The second spike of U.S. Covid-19 cases stalled office reopening plans across the nation.
Though overall daily cases are again trending downward, the fall and winter flu season – which many experts believe will further complicate efforts to combat the virus – is rapidly approaching.
With so much uncertainty, many organizations are considering long-term remote or hybrid work options. Google and Uber have already told employees they can work from home through June 2021; Nationwide Insurance will drastically reduce its physical office locations; and REI intends to sell its new 380,000-square-foot corporate headquarters to better “lean in” to remote work.
Yet many leaders have concerns about the degree of productivity, collaboration and innovation employees can sustain while working from home.
A recent Boston Consulting Group survey of more than 12,000 professionals across the U.S., Germany and India provides deep insights into employee mindsets and behaviors around remote and hybrid work settings.
- 76% of surveyed employees who transitioned to remote work due to the pandemic believe they have been as productive or more productive on individual tasks as compared to pre-Covid-19.
- Yet 56% of these same employees believe remote work has made them less productive on collaborative tasks compared to pre-Covid-19.
- Meanwhile, for professionals who have remained onsite amidst the pandemic, 74% say they have been as productive or more productive on individual tasks, while 55% say they have been as productive or more productive on collaborative tasks.
A decline in collaborative performance is perhaps the most compelling argument against a shift to a fully remote workforce. Digital collaboration tools have improved greatly in recent years, yet teams risk losing organic elements of collaboration when unable to connect in a physical space.
Social connectivity had a strong correlation to collaborative productivity among survey respondents. U.S. employees who were satisfied with their degree of social connectivity with colleagues were 3.2 times more likely to have maintained or improved productivity on collaborative tasks compared to those who were dissatisfied.
Physical and mental health were also found to have correlation to collaborative task outcomes. Professionals who reported improved mental or physical health since the pandemic were twice as likely to have maintained or improved collaborative task performance compared to those who reported mental or physical decline.
The survey also revealed employees who were satisfied with the remote work resources available to them (project management software, virtual white boards, videoconferencing, etc.) were about twice as likely to avoid a perceived drop-off in productivity.
Remote work will continue to play a role in American working life beyond the point where it is no longer a public health necessity. A shift in employees’ predilections will force companies to offer more flexible arrangements, as 60% of survey respondents indicate a desire for flexibility in where/when they work. Management teams determined to return employees to the office will likely have to adopt a hybrid model if they wish to do so in a sustainable manner.
This seismic shift presents several unique challenges for private equity portfolio company management teams. PE-backed businesses are under enormous pressure to deliver results for their equity investors, which usually results in a faster and more change-oriented operating environment. A poorly managed shift to a remote or hybrid workplace poses a genuine threat to value creation.
Executives are accustomed to taking stock of the overall health and physical/mental resources used by their employees inside the office. Effectively monitoring these factors amidst a remote work environment takes a far more deliberate effort.
In a Covid-19-era workforce, many employees are always outside of the office. This reality is likely to continue well beyond the discovery of an effective vaccine. Past ideas of work/life separation are no longer conceivable as employees manage their work and personal lives in the same space. Investment in the technological needs and overall wellbeing of remote workforces is required to achieve the high productivity critical to growing EBITDA.
That may seem like a tall order for portco executives under pressure to improve the bottom line. However, excising office leases and associated onsite perks (snacks, coffee machines, office supplies, etc.) results in immediate margin expansion and a portion of this capital can be redeployed to enhance the efficacy of long-term offsite work.
Sound investments in remote work technology and physical/mental health resources can help prevent a drop in productivity, a rise in turnover rate, and associated loss in profitability. Such factors should not be left to chance in today’s unprecedented economic uncertainty. Many resources, such as home office equipment, likely qualify as one-time expenses that can ultimately be added back to EBITDA.
Maintaining social connectivity amidst a remote work model presents the largest challenge and potential rewards for portfolio company leadership. Impromptu messages and video calls can help replicate some of the countless organic touchpoints that occur in the office environment. Companies are also exploring more creative solutions. The survey authors highlight one company that encourages employees to play videogames together that “simulate a collaborative environment.”
Equally important will be mitigating new, potentially deleterious dynamics to connectivity. Say a company that embraced a hybrid work model is holding a cross-functional meeting. Some participants are together in the office while others are isolated in their homes. The latter are at a greater risk of being marginalized during the meeting. Having all employees join the session virtually regardless of location can help minimize these pain points, as could investment in telepresence systems.
Management teams must keep an open line of communication with their fund as they analyze resource allocation amidst remote work’s rapid expansion. Sponsors often cannot know the intimate details of every company in their portfolio and may not be aware of the precise resources needed to accelerate value creation. A strong portfolio company leader must be an advocate for the tools and systems their team needs to sustain or achieve high performance.
Furthermore, many private equity firms have been managing global workforces for decades. They may have resources or insights related to remote work that can be shared. Closing the gap between what the fund thinks the company needs and what the company actually needs creates a symbiotic relationship wherein both parties benefit. Since many sponsors specialize in specific sectors, leaders across portfolio companies can also connect to share best practices.
Remote work should no longer be considered a temporary fix. PE-backed leaders must embrace this time of monumental change as a defining moment. How companies weather this storm will be a reflection of those at the helm. Coming out of a pandemic with a team that is stronger and more collaborative than ever will serve as proof a leader possesses the tenacity and adaptability to thrive in the private equity environment.
Falcon provides C-suite talent solutions for middle market private equity firms across North America. Follow us on LinkedIn.