Elad Blog: Back To The Office

Back To The Office

US should be roughly done with COVID in 2021

Almost exactly a year ago, I wrote a blog post warning the tech community about a new coronavirus in China[0] and the likelihood we will see multiple viral waves.

By end of March, 2021, the US is estimated to have enough vaccine to cover roughly half its adult population for COVID. By end of July, Pfizer and Moderna alone should have supplied the US government with 600 million doses - enough to cover roughly the entire US population including children. Assuming it takes a month or two to distribute the vaccines and another month between shots (and a month to make some mistakes, because, why not?), most of the USA should be covered by sometime in the fall[1]. The country should start to reopen sometime during the summer (probably red states first) with no strong logical reason not to reopen roughly everything by end of year [2]. This means by end of 2021 we should anticipate most teams back in the office barring something unexpected.

Image source 

By end of 2021, a big enough portion of the developed world will be vaccinated to allow previously remote offices to reopen and work to return to normal [2]. As companies think ahead on the future of work, a few different models emerge. In this post we discuss models of work, the future of corporate travel, and an aside on the Bay Area & tech.

Source

Many people now want to go back into an office

In mid-2020 multiple company surveys shared with me suggested tech company employees were overall content to be working from home. No commute! Flex time with kids! Can go be close to family! Were all seen as positives. Employees were more productive than ever at some companies based on rate of code commits or other (messy) metrics. However, COVID has also provided a distorted lens on this - people were scared to go see other people and all distractions were eliminated - no more gym time, hobbies, lunches or dinners with friends. The only thing people had was work or family.

CEOs of many of those same companies are now telling me that the majority of these same employees want to go back to the office. Employees want to see and build bonds and friendships with their coworkers, have a common culture, and work together. Some people also just want to get away from their families :) Not every employee wants to go back every day of the week, but many would welcome an office environment again.

Speed of back to work

A number of hardware and biotech companies have stayed open (or had subsets stay in office) alongside many other type of industrial, manufacturing (Tesla et al) , and agricultural companies. Recently some software companies have also reopened at 20% to 50% capacity or more - typically with mask, COVID testing, and distancing in office.

Through the course of 2021 office reopenings should accelerate and are likely to occur “slowly, and then all at once”. The most likely cause of office opening slow downs post-summer (when the US should be able to vaccinate anyone who wants a vaccine) will be unvaccinated employees who refuse the vaccine. 

The “we do not know enough” about the long term side effects of the vaccine will be a false argument - hundreds of millions of people will have had a vaccine by the fall and side effects to date in both practice (50% of Israel vaccinated, and >10% of the USA) and in clinical trials have been minimal and transitory - but that argument will be made. In Israel, a “green passport” allows only vaccinated people to go the gym or movie theaters and legislative proposals are moving forward to move the societal cost of non-vaccination to people in specific roles who refuse vaccination. The US may need to eventually either (1) remove liability to re-opening employers for employees who refuse what to date is a safe set of vaccines or (2) allow employers to suspend employees who refuse the vaccine depending on the type of work being done.  For example, different states have non-COVID immunization requirements for teachers in order to allow them into a classroom. [Update: see article on this here].

One can anticipate a number of future articles in the press about the lone, hold out unvaccinated employee going to work double-masked and trying to push the company to social distance (“we just don’t have enough data yet!” will be the false argument), while everyone around them is vaccinated and wants to move on with life. School and healthcare settings will likely have more politics and complexity around reopening.

Employers may at some point want to simply point out to unvaccinated workers they are at risk & can be vaccinated but need to be in the office and then roughly ignore them (you should talk to your legal team first of course). Frequent testing for unvaccinated employees (but not vaccinated ones) may be another option to allow the office to re-open to pre-COVID norms for those vaccinated. One Israeli legislative push is for unvaccinated people to have to pay for their own frequent testing in order to protect the rest of society. 

Models for Work

There are 3 future models for work, with lots of gray area in between. Each company will chose their own model from below. I anticipate most companies to choose models 1 or 2.

1. Full snap back to pre-COVID in-office work

In this approach most people are back in the office 5 days a week, with a subset of people taking a work from home day and an even smaller subset working fully remote ongoing. This is the same as the pre-COVID era, but probably with a larger proportion of the work force remote. Smaller companies (e.g. a few hundred people or less) on average are likely to adopt this approach. Larger companies (>1000) will probably already have a multi-office work force and some remote workers prior to COVID so are likely to have more flexible work styles (see below).

In general, I think a large number of early or mid-stage companies will "fully snap back" to in-office work (despite all the hype to the contrary).

2. Hybrid 

Hybrid models have 2 main approaches:

2A. Hybrid: 3 days in office for everyone, 2 flex days.

