By Peter Mastrantuono
Investors use a variety of criteria for identifying good investments. Among the common ones are sales growth, profitability, brand recognition and current valuation. With the radical transformation of work brought on by the pandemic, investors may want to begin evaluating a company’s adjustment to this new work paradigm as a new input into their investment decision-making process.
Accommodating a New Work Model
The idea of working from home (WFH) is not a new issue confronting companies; it’s been a topic of discussion since the advent of the personal computer and internet. Pre-pandemic, the idea of working from home was not always well received as many employers found it hard to manage and measure worker productivity outside the office. Famously, Marissa Meyer, the then-newly installed CEO of Yahoo, ended the practice in the belief that employees work best when they share the same central office.
The pandemic-induced WFH experiment has illustrated that companies can manage just fine without employees all being in the same place, thanks to newer technologies, like the cloud, video conferencing and employee communication and collaboration tools.
In fact, some studies show that the WFH arrangement may confer a number of tangible benefits that drop right to a company’s bottom line, including:
- Higher productivity that have led to an increase in output of 4.4%.
- Higher quality results, with 40% fewer defects.
- A 41% lower rate of absenteeism.
- An average reduction in employee turnover of 12%.
- An average increase of 21% in profitability.
Of course, WFH is not an unalloyed benefit to companies or their employees. There are challenges that cannot be ignored. For instance, while a WFH arrangement may be advantageous to experienced workers, new employees’ learning is stunted by the fact that engagement with older, more experienced workers is limited.
Another consideration is the adverse impact of a dispersed workforce on developing and maintaining the corporate culture. Though its effect is less quantified at this point, it could result in less collaboration and innovation.
Finally, there is the employees’ mental health aspect to consider. One of the consequences of WFH is that individuals often feel like they are working or on-call 24/7, leading to the sort of stress that can result in illnesses and burnout.
Getting It Right
While it’s hard to know what the future of work will look like, the consensus does suggest that it is likely to be one that integrates working from home and time in the office.
Achieving the right balance will be a difficult task. According to PwC, a consultancy, there is a disconnect between employers and employees as to the number of days working from home represents the optimal balance; these differences even exist between men and women workers.
Companies that find that proper balance may be positioning themselves to achieve higher margins and attract and retain a more talented workforce, resulting in higher stock valuations.
Of course, a company’s WFH policy can never be the sole investment criterion used to make an investment decision. Finding companies with sustainable growth potential depends on a number of other important factors, and working with an experienced financial advisor can help investors build a well-diversified portfolio that incorporates these exciting opportunities.
Peter Mastrantuono is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Peter worked for over 30 years in the wealth management industry, focusing on retirement planning, investing, asset allocation and financial planning.