About This Case

Closed

30 Oct 2008, 11:59PM PT

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14 Oct 2008, 10:40PM PT

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ROI On Digital Nomads

 

Closed: 30 Oct 2008, 11:59PM PT

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We're looking to get insights into how individuals and the workplace are changing due to an increasingly "mobile" workforce -- thanks to things like widespread laptop and mobile device usage, as well as wireless connectivity. These days, "working" no longer means "being in the office." People and employees have truly become "Digital Nomads." Over the next few weeks and months, we'll be hosting a series of cases exploring different aspects related to this new mobile workforce. Dell is sponsoring the conversations here, and the best results will be placed on a site sponsored by Dell: http://whitepaper.digitalnomads.com/. The content may later also be added to a whitepaper and a wiki on the subject. While Dell is sponsoring the conversation, the content is vendor neutral. Just provide your insights on the question at hand.

We all know that more employees are becoming Digital Nomads, but from a business and IT perspective, how do you determine if this is a net benefit or a net loss?  Do you do anything to measure the specific ROI of having a dispersed workforce?  If so, how are you measuring it?  What have you found?  What would make it easier to determine the ROI of having a distributed workforce?  Basically, we're looking for any discussion that can speak to the ROI (good or bad) of having a workforce made up of Digital Nomads.

16 Insights

 



The best ROI on digital nomads applies when you take strong performing employees that can work anywhere and allow them to do so.  These employees generate two kinds of new ROI from their mobility:

1.  They are able to better utilize resources that your company may not have available at a specific physical location to complete their jobs in the most efficient way.

2.  They are able to take advantage of services that save you money by not using your services at a specific physical location, meaning your overhead for those employees is reduced. 

These two steps can help to balance out a 100% digital nomad population where some of the other employees are not as productive. 

A common misconception with digital nomads is that they would not get anything done while away from the office environment.  While there is the potential for "goofing off", if there are clear project goals, then it should be clear whether or not work is getting done no matter where employees are located. I have worked at many locations where phyiscally present employees did hardly any work, and yet they were allowed to remain in service, so work must be done to address why underperforming employees of any kind are allowed to continue drawing a paycheck before digital nomads are blamed for lack of a work ethic.

Finally, being able to work without as many work-related interruptions is a huge benefit for many employees, and while there are a lot of interruptions at home, there may be even more distractions at work.  Since work-related distractions can have a vague scope and demand attention on the fear of being blamed for not working, the distractions at work actually tend to cause more of a dent in the work day vs. distractions where people know they aren't being paid to address, i.e. personal distractions at home.

Measuring ROI on something like a digital workforce begins with good benchmarks. Put simply, you will never know the return on an investment unless you already have good insight into measurable quantities that characterize your workforce, both mobile and fixed.

For instance, you could measure the ROI of having a dispersed workforce by measuring any or all of the following qualities:

  1. Productivity: Is your business creating more or less widgets per employee per year?
  2. Job satisfaction: Are your people more or less happy that they're working for you?
  3. Employee retention: Are your skilled employees sticking around longer, or are they reading want ads and jumping ship to your competitor?
  4. Creativity: Are your mobile workers -- freed from the stultifying environs of a cubicle -- being more innovative?
  5. Cost: Is it rising or falling per unit of work? 
All of these are valid measures, but all depend on one thing: valid benchmarks. You don't know if costs are rising unless you already have good insight into your operations. If you don't know how productive you already are, you'll never be able to know --- really know -- whether your mobile workforce is making you more productive or less.

So, first task: come up with three to five metrics that really define your business. You probably already know what those metrics are; if you don't know, figure them out.

Second: take as much time as you need to come to a clear understanding of where you stand, right now, in terms of these metrics. Maybe you already have that data at your fingertips, maybe you need a few months to compile them. Don't make any structural changes until you have a clear view of where you're starting from.

Third: open the door to a mobile workforce. (What's that you say -- your workforce is already mobile? Well, that's not ideal, but you can make do -- just focus your analytics on the segment of the workforce that has not yet gone mobile.) Test and measure against your three to five benchmarks. Prepare reports. 

Fourth: Adapt. The reports, and the metrics that inform them, tell you where things are working and where they are not. Fix the problems and let the successes continue to prosper.

Fifth: Continue to measure, tweak, and measure again. Then pat yourself on the back: you're managing your mobile workforce and maximizing its ROI.

What investment are you talking about measuring the return on? To measure the ROI, there would have to be an investment which was specific to making people mobile. However, the only investment needed to make workers mobile are laptops, VPN, Internet, and mobile phones. And that is part of the daily work portfolio anyway. So what investment do you want to measure?

The underlying assumption is of course "there will be more costs since I can not monitor my employees". Well, there are a number of sources - from popular books like "the four-hour work week" to serious studies by national research agencies - that people actually become more productive when they are not micro-managed, but can control their own work. Of course, if you change the management philosophy and the work situation and the same time, it is impossible to tell which had which effect. But generally speaking, it will always appear like people are more productive when they become mobile workers.

Those who already are mobile, especially those who travel a lot on business, have no choice. Here, the cost can be significant, though, unless there is free Internet access in the hotel, or you travel in the same country so you escape horrendous data roaming fees for 3G. But any mobile road warrior has been through the same tricks, and knows the cost of not being connected is much, much higher than the 25 euro per day that Swisscom charges in some hotels, for instance. They tend to look for the cheapest connectivity options, because they know how important it is. And the hotels are starting to catch on (although here is a real issue, that not all hotels have, or charge outrageous fees for in-room access). But they are already covered in the measurements of the investment - the cost is part of the travel cost which is part of the standardization budget, or budget for product development, or whatever. The measurement is already in place and there is no specific investment, and the ROI is known and sufficiently high - otherwise, they would not be doing it.

