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Sangeeta Shah Bharadwaj
From the January 2015 Issue
Amrita Trivedi couldn t help overhearing the heated argument outside her office
door. As general manager of the Noida, India, office of KGDV, a global
knowledge process outsourcing (KPO) company, she had always encouraged healthy
debate on her team, but she was surprised that her head of human resources,
Vijay Nayak, and her top project manager, Matt Parker, were going at it in the
hallway.
It s a benefit they earned, Vijay! Matt said. And they re hard workers. It s
not like we re just picking our favorites and sending them home to watch TV and
bake cookies.
But we re creating a two-tier system, Vijay responded. The people left in
the office are feeling demoralized. They want to work at home too. And they don
t see why they can t.
They can when they earn it! Matt practically shouted.
Amrita opened the door. Vijay, she said, are you ready for our meeting?
Matt sheepishly excused himself and walked away.
What was that all about? Amrita asked as she and Vijay sat down.
Matt s work-at-homers, he replied.
With headquarters in New Jersey and another office in Manila, KGDV offered a
range of services, including market and legal research, but its largest and
fastest-growing business was for the publishing industry converting, indexing,
and abstracting journal articles, which its clients, mostly U.S.-based
publishers , then sold to libraries, research institutions, and individual
subscribers. Like many KPO companies, it compensated employees on the basis of
their output. The more they accomplished, the more they earned and in the case
of the library project Matt ran, the more likely it was they d be permitted to
work remotely.
But Vijay wasn t happy with how things were going. We re facing a potentially
disastrous situation, he said.
What do you mean? Amrita asked. Matt s reports show huge jumps in
productivity. He told me last week that he wants to get even more people in the
program. And I ve heard only good things about the work-at-home employees.
That s the problem, said Vijay. You only hear positive things about them.
Meanwhile, the hundreds of employees who work in the office feel at a
disadvantage. Even if they stay late and work hard, they can t seem to produce
as much as their counterparts who work remotely. The productivity gap keeps
widening, which means the compensation gap does too. I m afraid we re going to
start to lose them. Maybe in droves.
Wait. Six months ago you and Matt both sat right here singing the praises of
this program.
This was true. A little over a year earlier, the library project had been
growing so fast that the company was running out of office space for necessary
new hires. Matt had convinced Vijay that they could accommodate more employees
over the longr un if some people worked from home. A similar program had been
successful in KGDV s Philippines office, so Amrita felt comfortable approving a
test run.
Matt had worked with Vijay to identify 20 willing candidates from the top 25%
of performers on his team and set them up with the technology and support they
needed to do their jobs remotely. There had been some hiccups at the beginning,
mostly around tech issues, but they d been resolved within the first month. By
the two-month mark, the remote workers were generating almost double the normal
output. So Amrita had agreed to let Matt move 25 more employees into the
program. Four months later they d increased the number to 75 and filled the
vacated workstations with new hires, upping headcount without adding
infrastructure costs. Now Matt had 100 people working from home.
I was fully on board, but that was before I saw the side effects, Vijay
explained. Every time a top performer is transferred into the program, the
shoulders of those left behind slump a little lower. And my team is fielding
lots of complaints.
You know headquarters expects us to grow the library project by 25% this
fiscal year, Amrita said. The demand just keeps increasing. In fact, she was
scheduled to present the expansion plans at the quarterly meeting the following
week. We re at 98% capacity in this building. To meet the numbers New Jersey
is throwing around, we d need to move at least another 200 maybe 300 employees
to home offices and fill their seats here.
I know. But if morale continues to slip, we re going to have a whole different
set of empty seats to fill. Honestly, Amrita, Matt isn t seeing the big
picture. I really think we should take time to fully evaluate the program
before we expand it again.
From what I heard through the door, Matt adamantly disagrees with that, she
replied.
Of course he does, Vijay said.
Will the Tide Turn?
Late that evening Amrita was headed down to the gym in the basement of the
office when she ran into Matt.
I ve been looking for you, she said.
Matt s face flushed. I m sorry about earlier.
That s OK. Do you have time to talk about it now?
Here?
Why not? I think we re the last ones in the office. They sat down on the
steps.
I know Vijay is concerned about retention, but I think he s being too
cautious, Matt said. You ve seen how much more efficient it is to have
employees at home. Our output is up and we re saving money at the same time.
