Home-Shoring Leverages the 30-Second Commute

<ed.note>Saw this article re: Dell, Northrop Grumman and homeshoring|onshoring. While they haven’t quite figured out that if your notebook isn’t encrypted, it doesn’t really matter if it’s at the "development center" vs. the home office when the data is stolen, I suspect when they become more familiar with the real estate, etc., costs, they’ll eventually turn from centralized geolocking to the truly distributed, digital enterprise. Why not? the enemies of their clients have.

The article reminded me of a recent Trends article. I’m not their shill but I do enjoy the Audio-Tech offerings. Their contact info at the link. Since I’m allowed to email this to a friend, I’m hoping they are cool with me blogging it.</ed.note>

Published: October 2007 [ mp3 ]

More than 95 percent of Fortune 1000 companies now have formal virtual work programs that allow people to work at home, or in a place other than the office. In a survey of 32,000 companies that had more than 1,000 employees, 52 percent had formalized virtual work. These included such giants as General Electric, IBM, American Express, Hewlett-Packard, Xerox, and the United States government.

As outlined in the book Working Virtually,1 there are three key market drivers helping virtual work, or “home-shoring,” grow explosively. They are:

Real estate savings. If a company doesn’t have to house employees, it saves on office space, utilities, and other costs associated with providing a place suitable for employees to do their work effectively.

Productivity. Productivity actually increases when people work from home, typically by as much as 48 percent. As it turns out, the higher the skill level of the employee, the higher the productivity gains, ranging up to 80 percent for professional support staff.2

Recruitment and retention. In a tight labor market, competition for the best employees is fierce. Balance between work and life is increasingly important to the Millennial generation. Providing flexible working conditions attracts and helps to retain the employees everyone wants. For some types of jobs, the impact on retention can be enormous: For a call center, it reduces turnover from an average of 40 to 60 percent a year to 8 to 10 percent a year.

According to a recent survey by the research firm IDC, reported in Fortune3 magazine, approximately 130,000 people are already working from home in the U.S., and the number should increase to 300,000 by 2010. For example, a customer service company called Convergys handles a billion calls a year through various 800 numbers. It employs 60,000 people in 55 call centers. It has just 1,000 agents working from home right now, but is in the process of tripling that number. Another example is Alpine Access, a company that handles calls for J.Crew, 1-800-Flowers, and others. It has 7,500 people working from home.

According to the IDC study, employing a call center agent in the office costs the company $31 an hour. To employ the same agent at home costs about $21 per hour. For Alpine Access, that represents a savings of $75,000 an hour, or more than half a million dollars in an eight-hour workday. That provides a powerful incentive for companies to consider this strategy.

Call centers aren’t the only companies proactively hiring people to work at home. The so-called “virtual assistant industry” is booming. Virtual assistants do virtually everything an executive assistant would normally do in an office, only they do it electronically from home. This has spawned a spate of books on the subject, such as The 2-Second Commute,4 Work Naked,5 and The Virtual Office Survival Handbook.6 These books give prospective “virtual workers” advice on how to work from home.

At the same time, Web sites such as Staffcentrix’s msvas.com that provide home workers with connections to employers, abound on the Internet. There are also organizations and clearinghouses, such as The Virtual Assistant Networking Association, which connects employers with aspiring virtual workers.

In part, this acceptance of virtual workers stems from the popularity of off-shoring in the late ‘90s. At the time, companies that had to field calls from customers were seeing their cost per hour rising toward the average of up to $31 an hour per employee, as cited earlier. Many found that by locating call centers in foreign countries such as India, where wages were low, they could reduce that cost to $15 an hour. They jumped at the chance.

Then suddenly, they were awash in complaints and bad PR. Customers were not happy with the quality of service they were getting from agents overseas who did not understand the customers’ needs and preferences. In many cases, the agents spoke English poorly and customers couldn’t understand what they were saying.

A firestorm of protests sent companies in search of low-cost solutions within the U.S. And, for many, work-at-home agents turned out to be the best compromise, costing significantly less than office work, but just a little more than off-shoring.