So the simple answer is: Keep using the same measurement methods. There is no specific ROI on mobile workers, because there is no specific investment.

The only thing that has changed is that people are not in the office as often. There are, of course, companies who have tried having less office space by using "hot seats" (not everyone has their own desk), but that generally makes people feel homeless for real. And a small cubicle is not a big investment, even if it is empty most of the time (if it is, you have other problems with the finances of your company).The important thing is to offer people a choice. For some, going to work may actually mean a break from a messy home situation, so it may mean more productivity. For others, it is the other way around. And for those who travel a lot on business, there is no choice.

One issue is that in some countries, the home workplace has to fulfill legal standards. But that investment can be covered by the employee, if there is a need for an investment. Generally speaking, letting someone work from home if they do not have space for it is a bad idea anyway. And in that case, the employee can be responsible for the cost. Or it can be a part of the employment benefits.

So on the whole, there is no specific I to measure the R on. Just keep measuring the productivity of people as usual. It will go up.

Assuming your IT services are currently sufficient to support a mobile workforce, enabling a mobile workforce is not a question of calculating your return on investment as the majority of a company’s investment will be in the form of defining policies and procedures for this new class of worker.  It is more of a measure of the Total Cost of Ownership or in this case, the Total Cost of Employment.  This would be the fully burdened cost of an employee including facilities and equipment.  
By creating a mobile workforce, your primary reductions will come in the form of overhead.  You will be able to reduce the cost of facilities due to few employee’s requiring office space, multiple phone lines, electricity, water, etc. and through the reduction of administrative and governmental overhead such as Insurance, taxes, physical security, facilities management, etc.  With a well aligned IT strategy, you could further reduce equipment costs by increasing hardware lifecycle at the same time increasing your data and network security posture.
Beyond the financial TCO aspects, you also have the human element; the intangible benefits of providing a more flexible work environment.  With rising gas prices, inflation, cost of living, and the blurring line between work and personal lives, allowing an employee to work from home has enormous qualitative benefits.  The employee reduces their gas, maintenance, and vehicle insurance costs.  They are able to reclaim 30 minutes to 2 hours plus of their life a day by not having to commute and a reduced stress level for not having to deal with rush hour traffic.  All of these things contribute to higher employee satisfaction which in turn creates higher retention.  From a hiring perspective, working from home can be viewed as a benefit as many employers do not offer such programs.
With all choices, there are negative aspects as well.  Management will require new skill sets to understand how to effectively manage a remote team.  Explicit efforts have to be made to build community and team work.  Being away from the office can mean some IT related issues are not able to be resolved as quickly or easily which results in extended downtime.  Depending on policies, some employees may feel some jealousy regarding those employees who do not have to come into the office.  The most common concern is if the employee is not able to be seen, they have more opportunity to ‘goof’ off.  On this specific point I disagree.  I have had several traditional employees who spent as much time and energy figuring out how to get out of work as it would have taken to just do the work.
The bottom line is just that, look at the bottom line.  Try to devise ways that you can reduce costs by allowing your employees to work from home instead of trying to quantify why you should allow them to work from home.

With any employee there are questions of return on investment.  The two components of the calculation is the income, what people are producing, and the outgoing, the cost of having individuals decentralized and working from the field

Measuring what people are producing does not vary greatly whether an individual works in an office or from the road or home.   There is an assumption that because an employee works in an office and can be observed, that they're doing their work and being productive.  The opposite is true of those who are nomads.  There is the assumption that because they're not being observed, that there is ample opportunity for slacking off.  Both of these have some truth, however, ultimately how we measure an employee's work is by productivity. 

Project management theory focus' not only on the the product but the process, and identifying measurable steps in that process.  In order to measure a digital nomad's work it is important to have agreed time frames and short term goals.  Maintaining good communication with in house employees and nomads is imperative. Whether this is completed by e-mail, telephone, video conference or in person depends on the needs of the industry, project, and individuals.  For industries which don't have a project focus, but are service delivery orientated, there are other metrics which can be used to measure productivity, such as billable hours, contact hours, or units sold.

Measuring the cost of digital nomads has two components. There are the cost savings by having a worker decentralized and additional costs compared to office based employees.

  • Office Space: Saving on rental or purchase of office space. 
  • Heating, Cooling and Electricity: With fewer office based employees, and less floor space, heating cooling and electric costs are minimized could mean a substantial savings to a large business.
  • Equipment: This can be an area of either savings or cost. Though not working in an office, thus saving on equipment there, individuals may need the equipment in their homes to work effectively.
  • Insurance: If the customers are being seeing their homes and offices rather than your business' office, liability insurance premiums are reduced. 
  • Personnel: More and more employees are looking for flexible work spaces and schedules. Providing this to digital nomads can translate into happier employees which means more productivity and less turnover resulting in significant recruitment and training savings.
  • Travel: Having employees spread out over large geographic area allows employees to be closer to the work rather than having to travel which results in reduced travel costs. This also has the added benefit of better customer service by having better local knowledge and greater face to face contact with your customers. 
  • Technology: Digital nomads would require a different set of tools to be effective in the field versus in the office. Rather than desktop computers, they would require laptops which traditionally have a shorter life.  They may require remote access to files stored on company servers, wireless internet access, and mobile phones and accessories.

Having a mobile workforce means exploring what productivity means to you as the employer and having clear communication of goals and progress.  The benefits of having digital nomads outweighs the costs. It can lead to reduced infrastructure costs, better connections with customers, and happier employees.  All of which are cost savings to the employer.

