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CEOs thought the return to office debate was over. They were wrong

Many corporate leaders were hoping that the debate over the return to the office was over when they implemented mandates for workers, but the latest data from New York City’s key office market suggests that many employees are still setting their own terms.

While average building visits are back above their pre-pandemic baseline, at 61%, according to the latest data from The Real Estate Board of New York, the momentum has stalled. Among its key findings released earlier this month: the 61% mark is a notable increase from 51% during Q1 2022. But visitation rates have “essentially plateaued,” REBNY said, since reaching a peak of 65% in mid-2022.

A report out on Thursday from the Boston Consulting Group warns of the coming wave of “zombie” office buildings, with vacancy rates and utilization under 50% — it says many buildings across the U.S. are already at that mark. Its analysis matches the 61% plateau cited by REBNY: “Assuming these trends continue and organizations right-size to fit new levels of demand, utilization may tick up slightly from today’s depths, but still only 60% to 65% of current US office space will be needed.”

While this is all bad for municipal budgets tied to tax revenue, and ancillary businesses close to office districts, the message to employers is different: taking a sudden hard line on return-to-office policies isn’t necessarily going to work, and in fact, can be bad for talent retention and recruitment efforts.

Companies including Amazon, Disney and Starbucks have enacted strict return-to-office mandates though not the exact same number of days in each case, and many employees aren’t happy. Other companies, too, could see reverberations if they enact similar policies, especially if the mandates feel arbitrary, human resources professionals say.

“It’s dangerously risky to take a my-way-or-the-highway approach,” said Yolanda M. Owens, a career coach with The Muse, an online career platform. Flexibility is especially important when recruiting for difficult-to-fill roles and in jobs where competitors continue to offer hybrid or remote-only positions, she said.

Wall Street leadership veteran Sallie Krawcheck, co-founder and CEO of Ellevest and the former Citi CFO and head of global wealth management at Bank of America, recently told a room of leaders at a CNBC C-suite event that just thinking everything can go back to “the way it was” is a flawed mindset.

While companies can have legitimate reasons to enact stricter in-office policies, they have to be mindful that talent is their biggest asset and taking too hard a line could be a major strategic misstep. 

This is true even as U.S. worker productivity fell 2.7% in the first quarter of this year, according to U.S. Bureau of Labor Statistics, and as employers announced plans to cut 337,411 jobs in the first four months of the year, a 322% increase from the same period in 2022, according to Challenger, Gray & Christmas Inc., the global outplacement and business and executive coaching firm.

For many employers, there is still time to get it right. Here are five actionable ways companies can navigate return-to-work decisions.

Think through the ‘why’ in forcing workers back

Companies shouldn’t simply issue a return-to-work edict, said Janine Yancey, founder and chief executive at Emtrain, an online training platform. Rather, they should clearly explain to employees the rationale behind the moves. Say, for example, a company wants to bring its marketing department back to the office more regularly. Executives could explain that collaboration helps the company achieve its targets more efficiently, citing real examples such as the advantages of face-to-face feedback for a design or messaging campaign. 

When companies don’t offer a rationale or tie the return to business objectives, there can be meaningful ramifications. She offers the example of a small technology company that took a sudden, inflexible stance on return-to-office. The company lost so many people in a short period of time that it had to backpedal, lowering its requirement for in-office days and allowing for more flexibility.

“Company executives need to take the time and energy to paint the picture for the rank and file so it doesn’t appear to be an arbitrary exercise of power,” Yancey said.

Seek input from in-person and remote employees

Companies should attempt to collect data on who is coming to the office now and how frequently, so they have qualitative and quantitative information to base their decisions on. It’s also advisable to seek input from various teams to understand productivity and how employees view their current work situation. A company-wide survey is also a good idea to understand more clearly whether workers find working from home productive and enjoyable and what challenges they are facing. 

Businesses should also understand the barriers employees face in coming back to the office, whether that’s a long commute or taking care of children, an elderly parent or a pet. Companies should also seek to understand what incentives would help mitigate these challenges.

As Krawcheck said, going back to five days a week in the office, “worked for white men, not everyone, and certainly not women and under-represented groups.”

Offer perks, but free food won’t cut it 

Many employees need incentives to come back to the office. “It needs to be more than free food and happy hours,” Owens said.

Companies could also consider perks such as helping with commuting costs or subsidizing daycare for children and adults. 

A little creativity can go a long way. Massage therapy and jewelry vendors are among the occasional offerings Workhuman, a provider of human resources software, has added for employees, said Zoe Peterson-Ward, chief customer officer. The company also hosts in-office celebrations for birthdays and anniversaries. That’s in addition to other perks such as free meals and an on-site gym in its Dublin office.

Invest in more than the same old cubicles

It can be frustrating when employees are required to come to the office just so they can be on video calls with colleagues in other locations, human resources professionals say. That’s why companies that want to bring workers back to the office need to focus on reconfiguring workspaces to foster additional collaboration.

Sandra Moran, chief marketing and customer experience officer at WorkForce Software, a human resources software provider, offers the example of a large technology firm that has reconfigured its workspace so that teams can work in close proximity on the days they’re in the office. Additionally, they’ve made a sizable investment in technology, so whether employees are in the office or not, they appear to be in the same physical space, Moran said.

“If all you are asking people to do is come back to sit in their cubicle, that’s not really interactive,” Peterson-Ward said.

Second-rate workspaces will be the losers in the future, according to the research. REBNY finds a widening gap between Class A properties and everything else in the commercial real estate market, with the highest quality Class A+ properties outperforming Class B by more than 10 percentage points.

While it said building where tenants are mandating workers back should be “shielded” from some of the impacts, Boston Consulting Group concluded in its new report that, “Older, cubicle-based buildings catering to office workers but lacking in modern amenities will suffer the most.”

If your company hasn’t yet, maybe don’t ‘mandate’

Many companies are still ironing out their return-to-office policies. JustAnswer, an online source for professional information, has seen a 49% increase in questions related to return-to-office mandates and/or policies in its Employment Law category compared with May 2022.

Before making widespread pronouncements, companies need to take a hard look at the reasons behind their decisions. Considerations include: what business imperatives require a stricter stance on in-office work? Is the decision related to productivity, collaboration or culture, or is it more arbitrary?

“There might be excellent reasons to have people come back five days a week, but in other cases, there might be no reason at all,” said Merry A. Kogut, who is a contributing attorney for JustAnswer and an employment law expert.

Companies should also evaluate whether across-the-board policies make sense, or whether in-office mandates should be implemented for certain functions only, Kogut said.

This story originally appeared on CNBC

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