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The impact of virtual relationships on the workplace

A 2011 survey by the CBI reported 59 per cent of UK employers offered teleworking. There are pros and cons to this. Famously, Sir Richard Branson chided Yahoos CEO for ditching flexible working policies, saying: to force everybody to work in offices is old school thinking. Michael Bloomberg and many others expressed the opposite view, contending that businesses depend on innovation and incisive decision making, both of which are damaged when people no longer meet face to face at the office. 

The UK government appears to be in favour. In 2011 Local Government Minster Eric Pickles launched a report which suggested public-sector employees should work at home to make save the Treasury 15bn. This government attitude will soon be supported by legislation, as later this year any UK employee will have a legal right to request flexible working, and employers will have a legal obligation to answer.

Already, the idea of working virtually has moved away from the realm of science fiction to reality for many organisations. But the growth of virtual relationships in a work context it still in its infancy and there has to date been little extensive research into its effects on sustainable business performance, particularly in the SME sector.

Some lessons can be drawn from larger organisations. Sun Microsystems, for example, has run a telecommuting program for 14 years. When Sun reviewed its program recently the company found that it avoided $64m per year in real estate costs, $2.5m on the electricity bill and employees saved on average $2,335 per year in commuting costs.

In 2012 researchers from Stanford Graduate School of Business examined the results of an experiment involving Chinas largest travel agency, CTrip. The firm wanted employees to work from home in order to save on office space, reduce staff turnover, and reducing labour costs by tapping into a wider pool of potential employees. Initially, they experimented with 255 employees, over a period of ten months. They then compared the productivity of call-centre workers who worked from home four days a week, with workers performing the same work from rows of office cubicles.

They found that the home workers were more productive, answering more calls and working more hours as a result of taking shorter breaks and fewer sick leaves. A quieter working environment at home was also a factor in the increased productivity. Home workers also reported being happier than office workers, which was an important finding as employee retention, keeping recruitment and training costs down, was a key concern. 

At the end of the experiment, CTrip estimated they saved about $2,000 per employee working at home, leading them to roll the option out to the entire firm. However, almost half of the workers who had worked from home chose to go back to the office despite the added cost of commuting.

Virtual relationships are not limited to home working . In an article published in IESE Insight, Paul Leonardi, Diane Bailey and Stephen Barley describes three different ways we work virtually today:

  1. Virtual teams – Geographically distributed teams supported by web-based communications; where the team roles and the essence of their work does not change very much;
  2. Remote control – This refers to operating through the use of data collected by sensors to monitor and change work processes, controlled from a location away from the workplace; and
  3. Simulations – Simulation technologies eliminate the need for human connection altogether. Examples include medical uses, or simulations used by fire-fighters to study the movement of fire and smoke.

The benefits provided by these technologies is evident, although there has not been enough research into their long-term effects on company performance, and the IESE Insight paper highlights some downsides.

Virtual does not always lead to cost reduction. Production processes can become less efficient when direct human interaction is replaced by the virtual, and companies often need to increase training activities, resulting in extra cost and short-term productivity loss. A U.S. automobile manufacturer, who experienced this when engineers worked remotely, developed this five-stage process: define work requirements; monitor progress; fix returns; route tasks strategically; and filter quality.

Employers of virtual teams should adopt similar measures. But other challenges will remain, as there is also the unpredictable human dimension; many people resist mediated exchanges, and not everyone reacts to virtual working arrangements in the same way.

Peter Chadwick is CEO at Ideas for Leaders.

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