A number of companies I know are going back to work for 2-3 days a week, with flex (be in office or not) the other days for most teams. The key is that all the employees will be in the office on the same set of days - to maximize in person interactions and collaboration time. Google, Salesforce, and others appear to be moving in this direction.

One implication of this is most workers still need to live close to a major hub or office, but one can imagine longer commute times (e.g. live in wine country but commute to SF 2-3 times a week). So for San Francisco as an example, more people will migrate out of SF to wine country or Sacramento and then drive in a few times a week.

It is possible this style of working will stick (particularly for very large public companies where honestly the average employee probably isn't that hard charging) while some smaller teams may stick with it or decide to flip back to mainly in-office work.

2B. Hybrid: Mainly back in office, but “remote” is considered its own office.

An alternate (and potentially overlapping) model to this is to still have a set of core locations were much of the employee base goes to work, but “remote” is also considered a full fledged “office”. This is actually how older school tech companies like HP and Cisco had some of their teams prior to COVID. Facebook and others seem to be moving in this direction. The extreme version of this has the CEO and executive team fully distributed across these offices, or as part of the “remote office” versus semi-centralized in one of the offices.

One version I have heard talked about but not yet implemented is where a company is remote-first, but also has either rented out or built “coworking space” in major cities or clusters. No one has a permanent desk, but rather each day need to come in and set up a new spot. Given the heavy ergonomics (desk, monitor, mouse placement etc) I have seen people set up in a typical office environment, I think this version eventually collapses in the limit to simply having office space with pre-set spots. Lets see.

3. Remote only

In this version there are no physical offices operated by the company. People can either work from home or from a 3rd party co-working space. There is no longer any form of headquarters and the team can be truly distributed (although early on specific timezones are likely to be emphasized or selected for [4]).

One benefit of this approach are you can hire anyone around the world (although timezone clusters tend to form early) [4]. You also may end up paying less, on average, as you match local pay more closely than Bay Area pay (which largely siphons off income to landlords).

Negatives include the need to scale processes early in the life of the company (such as goal setting or OKRs, tight onboarding, a move to asynchronous communication, and lots of documentation). 30 person remote-first teams may have the processes of 300 person non-remote companies - so going remote first comes with some unexpected overhead to be successful. New projects are much harder to kick off truly remote, while at scale “turn the crank” projects seem to survive remote work more. There are also some unexpected challenges - e.g. if a remote-only company buys a “normal” company with offices - do they keep the offices? Are the employees of the acquired companies going to adapt to a remote-only culture? It is possible the pandemic has made this an easier transition than in the past.

Gitlab at this point is the canonical remote-first company pre-pandemic. It is notable that only 3 tech companies seemed to have ever hit the scale of many hundred employees or more as truly a remote first company pre-pandemic - Gitlab, Automaticc, and Zapier (most other examples were subscale, or not truly remote first - however there may be others?). It will be interesting to see if a generation of remote-only companies will now grow to scale after the pandemic forced them to adopt remote-only early in life.

Choosing a model

When choosing the model that is right for you - you should take into account what is best for your company (versus what is most popular with employees in a survey before COVID is over - this might not be the same thing). It is perfectly OK to chose 5 days a week back in the office.

For many early or mid stage companies, being in the office most or all of the time may be the best solution given the need to form culture, foment creativity, and work tightly in a collaborative manner.

For a later stage company the best model may be team or function dependent - teams working on creative new products may benefit from being in office together more, while those working on existing products may need less time in person together. Similarly, some functions will benefit more from hallway conversations and face to face time than others.

Irrespective of what model you chose above, what the CEO and executive team does will be emulated by a large portion of the company.

Trade-offs in remote versus in-office work

Process matters more remote

When you start scaling a company (e.g. growing from tens to eventual thousands of employees) you realize that lightweight processes can help an organization from breaking and parts of the company going off the rails. On average, remote-first or remote-only companies need to implement scaling processes at an order of magnitude smaller company scale than an in-office company. While a 30 or 100 person company may all cohabitat the same office space, a 500 person company undoubtedly has multiple offices in different and therefore needs to build tooling to allow for people to collaborate across offices and timezones. A remote-only company needs to start to implement the same process much earlier. Process may include things like OKRs/goal setting, heavier asynchronous communication and documentation, special multi-day in person “onsites” to allow for collaboration on new creative projects, and very crisp onboarding, cultural integration, and other areas. This means that being remote-only or remote-first comes with inevitable process costs (and in some cases benefits - e.g. all companies should have early goal setting and clear individual and team ownership of areas).

New projects versus scaling existing

Many CEOs I know feel that remote work is easier for existing, scaling projects or products that are in “turn the crank” mode, while new creative endeavors are easier with in person, rapid fire collaboration. This means it is easier to be a large company or specific subteams (with existing process and products) that is remote first, than a small company (which is still figuring it all out).

