UK Government Research Finds The Best Companies Don't Need An Office To Be Productive

The UK government’s statisticians have some bad news for office landlords: They have crunched the numbers, performed some fancy regression analysis, and it turns out you’re wrong.

Well-managed businesses are as productive home working as they are working from the office, and poorly managed businesses do just as badly wherever they work.

Data from the Office for National Statistics also shows that well-managed businesses do not necessarily need more collaborative face-to-face interaction in their workspaces in order to remain more productive, or better managed, than badly managed businesses. 

Since the ONS found that well-managed firms tend to be large or young — so either the group who take most office space or the target audience for the funkiest, most collaborative workspace — this could be a problem for office landlords.

It all boils down to some issues with heteroskedasticity, a word that will soon be tripping off the tongue of big city office agents.

Heteroskedasticity is a very complicated word for the very simple concept that sometimes things are hard to explain because they change in unpredictable ways that don’t seem related to the other variables you are looking at. It is now about to start messing with your future office take-up predictions.

The top-line result from the ONS survey, which gathered information on the management practices, home working rates and other firm characteristics for about 12,000 firms in Great Britain during 2019 and 2020, is that better-managed firms adapted more easily to home working, and remained more productive whether home working or working from the office.

Of course, this is data from a pandemic, when working from home was the alternative to not working at all. But if you are a landlord trying to sell workspaces to these businesses on the basis that face-to-face collaboration is the key to productivity, this blows a hole in your marketing strategy.

This is how the analysis works.

First the ONS established that the larger a firm is, or the younger it is, the more likely it is to be well-managed. Whether firms are multi-nationals, or family firms, makes very little difference on its own, separate from the size/age issue. This was true before the pandemic, and it is still true. You can check out their maths here.

The better managed a firm was, the more likely it was to have moved toward home working, and this is where a large dose of heteroskedasticity comes into play. That is because better-managed firms might have different management options, or work in sectors or locations that made home working easier, or they may have been using home working more before the pandemic. 

The ONS wondered if maybe such firms aren’t much better at adapting to unforeseen circumstances like a pandemic, and instead simply work differently all the time, pandemic or not? If that were true, it would change how the trends could be interpreted.

The statisticians wanted to check, so they now attempted to control for some of the explanatory variables. This allows them to examine the effect of good management practices on home working for the pre-pandemic and pandemic period without the confounding effect of other variables that could be affecting home working rates. They looked at 2019 and 2020.

What they discovered was interesting for two reasons. First, after controlling for other factors, in 2019 better-managed firms did not have higher homeworking rates than worse-managed firms. But by 2020 there was a sharp difference: better-managed firms were working from home much more than the poorly managed. This seems to show that better-managed firms were, after all, better at adapting.

Second, it didn’t have to be this way. It might have been the case that better-managed firms depended more on face-to-face interactions than poorly managed firms (and that this is one of the things that makes them better managed). If this was true, it would be music to office landlords’ ears because it would suggest a link between good management and the kind of collaborative workspace that landlords are now peddling. 

Sadly for landlords, it didn’t show that. A well-managed firm is well-managed whether it is home working or not. It is also productive, pretty much regardless.

It’s not proof or the last word on the subject, and working practises during a pandemic may not be a good guide to working practices after a pandemic. But it’s not good news because this suggests (in the short term, so far) that the productivity of well-managed firms is not hugely related to whether they are home working or working from the office — or, put this another way, whether they have lots of face-to-face interaction and collaboration, or not. 

Selling conventional offices to managers who realise this is going to be hard work. Unless some more data comes to light.