Has flexible working scuppered corporate success?
Google's former CEO has blamed working from home for the company's AI struggles. Does he have a point? And how is the ne generation of spaces luring, rather than forcing, people back to the workplace?
Eric Schmidt has well and truly set the cat amongst the pigeons.
Last week, the former Google CEO cited flexible working as the reason behind the search engine’s struggle to keep up with competitors in the AI race. And he pulled no punches. It was, in his own words, a blunt delivery.
“Google decided that work-life balance and going home early and working from home was more important than winning,” he told students in response to a question from a professor about how the tech giant has lost the lead in AI to start-ups like OpenAI and Anthropic.
“The reason start-ups work,” he added “is because people work like hell…I’m sorry to be so blunt. But the fact of the matter is, if you all leave university and go found a company, you’re not going to let people work from home and only come in one day a week if you want to compete against the other start-ups.”
Schmidt probably didn’t think much of his comment at the time. A seemingly off-the-cuff remark to a clutch of students on his perceived cost of Google’s flexible work policy, it even raised a ripple of laughter around the room.
But 10 days, millions of views and viral status later, it’s clear that far from being throwaway, his words have landed - with quite some force - right in the middle of the ongoing workplace debate. They have also, quite understandably, not been well received by Google or its parent company Alphabet. As well as reportedly asking for the video - which has since been made private - to be taken down, Schmidt subsequently backtracked on his comments stating “I misspoke about Google and their work hours. I regret my error.”
I’m sure he does.
I would argue it has actually proven to be a pretty useful error for the real estate sector and wider world, though - cracking open a simmering, toxic debate that needs to be properly aired.
The question of where we should hang our occupational hats has become one of the biggest and longest-running deliberations to emerge out of the pandemic. For one of the best-known names in global business to openly claim that working from home and a greater focus on work-life balance has, in his opinion, negatively impacted a major company’s performance moves the debate to another level. From widespread outrage to shows of support, the reaction sparked by his words has revealed just how dramatically this debate continues to divide opinion.
So, does Schmidt have a point? And how are businesses the world over turning to high-quality, human-centred design to lure, rather than force, people back to the workplace?
Dangerous presumptions
Setting aside his reference to Google - that’s for the powers that be there to take up with their former CEO and, if the speedy apology is anything to go by, they wasted no time - Schmidt made two points in those now infamous twenty seconds that really struck me. First, that companies are suffering as a result of flexible working policies and second, the insinuation that people who work from home do not work as hard as those in a traditional workplace.
The problem with these sweeping statements is that they tend to look at a complex situation - in this instance the case against flexible working - through a single lens without the balance of a sturdy counterargument. For all the risks and downsides, perceived and actual, of a company-wide focus on work-life balance, there will be plenty of benefits. More on that later.
Schmidt’s assertions are also based on a potentially dangerous presumption. Many people have responded to his comments suggesting numerous alternative reasons for Google’s AI struggles, none of which relate to the businesses flexible work policy. In the absence of any solid evidence in either direction, companies need to beware of automatically assuming that shifts in workplace dynamics are the culprit for major, or indeed minor, corporate problems. Failure to do so could result in other, unrelated issues going unexplored and unresolved.
Not only that, there is no way of reliably proving or measuring claims like Schmidt’s on an individual, employee-by-employee basis. You will get people who are supremely unproductive in the office and those who are far more effective working from home, and vice versa. You will also get people who are unproductive, or indeed productive, wherever they are - an immediate spanner in the data works.
Even more pertinently, you will get people who are more effective in an office environment some days and better placed to work at home on others – a pattern usually dictated by the type of work they are doing on a day-to-day or week-to-week basis. It is this pattern that largely forms the foundations of the modern, flexible approach to work.
It is an approach, by the way, that was building momentum long before the pandemic thanks to advances in the technology required to work effectively from home, or anywhere else away from the traditional office for that matter. An enforced period of near universal remote-working simply proved it could be done on a global scale.
For many people this way of work gave them a glimpse of a world they hadn’t previously imagined possible. Careers and opportunities opened up - or back up – for people including working parents and carers thanks to the innate flexibility that came with widespread home-working. And while I don’t advocate a continuation of such an extreme approach, I do believe there is a lot to be said for workplace cultures that embrace a healthy work-life balance.
It remains hard to prove whichever way you look at this debate but it seems reasonable to suggest that people who want and need to work flexibly will be more productive and more likely to stay within a business when that flexibility is granted because they are happier, less stressed and better able to handle the day-to-day requirements of their role. Therein lies some of the benefits mentioned earlier; staff retention, talent acquisition and, a big one, inclusivity.
As for whether Schmidt has a point, in relation to Google specifically I don’t think there is any real way of reliably commenting one way or another, especially from an outsider perspective. More generally though, I can’t get on board with what he said given the lack of balance to or evidence for his argument.
Neither can I see how comments like this are going to stand in the way of a widespread evolution that goes way beyond Google’s flexible work policy. Apart from anything else, if the future of the workplace isn’t flexible, the people designing and developing the next generation of corporate spaces didn’t get the memo.