Synchronous vs asynchronous

In general remote (or distributed) teams have dramatically more asynchronous collaboration and communication than in person teams, for obvious reasons. This usually means more documentation, and use of tools that allow for non-real time communication.

Salary and compensation 

The majority of companies will differentially compensate employees based on their locations (for example Facebook, Twitter, Stripe, Gitlab, VMWare, and others all adjust pay - Reddit may be the rare holdout). A number of mid-market and large tech companies seem willing and eager to have employees move out of SF in particular, given its poor regulatory/government environment and high cost of living. I would not be surprised if more companies paid a “moving bonus” for people to move out of San Francisco or maybe the broader Bay Area. 

In parallel, more companies are hiring people not only out of the Bay Area, but also out of the USA - with hires in places like Argentina, Brazil, India, Poland, Romania, Serbia, Ukraine and other countries were cost of living and base salaries tend to be significantly lower.

Differential compensation tends to reflect:

1. It is better for companies to have people near or at hubs for communication and collaboration - so companies are willing to pay a premium if an employee continues to live near HQ or a major hub (typically Bay Area, New York, LA).

2. Local labor markets & costs of living differ. Many companies are paying a “moving” bonus and then cutting ongoing pay by anywhere from 10-30% depending on the new employee location, the local labor market, and cost of living.

3. This is already common practice and is non-controversial. Market-base salary adjustment are a long standing practice in every industry including tech. The “I want to have my (lifestyle) cake and eat it (Bay Area salary) too” view is likely misplaced relative to historical industry norms.

San Francisco as a special case

In October 2020, roughly half of US unicorns were in the Bay Area, but literally all 5 of the private unicorn companies announcing new remote first plans were based there (with 4 of 5 in San Francisco). This seems to be driven by a mix of high cost of living (lack of affordable housing), ever-increasing petty crime, homelessness, drug abuse issues, terrible public school policies, and general poor-governance. In parallel, some employees based in the Bay Area strike many company leaders as not only more expensive but also more entitled and politically-motivated (versus company-mission motivated) at work than their non-Bay Area counterparts. Many CEOs also view San Francisco as a city that will continue to raise taxes, for example the taxes on gross receipts and other add-ons are costing multiple companies headquartered in San Francisco thousands or tens of thousands per employee versus being located elsewhere - including employees who do not even live in San Francisco. 

This mix of expense and bad governance will continue to drive companies out of San Francisco (although many may relocate within the Bay Area itself - for example South San Francisco is much more business friendly). Some may go remote first, and some may simply leave. This will, of course, take many years to play out. The epicenter of tech in the Bay Area has moved over time from San Jose/Santa Clara (1970s-1990s) to Palo Alto/Mountain View (2000s) to San Francisco (2010-now). It will be interesting to watch if it sticks, or where it goes next in the Bay Area.

NOTES

[0] It is nice to be able to now write about re-opening, even if it will take some time.

[1] Of course, some people will decline the vaccine and a small number may be too remote to reach. Anticipate much hand-wringing about how we “must protect the unvaccinated” who *chose* not get vaccinated. An approach likes Israeli’s might work- a “green passport” that only allows people who are vaccinated to go to gyms, movies etc. as a positive incentive to get vaccinated.

[2] We will eventually (probably sometime during end of 2021) need societally to ignore the public health voices, special interest or political groups that will claim it is never safe enough to truly reopen because “variants”[3] or “only 90% of at-risk people are protected” or “ethics & equity” (really politics) or some other reason. See for example the lack of school reopenings in San Francisco. It would be a large net positive for society if we avoid TSA-like theatre for most aspects of life in the years to come.

[3] At this point all the vaccines have protected strongly from death for every vaccine and every variant (including the “South African” one). It is useful to remind oneself that the primary goal is to prevent deaths and hospitalizations. Unfortunately, as a worst case to date, while the AstraZeneca vaccine protected against deaths and severe disease in recent South African trials, its efficacy against mild to moderate COVID was weakened. The AZ vaccine has generally had lower neutralizing antibody titers than some of the other vaccines, so we will see data from others in the coming weeks. Some vaccine companies have already started trials with boosters to address variants in case needed. The most likely scenario is society will not be impacted much be the existing set of variants, however that is the largest near-term real risk to reopening.

[4] Time zones make a big difference in the ability to coordinate the synchronous part of work. For sales this does not matter as much, but for product development it often does. So often small to mid-size companies tend to collapse product development into a smaller set of time zones after trying to have people everywhere. Once a company gets big enough that autonomous teams can split off onto specific projects, multi-timezone efforts are easier.

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