Nicholas Bloom: How hybrid work keeps productivity inching upward

Few scholars have studied the phenomenon of remote work longer and from more angles than Stanford economics professor Nicholas Bloom.

Seven years before the pandemic, his study of Ctrip, a China-based travel agency with 16,000 employees, revealed prescient insights about work-from-home advantages for call center workers. Those who were asked to switch from full-time, in-office to working four days per week at home turned out to be 13% more productive and efficient. They were also more satisfied with their jobs, and their attrition rate fell by 50%. 

But one work model does not fit all in the post-pandemic world. Organizations are learning on the fly with variants of return-to-office, WFH, hybrid, and everything in between. But if there is one clear post-pandemic takeaway, Bloom explained in a recent interview with The Works, it’s this: The five-day workweek in the office is dead, and the four-day work week is still a dream. 

What’s working and not in this new hybrid work world?

Companies have all kinds of ways of measuring performance. The media focuses a lot on productivity, but profitability is probably more important. The tricky thing is that so much has changed—we’ve been through a pandemic, a boom, a slowdown.

If you look at aggregate data in the U.S., companies are performing quite well. The profit and productivity numbers both look pretty good. They look astounding, actually, if you consider that we’ve come through a pandemic. Productivity growth is actually slightly faster from 2020 onward than it was in the five years before. 

Your early study of call center workers wound up having huge implications, not just because of the pandemic, but because of the impact of automation and AI. What work models do you think make sense in customer support?

Call center workers are not creatives, they’re not managing or mentoring anyone else, and their jobs are easy to manage remotely. In our randomized study of Ctrip, we had two groups. One group had to work from home four days a week. The other had to keep coming in every day.

The company was anticipating that the performance of the people working from home would drop—and the reason they wanted to experiment was to see if they could save money on office space.

They were absolutely amazed—stunned, actually—to discover that the work-from-home employees were 13% more efficient. Of that 13%, 9% were working more of the time. They were less likely to take sick leave, less likely to arrive late, less likely to leave early. Even their lunch breaks were shorter. All of this added 9% more time on the job.

The other 4% said it was much quieter at home than in a noisy office. So those two factors highlight the benefits of hybrid. The average employee saved about an hour and 10 minutes a day working from home. 

That’s why most call centers are a better fit for remote work. Other jobs that are more management-heavy and require lots of group discussion may be better with a hybrid model. I suspect there are not many roles that are better off five days in the office if you can work some of that remotely.

What about IT organizations, who were heroes during the pandemic, making remote possible for the masses—and doing that remotely. What long-term work models do you see working best for those teams?

IT organizations have always leaned toward the remote end. If you look across industries, IT is the most remote; financial services is number two. One model in IT is hybrid, where you’re coming in two, three days a week. That's going to be important in organizations with a lot of mentoring and learning, a lot of younger employees who need to move up the experience curve, and where the activities require a lot of in-person discussion.

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There's a second model in IT where you're remote, but you attend retreats with fellow employees—meeting in person every six weeks or so for two days—but otherwise, you're allowed to work remotely. That’s going to be a better structure for organizations where they're mostly 30- and 40-somethings and not many junior employees. You see both models in the tech sector right now. Atlassian, Airbnb, and Automattic, for example, operate with a “retreat” version of hybrid. 

The majority of IT firms have gone back to the office, but it’s not totally clear to me how much that's inertia, because they own a lot of office space and have long leases. But if your office lease is expiring, it's no longer free going forward. Companies will think about that because a lease is typically 10% of costs.

You’ve studied this idea probably more than anyone, so give us an update: Is the four-day workweek any closer to becoming a reality?

That is a hugely complicated topic, but I’ll take a stab at it. 

I think there are actually four versions of the four-day workweek. Three of them I call “muggle” versions, because they're unexciting, but they exist.  And one I call “magic,” which is very exciting, but I'm not sure it really does exist.

The first muggle version is: I work more hours per day, but one less day. So, for example, if I'm working a 40-hour week, rather than work five days and eight hours, I’ll work four days and 10. That's just called shift flexibility, and it’s been around for decades.

The second is the part-time model. Rather than get paid for five days, I get paid for four days. That’s been around for hundreds of years—again, not very exciting. The third is: I work from home on Friday. That has kind of been labeled the four-day workweek, with Fridays being by far the most popular WFH day. The three muggle versions are all here.

The fourth one, the magic version—which the media gets very excited about—is when I work for four days and get paid the same as for five days. And I’m magically 25% more efficient per hour to justify the compensation. There are a lot of organizations lobbying for this, but so far, I have seen no rigorous evidence to support the theory. 

Hence the word ‘magic.’ Is there still an argument to keep exploring it? 

When I talk to managers, they are hugely skeptical because, they say, ”you're implying that I'm wasting 25% of my time right now, so if I could effortlessly increase productivity by 25%, I would do it in a flash.”

The more positive spin on it is: I think it's a good idea in the long run. Because what we’re learning from the muggle versions is that every year we're becoming 1% or 2% more productive—this stretches back since the time of Keynes. Americans spent the last 100 years becoming more productive but took much of it as more income.

Why instead don't we collectively say: “Let's just earn 20% less and have a three-day weekend”? I actually think the objective of the four-day workweek is great. But I think telling people they can magically do it isn't going to get us there.