This may not sounds politically correct but much of what we've experienced in this era of portable workers is while it's great to talk about productivity and satisfaction from the employee's point of view, much of the ROI for the business comes from lowering overall overhead and displacing some of that onto the employee. 

I think it's important to look at the ROI from 2 points of view: the worker's and his employer's.

Employer's point of view

office_meetingI recently had a gig with an internet firm which began as a completely distributed workforce.  There wasn't even a home office.  We managed our time, our teams, and our tasks completely remotely.  From an employer's point of view, this kept costs bargain-basement low.  Since everyone worked from home, the firm was spending almost nothing on office space.  I ran biz dev so I traveled (but no more than i would have working from a traditional office space).  There was not even a secretary on staff.  No corporate bloat.  The product of this experiment was that the firm stayed lean and mean and was able to reach profitability very quickly.

How was an interent startup with a growing staff able to do this within a year?  I think it's because this model inherently pushes out a lot of the costs onto the satellite employee in return for not requiring him/her to commute to a central office.  While phone, computer, and travel were paid for by the firm, very little else was.  We all had a shared mission to keep costs down by keeping bare-bones expense sheets.  While not all firms would encourage digital nomads to eat certain expenses like we were, I have the feeling that this is occuring a lot.  Even just logistically, employees working on a super-long leash receive less support, not more.  At some point, the mobile worker stops fighting for more and just works around the situation.  While many companies may treat their long distance employees better, I tend to think that this is generally the case.

Firms employing digital nomads are able to lower overhead tremendously.  Frequently this comes in the form of contract employees kept just under the threshold of full-time employment.  So things like healthcare and retirement benefits are skimped on. Some of this type of work is offshored currently, but the point is that firms are lowering their costs by displacing them onto the workforce.

Worker's point of view

Increased flexibility leads to increased productivity

Much work has been done to illustrate the increased feedback loop for workers working on flex-time and/or telecommuting.  Having worked for years as one of these types of employees before jutting out on my own, I feel like I know the benefits and detractions of this lifestyle very well.  As a father of five who values quantity (and quality) time with my children, being a digital nomad allowed me to craft my day around breakfast, carpool, and homework time.  digital_nomad When I was in work mode, I was in work mode.  No watercooler breaks, no silly meetings, no shmoozy lunches.  I was in the zone.  I had to be in order to ensure that I completed the tasks expected of me and more.  To measure this, we used shared hosted apps (like Salesforce.com for my sales pipeline and Google Docs Spreadsheets to monitor other outbound activity).  My boss was able to peer into my work processes whenever he wanted.

The downside of all this though is that this lifestyle is very hard to balance.  Because I didn't have clear delineation at-work/at-home times, I felt that I was working in fits and starts from the time I woke up in the morning until I went to sleep.  If a client calls with an emergency during a piano recital, you've gotta take the call sometimes and if a boss wants to vent on you during kids' bedtime, well, that happens as well.  While mobile apps and smartphones allow a truly mobile workforce, there are definitely drawbacks to the mobile lifestyle as well that affect productivity. 

Working from home, I also received less fringe benefits (see above).  I end up eating a lot of my own costs.  I sort of feel like this is a trade-off: in return for being able to work at my own discretion, I have to give something up.  But isn't that true of everything important in life as well?

Unless specific technology upgrades are necessary to mobilize a workforce, no investment is required. Most business people are mobilized by smartphones and laptops regardless of whether they regularly commute to an office. So instead of 'investing' in a mobile workforce, business owners can cut costs by allowing employees to work remotely. Office space, supplies, energy required to power and heat an office, and employee parking discounts are all removed from a company's overhead when employees are digital nomads. Here you have a net gain.

Responsible employees who accept accountability for the work they perform will save time by not having to travel to an office everyday. The average commuter spends at least an hour traveling to and from the office each business day. In an 8-hour day, this is a savings of 12.5%. Here you have another net gain.

Net gain + net gain = no brain(er)!

I telecommuted for more than three years, and was the only successful long term telecommuter in my company (admittedly, a LONG time ago!). Here are my experiences. I was able to verify the accuracy (from the company's standpoint, as well as my own) of the following:

1. Telecommuting saves money for everyone; but the real expense to the company,salary, is not changed, and the real expense to the employee, maintaining and improving your status, tends to be negative due to office politics (which, being absent, you will lose ground with). Even so, expense is not a "biggie" for anyone.

2. Since the employee saves in commute time (and less important, but real, in cost of preparation for work), the employee needs to "level the playing field" by keeping half the gain, and returning half to the employer. My commute was about 2-3 hours, so I regularly put in an extra 1.5 hours (average) for my employer. This resulted in a "win-win", and the employer fairly quickly realized what I was doing. Meanwhile, I had an additional 1.5 hours or so a day for myself and my family.

3. The worst part of telecommuting is SELF-DISCIPLINE! I am convinced that only one in about five employees have what it takes, and since you aren't at the office to explain (assuming you could) or to protect yourself from politics, most people who try it lose big-time! If you have the self-discipline (I had a big sign on my home office door; "I AM AT WORK! DO NOT DISTURB!" - I meant it), it can be very rewarding (the biggest reward is learning to discipline yourself, by the way!).

So, telecommuting - digital nomad - not for everyone, not even for very many!

Today's knowledge worker increasingly expects workplace flexibility as a standard part of the employment contract. It may be explicit, or it may just be implied. However the days of everybody being in the office at 8 AM are gone, and they are not coming back. Ordering the entire distributed workforce back to the office in most situations will probably result is an immediate wave of resignations, and reduced productivity from the rest as they spend their time looking for jobs. Neither is likely to be good for ROI. And if it is, that probably points to a serious recruiting issue at your company!

