Does Location Still Matter For Talent Management?

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When the coronavirus pandemic is “over,” what will become of remote work? For some 1.25 billion knowledge workers, this question is significant. Coronavirus caused a mass migration from offices to kitchen tables, cities to suburbs, New York to Florida, and California to everywhere. Only a quarter of the remote employees surveyed by JLL, a real estate company, want to return to the office full time.

So, does location still matter for talent management?

By necessity rather than choice, CHROs are running a massive remote work experiment, the results of which remain unclear. Maybe location autonomy has little or no impact on productivity, as 800 employers attested early in the pandemic.

However, location does affect three critical areas of talent management: international experience, organizational culture, and diversity and inclusion (D&I). How CHROs address these issues in the post-COVID world may shape their organization for decades to come.

International assignments and experience remain critical to C-suite progression

Bill Gates recently predicted that 50% of business travel will disappear in the post-coronavirus world. Apparently, he’s heard about Zoom too. However, travel for international experience remains essential. Most people do not become a C-level executive at a multinational company by working from their kitchen table for 20 years.

People who run multinational organizations need to understand the cultures of their employees. Even if teams in San Francisco and Shanghai both work for one brand espousing one set of values, they do so in different cultural, legal, and political contexts. These differences are extremely difficult to grasp without in-person experience, which is surprisingly rare and valuable.

Executive recruiters certainly share this view. Robert Half’s CEO Tracker reports that 59% of Australia’s ASX 200-listed CEOs have international experience. At the 100 largest companies in Europe, the percentage of CEOs with international experience grew from 60% in 2006 to 66% in 2016 according to DHR International. When Russell Reynolds surveyed board members at Canada’s 100 largest companies, 77% ranked international experience as an important criterion in CEO selection—yet only 37% of current CEOs had such experience (up from 25% two decades ago).

Academic studies suggest that international experience affects performance. Among S&P 500 companies, having a CEO who worked abroad correlated with increased corporate social performance. Another study linked international experience to positive effects on strategic change and firm performance—and the more international experience the CEOs had, the more of a performance bump the researchers found. In China, a CEO’s international experience is associated with higher IPO valuations and superior post-IPO performance.

Sure, businesses may send employees on fewer business trips, but international assignments will remain critical to developing C-level executives who can lead multinational firms effectively.

Unless CHROs deliberately build remote cultures, training and development may suffer

During the pandemic, many organizations have saved costs by closing empty offices. Companies like Slack, Square, and Twitter announced that their employees can work remotely forever. Siemens became the first major German company to introduce a remote model. Its 140,000 employees can work remotely two to three days per week. But remote work policies will interfere with attracting, developing, and retaining talent if they’re not executed well. I say this as the Chief Strategy Officer of a mostly-remote organization.

A fresh graduate can learn many of the basic tools of investment banking and management consulting (Excel & PowerPoint) remotely, but facetime is invaluable. How else do new recruits build meaningful connections with their colleagues (how many friends have you made over Zoom)? Who do they lean on as challenges arise? Who will answer their “silly” questions without judgement? The community and mentorship that make some firms successful risk breaking down.

Think back to your first career. Mine was in management consulting, and it would have been far less valuable had I spent those eight years at home with a laptop. Instead, my peers and I developed the Oliver Wyman work ethic late at night around a hotel lobby table and boxes of pizza, cranking away at tight deadlines. We learned the nuances of client engagement by listening to conversations between our boss and clients. Certain things are learned by seeing, listening, and doing. There’s no substitute for being there.

I say that with a caveat: all-remote cultures, most famously GitLab, overcome a lack of in-person time through a culture of documentation. With 1,300 employees spread across 65 countries, GitLab has gained unparalleled access to diverse talent. Their Remote Manifesto offers insight into how it works. Consider four of the ten bullets:

  • Writing down and recording knowledge over verbal explanations.
  • Written down processes over on-the-job training.
  • Public sharing of information over need-to-know access.
  • Opening up every document for editing by anyone over top-down control of documents.

That is the opposite of how most organizational cultures work. But if you can’t stroll down the hall to ask a coworker what their email actually meant, you need a culture of sharp writing and open access to documentation. All-remote work has drawbacks, as GitLab readily admits. Not all companies or employees are cut out for it.

For most companies, the best approach will be a hybrid model combining in-office and remote days. That doesn’t require a fancy corporate HQ in San Francisco. Regional satellite offices, near where employees actually live, might serve better.

Diversity and inclusion can suffer—or benefit—from remote work

The coronavirus pandemic has taken a disproportionately heavy toll on women and people of color. In the United States, for instance, more than 2.2 million women left the workforce between February and November according to the National Women’s Law Center. By forcing women out of high-paying, leadership-track jobs, the pandemic may erase decades of progress towards gender equality at work. As of December 2020, 9.1% of Black women and 8.2% of Latinas remain unemployed, compared to 6.1% of all women in the U.S. Pandemic-driven remote work has not helped their situation.

Too many women are overburdened with childcare, chores, and supervision of remote learning, and their male partners are not sharing the burden equally. A report from the Brookings Institution illustrates how intractable this problem could become. Even if women could return to work, their salaries may not cover the U.S.’s exorbitant childcare fees, which exceed 7% of the average income in every state.

CHROs could exacerbate or mitigate this loss of diversity depending on how they manage location. The first task is to bring local women back into the workforce, which means HR needs to rethink (or create) childcare benefits. If, for instance, childcare was provided on site—but no one is working on site anymore—then HR should adopt a system that funds childcare wherever parents seek it. Because many parents are supervising children who would normally be in schools but are too old for childcare, companies need to support flexible hours. In many knowledge jobs, it doesn’t matter what time of day work happens, as long as the result is of high quality.

At the same time, remote work offers opportunities to improve diversity and inclusion. If no one is required at the office, then companies can recruit skilled workers from more diverse cities and universities where they lack a local footprint. In addition, companies can hire talent in foreign countries with complementary time zones. South America, for example, shares time zones with the U.S., which makes it a natural fit for American companies that value real-time collaboration. Similarly, European companies can recruit remote talent in Africa. Whereas manufacturers tend to offshore labor to the east and west, knowledge firms should be looking north or south.

One reason to hire international women where they are—as opposed to requiring relocation—is that mothers can remain tapped into family and community networks that assist with childcare. Having someone who can drive your child to school or watch her on a late work night is vital.

CHROs have an opportunity to cultivate diverse talent and leadership by leaning into remote and hybrid work models. Software now solves the tax and compliance challenges brought on by distributed teams.

Location still matters

Although the pandemic has accelerated the shift toward remote work, I still firmly believe in the importance of location. Corporate boards will continue to favor C-level executives who have worked abroad and know how to build thriving businesses in foreign cultures. New recruits will continue to benefit from in-person training and bonding with their peers and mentors. Organizations will grow more diverse if they support mothers near home and seek new talent pools across state lines and international borders.

Again, businesses embraced remote work out of necessity, not choice. It was a jarring experiment, and the results may not be known for years. Digital communication never killed off the value of geography, travel, and place, and neither will COVID-19. Location still matters.

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