Business Startups

Startups May Find Advantage If Giants Retreat From Remote Work

IBM employees have been telecommuting since the early 80’s, long before digital nomads or remote workers became commonplace. But after recent announcements from Big Blue that it would begin to “co-locate” its entire marketing department in an effort to foster innovation, its position as a leader in remote work is potentially on the wane.

For startups, the situation also poses an interesting question: should remote work make up the backbone of staffing if it potentially limits innovation and team cohesion?

To answer that question, let’s examine other companies who have also backtracked on remote work.

Back To The Office

For startups who have bet their company’s talent on remote employees, IBM’s pivot to the office is worth noting. With over 386,000 employees, 40 percent of which are estimated to work remotely, IBM is one of the few public companies who have managed to make telecommuting work at scale—serving as a template for startups who have ambitious growth objectives and with remote teams.

But IBM’s remote work playbook has apparently broken down as it struggles to improve profits and expand service offerings. And in an attempt to stoke innovation and stay relevant, Quartz reported that Michelle Peluso, IBM’s chief marketing officer, concluded co-locating (working from an office) was the “only recipe” for success she knew.

IBM did not respond to an emailed request for comment by the time of publication or a phone call.

For those who follow the remote work space, that refrain from management is mighty similar to other struggling giants who rolled back work-from-home policies.

To cite one example, Best Buy ended its “Results Only Work Environment Program” in an attempt to turn around its struggling business. As the company told Business Insider:

“It makes sense to consider not just what the results are but how the work gets done,” said Best Buy spokesman Matt Furman. “Bottom line, it’s ‘all hands on deck’ at Best Buy and that means having employees in the office as much as possible to collaborate and connect on ways to improve our business.”

Best Buy traded just over $20 when that policy was announced in 2013. As of this writing in the beginning of Q2 2017, Best Buy is trading in the high 40s.

The same performance cannot be said of Yahoo!, which also called back its remote workers to the homestead in an effort to reform its work culture and turn the company around. The move was not well-received by the press or by those in the company. In the end, the former tech giant’s efforts to turn itself around independently failed.

Yahoo! ultimately sold to Verizon for a reported $4.48 billion and will operate under a new brand called Oath this summer.

Conflicting Signals

It’s not immediately clear from that ending remote work programs will take a company out of its slump or increase innovation, but the shift follows a common phenomenon noted by Kate Lister, president of Global Workplace Analytics (GWA):

“There’s a feeling of needing to rally around when things are going bad,” Lister told Crunchbase News. “But for every study that shows colocation increases innovation, I can show you another study that says the opposite.”

In the case of IBM, the news that remote work was ending in an effort to stoke innovation was met with skepticism. IBM has performed a number of layoffs over the years. And while the company claims that the policy change is not an attempt to reduce headcount (IBM’s CMO Peluso told Quartz “there are much simpler and easier ways to do that”), Lister finds the claim disingenuous.

“[Remote workers] tend to be older and more tenured,” said Lister, citing GWA research. “If you think about this… then the idea is they’re trying to shed themselves of grey hair.”

Should Startups Rethink a Remote Work Staffing Strategy?

A startup fueled by remote workers, like any other startup, thrives on the innovation of its employees. To see major companies cite lack of innovation as a reason to end remote work is notable and potentially discouraging to startups who rely on remote workforces to grow. But according to Lister, innovation is not rooted in physical locality.

“The fundamentals behind creativity and innovation is trust among the group,” Lister explained. “We know from research that new ideas come best in private and vetted best in public.”

Additionally, startups should perhaps remain unconcerned that IBM’s decision to move away from remote work is indicative of a broader trend towards colocation. Toptal, a startup that helps companies hire remote workers, and employs over 400 remote employees themselves, spoke plainly when asked about IBM’s potential impact on the remote work trend.

“IBM’s decision isn’t going to hinder anyone except themselves,” Taso Du Val, CEO of Toptal, told Crunchbase News in an email. “We see many Fortune 500 companies and innovative startups working with distributed teams every single day, and the numbers are only growing.”

It’s a sentiment that is echoed by other large companies as well. While Yahoo, Best Buy, and IBM have taken stops to colocate after hitting bumps in the road, Dell, which has also had a tumultuous few years, plans to expand its remote workforce from 25 percent to 50 percent by 2020.

In the meantime, IBM’s loss could be a savvy startup’s gain. Expanded access to talent is a big motivator for many startups who want the best and brightest.

“Whenever a big new talent pool hits the market, any company paying attention will act decisively,” said Du Val. “These companies are the ones most likely to act, and win, in the long run.”

In short: startups are probably going to innovate just fine in pajamas.

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