The focus of return-to-office discussions have long focused on the individuals. Why might workers prefer to stay home? Which age groups are most amenable to in-person work, and which are most combative? Does office collaboration make the most sense for creative types or heads-down numbers people? Can workers really be productive left to their own devices?
Yet the lingering question of how widespread remote work shapes company outcomes, as well as the wider sector landscape, largely remains unanswered because the whole experiment remains in flux. But a new working paper from researchers at the University of Michigan and University of Chicago, titled “Return to Office and the Tenure Distribution,” comes fairly close to positing an answer: Return-to-office (RTO) mandates, when they’re not wanted, are bad news for companies looking to keep their talent.
The researchers matched 260 million resumes to company data to analyze causal effects of RTO mandates on employees’ tenure at Microsoft, SpaceX, and Apple. In scientific terms, they found “a reduction in counterfactual tenure that increases for employees with longer tenure.” In layman’s terms: When the firms enacted RTO mandates, senior employees headed for the door—often to direct competitors—who let them work from home.
The number of top-brass employees at Microsoft—as a share of the company headcount—dropped by over 5% post-mandate; at Apple, it was 4%. (Microsoft mandated 50% of the week in-office; Apple, just one day a week.) SpaceX was the worst of the bunch, with a 15% drop, which the researchers chalk up to its uniquely stringent requirement: Five days a week in-person. That human outflow poses an enduring threat to “productivity, innovation, and competitiveness”—the component parts that separate a thriving company from one in freefall.
Microsoft’s internal data doesn’t align with the paper’s findings, Amy Coleman, its vice president of human resources and corporate functions, told Fortune via email. The term “return to office mandate” is also inaccurate, she said, adding that Microsoft is a hybrid workplace “that revolves around flexibility and a mix of workstyles across worksite, work location and work hours.” In 2022, Microsoft’s chief human resources officer Kathleen Hogan told Fortune the company considers “working from home up to 50% of the time as standard.”
Representatives for Apple and SpaceX did not respond to Fortune’s request for comment, though an Apple spokesperson told the Washington Post that the study drew “inaccurate conclusions” and “does not reflect the realities” of Apple’s business or attrition rates.
The human toll of forcing their hand
The statistical analysis came from People Data Labs resumé data, David Van Dijcke, a coauthor and University of Michigan economics PhD student, tells Fortune. “The takeaway is definitely that the effects [of RTO mandates] are more deleterious than people thought before.”
Granted, the study is far from all-encompassing; it only studied three major firms, and they were all “early movers” in the RTO push, Van Dijcke acknowledges, pointing to each of their 2022 mandate announcements. That meant senior employees who left Microsoft, Apple, and SpaceX had “pretty good outside options,” namely competing companies that offered remote work with far fewer strings attached.
“If we think of Covid as ending in 2022, that was certainly followed by an influx of people claiming they would leave—and then really leaving when the first return-to-office mandates happened,” Anthony Nyberg, a management professor at the University of South Carolina’s Darla Moore School of Business, tells Fortune. “Apple and Microsoft really agonized over how to change their policies—Amazon, too, made many public comments.”
To be sure, Nyberg went on, mandating an office return is a major strategic decision—and even in the Michigan study, which found a statistically significant portion of high-earning workers leaving, it remains unclear whether that’s necessarily a bad thing for their former companies. “A big part of this is likely to become a sorting effect in terms of talent finding their best-fit organizations,” Nyberg says. “And people going to competing companies has been a truism for all of eternity.”
Plus, especially within the tech industry, moving to a competitor that’s offering to shell out more money is hardly much to write home about. Particularly if you work remotely, changing jobs is “no more than getting a new laptop shipped to you,” Nyberg says.
It’s harder at the bottom
A major asterisk to the data that Van Dijcke hopes people understand: Senior people may leave after a RTO more often, and in much greater numbers than entry- or mid-level workers, because senior leaders simply have more to gain. “They’re older, they’re more skilled, companies want to hire them for their expertise,” Van Dijcke says; greener employees don’t command the same sway. “We also saw that employees who leave aren’t forced to accept suboptimal jobs—demotions,” he adds.
Earlier literature shows a preference for fully remote jobs is lowest among the youngest employees, who have the most to gain from in-person collaborative work. “That seems to explain the pattern we observed—that senior employees leave at higher rates,” Van Dijcke says. “They have better options, and they also want to work from home more than junior employees do.”
Even so, no RTO mandate should come at the expense of the bottom line, Nyberg stresses. “As soon as an organization can no longer achieve its strategic directives, halt the RTO plan,” he says. “But even during this period, these organizations keep enacting layoffs, which certainly suggests they’re not in a people shortage yet. And layoffs are much more dangerous, broadly speaking.”
Indeed, layoffs, especially across Big Tech, often have long-term lagging effects, making workers likelier to leave due to disrupted culture and fractured trust. But mandates are pushing people out, too; poor morale might just be poor morale. (Ninety-nine percent of companies found a drop in employee satisfaction following their RTO mandate issuance, per a recent University of Pittsburgh study.)
Many experts see the whole decision simply. “An organization is really hurting itself if it forces people to come back,” Stephan Meier, chair of the Management Division at Columbia Business School, tells Fortune, adding he personally thinks the future will be hybrid. “People are really motivated by having flexibility in how they organize their days. But a lot of leaders grew up in an in-office environment—that was their way to control employees, that’s how they thought the world worked, that’s what worked for them and it’s why they’re on top.”
Mandates, for the most part, miss the point; workers will come back on their own accord if they feel doing so would bring a material benefit—or make it easier to deliver on their own work objectives.
Nonetheless, if a company is hellbent on having full offices—even if that can only be accomplished by force—Meier says “now is probably a better time [to enact a mandate] than two years ago,” owing to the pressure of mass layoffs and dire economic uncertainty. But companies that roll out mandates, he stresses, are missing the point.
“Being a leader means finding something that benefits everyone, and makes the firm run better,” Meier says. And fears of depressed financial outcomes stemming from remote work are far overblown; underperformers existed long before the pandemic, and no change in work arrangements will necessarily create more of them. “Before quiet quitting, there was Microsoft solitaire—a different way of phoning it in,” Meier says.
All told, the findings in the report don’t seem too egregious to Nyberg, the South Carolina professor, who’s spent decades—through financial crises and boom periods—assessing the flow of human capital. “But then again, I’m old.”
This story was originally featured on Fortune.com
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