If we accept that distributed workforces are a fact of life, then measuring the return is no different than measuring the return on any other employee. Employees are paid to do a job. Whether it is sales or writing code, mature companies probably already have standards in place to measure those issues. The distributed employees shouldn't be under different standards just because they work from home or coffee shops. It comes down to being results focused, not activity focused. If your sales rep has a $1 million quota, and he regularly meets or exceed it, should you really care how he spends every minute of his day?

Company wide, there are several areas where companies can look for returns associated with a distributed workforce. Although there are quantitative benefits available, I think a lot of the ROI associated with a nomadic workforce is more qualitative in nature.

Fixed Costs: Digital nomads don't consume office space, parking places, HVAC or any other expense associated with every employee being in the same place at the same time. Office consolidations and closings due to the growth of nomadic employees can certainly be quantified.

Salary: Can you pay nomadic employees less? Certainly a home based employee in Omaha NE will probably be satisfied with less salary than somebody doing the same job in San Fransisco. It's a simple cost of living issue. Also, the lifestyle benefits for nomadic employees (no commute, being home for dinner, ability to make the school play at 6 PM, etc) are clearly valuable to employees. Given two otherwise identical jobs, I think many of us would happily take 5% less in salary to be a digital nomad versus enduring the commute and office lifestyle for the same work.

Turnover: Are digital nomads less likely to change jobs? Studies have shown that work location flexibility is an important factor in job satisfaction, and satisfied employees are less likely to jump ship.

Personal productivity: Are digital nomads less likely to take a sick day? Personally, I don't think I have ever called in sick when working from home. If I'm well enough to sit on the couch and watch TV, I'm well enough to sit in front of the computer and at least keep up with my email. It might not be my most productive day, but it's not a total loss either. Also, a recent HR World article suggests that telecommuters are more productive than their office bound coworkers. This is due to less distractions, meetings, and less commute related stress. The same article also reports that flex time workers (which is a step in the direction of a digital nomad) exhibit healthier lifestyles. It probably doesn't matter if you sleep in or exercise during the time you would be commuting if you went to the office. Either is healthier than sitting in traffic!

In summary, the question to ask is "Are we as a company better off today" and then look to both quantitative and qualitative factors for supporting data. Some of it will certainly be traceable to your distributed workforce. However, the distributed workforce is not really optional anymore, and it's going to continue to become even less optional.

 

Many businesses today have staff working from home, and they reap significant benefit from this. Facilities costs disappear, workers spend extra hours working rather than commuting, and they can draw on a larger talent pool since they are not limited to the immediate vicinity of their facilities. But what is the ROI for the digital nomads themselves?

Commute Time

The United States Census Bureau reports that the average American office worker spends 100 hours each year commuting to work, and that some workers in some cities spend much more time than this. This time is not subtracted from work hours, however. Instead, workers must rearrange their private time to allow them time to drive or ride to the office. I know of many workers who leave their homes before 7 AM or return after dinner to avoid traffic, causing them to miss out on valuable family time.

So-called digital nomads get this time back. Their commute typically consists of a walk up or down a flight of stairs. The time savings here is incredible - it is the equivalent of an extra two or three weeks of vacation each year! They also avoid the stress of driving in rush hour traffic, finding parking spots, and rushing to catch trains or elevators.

Transportation Cost

American workers are also expected to pay their own transportation costs to and from work. The Internal Revenue Service guidelines allow workers and businesses to deduct the cost of unusual transportation from their income for tax purposes, but they cannot do this for commuting to a regular place of work. The high cost of fuel, insurance, and automobiles can really add up - driving 8,000 miles per year to get back and forth to work easily costs $1,000 for fuel alone.

Avoiding the commute puts this money back in the pocket of the worker. Insurance costs can be reduced with "low mileage" coverage, automobiles last (and retain their value) longer, and the risk of damage or injury from accidents is greatly reduced.

Lunch

When I used to commute, I had a friend who brought a brown-bag leftover lunch to work every day. While many of us would take in a Chinese buffet or try out a new sandwich shop, he sat in the "office kitchen" eating reheated pasta. I got to talking to him, and realized just how wrong my lunch habits were.

Let's do some simple math. An inexpensive fast-food lunch costs roughly $4, while a sit-down lunch at a restaurant generally runs $7 or more. Even subsidized on-site cafeterias cost $5 or more. Assuming one eats a mix of these just four times per week, the total annual cost is $1,100. Moving up to five $10 lunches per week puts the tab at $2,500. Add in a morning latte at Starbucks and the annual cost is over $3,000.

Again, this money comes entirely out of the worker's own pocket. Working from home, I generally make my own coffee and lunch, for an estimated daily cost of just $2. When I do go out to lunch, it is with my family or friends, and these meals have an intrinsic ROI that goes beyond money.

Expense It!

Of course, digital nomads spend a great deal of time away from home as well. I have traveled nearly 6,000 miles this year, visited 35 cities, and spent 88 days on the road. For a consultant like me, travel expenses are normally paid by the client, but since travel is, by definition, away from one's usual place of work, all expenses incurred are at least deductible from personal income tax.

This separates long-distance travel from commuting in a very significant way. Where the daily commute is a significant expense, business travel is often a financial wash and can sometimes be a net gain. Accrued frequent flier miles and hotel points can offset vacation costs, and the savvy traveler will ring up extra points from credit cards and frequent dining programs.

Negatives

But business travel is not as much fun as it sounds - the stress of catching flights alone is enough to make me hate it, and the time away from family and friends can be personally very costly. Although commuting subtracts a hundred or so hours from one's personal time, a single week-long trip eats up 75 hours of non-working time! My 88 days spent away from home has removed about 1,000 hours from my personal life this year alone, the equivalent of a decade of commuting.

