It’s almost six pm in Cape Town on a warm evening in October, and Abhishek is just getting to work. A senior product manager at a mid-sized startup in San Francisco, he’s collaborating with a teammate to put the finishing touches on a product spec, flipping between Google Docs, a screenshare tool and Slack to convey his feedback. When a point seems unclear, he hops on Slack’s voice chat, resolving the issue in less than a minute. At the top of the hour, he’ll log onto Skype to lead his team’s daily standup over video chat.
Watching Abhishek work, it’s easy to forget that his team is over eight thousand miles away.
Despite the evening hour, the co-working space is half-filled with other participants in Hacker Paradise; over a dozen people tap away on laptops. Some are independent entrepreneurs or freelancers, but an equal number fall into the same category as Abhishek: full-time employees of major businesses, none of which are headquartered remotely close to Cape Town.
When Abhishek wraps up his call, I ask how he’s doing, and he raises an eyebrow. On cue, we look up from our desks and take in the view. The days are growing shorter back in California, but spring is in full bloom in South Africa. Through the bank of windows that borders one side of our beachfront office, we can see the magnificent tableau of Table Mountain, cast in purple shadow as the sun begins its lazy descent over the South Atlantic.
“I would say ‘no complaints,’ but that’s an understatement,” he says. “I love San Francisco, but the change of pace has been incredible. This is one of the best months of work I’ve ever had.”
The Talent Conundrum
From software engineers to product designers to data analysts, skilled professionals today are swamped with employment options. The proliferation of stocked kitchens, lavish equity grants, “unlimited” vacation policies, and fitness subsidies—perks offered by startups and mature businesses alike—is one of the most obvious signs of a competitive market for talent.
There is little doubt that hiring quality employees is a pressing concern for businesses around the world. A recent survey by the talent platform Toptal notes that 78% of business leaders across sector, stage and geography view talent acquisition as a major headwind to sustainable growth. When recruiting for competitive positions like software engineering, a business might wait more than a month to fill a vacancy. And when enterprises do find great employees, they’re hard pressed to retain them. According to the recruiting platform Jobvite, 30% of new hires last less than three years before transitioning to their next gig.
Beyond relatively stable traits like prestige, an appealing mission and visionary leadership, the traditional levers that businesses can wield to attract and retain strong talent are compensation and benefits. But competing on that front is expensive. In the United States, benefits add an average of 30% to the total size of a compensation package, a figure that is substantially higher in technology businesses and other competitive industries like finance. For young companies in particular, it can be near impossible to beat behemoths that tip the scale with cash and stock grants.
What’s worse is that competing for talent with traditional modes of compensation isn’t effective. A study by Glassdoor indicates that a 10% increase in base pay only improves the odds that an employee will stay at a company by 1.5%.
To Win Talent, Be Remote-Friendly
The key to finding and keeping talent is offering prospective employees what they want—and it isn’t compensation that makes the difference. As baby boomers begin to retire, the values of the workforce have changed, and hiring wisdom hasn’t always kept up. For one, the millennial constituents of today’s labor market tend to value freedom, flexibility, and diverse experiences far more highly than job security, stability or buying things.
Of course, cash compensation is an important input into the experiences a professional can afford to enjoy. But what if companies could skip the middle man of compensation and “offer” experiences directly to prospective employees—for free?
There is only one perk that provides top professionals with what they truly value—increasing recruitment, boosting retention and improving productivity, all while saving enterprises money in the process. That perk is remote work.
Why Remote Work Makes Sense Today
Many of the barriers associated with managing remote teams no longer exist—companies and managers that instinctively shy away from remote work may be relying on outdated wisdom that dates back to the outsourcing era of the late 1990s and early 2000s.
One common fear held by managers when considering whether to hire remote team members is that quality and productivity suffer when teammates are physically distant, especially when they need to work together to design and ship complicated products. Another concern is visibility; managers don’t like surprises, and may feel that they’d have a tougher time keeping track of progress without the informal check-ins that characterize an in-person environment.
