Working From Home vs the Office: Does it Affect Profitability?

In our post-Covid times, I am often asked about my analysis of the great work-from-home debate. I come from a traditional corporate background, where employees were expected to be in the office during business hours.

Years ago I moved into business consulting, where I travel monthly to my clients' headquarters, leading their Monthly Operational Review Process (MORP) for their team.

Having been on both sides of the table, I can say with the utmost confidence that where your employee works does not have a direct effect on your company's profits.

In fact, I would argue that this is the wrong question to ask altogether.

The real question is: how does the location of my employees affect my business operations processes in terms of profitability?

See, the integration of business processes with your people and sales is key to profits. There is no way around it. There are no shortcuts. If you do not have efficient and effective business processes, it will not make any difference as to where your employees are located.

What I see is that companies find it easier to have their employees in one place so they can quickly react to change and surprises that inevitably come up in their business, such as a missed cash flow projection, unplanned production downtime, or quality issues.

However, a reactive workplace will never be able to have sustainable profitability. Sure, they can fix it for a quarter, but micromanaging has never, in the history of the great Fortune 500 companies, been a successful implementation technique.

Here's what you should do instead.

Document your company's key processes

This is a tedious and laborious task, but there is simply no way around it. If you do not know how your employees achieve a deliverable, with specific steps, all documented, you simply do not possess the tools required to evaluate inefficiencies or determine what is missing from your current business operations.

Whether or not Sally is at her home office or work office, is the least of your worries. Your bigger question as a company executive and leader is, how can I help Sally complete a key company deliverable in the most efficient way possible?

If the answer is location-dependent, then you know Sally must be in the office. If not, ask yourself what is the driving factor for Sally to report to the office if it is not integral to the business operations.

Eliminate Process Inefficiencies

Once your key business processes are documented, look for areas with multiple touchpoints or errors and remove them. Ensure these processes include approvals and built-in checks and balances.

Remember, you get the biggest bang for your buck when you eliminate stops in the process instead of improving the quality of every step.

Most importantly, get stakeholder input and approval on updating these processes. Nothing worse than hearing, "Nobody asked me!"

Align Process with Personnel

Finally, review the processes to ensure you have the right personnel executing each process. Sometimes, misalignment becomes evident between the employee and the task at hand. This is normal, and either requires a re-organization of the department (note: this is typically a lateral move, not elimination) or requires additional training.

During this re-org, evaluate the location requirement. Can the job be done remotely, or does the job require in-person interaction and team building?

If you go through my P3 Process (Profitability = People + Process) to create a Profit Producing Culture I described above, you can easily determine if your business requires employees to work in the office for maximum profitability.

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