The digital nomad also tends to absorb many expenses themselves that would otherwise be paid by their employer. A ream of paper or pack or printer ink, some notebooks and pens, extra mobile phone minutes, a spare phone line, upgraded internet connectivity, and other miscellaneous expenses can add up. Travel expenses are also often un-reported or not reimbursed, and waiting on expenses can cause credit card finance charges to pile up.

People often suggest that one's home office can be a tax deduction. While this is true in theory, it is often not possible in practice. The deductible amount for a home office is a percentage of the total cost of the property, and this often is not sufficient to justify itemized tax returns, which is a prerequisite. Although I have worked from my home office for nearly two years, I have never been able to deduct its cost.

Conclusion

Those who work from home often see large benefits, both financial and personal. But these are offset somewhat for the true nomad, who travels long distances for work. Additionally, there are many social issues to be overcome when working away from the office, as discussed in other posts in this series. It is not an easy choice, but we all should consider the personal ROI.

The meaning of the word 'workplace' has become fluid like never before.  Instead of representing a specific building, it has come to represent wherever the worker is when they are doing their job.  Is having a remote workforce a benefit or a cost?  Like so much in business, the answer may depend on what you count as a benefit or a cost, and how you count it.

Even a junior accountant should be able to identify the impact of mobile working on basic cash costs.  Benefits to the business are measured in reduced overheads related to the dedicated corporate buildings.  Some examples would include: reduced rents as the business can operate from smaller facilities; reduced expenditure on furniture, fixtures and fittings as staff need fewer desks; reduced costs for heating and lighting; and a reduction in ancillary costs like physical security.  On the flip side, the business bears the extra cost for the equipment, services and support that enable remote working.  This will include at least the laptops and handsets needed for the job, the cost of the telecommunications services to connect people, and the hardware and software to support remote connection.  Incremental costs like laptops and cellphones need to be netted against savings in desktops and desk phones.  It may also be necessary to assess the cost of going beyond the minimum needed for remote working.  For example, the company may pay for or subsidize the purchase of furniture for home offices, the provision of printing and photocopying equipment or services, and the increased use of mail.  Over the last few years, the shifting balance in basic cash costs has encouraged a trend towards mobile working.  Equipment and communications costs are falling whilst technology keeps getting better.  Meanwhile, traditional costs associated with buildings, like electricity, look set to keep rising.  However, not all of these trends need continue as before.  For example, a recession will likely lead to reduced commercial rents.  Whatever the trends, a business needs to look at more than just the basic cash costs when evaluating whether to change its working patterns.  Though these are easiest to measure from an accounting perspective, they will not tell the whole story of how remote working impacts the business.

All businesses need to manage their risk, but few businesses factor risk into their assessment of the costs for mobile working.  This is unfortunate.  Risk is hard to evaluate, but that is why it should be evaluated.  Mobile working can greatly change the dimensions of risk for a business.  For example, there may be less risk of an interruption in business with a distributed workforce.  A distributed workforce may be able to continue unaffected when a central location is rendered inoperative due to a fire or flood.  This in turn may reduce costs related to insurance or to business continuity planning.  On the other hand, there will need to be adequate planning and investment in backup resources for communication and access to common data and applications, in case access to the primary resource is interrupted.  There need to be contingencies for every eventuality that may affect the remote worker, from the loss of a server at a given location to the need for redundancy throughout network connections.  Distributed working will often mean remote access to data, with an implied security risk.  Poor security risks both corporate espionage and the legal and the reputation damage caused by any violations of customer confidentiality.  To offset this requires an up-front and ongoing investment in security to deny access to unauthorized users and minimize the impact if data is lost.  For example, data models should be designed to limit the need for staff to work with remote copies of sensitive data.  Robust and secure protocols are needed for transmitting information.  Because laptops and memory sticks will inevitably be lost or stolen from time to time, encryption should be used to prevent the exploitation of the data stored on them.  Ignoring these preventative steps only increases the danger of that the business will be more severely and adversely impacted sometime later on.

Legal and regulatory responsibilities relating to mobile working are closely allied to the costs and benefits associated with risk.  Obligations vary from place to place, but any employer should carefully consider the potential for being held liable for what their employees do, and for what happens to them.  Remote working may change this dynamic.  For example, if an employee has a car crash whilst using a corporate cellphone, can the company be held liable?  Having a corporate policy that bars use of cellphones whilst driving may be a cheap and simple way to reduce the liability, but it may not be effective if, in practice, the company expected their employee to drive and take calls at the same time in order to meet deadline pressures.  Offering staff hands-free kit for their cellphones might be a better investment in the long run.  Remote working may also make it easier for employees to steal and abuse corporate resources, whether using the internet and other communications services for personal reasons or stealing commercially sensitive data by simply taking a laptop.  The company should seek to limit its liability in all the situations where mobile working may exacerbate the potential for misuse of corporate resources.  Similarly, businesses need to research their obligations for providing staff with a safe and healthy working environment, even if they work away from the office.  Again, it is worth noting that a legalistic or accounting approach to evaluating these costs may not be adequate to really assess the impact on the business.  Obligations may vary, and businesses may have differing views on whether these obligations impose a fair or unfair burden upon them.  Underneath the legal jargon, however, there will likely be some worthwhile motivation that the company should consider when assessing its own interests, as well as those of its employees, government and the community.  For example, what is the cost to the business of losing a valued employee in a car crash?  Is it desirable to have employees to be working from a home office that is not adequate as a working environment?  Putting a value to these considerations is much more difficult than the basics of bean counting, but no less important.

