Calculating the Hard and Soft Benefits of Telework

moneyFor years I’ve dealt with Six Sigma (process improvement) projects.  The one debate that comes up time and time again is around project benefits and what constitutes “hard” versus “soft” benefits.  I’ve now been engaged in more than a few of the same type of discussions when it comes to telework.  By now, you’ve heard of the many benefits of telework: increased employee retention, better work-life balance, decreased commuting, higher productivity, reduced carbon footprint, decreased real estate costs, etc.  But some of these benefits are more tangible than others.  Some you can quantify in dollar value and others may be difficult to quantify.

Let me start off with my definitions of hard and soft benefits.  Definitions may vary from organization to organization, but in the few I’ve been a part of, it’s generally consistent.  Hard benefits are those that directly tie to generating revenue or reducing expenses, can be quantified, and directly ties to the P&L.  If you work for a non-profit or government agency, a hard benefit should be easy to identify because it should align with a line item in your budget.  Soft benefits are either intangible, hard to quantify in dollar value, or represent some form of cost avoidance.

A quick example: you may be considering implementing a flexible work arrangement in your office place.  Through your research and benchmarking you feel that the new work arrangement will increase work-life balance, increase employee satisfaction, and decrease turnover.  All of these would be soft benefits unless you can translate them into a monetary impact.  Your Human Resource department may budget for talent acquisition (i.e. 3rd party recruiting costs, advertising, etc.).  Working with HR, you project that by retaining talent you can save $X in talent acquisition costs.   Now you’ve turned a soft benefit (employee satisfaction or decreased turnover) into a hard benefit (reduced talent acquisition cost).  If you can’t make this link, or if your organization doesn’t actually budget for talent acquisition, then the improvements remain a soft benefit.

Another hot topic is productivity.  No doubt you’ve heard about the productivity savings associated with telework.  Productivity is one of those benefits that could be hard or soft depending on how it is measured.  Let’s say you have a team of 6 people and you’ve improved productivity by 30% and the team only needs 4 people now to get the work done.  The team is now reduced by 2 (either they are let go or they go somewhere else in the business).  Or, if the team was producing product or service that generated revenue the 6 employees can now produce more which directly ties into additional revenue.  The productivity in both cases is a hard benefit because you either lowered your expenses (reduced headcount) or increase revenue (produced more products).

However, I typically see productivity gains touted in backroom or support processes and headcount is never reduced or reinvested somewhere else in the business.  For example, a customer service center improves productivity and can now handle more calls from customers.  The total number of calls handled may be hard to tie back to how much additional revenue you can expect even if management agrees with the concept that customer satisfaction ultimately drives future sales.

The bottom line is that if you want to consider something as a hard benefit you should see the direct impact to the P&L, income statement, or budget.  Ensure you include your local finance team when you calculate any financial benefits.  If they are uncomfortable signing off or reporting the benefits externally then it’s likely that you’ve identified some “softer” benefits.  This is not to say that soft benefits don’t carry equal weight, but from a reporting standpoint it’s important to know the difference.

Here is a list of some common benefits associated with telework (categorization is mine).

Hard Benefits

  • Real estate savings
  • Facility energy/maintenance  cost savings
  • Reduced travel costs
  • Reduced talent acquisition costs
  • Headcount reduction
  • Reduced employee relocation costs
  • Reduced IT infrastructure costs
  • Tax credits (in states where applicable)

Soft Benefits

  • Improved employee satisfaction  / greater work-life balance
  • Productivity
  • Reduced absenteeism
  • Reduced carbon footprint
  • Disaster recovery/continuity of operations planning

A couple of last tips or things to consider:  First, be careful of baking too many assumptions into whatever benefit formula or model you are going to use.  You could easily assume your way into complete fiction.   Also, be careful of distinguishing benefits to employees versus the organization.  I’ve seen a few telework calculators on the web and they are geared toward the personal benefits of telework (i.e. lower commuting costs).  These benefits are great, but the executives in your organization may not care compared to the savings delivered back to the business.

What are your thoughts?  Let me know if you have additions to the list above.


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