endowment effect

As organizations put plans together for returning to the office and whatever the next chapter of their business lives looks like, they are finding an unexpected barrier. Employees either don’t want to go back, or don’t want to work in the same way they did before the pandemic sent them home. What’s an employer to do?

This matters. A Gallup report indicates that if people believe their work can be done from home and they are made to go back to work in the office with no flexibility, there is a very real risk of disengagement and turnover. In fact, if the work can be done part or mostly remote, over 60% of employees seriously consider changing jobs.

Leaders I’ve spoken to are both concerned and confused. These folks were hired to work in the office. It’s not the company’s fault a disease made people go home for a while. Why can’t they just go back to the original agreement?

How the Endowment Effect is Impacting Decisions

There are two primary reasons people are digging their heels in. One cause is that so many people have realized their work CAN be done remotely, at least part of the time. They reported better work-life balance, a rise in (at least some forms of) productivity, and higher engagement scores.

The second reason is less obvious and far more insidious. Employers have been surprised that now that the initial crisis is over, people are resisting going back to what they’d already agreed to. In fact, they are willing to quit over it. The reason is something called the Endowment Effect.

By definition, the Endowment Effect is the notion that people are more likely to retain an object they own than acquire that same object when they do not own it. It also applies to non-tangible benefits such as flexible hours.

Essentially, this boils down to a simple point: Once people have been given a benefit or something they believe is a net positive (like working from home when they want) they strongly resist losing it. So, what is an employer or leader supposed to do with this?

What can employers do?

The first thing is to ask why you are asking people to come back. Is there a legitimate reason you want people to be in the same place at the same time? Concerns such as company culture, improved collaboration and brainstorming, and maintaining productivity should make you seriously think about how your company should work going forward.

The second thing is to recognize that the Endowment Effect is a real barrier to success. When there is an objection, what is behind it? Yes, it might simply be that people got used to not having to commute and working in their comfiest tee shirt. If you’re going into the office, you need to shower and wear grown-up clothes. Deal with it.

At the same time, you need to be realistic and open minded. Is the feedback you’re getting legitimate? If people are working when it’s best for them, not stressed about the commute, and they are engaged and doing good work, why are you forcing them to return?

How is this affecting you?

It’s entirely possible you’re dealing with the endowment effect yourself. Are you sure that being in the office together full time is the best solution to your team’s problems? Or do you miss the human interaction and the feeling of being the on-site boss?

As with so much in business, there’s a need to look dispassionately at what you want to have happen, what’s actually going on, and why.

As a leader and employer, it’s your right to have people work wherever you want. But is that the best answer? Are people simply resisting your desires out of selfish entitlement, or are there real benefits to a more flexible arrangement?

Your mileage may vary, but it’s important to separate the reasons from the excuses.


Wayne Turmel--The Remote Leadership Institute

Wayne Turmel
Co-Founder and Product Line Manager

Wayne Turmel is the co-founder and Product Line Manager for the Remote Leadership Institute. For twenty years he’s been obsessed with helping managers communicate more effectively with their teams, bosses and customers. Wayne is the author of several books that demystify communicating through technology including Meet Like You Mean It – a Leader’s Guide to Painless & Productive Virtual Meetings, 10 Steps to Successful Virtual Presentations and 6 Weeks to a Great Webinar. His work appears frequently in Management-Issues.com.

Wayne, along with Kevin Eikenberry, has co-authored the definitive book on leading remotely, The Long-Distance Leader: Rules for Remarkable Remote Leadership. Wayne and Kevin’s follow-up book, The Long-Distance Teammateoffers a roadmap for success not just for leaders, but for everyone making the transition to working remotely.

The latest book from Wayne and Kevin shows leaders how to design a team culture that has a one-team mindset and gets great results under hybrid-work conditions. You can pre-order The Long-Distance Team: Designing Your Team for Everyone’s Success now.

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