Yahoo’s telework ban smacks of another decade

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Ever since Yahoo Inc. CEO Marissa Mayer last week had Human Resources issue a ban on working from home, we've heard a lot about work-life balance and how disappointing it is that a young, female leader seems to have made the issue such a low priority. Fair enough, but the lady's job (now that she is back from that two-week maternity leave) is to increase the profitability (and presumably the stock price) of Yahoo, not to blaze a trail for working parents. The real question is, in an economic sense, will the "everybody back to the office" directive be a good one for Yahoo?

Employees were understandably incensed, which is a clue that it might not be a good decision. Unhappy people are less productive than happy ones, no fancy economic studies required.

Then again, a clutch of academic studies on the subject have uniformly found that employees working from home typically work as much or more as those at the office. As well, a report from from Cisco Systems Inc. , hardly a touchy-feely company, found that the allowing telecommuting was saving the company $277-million (U.S.) a year. As to the commentators who have noted that there is a lot of opportunity to goof off at home – well, that makes me wonder if they have ever worked in an office. The opportunity to play Solitaire during a work day is pretty universal wherever you are.

The Yahoo memo, however, does not suggest that workers were not working at home – merely that the company could get more out of them if they were at work, side by side with their colleagues. There is a grain of truth in that argument. If workers are never in the same room, they miss the chance to share ideas.

"Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meeting," reads the memo from HR head Jackie Reses "We need to be one Yahoo, and that starts with physically being together."

Ms. Reses' phrasing might reek of painful corporate-speak, but I believe she is referencing something economists call an "opportunity cost" – basically what is lost by choosing one option instead of another. In the case of Yahoo, the opportunity cost of allowing employees to work outside of the office is the chance for those impromptu meetings and the increased productivity that they bring.

It is hard to measure exactly how much that is worth, but it is not zero. In the midst of the debacle surrounding the Boeing Dreamliner, several commentators noted that by outsourcing bits of production all over the world, Boeing missed the opportunity to have different producers share notes, and that this hurt the final product.

Yahoo is not flying planes, but there is something to be said for ongoing collaboration. You can argue that the absolute productivity of employees is higher at home than at work when it comes to doing their own jobs, but that the total sum of productivity – equal to their own narrowly defined work plus the "extra" that comes from collaboration – is higher when everyone works together. That seems to be what Ms. Mayer is thinking.

The thing is, one would think that an effective company would be able to capture both sides of the equation by having people work at home but have to show up for regular meetings, or Skype in daily, or whatever. Having everyone show up every day, just because, seems to skip a couple of decades of technology, and send everyone back to the days when women who wanted to be taken seriously were expected take two-week maternity leaves.

Linda Nazareth is the principal of Relentless Economics Inc. and a senior fellow at the Macdonald Laurier Institute