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Elon Musk signals the risk remote work faces

Tesla CEO Elon Musk's decision this week to end remote work at the automaker may be an early indication of what's to come during an economic downturn.

Elon Musk, CEO of Tesla Inc., ended remote work earlier this week and then pulled remote and hybrid jobs from its career site. But the end of remote work at Tesla may have been the start of another effort: to begin cutting staff.

On Friday, Reuters reported that Musk wants to cut 10% of salaried jobs at the automaker and would pause hiring, according to a leaked email obtained by news outlet. In it, Musk wrote that he had a "super bad feeling" about the economy, Reuters reported. Tesla employed about 100,000 workers globally at the end of 2021. The company did not respond to a request for comment.

Musk's actions might highlight a longstanding concern that remote workers are more vulnerable to layoffs, especially in an economic downturn. Musk made the risk clear for Tesla employees when he tweeted Tuesday that remote workers "should pretend to work somewhere else."

But Musk's decision to end remote work may have another motive: getting employees to quit, according to some experts.

"It won't be the first time a company pulled a trick like this," said Kate Lister, president of Global Workplace Analytics, a telecommuting research and consulting firm. She cited IBM, which in 2017 reportedly told thousands of its remote workers that they would have to relocate to specific cities or leave.

"It was highly suspected as a way to get rid of older, more senior, more expensive workers," she said.

Will balance of power shift?

Remote and hybrid workers also worry they will be passed over for promotions and raises, Lister said. "Proximity bias is strong, and a majority of managers say they perceive the people they see every day as more productive," she said, adding that it's also easier to quit a remote job.

Before the pandemic, eight in 10 employees surveyed by Global Workplace Analytics said they would like to work from home at least some of the time, Lister said.

"That number has not changed, but now employees are in the driver's seat and are voting with their feet," she said. "There is no doubt in my mind we would not be seeing such large-scale adoption of flexible workplace strategies were it not for the labor and skills shortages."

Job seekers currently have the upper hand. This week, the U.S. Labor Dept., reported that there were 11.4 million job openings in April. On Friday, it said that the economy gained 390,000 jobs in May. But rising interest rates, the Ukraine war, rising energy costs and inflation have spurred worries that a recession is possible.

"If we enter a recession, the balance of power will swing back to the employer," Lister said. That "could empower leaders who were skeptical" of remote and hybrid work "to force people to come to the office," she said.

Manager resistance

Others see risks for remote workers as well.

Remote workers "can fall prey" to "executives who are traditionalists or who have a strong managerial philosophy that in-person work is essential for all workers," said J. P. Gownder, vice president and principal analyst at Forrester Research.

But most workers are hybrid, meaning they spend some time in the office, Gownder said.Forrester Research said about 66% of U.S. firms allow "anywhere work," and of those 51% are hybrid and 15% are mostly or fully remote.

While ending remote work may solve a company's short-term needs, it will become a competitive disadvantage in the modern world.
Dan SchawbelManaging partner, Workplace Intelligence

"Fully remote workers might be susceptible to heightened job concerns because they aren't as visible to managers," Gownder said. But even then, "we know that remote workers are actually more productive, on average, than in-person workers." He said they have more work-life balance and don't waste time commuting.

Employers also need to be careful if they pull back on the option of working from home, Gownder said. "Employees with unique, complex and rare skills will have numerous options to work remotely and will find job opportunities with more flexible employers."

The hiring advantage for companies that continue to offer remote and hybrid work arrangements could become a hiring differentiator.

"While companies may end remote work as a way to lay off employees, they also become less attractive to talent that seeks more flexibility in the work environment," said Dan Schawbel, managing partner of Workplace Intelligence, an HR consultancy.

"Most professionals have prioritized remote work and flexibility over the past two years during the pandemic and will seek companies that promote it," Schawbel said. "While ending remote work may solve a company's short-term needs, it will become a competitive disadvantage in the modern world."

Employees still have power

But some see the risks in remote work. Andrew Challenger, senior vice president of Challenger, Gray & Christmas, an outplacement firm in Chicago, said more employers want their workers to return to the office because they see the correlation between working from home and turnover.

"When people are just at home alone with their work, and they don't have colleagues or a team that they feel like they're deeply a part of, they're much more likely to take new offers," he said.

But employees still remain in control and "have a lot of power with a massive labor shortage on, and they don't want to come back," he said.

That may be changing. As the Federal Reserve increases interest rates and the economy cools, employees "won't have the same negotiating power," Challenger said. When that happens, it will become clearer what the post-pandemic world will look like in terms of days at home versus in the office.

While some push back against remote work, others point to advantages, including the often-cited advantage of tapping into new labor pools.

Lucas Mendes, co-founder of Revelo, said, "it would be naive to think that disallowing remote work will come without any tradeoffs," Mendes said. The talent that is hardest to hire, software engineers, have a lot of bargaining power and they have a preference for remote work, he said.

Software engineers want focus

Revelo is a remote work technology company in Miami. that connects employers to tech workers in Latin America. It focuses on that region because of similar time zones. The firm recruits people with tech skills and vets and creates a shortlisted candidate list for U.S. employers who hire these workers and work with them remotely. They also manage the local compliance, benefits and pay requirements. Mendes said they have placed over 7,000 workers since the firm's founding about eight years ago.

Tech workers believe remote work allows them to focus and cut out meetings that aren't needed, Mendes said. They also have different preferences regarding when they want to work; some prefer to start early or work very late. "Working from home accommodates all those preferences," he said.

The debate over remote work is hardly over.

Musk's stance has garnered a lot of attention, including on one of Musk's acquisitions targets: Twitter.

On Thursday, Scott Farquhar, co-founder and co-CEO of Atlassian, which makes software development and collaboration tools, weighed in on the debate, tweeting that Musk's requirement that employees spend 40 hours in the office per week is "like something out of the 1950s."

The future, Farquhar tweeted, is in having a "highly distributed, highly flexible" workforce. "In the past year alone, 42% of our new hires globally live 2 or more hours from an office," he wrote.

Patrick Thibodeau covers HCM and ERP technologies for TechTarget. He's worked for more than two decades as an enterprise IT reporter.

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