By Kevin J. Delaney
Welcome to our weekly briefing about what companies are doing to navigate the continued reality of remote work, to reopen safely, and to reset their practices for the long-run. You can sign up here to receive future editions by email.
What you need to know
U.S. businesses are prepping for a more extensive return to the office post-Labor Day. Blackstone, the private equity giant, is among those initiating a broader voluntary return to the office (some staff told Business Insider they felt pressure to return.)
Blackstone is sending home tests for Covid to all U.S. staff ahead of the return, using the saliva-based method offered by Vault Health.
France is among the places where businesses most broadly brought their workers back. Officials are spotting increasing numbers of coronavirus clusters linked to workplaces—roughly one in four of the total clusters—and are now requiring masks in any “enclosed and shared space” in offices.
The effectiveness of masks was underscored by an outbreak linked to a Starbucks in South Korea, where 27 customers were infected but the four mask-wearing staff were spared.
Workers returning from vacation have proved a challenge for workplaces in Europe. Germany’s SAP has asked staff to work from home for at least 14 days following holiday travel. European employees of FormLabs have to present a negative test and quarantine for at least 10 days after traveling to any country considered a Covid hot spot.
Unispace estimates that when things hopefully return to more normal, about 40% of workers will want to work from home at least three days a week.
CEOs are optimistic, while Americans are depressed. A new KPMG survey of over 300 chief executives found that a strikingly high 67% are more confident in the growth prospects for their company than they were before the pandemic hit.
How to explain this extreme bullishness? KPMG says executives are encouraged by digital innovation sped up by the crisis. Also, it surveyed big company CEOs, so the results don’t reflect the struggles of many smaller businesses.
Almost 70% of CEOs in the survey said they would reduce their office space. A similar number said their communications with employees improved during the crisis.
Meanwhile, Americans are experiencing a dramatic uptick in anxiety and depression since the pandemic started. Over 40% last month reported feelings associated with clinical anxiety or depression, compared to over 11% last year.
The CEO/worker disconnect will likely widen, with many U.S. companies making additional staff cuts as the crisis stretches on.
Casino operator MGM Resorts International in the U.S. is laying off 18,000 furloughed workers, or about one-quarter of its staff. Airlines, manufacturers, and restaurant chains are among the others laying off workers or expecting to soon. Economists warn that tens of thousands of family-owned small businesses will close and shed their staff.
A discongruent headline from this week: Salesforce.com reported record quarterly results that boosted its share price almost 30%, then announced it was laying off 1,000 of its 54,000 staff. The company said it was shifting resources to priority areas.
Some workers at the Ruby Tuesday restaurant chain are learning they’re out of work when they show up for their shifts to find their restaurant closed and moving trucks standing by.
Big corporate law firms are shedding partners deemed to be less productive at greater rates than usual, as they use the crisis to retool their practices.
As the crisis extends, companies are grappling with what a new normal looks like for taxes, finance, and budgeting.
Organizations are entering their annual budgeting processes, which are generally poorly suited to moments when companies have poor visibility into business conditions ahead. Writing in HBR, three Bain partners discuss how an agile approach, inspired partly by how NOAA tracks hurricanes, can be applied to budgeting in this uncertain time, noting that “precision is not accuracy.” NOAA issues directional guidance in May on the hurricane season but then has a detailed process of adjusting and aggressively cutting down uncertainty as storms arise.
Finance experts have voiced concern that having employees working at home for an extended period could call into question some companies’ tax nexus. When companies have a large portion of their workforce operating out of different states for an extended period of time (e.g. New York companies with staff working remotely from New Jersey and Connecticut), they could face additional corporate tax liability there. Some states, including New Jersey, have sworn off pursuing companies for such taxes in connection with the pandemic—but not all states have done that.
Another contentious issue: confidentiality around Covid cases. Employees have complained that they’ve been warned by managers not to notify colleagues that they or a coworker are infected. Companies cite privacy regulations, including HIPAA—but employees also have rights to communicate with each other about job conditions. (Businessweek has an in-depth examination.)