A fundamental rethink of the modern workplace
Despite a rise in mandated calls back to the office, the truth is that the way we work has changed whether the Eric Schmidt’s of this world like it or not. Not only that, occupier, tenant and employee demand has never been more powerful. “Post-covid, working patterns shifted forever,” says Martin Devine, head of the flexible offices advisory team at commercial real estate services firm Avison Young.
“When people were asked, or forced, to come back to the office there was a global voice, particularly among Gen Zs and Ys, that said we don’t feel comfortable with that.” It has become clear, he adds, that rather than a rejection of offices outright, that voice more often represents a rejection of offices that don’t meet modern expectations.
The result will be a “fundamental rethink of the modern workplace” to reflect those demands, he says. “You have to compete with the commute,” he adds.
The two major future of work trends currently dictating the success of modern office spaces and buildings are flight to quality and an increased demand for flexibility. What people are really looking for is a combination of the two.
This has not only resulted in a fresh focus on delivering office spaces that better meet modern occupier demands but has also sparked a major maturation of the flexible offices sector. We are no longer in the WeWork era. Instead of free beer and ping pong tables, modern flexible workspaces are now more likely to feature artisanal on-site bakeries and marble island units. Not only that they are increasingly being incorporated into traditional office portfolios, elevating their status even further.
The 51-storey 8 Bishopsgate in the heart of the City of London is a prime example. Launched last year, it is already nearly fully let despite tough market conditions. This is largely due to developer Stanhope’s focus on high-end design and materials, a non-negotiable commitment to sustainability and turning over 10% of the building over to amenity space. Proof that the flight to quality adage is an accurate one. The building is also set to become home to standalone flexible work provider Huckletree this Autumn when the company will take 75,000sq ft in the tower.
And Stanhope isn’t the only one shifting more attention towards this new, mature iteration of flex office space. UK-based developer Grosvenor plans to convert a fifth of its UK office-stock - around 300,000 sq ft - into hospitality-led flexible space and London-based Great Portland Estates has an ambitious target to deliver 1m sq ft of flex space across the UK capital.
Derwent London, the developer behind some of London’s most iconic office buildings including The White Collar Factory and The Tea Building, has taken the incorporation of flexible workspace even further to meet changing occupier demands. The introduction of two private members-style clubs in their portfolio – one in west London and the other east - not only puts flexible working at the core of their company-ethos, it shifts the role of the developer from space provider to lifestyle curator.
The two lounges, DL/28 in the East End and DL/78 on Charlotte Street in the West End are much more in line with a private members’ club than a traditional office space. Free to enter for anyone within the portfolio, they are the ultimate modern iteration of flex space. They can both be used as a workspace, a meeting point or just somewhere to drop in for breakfast, lunch or a coffee. Members are able to bring a guest and larger rooms allow for meeting and event organisation.
The whole point, says Kane Lewis associate on the leasing team at Derwent London, was to “create spaces that reflected changing occupier demands while simultaneously keeping commercial workspace at the heart of the strategy”. Proof that with the right outlook and openness to pivot, there is success to be had as an office developer in a world where the future of offices have been called into question.
Edging out
None of this is new. The lure of decent, high-quality flexible workspace has been delivering the goods for some real estate companies for years. Dutch developer EDGE famously managed to bring swathes of staff back to its central Amsterdam office by May 2020, just two months post-lockdown, due to its already in-situ flexible workspace offer bolstered by the right (also already in-situ) air-quality and occupancy reporting technology.
So, why wasn’t everyone delivering workspaces at this level back then? The simple fact is that, for a long time, the incentive to take on the additional costs of developing or redeveloping a building to such a high specification just wasn’t there. Now, supercharged by Covid and the post-pandemic shift in the way we work, it most definitely is. The key is to find a way to be on the right side of occupier demand before it’s too late.
The human experience
And so, to Schmidt’s comments one final time.
It’s fair to say that whether people leave early or work from home is not explicitly linked to this evolution of modern, flexible workplaces. You could, quite feasibly, have employees working in a flex space five days a week not leaving a millisecond before contracted.
But what this trend demonstrates more widely is a focus on staff as people. People who not only want certain things out of places where they work but who have lives outside of their careers. A flexible, human-centred space goes a long way to promoting a flexible, human-centred culture. A culture that more and more companies are prescribing to. Not just because it makes them look good, but because it attracts - and retains - the best talent and rewards them with a happier, more productive workforce.
Evidence to prove his point or not - and for now there is little to suggest much in the way of the former - when Schmidt said that Google cared more about work-life balance than winning, I can’t help but feel he rather missed the point.
Emily Wright is a real estate and technology journalist contributing to titles including WIRED, GQ, The Spaces, The Evening Standard, The Times and The Telegraph. She spent 12 years of her career at EG where she worked as both tech editor and then head of content. She has interviewed major players from both within and outside the property industry including Zaha Hadid, Sidewalk Labs' Dan Doctoroff, Lord Richard Rogers, Daniel Libeskind, Donald Trump and Sir Terence Conran.
Emily is now head of content at CREtech where she specialises in curating content and interviewing speakers from across the built world with a focus on innovation and sustainability. She is also a freelance journalist, contributing editor, moderator and keynote speaker focussed on design, development, cities, innovation and ESG.
