Remote, Back to Office, or Hybrid? 4 FP&A Challenges to Consider

The ongoing shift in the workplace, which has been nurtured by our ability to work remotely and the flexibility that companies need in order to cope with the unpredictable, has forced companies to rethink how and where they want to work: fully remote, return to the office, or hybrid work. Deciding which model fits their team best is a key strategic move, and it’s one that financial planning and analysis (FP&A) teams will have a crucial say in. There are, however, four important challenges that FP&A teams will need to tackle in order to provide the best support for their organizations. Let’s discuss them.

1. Understanding the shifts of a dynamic workplace

FP&As need to go beyond the numbers of their financial statements. In fact, they need to understand the trends that are shaping today’s workplace and the hurdles that a company may face if it opts to return to the office or go fully remote. In order to improve financial planning and deliver better insights, it is important for finance professionals to understand the implications associated with each option and the trends that are shaping the corporate world.

Based on data from various surveys, Nikodem Szumilo, Associate Professor at University College of London, and Thomas Wiegelmann, managing director of Schroder Real Estate, argue that there’s enough evidence that “most office workers actually want to go back to an office — but only two or three days per a week.” This kind of information should be taken into consideration by FP&As when measuring and forecasting things like productivity and retention rates.

Finance teams must understand the complexity that the various options in today’s workplace offer, as well as the fact that an option that suits employees best might not do the same for management. Finance can play a key role in making sure that both parties are happy, while also moving the company in a strategic direction.

Let’s look at this example: Many managers are eagerly looking forward to bringing employees back to the office to be able to physically keep tabs on their work progress. But if employees are rooting for a remote (or hybrid setup), it can be financed by a job to bring up tools like a project time tracker. Not only does this help managers have a better handle on their team’s work, but it also provides useful insight into business operations, finance, and daily decision-making.

2. Adopting a more strategic role

The modern finance department is rapidly moving from a transactional thinking approach to a strategic one. “The new operating model of finance recognizes the subject matter expertise of FP&A and its focus on delivering the best data for business decision-making,” explains Anders Liu-Lindberg, leading advisor to senior Finance and FP&A leaders.

Being able to meet that role will certainly be a challenge for many FP&A teams that are still solely focused on the transactional side of their business. Even if managing the cash flow is still an essential part of their job, finance professionals need to update their role within the organization. “The traditional roles of transaction processing and reporting remain, of course, but in an automated form that releases resources to explore value drivers in the business and move the focus to plan with an uninterrupted forward-looking view. FP&A is at the very heart of business decision-making,” argues Liu-Lindberg.

In terms of financial forecasting and financial planning, for example, FP&As should encourage their companies to truly understand where and how their employees would like to work. If they are able to gather and analyze such information, they will be able to better predict the amount of capital the company will need to invest in certain areas.

“If your organization is enforcing a strict back to the office mandate, you’ll likely need to plan for additional recruitment fees and training, as well as allowing for dips in productivity as you replace the people who inevitably resign,” argues Kevin Phillips, Founder, and CEO of idu Software. Considering this, if you are able to collect information about your employees’ working preferences, you will be able to forecast much more precisely.

3. Quantifying the impact of all the scenarios

Whether you are going fully remote, opting for a hybrid workplace, or going back to the office, this is one of the biggest challenges that FP&A teams need to face. In fact, in any of these scenarios, there are considerations to make from the financial point of view. According to Phillips, the following are the three things FP&A teams need to consider when quantifying the impact of each option:

Let’s review some of the practical costs that companies need to consider when opting for any of the three scenarios above.

Working from home 100%

If you decide that you and your employees are going to be working from home on a regular basis, “you need to account for mortgage and lease liabilities. What will it cost to get out from under a long lease agreement or to sell commercial real estate?” asks Janet Schijns, CEO of JS Group. Considering the crucial role that rent plays in any budget strategy, this is an important consideration to make.

Apart from lease liabilities, any financial planning needs to evaluate the remote setup costs that your employees may need. For those with a high-speed Internet connection, good hardware, and comfortable working space, things may be simple. However, for some other people, the remote setup costs could be steeper.

