Are remote firms sacrificing long-term knowledge gains for short-term productivity?

Research from Natalia Emanuel, Emma Harrington, and Amanda Pallais highlights the tradeoff of being physically near your coworkers. Being close to coworkers enhances the development of skills and knowledge over the long term but may reduce output in the short run. The findings suggest working from home (WFH) offers mixed outcomes over varying time frames, with immediate benefits potentially undermining the long-term professional growth of employees. Some additional insights from their work:

• Increased Feedback: Engineers sitting near their teammates received 22% more online feedback (e.g. Slack), particularly benefiting younger and less tenured engineers. The pandemic and the shift to remote work significantly reduced the proximity advantage, making this feedback advantage largely disappear.

• Impact on Mentorship: Proximity enhanced both the provision and receipt of mentorship, with significant implications for female engineers who engaged more in both roles.

• Decreased Programming Output: Engineers, especially senior ones, produced less work when seated near junior colleagues, indicating a tradeoff between mentorship and immediate productivity.

• Career Trajectory Impacts: Proximity led to fewer early pay raises due to reduced output but resulted in higher long-term pay raises as engineers developed more human capital.

• Greater Mobility: Engineers trained in close proximity to their teammates were more likely to leave for higher-paying jobs elsewhere, suggesting that the benefits of mentorship extend beyond the current firm.

• Negative Externalities of Mixed Proximity: Having team members in different locations reduced the amount of feedback among co-located workers, highlighting challenges in hybrid team structures. The presence of just one remote team member before the pandemic reduced feedback among co-located workers.

• Gender-Specific Effects: Female engineers experienced more pronounced tradeoffs, receiving and providing more feedback when co-located but also facing greater impacts on their programming output.