There’s Cake in the Breakroom! A New Marketplace Podcast

If you work in an office, do you ever find yourself thinking that you could get more work done at home?

That’s the question we address in our latest podcast, “There’s Cake in the Breakroom!”

You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript below.

There are at least two primary perspectives on this topic:

  1. Employees think about how much better their lives would be if they didn’t have to deal with commuting, the office culture, etc.
  2. Employers think about how productivity would plunge if employees were allowed to work at home — or, as it’s sometimes known, “shirk at home.”

But there’s at least one more perspective to consider. A firm might look at the office rent it pays and think it might be worth the trade-off to let employees work at home instead. This could make sense as long as the real estate savings were enough to offset the expected drop in productivity from letting employees work at home.

So what do we know about productivity among those who work at home? While the share of Americans who work at home has been slowly rising, the fact is that productivity is hard to measure.

Enter James Liang and Nicholas Bloom. The former is a founder and chairman of Ctrip, a big Chinese travel website a la Expedia. The latter is a labor economist at Stanford. They, along with co-authors John Roberts and Zhichun Jenny Ying, have done a study called  “Does Working From Home Work?  Evidence From a Chinese Experiment,” in which Ctrip employees were randomized into work-at-home groups and work-at-the-office groups.

The results may surprise you — and, if you happen to run a company, you might rethink your future.

In our podcast, you’ll from Liang, Bloom, and Christine Hoehner, a public-health professor at Washington University who co-authored a study about the health effects of commuting, which we wrote about earlier here.

The working environment at Ctrip. (Photos courtesy Nick Bloom)

Ctrip employees at home and at the office. (Photos ourtesy Nick Bloom)

 

Audio Transcript

Tess Vigeland: Time now for a little Freakonomics Radio. Every couple of weeks, we talk to Stephen Dubner, the co-author of the books and the blog about the hidden side of everything. Hello Stephen.

Stephen Dubner: Hey Tess. You having a nice, calm, peaceful, productive day at the office today?

Vigeland: It's a newsroom, Stephen -- no such thing, right? Although we are in the dog days of summer.

Dubner: Let me ask you this, Tess: You ever fantasize about just working from home instead? Maybe setting up a little radio studio in your living room, and you could look at your scripts from your favorite easy chair? Doesn't that sound nice?

Vigeland: With my cat on my lap? Well, just between us -- because nobody's listening -- yeah, I think about it all the time. But I don't think it's going to happen.

Dubner: Well, you know, bosses tend to have a kind of standard line of thinking here, that you know, left to your own devices, you'd spend all day watching cat videos or watering the garden, whatever.

Vigeland: Yeah, and?

Dubner: That's why it's sometimes called "shirking from home," rather than working from home. But today, I come, Tess, bearing evidence that working from home might actually be a great thing.

Paddy Hirsch: Sorry to interrupt, I know you're talking to Stephen.

Vigeland: Paddy? Paddy, I'm on air.

Hirsch: I know. But we need to fix this. We really need to talk about the 15th or the 22nd.

Vigeland: Stephen, I'm really sorry. Paddy, you need to give us a moment. Please continue.

Dubner: Yeah, OK. So I wanted to tell you about an interesting experiment at a Chinese company called Ctrip. It's basically the Chinese version of Expedia, the travel website. It's based in Shanghai. The company's got about 14,000 employees. Here is the company's co-founder and chairman, James Liang.

James Liang: The real estate in Shanghai is getting very expensive, we're thinking maybe we should move some people at home, when the technology's ready. Then we thought hey, this might be a very interesting academic subject, if we can do it more scientifically.

OK, so you've got a boss here who's thinking about saving on office rent by letting some people work at home. But Liang is not your typical boss; he was actually taking a break from running the company to get a Ph.D in economics at Stanford. And that's where he met a labor economist named Nick Bloom, and they decided to set up this work-at-home option as a real experiment. So what they did is they recruited 500 Ctrip volunteers -- employees -- half of whom were then randomly selected to work from home for the next nine months, and the rest, which became the control group, they would keep working in the office.