Here’s are some of the best tips and insights from the past week for managing yourself and your team:
Start a buddy system. Australian digital marketing company Webprofits has each staffer meet for at least 15 minutes weekly with two colleagues. They’re asked not to talk about work or Covid, as a way to create personal connections and help colleagues identify when a buddy might need extra support to avoid burnout.
Embrace your angst. One way to avoid burnout, Buddhist priest Daniel Soten Lynch advises, is to “get in touch with the aspect of ourselves that cannot be burnt out.” Meditation helps you do that.
Take 15 minutes to plan your day each morning. Whether at home, or while on a short walk, this helps transition to working like a commute normally would. Identify a few “must wins” for the day from your longer to-do list.
Give your cell phone number out to colleagues. Christal Bemont, CEO of California software company Talend, gave her personal number out to all 1,300 staff and told them to call her about any mental health concerns.
Derek Jacobson is co-chief investment officer at Madison International Realty, a $7 billion real estate private equity fund in New York. The fund’s portfolio is split between Europe and the US., and Derek has a specific focus on its European investments. His firm, which has 70 staff, is scheduled to return to the office on a voluntary basis after Labor Day, and Derek expects to split his time between going in and working remotely. He spoke with us about the outlook for commercial real estate and what savvy managers are doing now.
Given the number of American workers who now say they prefer to work remotely at least a few days a week, how are businesses rethinking how much office space they have and how they use it?
The use of office space is going to evolve faster than it already has. Thirty or 40 years ago, maybe 90% of the square footage you would rent would be utilized for offices and cubicles and spaces where people sit and work. Now, even before this, the percentage of square footage devoted to actual workspaces was dropping, as companies, led by the tech industry, added amenity spaces, collaborative workspaces, wellness facilities, gyms, food offerings, etc. If you speak to the tech firms, such spaces are sometimes more than 50% of their square footage, and the minority of the space is actually workstations.
Now, more people will feel comfortable working at home, and will utilize the office irregularly. But I’m not sure the footage that these companies lease will be all that different—it will just be set up differently. You will have much much lower density in terms of people per square feet, but the overall size will be the same.
There are elements that are very difficult to replicate remotely. The virtual technology is not yet at the level where my firm would gain an investor purely without meeting them personally. Where office space becomes more necessary is mentorship, advancement of people, culture and team-building—that is hard to do remotely. The death of the office is overstated.
What would you tell a friend who’s trying to decide what to do about their company’s office space, for example, to let their leases lapse or downsize their spaces?
I know of one case where a company was negotiating a new space in New York, and were very close to signing that when the crisis hit. It’s now signing, at a 25% lower all-in cost than pre-Covid. Anyone who is in a position where they can negotiate should take advantage of that. That said, it’s better to have office space than not, though the type of space you might have is going to be different.
You sound more optimistic than I would have thought, given the pressures on commercial real estate from businesses struggling or going remote, and the collapse of physical retail.
Post 9/11, people talked about the end of the urban office and it just didn’t happen. This will end, and people will want to have human contact and that human contact will lead to density. And if you’re living in a city, most people will have a small apartment. The biggest problem we’ve had is with our junior colleagues who are living with four roommates in a small space, and now they’re all stuck on top of each other working from home. I can’t imagine that everyone can have a home office, and so there is definitely a need for office space. Our models project the growth of commercial real estate will slow down, and maybe people will say they can be more efficient with the space they lease.
There is a difference between office and retail, which we also invest in. Retail is a whole different animal. There was a long burn in the evolution of retail and that has just accelerated with this crisis. This was just the two by four that broke the camel’s back.
But those retail spaces are going to evolve. We are evaluating a portfolio investment in the UK that is targeting well-located urban retail centers. The front 20% will be retail stores where you can buy things. The real meat and potatoes will be in the back 80%, where they’ll have last-mile fulfilment for online commerce.
