Reducing Cost and Improving Productivity with a Virtual Workforce

By Chad Thompson, Ph.D., and Pat Caputo, Ph.D.

While organizations have long used virtual work arrangements as a tool to recruit and retain key employees, implementing a virtual workforce is now being viewed as a broader strategic option for reducing operating and real estate expenses. Economic trends and a focus on cost cutting, along with recent legislation and improved technology, have accelerated and encouraged virtual work arrangements.
But how does an organization make the seemingly radical shift from a traditional environment, where employees are expected to “punch the clock” in an office setting, to a virtual workforce?

Clear and Tangible Benefits

Reduced fixed costs, improved scores on human capital metrics, and cultural benefits are often cited advantages of a virtual workforce. Additional benefits can include improved recruitment and organizational attraction and support of corporate sustainability initiatives.

Real estate cost savings
Real estate cost savings associated with employees working out of a non-traditional office, such as a home office, and eliminating commuting reimbursements are tangible and easily accountable savings. Most organizations can quantify the specific real estate savings associated with a virtual work implementation, although, on average, organizations save between $5,000 and $8,000 per employee.

Increased employee performance and retention
The evidence and degree of increased productivity from a virtual workforce as compared to a traditional workforce varies, with estimates ranging from 10 to 43 percent. In some instances, the net increase in productivity is on par with the real estate cost savings. It is difficult to generalize any one organization’s virtual work success story across multiple jobs or industries. Fortunately, organizational researchers are beginning to find increased support for the expected benefits of a virtual workforce—that such workers are often more productive and more likely to remain with the organization.

Improved recruitment and organizational attraction
Aon Consulting’s 2008 Benefits and Talent Survey identified talent recruiting, selection, and retention as areas of increasing importance over the next three to five years. Virtual work has quickly become a key differentiator in attracting and retaining key employees. Even in a down economy, retention of key employees and recruitment for select positions will remain competitive. A successful virtual work program can be a key competitive advantage.

Moreover, in today’s housing market, organizations are increasingly reluctant to commit substantial assets to relocate employees. Additionally, employees do not want to move and sell their own houses at discounted prices. A virtual work arrangement allows organizations to significantly increase their recruiting base, as recruiters are not constrained to a specific geographical area.

Organizational and environmental sustainability
Virtual work programs also support corporate sustainability initiatives. By reducing real estate needs, organizations save on space and fixed costs such as energy. The environment benefits as well, with reduced carbon output, gasoline usage, and highway congestion.

Overcoming Barriers to Implementing a Virtual Workforce

Maximizing the return on a virtual workforce is contingent upon a planned, long-term commitment to remote employees. Achieving lasting organizational benefits depends upon anticipating and addressing the hidden costs of virtual workforce management. Unexpected costs can substantially mitigate the net benefit of any organizational restructuring, including a virtual workforce.

Strategies for Success

Deploying a proactive human capital management strategy for newly staffed or transitioned workers in these arrangements is critical to ensuring a successful immediate and long-term return on investment.

Effective elements in implementing a virtual workforce include the following:

• Determining your organization’s readiness to accept a virtual workforce.
  
• Identifying jobs that lend themselves to remote work.
  
• Selecting employees who can work remotely.
  
• Managing the virtual workforce.
  
• Ensuring that workers operating remotely are engaged.
  
• Establishing policies for the virtual work environment.
  
• Developing a change management and communication strategy.

These elements are discussed in more detail in The Reality of Virtual Work: Is Your Organization Ready?

 

For more information on selecting and managing virtual workers, contact Chad Thompson at chad_thompson@aon.com or 248.936.5448 or Pat Caputo at pat_caputo@aon.com or 212.441.2176.