It is wise to avoid generalizations about where people work best.  Whilst many managers can offer anecdotes to support their opinions, an anecdote is not the same as scientific evidence, and many managers will be guilty of looking for examples that reinforce their existing prejudices.  In an office, there may be the potential for easier and more straightforward contact with colleagues, and it may be simpler to keep an eye on what people are doing.  On the other hand, conversations by the water cooler may add nothing to productivity, and an employee may be quietly sat at their office desk but only pretending to work.  There can also be many distractions at home.  Even being on a client's premises may be unproductive, especially if the client fails to provide an adequate environment, or if client staff are guilty of causing regular interruptions to work.  Tools to monitor staff behavior, like internet usage, are equally relevant wherever the worker is, although this kind of activity will not prevent workers determined to "goof off".  Ultimately, to assure productivity requires a commitment to manage by objective, and to the regular communication about progress between staff and line management, wherever they both are.

Some jobs, like sales or consulting, necessitate a workforce that is mobile and spends a large amount of time visiting clients or traveling between them.  There are obvious advantages to providing staff employed in these fields with technology that improves communication and enables greater productivity.  The staff will also appreciate any advantages, if it allows them to use their time more effectively.  If a few hours on a plane or train can be spent finalizing a customer's report, that can make it easier to hit deadlines whilst freeing time for home and family.  Similarly, the time saved not journeying to the office for routine administration tasks can be used for either work or play.  With roles that already necessitate work away from a fixed base, the trend to mobile working generates no additional fears about lack of supervision.  However, the benefits of using technology will generally be smaller, as most of the cost savings that can be attained through having a distributed workforce will have been realized already.  The potential advantages in mobility are greater when offered to staff who traditionally work in an office environment.  At the same time, there is a greater fear that the loss of supervision will lead to reduced productivity.  If mobile working is to be extended further, the challenge is for the business to find new and more sophisticated ways to monitor productivity.

Good management of each individual employee will help get the most out of a workforce, but that may not help with deciding whether greater mobility is an advantage.  In a larger company, with many employees doing essentially similar tasks, one sensible approach is to conduct a trial where mobile working is offered only to a small group.  Senior management can closely scrutinize the productivity of the trial group, whilst also learning lessons about the technology used and the impact on the employee's attitudes, approach and lifestyle.  At the end of the trial, management can decide whether the experiment was a success and should be rolled out more widely.  Trials will not be suitable for all companies, though.  In small businesses, management should hopefully be able to anticipate the likely impact on each individual employee, but should also be ready to quickly adapt their approach, or roll back their mobility program, if glitches are found or productivity falls.  In businesses where people perform a wide variety of differing tasks, it makes sense to pioneer mobile working practices with those departments that already spend most time away from the workplace, such as the sales team.  On a similar basis, it may be more appropriate to first offer mobile working to individuals with more creative jobs, as there will already be an expectation that these people need to be productive without being closely supervised.  In contrast, if the jobs being made mobile are relatively routine, it is worth first ensuring that there are already adequate measures of productivity before the ability to directly supervise staff is lost.  One way for management to review their own measures of performance is to consider how they would calculate pay if staff were paid on a piecework basis, or what key performance indicators would be included in a contract if the jobs were outsourced.  Whatever activity is being made mobile, an incremental approach is often wisest, even if this slows down the realization of benefits that can be measured in cash.  Experiences learned from a limited rollout will help put a value on factors that are intangible and hard to predict.  This experience is very useful for accurately forecasting the impact of further extensions of mobile working.

In the realm of modern management theory, it might be possible to interpret this question about the benefits of mobile working as really being about the motivation of employees.  For example, it may be that mobile working is expected to lead to improved results because of better staff retention, more flexible working hours, and a better balance between the pressures of home and work.  None of these advantages should be assumed.  Even if there are many positive reports about the advantages of mobile working, management are well advised to assess their digital nomads within a complete context of management data, including measures of financial performance, workplace productivity, and employee satisfaction.  Experience has shown that there is not always a correlation between how employees perceive their productivity and their actual level of output.  This means that management should resist the temptation to measure their digital nomads differently from others in the company, as the different measures used may obscure the impact of remote working.  Whilst listening to employee feedback about mobile working is important, it is just as important to ensure traditional performance indicators remain in place.  That said, there are a number of potential factors which may lead to net benefits for the company, some of which have been alluded to above: reduced travel, increased flexibility, and better staff retention.  The extent to which these affect the bottom line will depend on the circumstances of the business.  For examples who receives what benefits from reduced travel?  Is it the company (fewer parking places), the employee (less money spent on gas) or both sides that gain by eliminating the commute?  Does the increase in employee flexibility also lead to better customer service, or are customers sometimes adversely impacted?  When looking at retention, is the company is retaining its best people, or just the people that gain the most from remote working?

When all the numbers are collected, there is one final rule when trying to gauge if dispersing the workforce has a positive ROI.  Do not rob budget from Peter to pay for Paul's department.  In other words, do not move numbers around on a spreadsheet and only look at the ones that give the answer that was originally expected.  It may seem obvious that mobile working will help the business to reduce some of its overheads, like utilities, but those benefits will soon evaporate if unhappy employees expect more in their pay packet to cover increased domestic bills.  Ignoring the change in business risks that comes with a fundamental change in work patterns could ultimately cause the business to go under.  Time is money, and staff may be very positive about their increased flexibility, but have clear measures to ensure they really are doing as much work before.  Even if the worker response is good overall at the beginning, be careful to identify any individuals who are exploiting the change for selfish reasons.  Over time, slackers may breed jealousy amongst their hard-working peers, causing demotivation to spread.  Even if there are no slackers, be clear on how you know that and how you can communicate that to your (newly-distributed) team, as the suspicion that a colleague is not pulling their weight can be as damaging to morale as the reality.  Employees may get a benefit from the time saved in commuting, but be wary of the reaction that can be caused if this saving in time is entirely consumed by ever-larger workloads.  Finally, you probably will get more from your people if they like and appreciate each other, and for that to happen they will need to meet in person from time to time.  When first moving to mobile working, you can rely upon the relationships that already exist, but as new people join, you need a different approach to building a team ethic.