And so far, it s helped with attrition, not hurt. Our rate is down by 5%, which
is outstanding. People see the opportunity to work from home as a huge benefit.
But Vijay thinks the tide is going to turn. If the people stuck at the office
feel like second-class citizens who can t ever reach the work-from-home goal,
why wouldn t they leave?
He s giving a lot of weight to the comments of one or two disgruntled people
people, I don t need to remind you, who aren t top performers. If they can t
reach a level of productivity that qualifies them to work at home, then maybe
they re not suited for this.
You re saying it s OK if we lose some of your office-based people? she asked,
surprised.
No, of course not. But honestly, I don t see the widespread dissatisfaction
that Vijay is describing. My job is to run this project profitably with high
quality, and that s what I m doing. I m meeting those objectives. What else can
I do?
Amrita thought about her upcoming presentation, the growth that the executive
team was looking for. Just show me that Vijay is wrong.
From the Horse s Mouth
Later that week Matt knocked on Amrita s office door and asked to come in. He
had Nisha and Amal, two library project team members, with him.
I wanted you to meet a couple of my stars, he said. He explained that Nisha
had been in the first wave of employees to start working at home, and she loved
it.
I come into the office once or twice a month for meetings, but mostly I get to
make my own hours, Nisha told Amrita. If I feel tired, I go for a walk. If I
feel energetic at 3AM, I work then. This is the happiest I ve been at a job in
a long time.
Nisha s been our top producer for the past six months, Matt pointed out.
Then it was Amal s turn. Matt explained that he d been hired only two months
earlier, so he wasn t yet eligible to work at home, but he was trying hard to
get his output up. It s a big part of why I came here, Amal explained. Most
of the other jobs I considered were entirely office-based and involved a long
commute. It takes me 45 minutes to get here, but at least I know I may not have
to do that forever. I wanted more freedom.
If Amrita hadn t known Matt better, she would ve thought he d scripted their
lines. But he was too straightforward for that.
I really appreciate your coming in especially you, Nisha, she said.
No problem I was in for a training anyway, Nisha replied.
After the two employees left, Matt asked Amrita what she thought. I wanted you
to hear it from the horse s mouth, he said.
They were persuasive, but they re just two of 500 employees, Matt. If unhappy
employees were as willing to talk to the boss, I m sure Vijay could get two of
them in here too. Why don t the three of us sit down and hash this out? I m
sick of hearing it from both sides, and I need to figure out what I m going to
say in that quarterly meeting next week.
About Survival
They met that afternoon in a fourth-floor conference room that looked out on
the city. Amrita reiterated that she would have to make a recommendation to the
executive team; if its growth plans were at risk, she said, she needed to tell
the team that.
Matt got right to the point. This is about the India office surviving. Our
customers have more work than we can handle right now, and if we turn them away
Sorry, we don t have the capacity, the infrastructure, the people they ll go
to our competitors. There are too many KPO companies in Noida, in India more
every day for us to be turning down work.
But we need to grow smartly, Vijay said. And this program has expanded very
quickly. Maybe we should pause and take stock of where we are before we push it
further.
Didn t you hear what I just said? Matt retorted. The ship is leaving, Vijay,
and KGDV needs to be on it. We re turning money away right now, and we stand to
lose some of our biggest clients.
What about adding more in-office employees 20 or so at a time? We could grow
the project more slowly, Vijay asked.
Where are they going to sit? Should we start putting two to a desk? Assign
half our people to the graveyard shift? Or spend a year and more than a million
dollars building a new facility and turning down business in the meantime?
Amrita looked at Vijay and shrugged. He s got a point.
But this experiment is just a year old, Vijay said. If we double down on it
now, before we know how it works over the long term, we re taking a huge risk.
The output increase and cost savings have been impressive, of course. But they
re short-term results. We don t know yet whether those employees will continue
to be as productive in the next year and beyond. And it s hurting our employee
development. We thought this program would create healthy competition, but it
has created two classes. The good performers get even better, and the poor
performers get worse.
You re hearing more complaints? Amrita asked.
Yes.
Amrita caught Matt rolling his eyes. If they want to work at home so badly,
let them, he said. I don t see why more employees can t take advantage of the
program. Let s lower the output threshold and free up even more desks. We ve
got the proof not just in our own numbers, but in Manila s, and in all the
research out there. People are more productive at home. Period. This is the
future, Vijay: the office-less company.
