Calculating the P&L of hybrid work

It’s easy to assume that this transition is a purely cost-saving exercise, with overheads slashed as video conferencing replaces business travel and remote collaboration shrinks the office footprint. But, while conferencing tools such as Webex undoubtedly save both time and money, for many organisations the case for hybrid is not primarily financial.

Working from the beach, but keeping the office

“We’ve always informally worked hybrid,” says Kate Diver, head of people risk, workplace and expansions at international fintech firm Wise (formerly TransferWise). “But we only went officially hybrid in September of last year.”

With staff from over 90 nationalities, many of whom wanted to work from their home countries during lockdown, the solution Wise opted for was radical. It now allows employees to work from home for up to three days a week and work remotely from anywhere in the world for 90 days a year, a policy that Diver believes will improve staff retention and employee productivity as the business expands.

Wise made savings on utilities and office costs over lockdown, but also invested in research on policy and in staff perks. And, Diver says, there are no plans to shift to a remote model. “We might not acquire space as fast, or we might look at different ways of designing our spaces,” she says. But offices and some of their associated costs remains part of the business’s future.

Working from home and video conferencing both have their part to play, but some companies still need a physical presence where its customers are based. (Credit: 10000 Hours/Getty)

Investing in IT and the buzz of the City

In 2019 Acuity Knowledge Partners was about as office-based as a business can be. As a research provider to the finance sector, digital security, confidentiality, and client compliance standards seemed to demand a fixed base.

“Frankly, the more non-removable the hardware was, the better, from a client perspective,” says Damian Burleigh, Acuity’s chief revenue and marketing officer. “Our sales and marketing groups were very well set up for remote working. But our production facilities had to very quickly go from very few laptops to 3,000 laptops.”

For Burleigh, the hybrid model is undoubtedly part of Acuity’s future. He has seen productivity gains from eliminating the daily commute; the shift to video conferencing has made prospective clients easier for his sales teams to reach; and he anticipates hybrid work will improve diversity, particularly with regard to women in the workforce.

From a purely financial perspective, however, the ledger is unclear. “Travel and entertaining probably came down for us by about 2–3% and we’ve probably saved somewhere in the region of $2–3m,” Burleigh says. “We were able to renegotiate rents for our premises in most locations globally, but we had to invest in remote infrastructure.”

As for Wise, there is no question of moving to a fully remote business model. Working from home, video conferencing and instant messaging all have their part to play, but Acuity needs a physical presence in the financial centres where its customers are based.

Before the pandemic, some companies like Cisco were already reducing their real estate footprint by 50% to move towards a more hybrid model (Credit: Klaus Vedfelt / Getty Images)

Leaders of hybrid work technology

Director of collaboration for Europe, the Middle East and Africa at tech company Cisco, Vaughan Klein has been working flexibly since Cisco acquired the Webex suite of conferencing and collaboration tools in 2007.

“We’re almost 15 years into our flexible working arrangement,” he says. “We sent everybody home and we never missed a beat: we already had the technology, we already had the HR policies, we already had all of that ready to go.”

For Cisco, the shift to hybrid working has generated cost savings in the region of $500m over the last five years. “Before the pandemic we were moving around the world, reducing our real estate footprint by 50%,” Klein says, noting that the reduction in commercial property values will significantly hit some businesses’ bottom line, not to mention their pension funds.

Cisco reinvested some of its property savings into technology. “Pandemic work is not hybrid work,” Klein says. “And some of the savings that you make need to be redeployed in making home offices good areas for you to work in.”

Looking beyond health and safety issues such as ergonomic furniture, laptops may not be optimal for hybrid working, Klein notes. “If I’m staring into a camera that’s looking up my nostril, it’s not a very good appearance,” he says. “So should I provide some sort of dedicated video device with a processing capability that frames me automatically and presents a great outcome?”

Video conferencing for productivity gains

When it comes to the P&L of hybrid working, productivity is an entry on the credit side of the ledger: one survey found employee productivity grew by 13–24% during Q3 of 2020, while almost 70% of organisations believed the gains were here to stay.

“There is a real advantage to video conferencing,” says Dr Abdelkader Aoufi, lecturer in operations management at the Cranfield School of Management. “It saves time and reduces waste. In offices, meetings take longer, while people might be distracted, but when we do an online meeting, we go straight to the point.”

But a successful transition to hybrid working requires investment. “We need to redesign our space in the office. Yes, there is a cost reduction in terms of space, maintenance and utilities, but we need to redesign the layout,” he says. Leaders might invest in brainstorming spaces over cubicles, or video conferencing systems rather than the classic boardroom table.

Collaboration software such as Webex can help businesses of all sizes enjoy the productivity gains of hybrid working – even helping to manage risks such as employee burnout by enabling staff to track their work-life balance. The hybrid model not only improves productivity but enables organisations to reduce their real estate footprint. Yet, while the cost savings from hybrid working are real, many businesses will find they need to invest to make the most of the transition.