Some Shops (Quietly) Stick with Hybrid Work Policies

Hybrid work arrangements have helped some firms reduce their real estate costs, they say.

September, 2022

In the Media

Several high-profile companies, like Goldman Sachs and Morgan Stanley, have recently increased pressure on employees to spend more time in the office. But at other asset managers, hybrid work arrangements that have been in place for months or longer appear to be enduring, according to executives and spokespeople. And in some cases, the increase in hybrid work since the pandemic began two and a half years ago has dovetailed with cutting real estate expenses, perhaps reinforcing their commitment to increased remote work.

Invesco, Prudential, Voya and Wellington are among the firms that seem to be sticking with hybrid, even as others seek to increase the time that workers are in the office.

“[W]e have embraced this hybrid way of working, and that’s had an implication on the real estate footprint that we have as a company,” said Michael Katz, Voya’s executive vice president of finance, strategy and investor relations, at a conference last week. “Certainly, that’s been helpful.”

Some 95% of Voya’s employees “have the opportunity to work from home,” a company spokesperson said. “While we have therefore reduced space in several of our offices, we also continue to leverage our sites for collaboration with employees and clients.”
The firm has not publicly disclosed its real estate savings.

Such endorsements of hybrid work run counter to the stance taken by some prominent firms and executives.

Goldman Sachs, for example, recently dropped its vaccine requirement and other Covid-19 protocols, signaling that most remote work at the company is in its end days. Morgan Stanley reportedly also took similar steps in August. BlackRock, too, wants employees to work in the office rather than remotely, Chief Executive Larry Fink said last week.

Firms pushing their workers back into the office aren’t necessarily looking to end hybrid arrangements, said Jeanne Branthover, managing partner and head of the global financial services practice at DHR Global. Rather, they’re encouraging workers who have spent most of their time working from home to come back into the office.

Most asset managers shifted to predominantly remote work at the onset of the pandemic in early 2020, as local and state officials put in place shutdowns aimed at reducing Covid-19’s spread. The big question among many employees has been whether their firms would abandon hybrid work once Covid-19’s danger subsided.

Invesco disclosed in April that under its workplace strategy, its hybrid workers are expected to spend two to three days, on average, in the office. But employees have opted for the lower range of that requirement, spending an average of 1.8 days per week in the office, according to an internal analysis of employee behavior during the week of July 11. Some 84% of “contributors” had visited a North America office in the 30 days prior to July 18, while 91% of leaders had done so, according to the analysis, excerpts of which were viewed by Ignites.

The firm’s careers website states that it expects about 80% of its roles will be hybrid. Cutting real estate costs has been a major focus at Invesco over roughly the past two years.

Invesco Chief Finance Officer Allison Dukes said in April that Invesco was reassessing its real estate needs in light of the move to hybrid work. About 65% of Invesco’s $200 million cost-cutting campaign, launched in late 2020, has come from trimming property, office, technology, and general and administrative expenses, Dukes said in January. The costs are being taken out of the annual expense base. The firm exceeded its goal by $13 million in the second quarter of this year.

The company plans to reduce its Houston office square footage by 53% and has delayed the buildout of two floors in its new Atlanta headquarters. When firms can pare real estate costs also depends on when their leases expire, and how long those contracts last. Invesco’s operating leases had a weighted-average remaining lease term of 5.4 years during the year ended Dec. 31, the firm’s 2021 annual report says.

At Wellington, where employees are required to be in the office three days per week, the firm’s real estate budget as a percentage of revenue, or as a percent of total cost, has declined, said Chief Financial Officer Ed Steinborn. “[W]e’re using space much more efficiently, so if you look at the amount of usable seats per square foot, that ratio is improving over time,” he said. The firm plans to move to its first office in Manhattan and has increased its space in Chicago, but has shed space in Marlborough, Massachusetts, and Boston.

Prudential’s hybrid schedules vary by team, and the firm has not set a minimum number of days that employees are required to be in the office, a spokesperson said. “We continue to advance our real estate strategy in the U.S., which included consolidating our New Jersey locations into our Newark offices,” she said. “We are also downsizing and selling certain other properties around the country where our new hybrid working model allows us to have a smaller footprint.”

But firms have also signaled that their workplace policies could change.

Invesco’s careers website, for instance, notes that employees must live within a reasonable commute from the office. “Our ‘new normal’ will likely change over time,” the website notes. “We’ll test, learn and evolve our approach as we go.”

Franklin Templeton, which has advocated for flexible workplace policies, appears to be reevaluating its previous approach of not mandating a set number of days per week in the office. “Franklin Templeton is communicating with its employees around what a hybrid work schedule will look like going forward, taking into account company and individual employee needs,” a spokesperson said.

Since people are still getting Covid-19, the question is whether more people in the office on a regular basis will result in increased outbreaks, DHR Global’s Branthover said. If many employees get the virus, it’s unclear what impact that would have on firms’ planning and their approach to in-office versus remote work, she added. “The bottom line is, this is all changing,” she said.

Originally published on September 16, 2022, by Beagan Wilcox Volz for Ignites.

Stay Connected

Insights in your inbox