Vijay shook his head. That s not realistic. Sure, many Indian companies are
letting employees work from home, but just one or two days a week. The remote
employees on the library project are almost never in the office. We have no
connection to them. We don t even know how they manage to complete so many
projects in so little time.
You think they re cheating? Matt was getting angry again.
No, that s not what I m saying, Vijay replied. If we can t see them, work
side-by-side with them, then we don t know what they re doing so well. We can t
capture their best practices and share them with others. There s a business
benefit to having people together in the same building, and I fear we re not
reaping it. Instead we re sending our best and brightest home to work in a
vacuum. There s no cohesion if everyone is spread out in his or her own corner
of the city.
Matt was quiet for a moment. Then he said, Amrita, you met Nisha the other
day. She comes in for trainings and meetings. It s not like she s a faceless
number. She s a valuable employee.
But for every Nisha you bring in here, I can show you an employee who s
frustrated and increasingly disengaged by being stuck in the office, Vijay
countered. He turned to Amrita. I strongly feel that we should slow this
program down.
Matt turned to her too. Amrita, I respect Vijay s feelings. But the numbers
clearly say we should be moving full steam ahead.
Should the India office expand its work-at-home program?
The Experts Respond
Ashok Mishra is the executive vice president and chief operating officer at
Innodata.
Amrita needs to proceed cautiously. Before expanding to the degree that Matt
suggests, she should test the program in a similar project. That will give her
a better understanding of what s working and what isn t so that she can
increase capacity without creating a risky situation.
Vijay s mindset that employees should be treated equitably, or at least have an
opportunity to make the same money their colleagues do is common in the
developing world. Traditionally, people at roughly equal skill levels are
grouped into a compensation band, and huge pay discrepancies within that group
are not allowed. You certainly wouldn t see one person making twice as much as
another in the same skill group. But this view is shifting, particularly in the
knowledge-processing and technology industries. Now many companies are
realizing that paying star employees handsomely can be a smart approach. In the
software industry, for example, one developer may get $30,000, while another
with the same education and experience gets $100,000 because he s a genius at
what he does and therefore much more valuable to the company.
This case is loosely based on my experience at one of Innodata s offices. Like
Vijay at KGDV, we had three concerns about our work-at-home program: equity,
being disconnected from employees, and sustainability of results. But we
addressed each of them.
In response to complaints about equitable pay, we gave our in-house employees
productivity training (on company time), which helped many of them improve
enough to be eligible for the work-at-home program.
To avoid disconnection from our work-at-homers, we left one-sixth of their
seats in the office vacant so that they could come in on rotation for updates,
trainings, and meetings with their managers.
Amrita should remember that not everyone wants to work from home.
As for the sustainability of results, we monitored productivity and we did see
occasional dips for individuals but not for the program as a whole. Some of our
top performers had days when they didn t produce as much owing to a temporary
situation, such as a family commitment. So we asked all of them to keep us
informed about when they might have trouble matching their previous numbers;
that has helped us to better predict results.
Amrita should also remember that not everyone wants to work from home. We were
surprised to discover that although about half our employees were eager to take
advantage of the program, the other half weren t interested because they would
miss the social atmosphere of the office.
Vijay s worries are not reason enough for Amrita to pull the plug or even to
stall the program. Her aim is to get more work done with the same number of
seats, and that s what the work-at-home program is delivering. But she needs
further evidence that it can be implemented more broadly. So expansion should
happen slowly, with help from Matt and Vijay.
Josh Blair is the chief corporate officer at TELUS.
As the general manager of the India office, Amrita has a primary objective: to
facilitate the growth that headquarters wants to achieve. She can do that
through the work-at-home program, and she should definitely expand it.
Matt makes a compelling argument: Productivity is up, and retention is
improving. He has the necessary evidence, but I don t agree that Amrita should
leave him alone to continue down the same path. In fact, this success shouldn t
be limited to the library project, which was essentially a pilot (with the
experience of the Manila office as backup). Now it s time for Amrita to take
ownership of the program and figure out how it can be expanded throughout the
India office, while thoughtfully addressing the flaws Vijay has pointed out.
Once it s been proven to work in India, it can be tested in and expanded to New
Jersey.
