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Workplace flexibility demands are often associated with younger workers, but new research finds senior staff are more likely to quit over return-to-office (RTO) requirements, suggesting imposing of such mandates may be costlier for employers than previously thought.
The battle over workplace flexibility has been largely framed as a standoff between lower-level workers demanding remote and hybrid work, and senior managers, who are keen to bring staff back to the office. A new study, however, found that RTO mandates were more likely to result in a loss of senior staff, which could change the calculus for employers setting those policies.
The study, which was led by University of Michigan economics PhD candidate David Van Dijcke, drew on resume data from People Data Labs to examine the distribution of employees across the workforce and how it changed after the RTO mandates at Apple, Microsoft and SpaceX.
“We constructed a sort of ‘Frankenstein Microsoft’ by taking a bunch of large tech companies that did not return to the office, and used their workforces over the same period [to compare against],” he explains. “Our Frankenstein mimics what would have happened to Microsoft if it didn’t [force a] return to the office.”
When comparing what happened to the real Microsoft, Apple and SpaceX with similar tech worker populations that were not subjected to RTO mandates, Mr. Van Dijcke found that the general population remained relatively consistent, but that there was a significant change among senior staff. In fact, the stricter the mandate, the greater that change was.
At Microsoft and Apple, which required staff to return some days a week, there was a 4-per-cent reduction in the distribution of senior staff. SpaceX, which enforced a full RTO policy, saw a distribution shift of 15 per cent.
“I personally thought we would see junior employees, who graduated during the pandemic or studied remotely, demand more flexibility,” Van Dijcke says, adding that there was no statistically significant change in resignation rates among the general worker population after RTO mandates were announced. “There wasn’t a general attrition that managers could easily deal with; it seems the managers themselves, the senior employees, are leaving, and that creates a different class of problems.”
Those resignations represent a higher cost to employers, according to Mr. Van Dijcke, because tenured staff have more institutional knowledge, making them valuable to the firm. Studies also show that the more senior or specialized a staff member is, the more expensive they are to replace. That extra value, however, also makes it easier for them to leave, as they’re more likely to land on their feet.
“It’s easier for them to leave and get a good job, so it’s not just about preferences, but about options,” Mr. Van Dijcke says. “When we looked at those who left after the RTO mandate … we don’t find any evidence that they’re going into unemployment more often or accepting demotions.”
Instead, Mr. Van Dijcke says they’re more likely to land a new job with the competition, further adding to the cost of their departure.
“There is a body of literature that shows firms explicitly engage in these ‘learning by hiring’ practices, meaning if they want to gain expertise in something, they simply steal away an employee from a competitor,” he says. “This isn’t just a big loss in terms of human capital, but it could pose a competitive risk as well.”
In fact, the study found that former Microsoft employees were more likely to land a job at competitor firms like Meta, Snap Inc. and Intel. It’s important to note that the researchers used employee data from April of 2022, when post-pandemic RTO mandates were first announced, and before the wave of layoffs that hit the tech sector later that year.
The study also found that simply announcing an RTO mandate had an impact on senior staff resignations, even if those mandates were delayed or watered down later, as was the case at Apple.
Mr. Van Dijcke says the research doesn’t advocate for flexible work, but rather helps employers understand the full costs of their RTO policies.
“We’re not concluding which is better, but we document a new, potentially very harmful side effect of return-to-office policies,” he says. “It’s a risk, and it seems like an underappreciate risk, with potentially very costly side effects.”