Now here is Nick Bloom talking about what the company expected to get out of this experiment.

Nick Bloom: Their view is they'd save a money on space, they'd save a lot of money of low attrition, but they'd lose on productivity. And in fact, productivity went up.

Vigeland: Productivity went up? You were working at home and your productivity goes up?

Dubner: Exactly. Now keep in mind, these Ctrip workers were essentially call center employees -- not all jobs are as easily transferred to home as that. But that said, the home workers -- the people that worked from home -- were about 13 percent more productive than an equivalent group of office workers. Here's Bloom again.

Bloom: They also started and stopped on time, because they didn't turn up late because commuting, or the plumber didn't turn up or they were sick, etc.

So some of the gains, Tess, came from people simply working more hours at home. But home workers were also more efficient. Now you say, 'How can that be?' Here is Bloom's explanation for that.

Bloom: In the office, it's very noisy, you can hear the guy next to you on the phone or the person across the desk crying because their boyfriend has just split up with them. It's horribly distracting.

Now, Tess, Bloom does make the important point that not all employees have the same preferences, of course. Some people -- you and me, maybe -- want to work at home and would perform better there. Others want to work in an office and would perform better there.

Vigeland: Right, so Stephen what you're saying here --

Hirsch: Tess, are you coming in to say goodbye to the interns?

Vigeland: Paddy, Paddy, I'm in the middle of work.

Hirsch: They've got red velvet cake.

Vigeland: Well despite that, I really need you to let me finish this interview. Sorry.

Hirsch: Geez.

Vigeland: I'll be right there, really. OK.

Dubner: Sounds like you've got a little bit of experience with office distractions yourself, Tess? Yes?

Vigeland: Just a few, just a few. Cupcakes, but nevertheless.

Dubner: That said, it would naive to think that home workers don't also get distracted, but the evidence here suggests that as distracting as home may be, the office -- as you've experienced today -- is even worse. And on a different dimension, getting to work can be bad for you too. Here's Christine Hoehner. She's a professor of public health at Washington University. She recently finished a study on the health effects of commuting.

Christine Hoehner: So we found that people who commuted longer distances were less physically active, less physically fit, weighed more and had higher blood pressure than people who had shorter commute distances.

Whoa, so Tess, there you've got it.

Hirsch: Tess, you really need to sort this thing out. OK, so it's either the 22nd or the 15th of September.

Vigeland: Paddy, Paddy.

Hirsch: Would you make a decision, for everyone's sake?

Vigeland: Paddy, OK. Let's go with the 15th. Are we done now? Thank you. OK. Stephen?

Dubner: Tess, you ready to work at home?

Vigeland: I think I just might be.

Dubner: Have I won you over?

Vigeland: Where do I sign up? Stephen Dubner, our Freakonomics correspondent. He puts out a podcast too. You can get that on iTunes and hear more on Freakonomics.com. Stephen, we'll talk to you in a couple of weeks.

Dubner: I hope so, thanks.

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COMMENTS: 26

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  1. Bobby G says:

    Where can I read the transcript? The post says “below” but I don’t see it.

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  2. MrT says:

    Working from home would make a revolutionary change in my life as I’m about to start a family. I work in a job where working from home would definitely be feasible. Hell, if I could work in the office between 9-3pm and work the rest from home, that would be great. But there is massive resistance within the corporate culture in the US (and most of the Anglo West). When I first graduated and entered the corporate world in the early 2000′s it was advertised to us that working from home was just around the corner, so to speak. However, it seems that all this technology has allowed us to do is do the work of 3 people, cutting down on labor costs for employers, and getting us more entrenched in the office. I would kill to work from home, but with 8% unemployment, I’m too afraid to even ask.

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  3. James says:

    I certainly can relate to being more productive working from home – I’ve been doing it for a decade, mostly self-employed (software development). Of course there are distractions, but they run both ways. I may decide that it’s such a nice day that I’d rather take the dogs for a hike instead of working (but I think about work when I’m hiking, and sometimes come home with solutions to problems). Equally, though, I may get deep into an intriguing problem, and find myself working ’til midnight or beyond.

