Hybrid work has flourished largely because of public health concerns and employee demands for flexibility — and seeing an economic downturn as increasingly inevitable, employers continue to embrace such arrangements with cost savings top of mind.
In a survey of 250 CFOs, the global flexible workspace firm International Workplace Group (IWG) found that 82% see hybrid work as a way to cut their expenses. With more than one-third (36%) predicting a recession this year, nearly all those polled (97%) say they are cutting or planning to cut costs by more than 10% annually.
As their transition to hybrid work continues, more companies are reducing their office footprint, with fully half of CFOs surveyed by IWG already opting for short-term leases or shared workspaces. Recently, Airbnb announced it would sublease 150,000 square feet of space it occupies in San Francisco, just days after it said it was giving up another 301,000 square feet in nearby Santa Clara. CEO Brian Chesky moved the company to fully remote last spring.
“CFOs are always trying to manage finances and reduce unnecessary costs – especially at times of high volatility, and we’re certainly in one of those at the moment,” said Mark Dixon, founder and CEO of Swiss-based IWG, which has more than 3,300 locations worldwide and counts companies like Disney, HSBC and Microsoft as clients. IWG has committed to adding 1,000 new locations in the next year to cater to the growing demand for hybrid work setups, notably in suburban areas.
According to IWG, more than half of CFOs (53%) relate that their employees have come to prefer a hybrid model, with 87% saying it provides cost savings for staff at a time when the cost of living is on the rise.
Dixon said another reason more companies are moving toward hybrid work and reducing their real estate commitments is sustainability. “Companies have to adapt the way they run the business,” Dixon said. “The better companies are doing it and have been able to manage their business as well or better than they could before, with half the cost and half the footprint and with their people happier. … It takes time for these changes to come through.”
As someone who has held the CFO title three times in her career, Amy Spurling, founder and CEO of the Boston-based employee perks and rewards platform Compt, is used to money matters, having navigated, for example, the 2008 financial crisis. “Planning for a down market is something that is always in the back of my mind, even during good times,” she said. “If there is one thing the pandemic taught us, it’s that you really can’t predict when the market will shift nearly overnight.”
She agreed that hybrid and remote work and reducing office space are important ways businesses can control expenses, but pointed out that the vast majority of capital spent in a company like hers is on headcount. So, being mindful as to what would necessitate the need to add to the team and when to slow hiring is critical.
“Far too many venture-backed companies get pushed to hire as fast as possible following a capital raise,” she said. “This adds risk to the business and doesn’t take into account that there is much that needs to be learned about overall product-market fit. By investing in experiments and tests, you are better able to hire just in advance of a growth phase so that you’re well-staffed but not overstaffed. This reduces the likelihood of needing to make cuts to the team if the experiments don’t pan out.”
IWG’s survey revealed that in addition to cutting back on real estate, companies are also cutting personnel to save money, with 44% of CFOs introducing forced redundancies. They are also slowing the onboarding of new staff, with more than one-third (36%) reducing new hires and a similar number (33%) delaying them.
Jeff Mains, CEO of the business consultancy Champion Leadership Group in the Dallas area, offers the following advice for business owners looking to curb expenses with a downturn looming:
Getting rid of unnecessary overtime is the first step in cutting operating costs. “Even though a few hours of overtime here and there might not seem like much, when multiplied by a large workforce, they soon add up,” Mains said.
Contracts are a great place to look for long-term cost control measures if your company works with a wide range of third-party vendors. Contracts that span multiple years tend to be written in the supplier’s favor, so switching to annual bidding could help you save money on purchases.
Practice flex work:
For businesses with extended trading hours or irregular working times, flexible work schedules can help mitigate overtime while also boosting employee morale and productivity. “The key is to evaluate the current workload and personnel, identify the most important tasks, and fill open positions with the right people at the right times,” added Mains.