Hybrid working could deliver productivity gains from staff retention alone, report claims

Hybrid working could deliver significant productivity gains by helping organisations retain employees, recruit from a wider talent pool and preserve institutional knowledge, according to new economic modelling from International Workplace Group (IWG) and Arup. The analysis estimates that improved employee retention associated with more flexible working practices could be worth $204.7 billion to the US economy and £10.8 billion to the UK over five years. Retention represents the largest potential source of productivity gains identified by the modelling.

The research argues that reducing employee turnover has economic benefits beyond cutting recruitment costs because organisations also retain experience, knowledge and productive capacity when people stay. IWG and Arup estimate that reducing disruption caused by the loss of organisational knowledge could contribute $65.5 billion in productivity gains in the US and £5.7 billion in the UK over five years.

Improved talent attraction could contribute a further $98.3 billion in the US and £6.5 billion in the UK, according to the modelling, while efficiencies in recruitment and onboarding are estimated at $9.4 billion and £600 million respectively.

Separate research cited by IWG suggests flexibility is also becoming an increasingly important factor in recruitment. Some 81 percent of chief human resources officers surveyed said hybrid working was important for retaining top talent, while 86 percent identified flexible working as the benefit most sought by prospective employees.

The company also claims hybrid working has become the most commonly cited strategy among employers competing for technology workers. Some 37 percent of business leaders surveyed identified hybrid or flexible working as a means of attracting tech talent, compared with 35 percent who cited competitive pay.

Nearly three quarters (72 percent) of business leaders said flexible working was important for attracting younger leaders, while 78 percent believed organisations offering hybrid or flexible arrangements have an advantage over employers that do not.

The findings add to the debate about the relationship between working location, recruitment and organisational performance as employers continue to reassess workplace policies introduced or expanded during the pandemic.

IWG argues that giving people greater choice over where they work can widen employers’ potential recruitment markets by reducing geographical constraints, while also helping organisations retain existing employees.

The research also considers the potential interaction between hybrid working and artificial intelligence. Four in five CEOs surveyed by IWG said combining AI with hybrid working increased employee productivity. Around 60 percent of US workers and 68 percent of UK workers surveyed also said AI was improving their experience of hybrid work. The figures are based on economic modelling and IWG research rather than observed economy-wide productivity gains, so the projected values depend on the assumptions used about the relationship between flexible working, recruitment, retention and productivity.