In the end, to measure the ROI on your digital nomads, you measure the inputs and outputs of your business, and understand how remote working changes them in many ways.  There are the straightforward and regular cash costs, the costs as calculated in terms of probability and risk, and the human costs.  Balance all the pluses and minuses against the products and services being offered.  Is quantity and quality going up overall?  What is the feedback from your customers?  Are you hitting or missing more deadlines than before?  Avoid generalizations, and take small incremental steps towards making a workforce more mobile, measuring the impact on ROI as you go along.  Of course, it will hard to separate the impact of mobile working from the many other factors that affect corporate results, but looking only at the numbers that are easy to measure may point the business down the wrong path.  Every employee is a unique individual.  Some will respond to mobile working better than others.  If you really want know the ROI of dispersing your workforce, first know how to measure the ROI of every member of your team.  Once you can do that, deciding if you should mobilize your workforce is easy.

There is no escaping the fact that people are social animals. For a few, communication through email and phone is sufficient to satisfy this need, but for most people, nothing can replace face-to-face communication.

For the mobile worker, this means occasionally assembling with coworkers - or, more frequently, visiting clients and customers. The large, unexpected costs will come from airfare and hotel stays when the customer base and workforce is distributed over a large geography. This can easily add $2,000-$10,000 per employee per month and can it certain circumstances severely reduce profit margin.

Productivity level, computer costs, rent, commuting time and cost are all additional factors, but when overnight travel is involved, all other costs are usually of secondary concern.

 

Tangibles and Intangibles of Digital Nomads

To gain good perspective on the ROI of digital nomads it's important to look at both tangible gains like reduced facility expenses and intangible factors like employee morale and the security of intellectual property.

The leadership inside many organizations has a tendency to focus on tangible benefits. That kind of benefit usually takes the form of numbers that are comfortable in their black and white symbolism. The problem with that approach is that it can often lead to shortsighted decision making and quickly lead an organization toward mediocrity or worse.

The table below illustrates the theoretical costs and gains realized from a set of tangible benefits. Values will scale to a cost of -100 to a gain of 100. This provides a model for discussion without the distraction of company-specific metrics.

Tangibles

View the table in html.

Now take a look at intangible benefits using the same scale.

Intangibles

View the table in html.

With this analysis, it's clear that the business is benefitting strongly by utilizing digital nomads, though individual organizations are sure to allocate valuations differently. This is simply a tool meant to provide clarity and direction.

 

In Los Angeles, where traffic congestion was almost a given, one of our most essential workers was in a car accident. Serious back pain prevented them from making their hour-long commute for nearly a month. But a laptop let them keep working for us full-time -- from home.

That's the secret ROI for mobile devices: they're lifesavers in situations that are unexpected. When an air duct malfunctioned and we had to evacuate our building -- several employees simply "went mobile," and worked the rest of the day on their laptops at home. It'd be just as useful if the building caught on fire, and even if there's an earthquake -- we're ready. All of our remote connections are made with a secure dial-up line, but some workers don't require a network connection. I remember one who even insisted that his laptop helped him beat traffic congestion. He's just pull over, grab dinner, and work on his laptop until the traffic on the highway died down.

Not only can happen sooner because of mobile devices. Sometimes mobile devices are the only reason that work is even possible. I remember being assigned to interview three executives who were always out of their office. But when they paid a surprise visit to our department, I was able to grab my laptop and do a quick question-and-answer session at the end of their meeting. It was the last day before our deadline, so without the laptop, we would've had to proceed without their input.

The biggest return from mobile devices comes in situations that are unexpected -- but there's other benefits that are less tangible. Employees are happier when they can work from home. It gives employers a crucial flexibility when a personal crisis comes up at home -- a family illness, auto problems, a child's doctor appointment, or even a personal day. Mobile devices help employees maintain a consistent productivity in the face of life's unpredictability -- but more importantly, it helps employers retain employees. It's a ROI that isn't measured -- the time that's not lost to train a new employee who's left for an work situation that's more flexible.

Converting to a largely remote workforce has a significant upfront cost, both in tangible ways (such as supplying remote workers with laptops) and intangible ways (loss of facetime, and time spent learning to adjust to the new work setup.) In most cases, however, the longterm ROI makes up for this many times over. When trying to determine ROI, there's 4 key factors to consider:

1. Costs - What costs will the conversion encur?
2. Savings - What costs will be saved?
3. Profit Increases - What's different about having mobile workers that will increase profits, and how much extra profit will result?
4. Profit Decreases - What's different about a nomadic workforce that decreases profits, and how much profit is lost as a result?

Ultimately, of course, if the savings and profit increases exceed the extra costs and profit decreases, then your ROI on the conversion is worth it. Let's examine each of these in more detail.

Costs
There are actually surprisingly few direct costs. Mainly, you need to provide everything necessary for a remote force to do their jobs. Forums, IMs, etc, can typically be set up at negligable cost, software for remotely using internal machines is usually pretty cheap, and there's probably not much else you need to provide a remote worker that they wouldn't normally have. The only major expense per employee would be providing a decent laptop for each - but there's a good chance you do this anyway.

Savings
There are a lot of small savings, but there's one huge one that stands out above the rest, and singlehandedly makes up for all of the costs many times over - office space. When a large portion of your staff is rarely or never on site, far less people need offices, and that means you can have a smaller building, saving a huge amount of money.

