employer/employee Misalignment
Payscale’s 2021 State of Remote Work Report2 revealed that 81% of organizations lack a compensation strategy that accommodates remote employees, yet 50% of companies anticipate having a hybrid of fice model after the pandemic. On the other side of the desk, many workers are explicit in their desires for more flexible work conditions. A September 2021 survey of 1,000 U.S. workers by beqom, a Switzerland-based compensation management software provider, showed that, due to the pandemic, 82% of workers expected more flexibility in their work hours. Moreover, 65% of those surveyed would accept a reduced wage for the ability to work remotely.
Setting aside work locale, beqom data also highlighted that many people expect higher salaries as a result of the pandemic. Gen Xers and Millennials led the age cohorts in this regard, with 58% and 56%, respectively, anticipating wage increases.
In studying industry data, a picture of misalignment and tumultuous change emerges. Especially against a backdrop of the so-called Great Resignation and its monthly overall “quit rate” of nearly 3% (and over 6% in some industries),3 organizations understand that workers now hold greater leverage in negotiations than they have in decades. Nevertheless, many companies fail to fully grasp their current and potential workers’ priorities. Recent PwC analysis revealed that wages/salaries were the top reason why employees seek new jobs, yet only 41% of executives note this as a reason for employees quitting.4 Flexibility ranked fourth out of 16 on workers’ list of reasons to exit, yet was acknowledged by only 34% of executives.
Businesses, and executives in particular, must be better at tuned to the rapidly changing course of employee expectations around compensation and WFH/hybrid flexibility. Failure on this front will only exacerbate the worker exodus and leave management ill-equipped to attract new talent.
Attracting and Retaining Talent
The authors have a combined experience of over 40 years in human resources and constructing organizational compensation strategies. In working with groups ranging from small startups to international enterprises, many lessons have emerged that bear close consideration in today’s employment climate.
Many companies, especially smaller ones, lack a formalized pay structure. Traditionally, omitting such structures can lead to new hires coming in at higher total compensation levels than workers with seniority. Failure to codify job roles and role hierarchies only compounds the likelihood of inappropriate compensation. Now, in the context of changing talent demands as noted above, the propensity to construct poor compensation packages with negative effects on morale among colleagues only increases.
HR should rely on compensation market data from reputable sources. This will uncover current competitive rates for defined roles. With rates and defined roles, the organization can create a pay structure in line with its market, region, and organizational growth stage. Market data should be reviewed on a twice-yearly basis to ensure ongoing alignment with industry peers
With pay structures in place, companies should turn to the hybrid/WFH question. Pay scale's survey shows that 69% of organizations do not plan to lower pay for employees that switch to working remotely, but this does not imply that new hires will receive the same pay as office-only workers, especially knowing (as stated above) that many candidates would accept lower pay for more flexibility. Again, there is a potential pay scale mismatch brewing here. Companies need to coordinate remote work with their compensation plans and enforce them through clear policies.
Enacting this equality can be trickier than it seems. Remote and in-office workers will likely have different incentive packages. For example, WFH staff may receive home office equipment and software stipends, while in-office workers could receive gas and parking allocations. These may be normalized by dollar amount or some similar measure. Benefits such as health and disability coverage should generally remain constant regardless of work location.
Perhaps the thorniest issue is whether to pay remote workers less if they live in an area with a lower cost of living than the corporate office. Workers are now in a position to arbitrage such differences—that is, get hired on in costly Seattle then move to far more affordable Wyoming while collecting the same pay as a remote employee. As of yet, there is no consensus on how companies should handle such situations, although the market seems to be leaning toward equal pay regardless of location. Organizations might seek to split the difference with remote workers, either through base wage adjustment or altering of stipend allocations. Whatever the decision, it should be implemented at a policy level, not on a case-by-case basis.
Adapting to the New Normal
The remote work paradigm shift came suddenly to millions of workers and businesses alike in 2020. On the whole, though, workers seem far more motivated to keep their new independence than companies are to grant it. Pay scale data states that 45% of job seekers self-report as telecommuting at least some of the time. Also, the number of companies that prohibit remote work fell from 31% before the pandemic to only 9% now. And while still in the obvious minority in terms of work model, the number of fully remote organizations doubled from 3% to 6% after the pandemic. Taken in total, Pay scale notes that 18% of employees worked remotely prior to 2020; that number now stands at 47%.
These are seismic changes, especially for older firms that identify their corporate culture with in-office presence. Management and executives may feel that “water cooler collaboration” is instrumental to brainstorming. Sales may suffer if done via teleconference. Work productivity may drop from remote workers, and new remote hires may be far slower to integrate and execute. All these assertions may be true, but there is no way to elevate these assessments beyond the level of hunches without methodically collected data.
The best way to adapt to a new normal is to define it relative to known baselines and then either test or survey, as appropriate, to determine current values in the changed environment. To know if workers are more or less productive when remote, establish quantifiable criteria for that productivity, then measure them on regular intervals. If and when a remote work model is implemented, have HR send out periodic surveys regarding their ability to collaborate, then weigh this against known averages for relevant collaboration efforts, such as product development or multi-team workflow cycles. Not least of all, remain aware of personal and corporate biases. If there is a desire for remote work to fail from the outset, metrics and measurements may involuntarily reflect this.
Adoption of hybrid and WFH models will change companies and their cultures. Arguably, though, that change is now inescapable, as survey data indicates. The challenge going forward will be to shape the new culture in positive ways. Equitable compensation based on strategic policies will play an outsized role in this process.