CHRO survey: Hybrid work is here to stay, and employees are in the driver’s seat
High-growth startups have made massive adaptations to keep and attract people—but in ways that could threaten prized ingredients of success: culture and product development.
Ever since Google ushered in the era of open offices, gourmet food, and workplace massages, there has been a broad consensus about how to organize the workplace for entrepreneurial success: get people into the office, encourage them to stay as long as possible, and create opportunities for collaboration. Now, leaders may be forced to rethink that formula, in large part because employees are no longer buying into it.
A new survey of CHROs at SoftBank Vision Fund 1 and 2 portfolio companies from around the world shows that virtually all plan to embrace some form of hybrid or remote work even after the pandemic ends, with only 6% expecting a full return to the office. The decision is largely driven by employees, who have made it clear they value the freedom to choose where and when they want to work. And in an environment where the competition for talent is as fierce as ever—60% of respondents identified hiring and retention as their top priority and challenge in 2022—companies know flexibility is table stakes in the race to remain competitive.
The survey also shows that for CHROs and other executives, this state of affairs sets up a challenge that’s likely to dominate their lives for years to come. Hybrid work is believed to have its advantages, such as increased productivity and leaner costs. But survey respondents also said hybrid work may negatively affect two critical ingredients that often determine success at venture-backed startups and help companies differentiate from each other: culture and product development.
CEOs and other leaders will need to find creative ways to head off these downsides. The strategies survey respondents say they are already implementing are a good starting point. They include over-communication, increased transparency, developing writing-oriented cultures that document what was previously shared only verbally, and a stepped-up reliance on digital collaboration tools. Perhaps the clearest sign that none of these can replace face-to-face interactions is that 4 out of 5 of those polled say they plan on hosting more off-sites to get people together in person.
The survey, which included participation from 53 companies, surfaced other insights which we highlight below. But the overriding theme is clear: The balance of power has shifted significantly from employers to employees, and companies that want to succeed are being forced to adapt. Here are the five key trends that emerged:
1. Globally, 80% of companies say they need to offer hybrid work to remain competitive
For all the talk of telecommuting over the years, hybrid work was by no means the norm before the pandemic. As of early 2020, 66% of companies required employees to be in the office five days a week. By early 2022, that number had plummeted to 6%, and it is expected to remain there based on survey respondents’ plans. This is no surprise, given that more than 80% of American and European companies feel they need to offer hybrid work to remain competitive.
Companies offering hybrid work environment
Companies who say they need to offer hybrid work to remain competitive
Not only are companies letting go of their in-the-office-all-the-time culture, but most have even given up trying to impose rules on their hybrid frameworks. That flies in the face of advice from HR experts, who have consistently recommended some structure (for instance, days when everyone is expected in the office and days when no one should be in the office) to ensure equity and to maximize opportunities for collaboration. The majority of companies are letting employees decide if and when to come to the office.
Globally, 62% of companies say they have “no set expectation” on how many days people spend in the office.
2. Hybrid work presents the same opportunities and challenges for companies globally
Regardless of how companies feel about going hybrid, it has impacted their business. Nearly three-quarters reported some productivity gains, perhaps because commutes no longer eat into employees’ workdays. And almost every company said hybrid work leads to a leaner cost structure—though, surprisingly, just 7% expected to close or downsize their office space this year.
But in a sector of the economy famous for putting a premium on product and culture, both could suffer, raising long-term questions about the adaptations companies need to make to maintain some of their competitive edge.
The business impacts of hybrid
3. Talent remains companies’ top challenge, and flexibility is king when it comes to hiring and retention
Finding and keeping talent in tech has always been a big challenge, and it’s only become more difficult during the Great Resignation. Over the past year, two-thirds of companies said it was harder to hire in 2022 than the year before. That includes 87% of companies on the West Coast of the United States and 77% of companies in the enterprise sector. What’s more, more than a quarter (30%) of companies reported an attrition rate of more than 20% in 2021, meaning that 1 in 5 employees walked out the door. (Average attrition across the tech industry is approximately 13%, according to various surveys.)
Nearly all CHROs (98%) said they have tried various new tactics to recruit and retain employees, but none has been more effective than flexibility.
What companies find most helpful when it comes to recruiting talent
What companies find most helpful when it comes to retaining talent
4. Series D & E companies are feeling the pinch more than others
While all of the companies struggled with aspects of hybrid work, companies in the middle of their journey to going public appear to be struggling the most. Nearly all of the CHROs of companies in this cohort (who have recently raised a Series D or Series E) said hybrid work was making it harder to build their culture, and these companies were twice as likely as the early and late stage companies to say hybrid work made product development more difficult. They are also disproportionately represented among those who said they suffered “significant attrition” in the last year.
Key challenges for companies at different stages of growth
Why? It may be easier for an early-stage startup with a few dozen employees to build a sense of community and execute its plans via Zoom. At the other end of the spectrum, the latest-stage private companies and public companies may have already had the time to establish processes to operate efficiently and to cement behaviors and values. Series D and E companies are caught in the middle and committed to scaling fast. Slowing down to focus on culture and process may not be an option for them.
That suggests CHROs of early-stage startups should work even harder now to build their culture and product development processes, given the challenges that are likely coming their way.
5. Start planning for those off-sites
CHROs are already doing what they can to make up for the reduced human connections and cohesion resulting from hybrid work. Not surprisingly, their favored approach is to find new ways to recreate face-to-face interactions.
How companies plan to keep employees connected in 2022
Of course, these new ways of reinforcing or improving a company’s culture require support from the top. CHROs said they need CEOs to actively endorse their initiatives and to embrace both digital and in-person opportunities to communicate with employees, with an extra emphasis on transparency and empathy. With employees in the driver’s seat, the CEO’s role in earning the trust and maintaining the allegiance of their workforce is more critical than ever.