Should Organizations Relocate Their Workforces?

The pandemic has resulted in more employees working from different locations. Many large, centralized offices and plants have become echo chambers lacking human habitation. Others are more sparsely populated at any given time, because employees do not spend all of their working time there. This massive relocation of work and those who do it may be temporary or may impact where work will be done over the long term.

It is incumbent on management to decide what impact location has on productivity. Some roles demand face-to-face customer contact, which mandates co-location with those customers. Much work is done by one person, who completes a unit alone. When there is no physical interdependence between those doing the work there is no co-location requirement. Several Engineers can simultaneously work on a design without being in the same place. Due to the evolution of technology face to face (or pixel to pixel) contact can be maintained while people are geographically separated. If physical separation does not impede the effectiveness of the participants, location is not important.

So where should organizations locate their workforce, at least while the work is being done while the pandemic still is impacting personal contact?

Location Options

  • Having each employee perform their work at their own chosen location is one option. The other extreme is having all employees perform their work in a single location. The vast majority of work can be done with some separation at some times… a hybrid approach.
  • Virtual teams operating globally can utilize time differences to make progress “24 – 7.”  Global relay teams can circumnavigate the world by passing their work at the end of their workday onto people beginning their workday. If each team does not require co-location this enables team members to be themselves dispersed. The feasibility of having as many work locations as workers depends on the divisibility of work and the tools required to perform the work. If a maintenance team shares equipment and tools it may require co-location, since providing each employee their own set of tools might not be economically feasible.  JetBlue reservation agents work out of their homes, utilizing terminals that connect them to central processing units. This would not be economically feasible if each agent required their own expensive mainframe computer, rather than a relatively inexpensive terminal.
  • Another alternative to one central work location is to have satellite locations which are linked appropriately with headquarters. Sales offices located near the customer base of those servicing them are widely used. This reduces the distances representatives must travel when face-to-face customer contact is required, and it also reduces sales expense. The same principle applies to physical distribution centers. If Amazon stored all of their inventory in one location the option of the same, or even next day delivery would not be feasible. On the other hand, since much “product” is in digital form today, server farms can be located based on economic considerations, rather than on logistical realities. 
  • Satellite locations can also enable people who work together to be co-located. Remote interaction is sometimes less productive than face-to-face dialogue when work is interdependent. Co-location can also enable people to experience social interaction. Organizations have often found employees to be frustrated by the lack of social contact, which is a basic human need. Just as riding an exercise bike looking at a screen showing a road through the Tetons falls far short of actually traversing the physical route, interacting with someone shown on a screen is not the same as looking at them in person.  Although co-location can result in frustrating interruptions, not all work requires social isolation.

Where To Put Satellites?

The migration of Silicon Valley personnel to Northern Nevada and other less expensive locations has demonstrated people will seek to have the highest standard of living possible while being employed with an organization. Having housing costs drop by 50% can be the economic equivalent of a huge raise in pay, which may be economically out of the question.  Relative taxation rates may also be a major consideration. Spending an hour or more commuting each way to the work location is costly, not only in time but in energy. If satellites can be located closer to those assigned to them both time and out-of-pocket costs can be reduced. 

The decision should also be influenced by the availability of the talent an organization requires and the cost of that talent. A large organization I consulted with did a feasibility study that suggested moving the IT personnel from Manhattan to a mid-sized city in the South would be economically desirable. Since management was willing to maintain the pay ranges and pay rates for those relocating the economic well-being of the employees would be greatly enhanced. Despite the due diligence the move resulted in over 2/3 of the personnel resigning, either before or within a year of the relocation. When replacements were sought it was discovered that there was a shortage of the type of talent required in the new location, increasing the damage caused by the decision. When further investigations were conducted it was discovered that IT professionals valued valued the professional meetings they attended locally in New York, which provided networking and skill development opportunities. Since both of these were not available in the new location people found the move to be undesirable.

When selecting a location the primary concern of the employer is the cost of labor. There are significant differences between the cost of living and the cost of labor in many labor markets. The talent supply – talent demand relationship dictates the cost of labor. Other factors influence the cost of living. Sound compensation management principles mandate using the cost of labor as the prime driver of compensation levels.Employers should focus on both the cost and the availability of the knowledge and skills they require.

Employees will have different perspectives. Moving from Silicon Valley to Northern Nevada while remaining employed by an organization may be desirable from an economic standpoint, due to the lower cost of living. But if there are no equivalent employment opportunities available the new location may bind the person to the current employer, since there are no good options. 

The Right Talent In The Right Place

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When the pandemic subsides, where and how work is done will have changed. Each organization should be doing scenario-based planning to prepare alternative strategies that will work in whatever future manifests. Continuous environmental scanning should be used to anticipate how and where work can best be done. Waiting until things “settle down” is a recipe for being caught off guard when the next major exogenous shock occurs. The environment will be less like a roller coaster, with periodic ups and downs, and more like white water rapids with continuously changing flow patterns. 

Where and how work is done will impact organizational effectiveness.