Nicholas Bloom Addresses Working from Home Challenges During COVID-19

By TAP Staff Blogger

Posted on March 31, 2020


“Everyone assumes I would be gushing over the global rollout of working from home,” says SIEPR's Nicholas Bloom. “Unfortunately not.”


In 2015, Stanford economist Nicholas Bloom published a paper he co-authored in the Quarterly Journal of Economics that called attention to several benefits of working from home. In “Does Working from Home Work? Evidence from a Chinese Experiment,” Professor Bloom and his coauthors James Liang, John Roberts, and Zhichun Jenny Ying report on a working-from-home experiment they conducted with Ctrip, China’s largest travel agency.


The 9-month experiment with a random selection of 1,000 employees revealed that working from home led to a 13 percent increase in performance plus a 50 percent drop in employee-quit rates. The experiment was so successful that Ctrip rolled out working from home to the whole firm.


Professor Bloom shared findings from this research in a blog for TAP, “Does Working From Home Work?” (published in 2016). A key takeaway he highlighted:


The overall impact of WFH [working from home] was striking. The firm improved total factor productivity by between 20% to 30% and saved about $2,000 per year per WFH employee. About two thirds of this improvement came from the reduction in office space and the rest from improved employee performance and reduced staff turnover.


Now, five years after this first randomized experiment on working from home, the COVID-19 pandemic has a growing number of states and localities issuing workplace restrictions and “stay-at-home” orders. For many businesses, having their employees work from home is the only option to continue operations. And for many individuals with work that is possible to perform remotely, at least to some extent, the COVID-19 restrictions have placed significant challenges on them as they strive to set up a home office, maintain professional networks, and move projects forward.


In “Productivity Pitfalls of Working from Home in the Age of COVID-19,” an article posted by the Stanford Institute for Economic Policy Research (SIEPR), Professor Bloom discusses how the current global work-from-home movement differs from his research of companies that instituted remote work options for their employees. “We are home working alongside our kids, in unsuitable spaces, with no choice and no in-office days,” says Bloom. “This will create a productivity disaster for firms.”


Below are a few excerpts from “Productivity Pitfalls of Working from Home in the Age of COVID-19.”


The Challenges of Working from Home


As a married father of four trying to maintain his research productivity and preparing to teach an online class to Stanford students, Bloom can speak with authority on this point.


“Working from home with your children is a productivity disaster,” Bloom says. “My 4-year-old regularly bursts into the room hoping to find me in a playful mood shouting 'doodoo!' — her nickname for me — in the middle of conference calls.”


Bloom’s analysis of Ctrip also took into account that employees were only allowed to work from home if they had a home office. The room could not be a bedroom, and nobody was allowed into the room during the workday except for the employee.


“Many people I have been interviewing are now working in their bedrooms or shared common rooms, with noise from their partners, family or roommates,” Bloom says.


The Importance of In-Person Collaboration


In-person collaboration is necessary for creativity and innovation, Bloom says. His research has shown that face-to-face meetings are essential for developing new ideas and keeping staff motivated and focused.


“I fear this collapse in office face time will lead to a slump in innovation,” he says. “The new ideas we are losing today could show up as fewer new products in 2021 and beyond, lowering long-run growth.”


The Benefits of Social Company


[From the working-from-home research:] After nine months of allowing those employees to do their jobs at home, Ctrip asked the original volunteers whether they wanted to keep working remotely or return to the office. Half of them requested to return to the office, despite their average commute being 40 minutes each way.


Why was that? “The answer is social company,” Bloom says. “They reported feeling isolated, lonely and depressed at home. So, I fear an extended period of working from home will not only kill office productivity but is building a mental health crisis.”


Despite the drawbacks, Bloom suggests a few things that can help stem the productivity decline he fears: Regular check-ins between managers and their teams; maintaining schedules that strive to separate work life from family life; and collaborating with colleagues on video calls rather than phone calls.


Read the full article, “Productivity Pitfalls of Working from Home in the Age of COVID-19” (SIEPR, March 30, 2020 by Adam Gorlick).


Read more from Professor Nick Bloom:


Nicholas Bloom is the William Eberle Professor of Economics at Stanford University, a Senior Fellow of SIEPR, and the Co-Director of the Productivity, Innovation and Entrepreneurship program at the National Bureau of Economic Research. His research focuses on management practices and uncertainty.