Given this trend, we offer the following four forecasts:

First, expect this trend to accelerate at a rapid pace in the next few years. The motivations for this increase in working from home are obvious: It leverages existing fundamental trends in demography, technology, and attitudes. Ubiquitous broadband, voice-over-IP, and the ever-improving price performance of hardware and software have made it both simple and cheap to provide the infrastructure of a major office complex to people who work at home. Also, the dramatic growth in the ranks of semi-retired Baby Boomers and Seniors who want to work only part-time and avoid commutes provides a huge employee pool ideally suited to virtual work. And, the values and attitudes of Boomers and Millennials mesh well with the dynamics of virtual work. It gives them the flexibility and “personal control” they want. Home-shoring is, therefore, an obvious answer for millions.

Second, as home-shoring takes center stage, business leaders will have to increasingly redefine what it means to hire an employee. Many companies do have a limited experience in this area; distributed work isn’t really new. It’s really a matter of extending it to a broader range of jobs and locations. A company that’s paying a huge premium for high-rise office space in a downtown location could see those costs drop to the bottom line as it is relieved of the burden of housing all those workers. And, when one competitor makes such a game-changing move, the others in its industry will be forced to follow. Expect hierarchical silos to give way to relationships and networks of trust, as this trend expands. Virtual work forces will become the norm, with employees being more productive, more satisfied, and finding work more meaningful than ever before.

Third, in the coming decade, so-called “virtual worlds” will begin to play a more important role in business. As true broadband comes of age and video conferencing matures to a practical level, total-immersion virtual environments will come to replace much of the bricks-and-mortar office space we now occupy. A core team of employees will typically continue to reside in the physical office. But companies will increasingly develop their own private virtual worlds in which employees, represented by avatars, will interact in virtual office space. They will buy, sell, perform work, do research, have meetings, share information, form relationships, and resolve problems, all without ever entering a physical space. Instead, they will use a secure network on which the virtual world resides. This will provide a new blueprint for how organizations function.

Fourth, dispersing people geographically through the virtual workplace will require new strategies on the part of employers to engage workers who don’t come to the office. It will require a shift toward a more holistic view of the individuals and a new emphasis on relationships to keep employees fully engaged. A sense of community will take on a new importance. While this will be a challenge, it will also be facilitated by some obvious features of a virtual environment. For example, status symbols will lose their meaning, because you can’t see if someone has a corner office or a cubicle. In a sense, all people are equal in a virtual environment. This will make closer connections possible and contribute to the smooth functioning of virtual teams.

References
  1. Working Virtually: Managing People for Successful Virtual Teams and Organizations by Trina Hoefling is published by Stylus Publishing. © Copyright 2001 by Stylus Publishing, LLC. All rights reserved.
  2. Greensboro News & Record, July 15, 2007, “‘Homeshoring’ Keeps Call Center Jobs in the U.S.,” by Rebecca Carroll and Jane M. Von Bergen. © Copyright 2007 by News & Record, Inc., a division of Landmark Communications, Inc. All rights reserved.
  3. To access the Fortune Online article “Commute to Work in 30 Seconds,” visit the CNNMoney website at: money.cnn.com
  4. The 2-Second Commute: Join the Exploding Ranks of Freelance Virtual Assistants by Christine Durst and Michael Haaren is published by The Career Press, Inc. © Copyright 2005 by Staffcentrix, LLC. All rights reserved.
  5. Work Naked: Eight Essential Principles for Peak Performance in the Virtual Workplace by Cynthia C. Froggatt is published by Jossey-Bass, a Wiley Company. © Copyright 2001 by Cynthia C. Froggatt. All rights reserved.
  6. The Virtual Office Survival Handbook: What Telecommuters and Entrepreneurs Need to Succeed in Today’s Nontraditional Workplace by Alice Bredin is published by John Wiley and Sons, Inc. © Copyright 1996 by Alice Bredin. All rights reserved.