But technology has mitigated or eliminated many of these concerns. Tools like Github, Slack and Zoom make remote and asynchronous collaboration way easier than it used to be, while online ticket trackers and kanban boards like JIRA and Trello ensure that managers have a clear view into their team’s activities. Along the way, management practices have evolved as well, focusing more on employee outcomes—as measured through frameworks like the balanced scorecard or Google’s OKR—than output, like the number of hours an employee spends at their desk.
Benefits of Remote Work for Businesses
There are many tactical reasons why a remote-friendly workplace is directly and indirectly advantageous for businesses. Among the most significant benefits:
- Hiring: Allowing some or all of your team to work remotely lets businesses widen their catchment area for hiring. Without being forced to hire in competitive metropolitan markets with a high cost of living, enterprises can search for the best talent worldwide, making hires faster while paying less for the same level of quality. The fully distributed startup Buffer publishes its salaries here, demonstrating the savings accrued by hiring many employees in average or low cost-of-living areas vs San Francisco.
- Retention: The research firm TinyPulse surveyed over 500 remote employees and found that they were happier and felt more valuable than their on-location peers. This translates to better employer outcomes: companies that allow telecommuting and remote work exhibit lower turnover than traditional peers.
- Overhead: Remote work means spending less on fixed office space, often in expensive cities. With a team of over 30 people, Buffer only spends $7,000 on monthly rent and 3.6% of revenue overall on office costs, compared to the average Silicon Valley startup which spends around $6,100, or 7.5% of revenue, to house just 10 employees.
- Coverage: Having employees in multiple time zones means support, product and sales tickets can get resolved in real-time, with remote employees tag-teaming in shifts to get the job done round the clock while a competitor’s staff is unresponsive.
- Perspectives: Encouraging employees to travel widely, and hiring people in other parts of the world, means that a company benefits from a workforce empathetic to a wide spectrum of cultures. This blog post by Dror Liebenthal, director of operations at Toptal, summarizes the personal growth that accrues when you’re free to work and travel around the world.
Given these benefits, it should come as no surprise that institutional attitudes toward remote work are changing. Over 43% of U.S. workers telecommuted in the past year, up from 9% who did so in 1995. By 2020, around 50% of the global workforce are projected to work remotely. Successful businesses like Automattic (makers of WordPress), Toptal, Buffer and Zapier already operate with 100% remote teams.
Challenges of Remote Work
There are undoubtedly challenges associated with productivity in a remote-friendly workplace.
“Time zones are a big one,” says Abhishek. “I’m in a role where I need to collaborate frequently with my team, and it can be tough to stay late at the office local time.”
Many digital nomads and remote workers address this concern by living or traveling in places within a few time zones of their employer’s home base. Another solution is traveling with communities like Hacker Paradise, where night owl workers will have plenty of company.
It’s also true that not all employees are cut out for remote work. No matter what the role, strong communication skills are crucial in remote workers. Equally important is a proactive, self-starting attitude, since a manager won’t be around to manage the day-to-day. Businesses that permit remote work some or all of the time may need to adapt their hiring rubric to emphasize these traits.
Make It So
Most enterprises won’t be prepared to get rid of their offices and make the leap to a fully distributed team like Buffer and Toptal—at least not yet—but there are many ways to experiment with creating a remote-friendly workplace.
An easy way to test demand for remote work is giving employees flexibility to work from home when they feel sick, have to cover for a spouse or otherwise can’t come in. This gives managers and teammates the opportunity to test drive remote collaboration with low stakes.
Another way to experiment with going remote is giving trusted employees with enough tenure the opportunity to take a “working sabbatical,” allowing them to take a few months to a year to work from anywhere in the world. The effects of a change of scene can be profoundly reviving for valuable employees who might otherwise get restless, and risk is minimized with an employee with a demonstrated history of productivity.
Executives and managers will want to test the waters before making any major changes in hiring policy, but in our view, the benefits of remote work are crystal clear for employer and employee alike. Just ask Abhishek—he’s going kitesurfing tomorrow afternoon before work, and from that point of view, the water looks great.