In the US there will be a real reckoning, but over time there will be a transformation of the use of the space. We are invested in 25 Lord & Taylor stores, which is most of them, and they just went bankrupt. I’m not that worried about them, because many of them are in locations where there’s a much better use for the space. We are the ones that will take the pain, but eventually it will evolve into the next use.
NBA players are emerging as powerful voices for social justice. The Milwaukee Bucks this week took things to the next level, as they refused to play to call attention to the case of Jacob Blake, the Black man shot in the back by police in Kenosha, Wisconsin—and the rest of the league joined the strike.
The players agreed to resume play after reaching agreement with the league around activities such as advocating for criminal justice reform and access to voting. Some NBA arenas will be made available as polling sites for elections.
Other pro athletes followed suit—and it appears that we’ve entered a new chapter around social engagement by athletes. It was just four years ago that the NFL’s Colin Kaepernick began protesting racial injustice, which eventually cost him his job.
The NBA offers a blueprint for economic fairness that is instructive more broadly. Its rules around salary caps and college draft selections help level the playing field for small market teams. A recent Times video explains.
Business Insider compiled memos and statements that businesses including ManpowerGroup, the biggest public company based in Wisconsin, issued about the Blake shooting. ManpowerGroup reiterated that it was with its Black and Brown employees and will continue to listen, learn and change; the University of Wisconsin will use its facilities to give safe spaces to students to process feelings. Surveys show Americans are looking for corporate leaders to publicly condemn racial inequality and police brutality.
California lawmakers are weighing legislation that would require public companies based in the state to have at least one board member who is a person of color. Assembly Bill 979 follows a 2018 law requiring such companies to have at least one woman on their board—nearly 45% of board directors added since then are women.
Black women are particularly underrepresented in the upper echelons of companies, according to a report from Lean In, filling just 1.4% of c-suite positions, while making up 7.4% of the US population.
PwC last week publicly released its first diversity report. Black and Latino employees represent only about 5% of its partner-level staff, though that number is rising.
New research shows a correlation between union membership and employee job satisfaction. “Union members are also less likely to be stressed, worried, depressed, sad or lonely,” write the Dartmouth and University College London professors behind the study.
Union membership was associated with lower job satisfaction for workers born in the 1940s and 1950s, but is now positive for those born between the 1960s and 1990s. The researchers theorize that this is explained by the wage premiums currently enjoyed by union workers, among other factors.
Bill Gates is (possibly) stressed out. SHL, an HR consulting and services firm, analyzed the language in tweets from top business and political leaders from 2009 to 2020, and concluded that Gates was among the most stressed. The analysis assumes that Gates writes the tweets himself. I’m skeptical—more likely, someone who works for him is stressed out.
The Japanese government is subsidizing “workations.” Under a program designed to boost domestic travel amid the crisis, employees work during the day from a hotel in a holiday location and then get to enjoy the setting after hours or during a weekend stayover. Companies say workations lower stress and raise productivity.
Voice-chat apps are trying to enable office banter among remote workers. Services such as Watercooler, Yac, Chalk, and Space let people burned out by video calls converse with colleagues over the course of their work day, dropping in and out of live group discussions. The aim is to nurture connection between staff as much as it is about productivity, looking “to recreate the casual conversation of employees on their way to a meeting or before lunch,” as the Journal puts it.
Classical Romans were enthusiasts of remote work. Their tablets and styluses allowed them to work away from their desks, as a letter from 2,000 years ago authored by Pliny the Younger, a lawyer and author, illustrates. Pliny explained to his friend Tacitus that he decided to bring his pencil and tablet with him on a boar hunt, and found it a highly productive way to get work done, as “the mind is stirred and quickened into activity by brisk bodily exercise.” “Whenever you hunt,” Pliny exhorted Tacitus, “Take your tablets along with you.”
The handbook for this new era of business doesn’t exist. We’re all drafting our own as we go along—and now we’d like to start doing so together. Thanks for reading—you can sign up here to receive future editions by email. Have a great week!