Profit Increases
There are MANY sources of increased profit as a result of converting to a dispersed workforce:

1. Larger pool of employees to draw from - When you're bound to an office, you mainly have to hire people within commuting range of the building, or pay to relocate the few who are willing to move to work for you. With remote employees, there's no such problem. Did you just find a guy that's an expert in a rare skill you need, but he's 12,000 miles away? This is no longer a problem.

2. More flexible schedules - You may not think of this as being all that great for your bottom line, but the simple fact is, not everyone works best during standard working hours, and given a choice, will generally choose a schedule that fits their natural cycle. Sure, this means you're getting work submitted at 4AM, but it also means people are working at their best ability, and in the end, that's means higher quality work, and therefore more profit from that work.

3. Happier staff - A happy employee is one who does good work because he actually wants to see the company succeed, rather than doing just enough to keep his job. When a worker gets to schedule his job around his life instead of the other way around, that alone makes a huge morale difference.

4. Better retention - This is really an extension of #3, but the more you like a job, the less likely you are to look elsewhere. Very new employees tend to contribute very little to a company, because they have to learn about both the company and the job. Employees who have been there several years, on the other hand, can get far more work done than the average employee, because they've learned all of the little tricks over the years, and they know your company inside and out. Therefore, the better you are at keeping people in your company, the more you're making per employee.

5. Lower per employee cost of operation - Since you can have a smaller office, you need less cleaning staff, a smaller kitchen, etc. Additionally, employees that aren't in the builiding aren't consuming electricity that you're paying for, aren't using office supplies, etc. Over time, this can add up significantly.

Profit Decreases:
Fewer things lower profits, but unlike costs, these cause your company to take a continuous hit, so they're important to look at.

1. Travel costs - If someone has to fly in to attend a meeting, your company of course has to pay for the trip. When your workforce is scattered around the world, this is likely to not only happen more often than normal, but be significantly more expensive when it does happen.

2. Loss of communication - It's often harder to communicate with employees when you rarely or never see them face to face. This can lower efficiency in collaborative work substanially, and because of that, this is probably the biggest profit reducer of a nomadic workforce. Thankfully, there are many ways to reduce the effect this has, because there are many ways to improve the overall quality of remote communication. Discussion of this is worth an entire article in itself, and indeed, many have already been written - this Insight Community case deals extensively with this issue.

3. Meetings are harder to run, and take longer due to not everyone being able to talk. This can be a significant issue, but thankfully, meeting software, as well as simple text chat programs, go a long way towards reducing this problem. Of course, a virtual meeting, regardless of the format, takes longer to accomplish the same results, so while this problem can be reduced, it cannot be fully eliminated.

The Bottom Line
Ultimately, while the initial costs of converting a workforce to telecommuters can be significant, and you will incur costs long after the conversion, in most cases, the savings of needing less real estate paired with the many sources of extra profit that come from not being tied to one physical location tend to make up for this by a large enough margin to be very much worth the change.

Of course, not every company comes out ahead, and you'll have to look for things that may limit your ability to get the full benefits of remote work, and may incur additional costs and profit decreasers. These vary from industry to industry, so you will of course have to apply your knowledge of what makes your industry unique. Ultimately, however, nearly all types of businesses can benefit from having at least some of their staff being telecommuters.

Digital Nomads:

As fixed office workers move into the growing legions of Digital Nomads it is easy to see how in theory ROI would improve as a result of the increased flexibility, decreased need for office space, improved morale, and other factors.    However these clear advantages must be balanced against the challenges faced by businesses with a mobile workforce.   Are your employees as productive remotely in environments that are often unsupervised?    Are your costs to maintain your Digital Nomads balanced by savings or productivity improvements?

To answer most ROI questions it's best to try to eliminate as many potentially confusing variables as possible, so a good initial approach to answering the question of ROI might be to task existing employees with the same jobs but allow them for *half their time* to work remotely, not check in to the office for extended periods, and work from home.   During this experiment measure productivity carefully in the two environments - office and mobile - and for most you'll likely see clear patterns emerge.

Clearly however personalities will matter greatly and it may be wise to experiment with various options to see which of your staff is best suited to the mobile work lifestyle and who will perform best in the office environment.

Our own experience as our travel websites grew to dozens of workers was generally that *closely supervised* workers were generally more productive than unsupervised though we had problems in the office environment (which was very open and relaxed) as well as when we allowed people to work from home.  

HP has an excellent series devoted specifically to the issue of improving ROI via a mobile workforce. They point out that the inexpensive availability of secure connectivity via wireless broadband, bluetooth, and other technologies has effectively freed up workers and businesses from the constraints of only a few years ago.

Obviously, some jobs lend themselves beautifully to working at home for companies far away - in effect a form of digital nomad "couch potato".  As FastCompany reports, JetBlue manages a large part of their reservations workforce remotely using mobile technologies.   Jet Blue has a cadre of working moms who use mobile technologies to book flights all over the system.    Highly skilled workers are available who might otherwise not be for office environments, and all that is required are broadband internet connections and phone which can be VOIP.   In this example the ROI is easy to measure as these workers are doing *exactly the same* tasks in our out of the office.

Summary:

Generally I would suggest that mobile workforce ROI will remain highest when you are dealing with highly motivated staff such as management and commissioned employees, and worst (in fact negative) when you are trying to "mobilify" employees who are generally just putting in their time.

Source links:
HP: http://www.hp.com/sbso/productivity/howto/wireless_improveROI/plan-it.html
Fast Company:  http://www.fastcompany.com/magazine/82/jetblue_agents.html