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2015-03-24 05:55:08
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