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Companies With Flexible Remote Work Policies Outperform On Revenue Growth – Report

Companies With Flexible Remote Work Policies Outperform On Revenue Growth – Report

Employees frustrated with their CEOs’ return-to-office mandates have tried arguing that remote work is linked with greater productivity. That it helps the environment with fewer commutes and improves diversity by broadening the talent pool. Now, they may have another argument to get their CEOs’ attention: Higher revenue growth.

A new report released Tuesday by Scoop, a hybrid work management startup that also compiles the data set Flex Index, includes an analysis of remote work policies and revenue growth at 554 public companies done in partnership with the Boston Consulting Group. It found that the average public company that gives employees choice over whether to come into an office also outperformed on revenue growth over the past three years by 16 percentage points, compared to companies with more restrictive policies.

“That gap was really surprising to us—and larger than expected,” says Rob Sadow, CEO and cofounder of Scoop, whose Flex Index acts as an online “repository” of remote work policies for some 7,500 companies. The analysis tracked revenue growth between 2020 and 2022, first normalizing the data for industry performance to eliminate differences between high- and low-growth sectors.

Few studies have yet compared the relationship between revenue growth and companies’ remote work policies, says Nicholas Bloom, an economist and professor at Stanford University who is also an adviser to Scoop. That’s in part, he says, because most survey tools study individuals’ experiences with remote work, rather than corporate policies. Combined with past research that connects flexible work policies to headcount growth, “collectively they paint a pretty strong picture,” he says of the two reports from Flex Index, even if the data does not suggest remote policies actually cause revenue growth.

But whether higher revenue prompts firms to need to hire faster—and choose flexible policies to do so—or more flexible policies are engaging workers and leading them to do better work, “in some ways it doesn’t matter so much,” Bloom says. “If I’m reading this as a manager, the interpretation is pretty similar. Flexible employment practices are going to help support growth.”

As the conversation remains red-hot over whether working from home helps or hurts productivity—and more CEOs cite efficient work as a reason for return-to-office mandates—the new analysis could add fuel to the discussion. “There’s way too little real data and analytics,” says Debbie Lovich, a senior partner at Boston Consulting Group focused on the future of work. “There’s a lot of perception and opinion but not [many] real correlations like this.”

The report shows that the three-year industry-adjusted revenue growth rate of companies that have what Scoop calls a “fully flexible” policy—meaning they allow employees or teams to choose when or whether they come to the office, or are fully remote—is 21%. Companies in the data set with more restrictive policies—say, those that have corporate mandates for a couple days per week or those that require full-time work in the office—had only a 5% industry-adjusted revenue growth rate, the analysis found. When excluding the tech industry over the same period, public companies that were “fully flexible” outperformed by 13 percentage points.

Lovich, whose firm worked on the analysis with Scoop, says the report doesn’t yet show that flexible policies cause higher revenue growth. Rather, she says flexible policies are one likely “symptom” of a culture that trusts workers, has other employee-friendly benefits and values forward-thinking strategies, technology and ideas. “If they’re less restrictive on [remote] work policies, they’re probably more pro-innovation, more purposeful and more engaging,” Lovich says, all of which could lead to higher revenues. “I doubt those companies would be taking attendance and measuring badge swipes.”

Scoop’s Flex Index data set includes policies from some 7,500 companies of all sizes; 554 publicly traded companies were included in the analysis. (Among those publicly traded companies, 27% have “fully flexible” policies; 55% have a hybrid policy with various in-office requirements; and 17% are full-time in-office.) Office policies in the data set are generated by submissions of current employees that company managers have the opportunity to verify or manual entry of publicly available information such as company web sites or media reports.

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The Flex Index categorizes remote work policies based on corporate-level rules, meaning some employees included in the “fully flexible” category could be subject to team-level in-office requirements. Still, that likely means the office time is more tailored to individual employees’ work, something Lovich says is important when thinking about hybrid policies.

“The more we can empower people closest to the work, the better the work will be,” she says. “For office workers [with mandates], all of a sudden you’re telling me when and where to show up. It says you don’t trust me.”

Sadow thinks that even if the results don’t show a causal relationship, they do help counter an increasingly common argument. “The argument a lot of execs and board members have is they believe companies that offer flexibility are going to underperform because they’re not together,” he says. “That they’re not going to allow for water cooler conversations and relationships to develop. The data suggests not only is that not true in terms of underperformance, but you might actually outperform.”

Forbes

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