That s what we did at TELUS. Nine years ago we experimented with a work-at-home
program in one division, tweaked it on the basis of what we learned, and then
rolled it out to all our major locations across Canada. Currently 65% of our
roughly 30,000 Canadian employees work at home either full-time or part-time.
And we couldn t be more pleased. We ve lowered our real estate costs by some
$50 million annually, advanced toward our goal of reducing our carbon footprint
by 25% by 2020, and made employees who want more freedom very happy. Some want
to skip long commutes in cities such as Toronto and Vancouver; others have a
personal interest in lessening their impact on climate change. Still others
enjoy how much more productive they are in a quieter environment.
That s not to say that Vijay s concerns aren t legitimate. They are, and they
should be addressed. It s not surprising that people in the office are envious
of their colleagues who are permitted to work from home. When we launched our
program, there were similar worries about fairness. But Amrita should be able
to address this by taking a step back and looking at the program as a whole.
The first question she needs to answer is, Which roles can or cannot be
performed from home? At TELUS, for example, employees who serve customers in
stores obviously can t take advantage of the program. (However, they can
progress to roles that would allow them to.) The second question is, How does
one qualify? Here, Amrita should make the criteria black-and-white: As long as
employees meet their performance objectives, they may work from home. TELUS
team members know that they will be pulled back into the office if they aren t
performing to expectations. It s rare, but it does happen.
Transparency is the only way to guarantee that the program is perceived as
fair.
Vijay is also right to care about maintaining camaraderie and collaboration.
This is essential. To address it at TELUS, we train our leaders in best
practices. Team leaders decide how and when to bring people together. Many of
our distributed groups meet face-to-face once or twice a week; those who are
more geographically dispersed may videoconference on a weekly basis and meet in
person once or twice a year.
Matt has already done some of these things, such as establishing clear
performance qualifications, but clarity about the rules and norms is critical.
Amrita and Vijay should help him communicate more broadly about who is eligible
for the program, how they qualify, and why. Transparency is the only way to
guarantee that employees will perceive the program as fair.
If Amrita isn t fully convinced, or if Vijay s concerns persist, she might
consider bringing in an external reviewer a local business school professor, or
a consultant to evaluate the program and give her suggestions. In 2013 we
worked with Ivey Business School to assess our program. It got rave reviews,
but we also learned how we could further enhance it.
Matt has done a great job; now it s time for Amrita to take over and make sure
that the right support is in place for an office-wide program. If she does, she
could not only meet her bosses expectations for the library project but exceed
them. That may be the home run she needs.
Sangeeta Shah Bharadwaj is a professor of information management at the
Management Development Institute in Gurgaon, India.
Case Study Teaching Notes
Sangeeta Shah Bharadwaj teaches the case on which this one is based in her
Strategic Outsourcing of Business Processes class.
What drew you to this story?
Typically, conflict in outsourcing companies is between delivery and sales
teams; here it was between operations and HR. Also, output-based pricing makes
performance easy to measure, but this company wondered if the numbers were
misleading.
What issues do your students debate?
Normally, two groups form: students who give highest priority to meeting
targets, contributing to revenue, and growing the company, and therefore
support the project manager; and students who focus on the unusually high
performance of the work-at-home employees and whether they might be cheating.
What key lesson do you hope they ll take away?
Work-at-home policies don t always increase employee satisfaction and improve
productivity. They bring up challenges for operations, HR, and other functions.
The concerns of all these constituents must be considered.
Comments from the HBR.org community
A More Equitable Approach
Using working at home as a reward fuels resentment, negativity, and a class
system, leading to low morale and lower productivity. The program should be a
benefit available to and voluntary for all workers.
Rachana Nair, senior project manager, Alcatel-Lucent
A Strain on Collaboration
As one who has transitioned to working remotely an ocean away, I can attest
that collaboration and learning from others is now more challenging. But I love
working from home. If I were close enough to the office, I d visit regularly to
build relationships and learn new skills.
Angela Scott, senior supply planner, HAVI Global Solutions
Diminishing Returns
If the productivity gains provided by the work-at-home program outweigh the
costs of new infrastructure, that s the way to go. But I d suggest slow
expansion. The law of diminishing returns will kick in sooner rather than
later.
Vikrant Rai, manager, content and community, Adobe