    The main thing I miss, honestly, is the commuting, because I did most of that by bike.

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  4. Jeremy says:

    After reading the study, I found the random selection of people willing to participate not random at all. It states “Approximately half of the employees (508) were
    interested. Of these, 255 were qualified to take part in the experiment by virtue of having at least
    six months tenure, broadband access and a private room at home (in which they could work).
    After a lottery draw, those with even birthdays were selected to work at home while those with
    odd birthdates stayed in the office to act as the control group. The home and office employees in
    each team had to work the same shift because they worked under a common team manager. The
    two groups also used the same IT equipment, faced the same work order flow from a common
    central server, and pay system. Hence, the only difference between the two groups was the
    location of work.”
    What it fails to take into account are the other 50% that were not interested in working at home. Is there a perception bias at play here? In other words, did those that want to work from home have some additional incentive to be “interested”? And if so, does a 12% increase in performance mean that much if there was already an incentive?

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    • Nick Bloom says:

      Great point – the 13% higher productivity was only among people that volunteered. Interestingly after the end of the 9 month experiment the firm declared working from home a success – they calculated they save about $2000 per employee at home – and rolled it out to the entire firm. At that point a lot of people changed their mind – about 1/2 of the original volunteers stopped working from home, and about 10% on the non-volunteers went home.

      Looking at this subsequent well-informed volunteer group (those that are working-from home after seeing the experiment) they work about 25% better. So it looks like working from home plus choice is the best of all worlds. It works very well for some people and not for others, and if you have motivated employees that can choose you get fantastic outcomes.

      Certainly, for CTrip allowing working-from-home has been a great business decision saving them many millions of dollars a year. So much so they are now actively encouraging as many employees as possible to do this. Another firm – JetBlue in the US – similarly has had tremendous success with working from home.

      Cheers

      Nick

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      • carlosmx37 says:

        Im sorry,but….
        I do believe that just one or two years is so little period of time to say that definitely the worker at home is more productive ,respect worker at the ffice.
        Maybe,_just maybe,.the worker at home really wants that the experiment be a success, and continues working there.
        Perhaps it is just another case of the “hawthorne effect”,,and the worker works harder,more hours,because is being evaluated.
        I hope to be wrong,of course!..Ive been employee,and boss,.contractor,working at home,and at an office.
        but i do still believe that best jobs,best tips,best gossiping,best internal info,…the next promotion,goes to the “in-house ” coworkers.
        after all,….at home you do not find the opportunity to share ,and exchange the last rumor of a merger,..as you could if find a pal at the lavatories!

        ( and when working at home,.I do wash my teeth at two pm!,..and miss my loved printed favorite monday newspaper!,.grrrrrrrrrrrr!)

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  5. john robin says:

    tom Morton presenter on BBC Scotland does broadcast from his home in the Shetland islands as does a veteran dj on radio 2

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  6. Adriel says:

    If the cost of gas gets a lot higher or if we start to get serious about reducing greenhouse gas, I’d see telecommuting to gain in popularity. Why spend an hour or two driving to work everyday when you can put on your bunny slippers and walk over to your home office?

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    • Nick Bloom says:

      Absolutely – in China there is another issue around developing inland parts of the country. Working from home allows people to live much further away from the office and commute long distances on the rare occasions they come in.

      As US example was JetBlue that had call-center operatives come in only once a month. As a result people could live far-away from the office in nice local communities, and that made it possible for them to recruit amazingly high-quality people for the job. You could also use this to move more Government jobs out of DC and into regions that would really benefit from them.

      Cheers

      Nick

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  7. RJ Roy says:

    When I first heard Paddy butting in, I actually thought for a bit that the joke was going to be that Tess actually WAS recording from home, especially with distractions having just been mentioned!

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  8. Genevieve Comtois says:

    I do work from home! I love it but I need to get out at least once a day to meet peoples and keep an overall good productivity. If I ever hired employees, I would like them to work in their home too and grow some kind of invisible business with a web of apartment linked together!

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