Business leaders expected a productivity downturn when the pandemic forced millions to work from home. However, many were surprised and relieved when their employees’ output remained steady or even increased during the lockdown. Remote work proponents used the promising statistics to advocate for permanent telecommuting and hybrid work options. And for a while, their argument held water.
But new data shows that employee productivity is now on the decline. According to a recent report by the Institute for Corporate Productivity (i4cp), worker output in the US is dropping at the fastest rate in 75 years. Now, some organizations are counterpunching by claiming that flexible work arrangements are the reason why.
Gregory Daco, chief economist at EY Parthenon, told Fortune that many of his clients across all industries blame remote and hybrid jobs for the productivity slump. However, he disagrees that the new work models are the sole or even a significant cause of the problem. He cites the considerable labor churn over the past two years as a major factor. The massive turnover rate has made it very difficult for employers to train staff and get them to a pre-pandemic productivity rate.
And there’s another, broader reason behind the low output trend: employee engagement is also sagging. Besides being one of the driving forces behind the Great Resignation, weak engagement contributes significantly to the lack of effort remaining employees put into their jobs.
Remote and hybrid workers often have difficulty feeling engaged with their organization—especially now that many employers aren’t trying to form genuine connections with off-site staff as they did during the pandemic. And back-to-office mandates caused morale to slump for numerous employees forced to return to the workplace.
Trust is eroding on all sides. Employers are increasingly suspicious of how much, how hard, and how often their remote team members work. Their attitude, along with the surveillance technology many put into play, has caused lots of remote team members to lose confidence in their organizations.
Additionally, many workers forced to return to the office have lost faith in bosses who reeled back remote options and demanded they appear in person. And remote workers citing proximity bias mistrust employers who seem to favor on-site colleagues.
Less dramatically, engagement and productivity suffer when people simply aren’t interested in their work. For example, apathy can grow when employees don’t feel a sense of purpose because their jobs seem boring or meaningless. Workers also disengage when their employers fail to outline expectations effectively, causing mistakes and sparking a blame game. And employees who don’t feel recognized or valued feel less motivated to excel.
Across the board, disintegrating engagement is tanking productivity.
“Employees seem to be following a pattern of professional detachment,” Eric Watkins observed in Entrepreneur. The president of Abstrackt Marketing Group noted that since early 2020, worker engagement surveys have shown a steady decline in employees’ emotional investment in their jobs. But organizations that understand the vital link between productivity and engagement can turn things around.
RECOMMENDATIONS TO ENGAGE ALL WORKERS
In a recent Forbes article, Jack Kelly, Founder and CEO of the Compliance Search Group, offers leaders a strategic list of recommendations to engage all workers better. Financial security contributes to employee engagement, so he begins his list with keeping pay in line with inflation and offering financial assistance programs. But the rest of his suggestions dovetail into organizational culture.
Kelly advises leaders to:
RECOMMENDATIONS FOR REMOTE STAFF
Business advisor Tara Coomans’ 15-year-old PR agency has always been fully remote. In an article for Entrepreneur, she gives leaders specific advice on boosting off-site teams’ productivity. She cites studies showing remote workers put more hours in than their on-site counterparts, mainly because they don’t spend time commuting. However, more hours spent on the job can lead to employee burnout.
Coomans advises leaders to schedule one-on-one check-ins with remote team members to listen to their challenges and help them maintain a balanced work schedule. These meetings facilitate relationships and establish a sense of belonging for staff members. They allow both parties to know each other more personally, which helps build mutual trust.
Instead of investing in surveillance mechanisms to ensure remote staff are on the job, Coomans tells leaders to set clear goals and objectives and evaluate results. She explains:
“Rather than think of output in terms of hours worked, think about output in terms of contributions. What exactly should an employee be delivering? What KPIs should an employee be tracking for themselves? What is the contribution expected from their role?”
Because they don’t interact in person, remote workers are more at the mercy of endless technological interruptions than on-site employees. Coomans recommends setting up a “hierarchy of communication” to alleviate constant distractions that can prevent people from working more effectively. She also favors eliminating non-essential meetings to allow people more time to do their work.
Gregory Daco has studied and written extensively about the labor market. He points out that the drop in productivity is “exacerbating compensation pressures and pushing up unit labor costs.” People are working more hours, but their output is not measuring up. Ultimately, this trend is bad for everyone. He explains further in Fortune:
“One of the reasons sluggish productivity hurts the economy is not just that it limits supply; it leads to inflationary pressures. Think of it like: a working employee has a cost. They have to be paid. That wage is offset by their productivity. What matters to an employer is how much they’re paying per unit of output. That’s unit labor cost.”
Daco believes that employers who work with their teams to reinvigorate productivity, including offering more flexibility and building trust, will help relax inflationary pressures. He says the current economy is operating in an environment of constraint. But he notes, “Productivity is the key out of this mess we’ve been in.”
The US Bureau of Labor Statistics offers a simple outline of productivity’s effects on the economy.
“Historical or “time series” data on output and hours worked show the importance of increases in labor productivity to economic growth in the United States. With growth in productivity, an economy is able to produce—and consume—increasingly more goods and services for the same amount of work.”
On an individual level, Investopedia calls productivity “the most fundamental and important factor determining our standard of living.” Higher output leads to greater profitability for businesses, higher wages, increased supply, and lower costs for consumers.
And productive workers are happier on the job. Ironically, when leaders work to improve employee engagement to boost output, their staff’s elevated productivity leads to higher engagement. Workers feel more fulfilled, and they’re less stressed because they’re operating more efficiently. By increasing the employee value proposition, leaders build a cycle of productivity.