While the coronavirus pandemic has devastated livelihoods, it presents an opportunity for companies and policymakers to reinvent the world of work. The future is full of possibilities – but no easy answers.
The COVID-19 pandemic has changed the world in various ways, particularly the dynamics of labour supply and demand.
Some of the trends seen over the past year – such as the rise of automation, cloud computing and artificial intelligence – were already underway before the coronavirus hit. But the coronavirus is likely to accelerate the speed at which these new technological tools will be adopted. As Microsoft CEO Satya Nadella recently put it in a quarterly earnings call: “We’ve seen two years’ worth of digital transformation in two months.”1
In this article, we examine the workforce trends being accelerated by the pandemic and how they are likely to fundamentally shift the way companies, teams and individuals define their roles.
The future of jobs
In the first half of 2020, unemployment spiked across the world, hitting workers at the lower socioeconomic scale and those in developing economies particularly hard.
According to the World Economic Forum’s The Future of Jobs Report 2020, about 50 per cent of employees in developed markets such as the US and Switzerland cannot fully work at home. In emerging markets such as Brazil, Mexico and Bangladesh, the proportion is even higher, at 70 per cent or more (see Figure 1).2
Figure 1: Share of workers unable to work from home, by per capita GDP (per cent)
The accommodation and food services industry has been among the hardest hit, with about 47 per cent of workers unable to work from home, and therefore at higher risk of unemployment during lockdowns, according to the WEF report.
Remnants of the industrial age are not as relevant in today’s knowledge economy
Meanwhile, the crisis may be jolting companies in other industries out of conventional practices that are no longer fit for purpose. Remnants of the industrial age, such as nine-to-five close monitoring of employees, a method originally used in factories to measure productivity, are not as relevant in today’s knowledge economy.
It took the pandemic for some executives to realise “different environments are appropriate for different kinds of work”, says Jonathan Bayfield, head of UK real estate research at Aviva Investors. Old habits are being severely tested and forcing companies to re-examine how work works.
Chris Shipley, co-author of The Adaptation Advantage: Let Go, Learn Fast, and Thrive in the Future of Work, believes “without a doubt that nothing is ever going back to the way it was in the past”.
While some are referring to ‘the new normal’, Shipley encourages companies to manage ‘the now normal’. Firms will need to adjust as circumstances change rather than wait for uncertainties to resolve themselves.
The impact of working remotely on productivity is not yet clear, but early evidence suggests an improvement
The impact of working remotely on productivity is not yet clear, but early evidence suggests an improvement under certain conditions. According to McKinsey research, businesses that adopt innovative processes to expand remote working may be able to reduce costs, boost efficiency and access a larger talent pool due to fewer geographical constraints.3
Kevin Gaydos, co-head of credit research at Aviva Investors, expects a majority of the workforce to eventually return to the operational environment that existed prior to the coronavirus outbreak.
While managers in some industries may have found that employees can work from home and still be productive, the role of the workplace as a hub to “build cultures, connect through interpersonal interactions and enable collaboration – those types of things” will remain centre stage, says Gaydos.
Can productivity be sustained?
At stake is whether any gains in productivity can be maintained from a more flexible working mix. Innovation – one of the key ingredients of success for companies in the knowledge economy – may suffer in a remote-working scenario, reducing productivity. Spontaneous interactions that happen when employees come together to share ideas, reflect on them and discuss new ideas are difficult to replicate online.
But the fallout from COVID-19 has also provided a glimpse into new possibilities. Giles Parkinson, global equity portfolio manager at Aviva Investors, foresees a hybrid model that combines more efficient use of technology alongside deliberate and thoughtful in-person collaboration.
At least within the sectors in which people can work from home, teams may decide to meet in the office for two or three days a week rather than the conventional practice of commuting into the office five days a week. If that is not possible, they may decide to come together for a week every quarter or a few weeks every year depending on team preferences and the requirements of individual projects. The point is: individuals, teams and companies would have more autonomy over the way they choose to work.
Companies that can reimagine the way teams can work together more efficiently are going to be more likely to outperform their peers in future, Parkinson believes. Fundamentally, they'll come out of this crisis as stronger businesses in a more competitive position, because they have adapted to the circumstances to become more resilient.
Technology-related stocks are perhaps benefitting the most from this trend
Perhaps benefitting the most from this trend are technology-related stocks helping to digitise the workforce. While Zoom has been the poster child among software companies that connect employees remotely, others such as Microsoft have also shone. The company’s CEO Nadella, for example, announced in an October 2020 earnings call that usage on its Teams platform increased by more than 50 percent in the prior six months, totalling 115 million daily active users.4
According to Deloitte, at least 100 digital remote collaboration products were released in the first eight months of 2020.5 Such tech collaboration tools have implications beyond the office, for sectors such as medicine, education and even entertainment.
The state of play
If workforce trends are shifting online, office space must also evolve. Research and advisory firm Green Street reckons the move towards remote working may reduce office demand in the long run, giving tenants more negotiating power.
Preferences are also changing. Future offices may have a less rigid layout, with more capacity for spontaneous exchanges. Remote workers may have to be accommodated with facilities for meetings at satellite locations around a main hub. The working environment should also strive to facilitate the retention of employees, who will expect a range of on-site services.
Service provision will increasingly become a key element in building design at an early stage of the development process; outputs from this may include wellness centres, concierge services, catering and differentiated technology.
According to Green Street, age and building quality will become a more important indicator of future return expectations.6 A portfolio with more ultra-modern offices, for example, may attract more demand while requiring less additional cap-ex.
City-centre commercial buildings also matter for entirely different reasons. They support the local economy – restaurants, bars, retail shops and other businesses, so much so that many governments (including the UK’s) began nudging people back into the office in 2020 before a resurgence in coronavirus cases halted their efforts.7
Policymakers and companies need to collaborate in reinventing work in the wake of the pandemic
The City of London Corporation, which governs the Square Mile, recently outlined plans to inject more vibrancy into an area traditionally dominated by offices, which lacks the range of amenities available elsewhere to draw visitors. Officials are targeting a more diverse range of tenants, aiming for a fifth to be new to the Square Mile by 2025. They also want to increase visitor numbers during evening hours and weekends by 50 per cent.8
These projects highlight the need for policymakers and companies to collaborate in reinventing work in the wake of the pandemic. History tells us societies that adapt to new conditions and support their populations through periods of turmoil can emerge stronger and more resilient. This could also prove to be the case in 2021 as the world starts to picture life beyond COVID-19.