In fact, for “a telehealth provider or call center agent, you may need to cover VPN access, HIPAA-certified unified communications and collaboration licenses, secure cloud storage, improved broadband access, remote tech support, cyber insurance that covers risks associated with remote access and in some cases mobile devices and plans,” explains Schijns. On top of that, you may even need to reimburse some of your remote employees for the expense associated with their work.

However, going 100% remote work also offers some cost-saving benefits. Apart from not having to pay rent for a big office, the possibility of bringing remote hires into your team represents a good opportunity for saving money. “You can now hire top talent from anywhere in the world and pay them more than what they would earn locally, but less than what you’d have to pay at home. This is a win-win situation, especially for your salary costs,” argues Phillips.

Along those lines, FP&A teams must treat all the technological investment and organizational changes their companies adopted during the pandemic as an investment that favors the remote work option. The biggest cost of switching to remote or blended work is the cost of adapting to the new technology has already been paid. Nobody should commit to long-term remote work because they want to recover the sunk cost of moving online due to the pandemic. However, the pandemic irreversibly reduced the cost of switching to remote work and made this choice cheaper,” argueSzumilo and Wiegelmann.

Return to office

As we mentioned before, if you want everybody to go back to the office, your financial planning needs to consider the potential of facing resignations from employees who don’t want to lose the flexibility they gained during the pandemic. This will have an impact in terms of recruiting fees, training costs, and the additional perks you may need to offer if you want to persuade your top performers to stick with you.

Furthermore, any budget strategy designed around the option of going back to the office needs to bring into consideration some sort of investment in perks capable of compensating for the loss of flexibility and additional costs (e.g. commute, gas, lunches) that employees will need to pay when returning to the office.

Some companies are, indeed, already offering practical solutions to their employees. For instance, Bloomberg is giving its US employees a $75 daily commuting stipend while PwC in the UK is offering an extra £1,000 for commuters. “But these perks and stipends certainly don’t extend to all companies–meaning people are not only being asked to give up remote work but also spend more to do it,” argues writer Sophia Epstein.

The costs associated with healthy environments, however, are an element that should play an important role in the financial planning of any organization, and FP&As will play an important role in guiding companies in making the right investments. “More robust air filtration and newly installed outdoor spaces are among the items that will add to developers’ costs when more employees return. New cleaning practices may make those services more expensive, and landlords are offering new amenities to lure tenants back,” explains writer Julie Weed.

Providing this kind of guidance, however, can be a big challenge for FP&A teams that need to deal with top executives unwilling to incur those kinds of expenses. To tackle this, FP&A professionals need to quantify the potential effects of not implementing some of the needed structural changes. As stated by Nellie Brown, a health and safety specialist who provides training and technical assistance for New York State workplaces, “if you don’t spend money on upgrading your ventilation, you might be spending it on sick people.”

Hybrid workplace

Considering everything we mentioned about the two previous scenarios, it is easy to understand why a hybrid workplace has been embraced as the ideal to move forward by so many organizations around the world. While this model partly combines the disadvantages of the other two options, it fully combines the best of both worlds. For instance, with a hybrid work model, you will be able to improve your retention rate while saving costs on office space.

From the financial point of view, the reduction of office space is, in fact, one of the most attractive elements of a hybrid workplace. In fact, there is a broad consensus among CEOs that organizations will need less office space in the future. “This could drive significant cost savings in both operating costs and capital expenditures,” argue Deloitte managers James Griffin and David Asker.  

In spite of these benefits, finance teams should carefully assess all the pros and cons that come with this model. In order to do that, FP&As will need to analyze the data accurately, and this could be a significant challenge for organizations that are still relying on spreadsheets and lack automation and data collection tools.

4. Making a strong business case

Right now, the business case that CEOs and top managers are using to justify the return to the office gravitates around two variables: productivity and management. The rationale is that some employees are more productive when they work in the office. Plus, many leaders think having everybody at the office allows managers to monitor the performance of those employees more effectively.

The problem with this rationale is that there’s little evidence that supports such claims. In fact, there are numerous surveys that claim just the opposite. Because of this, one of the most important emerging challenges faced by the finance controller today relies on its ability to provide guidance in regard to the business case that a company uses to justify the return to the office.

If you want to make your case in terms of productivity and management, you need numbers that support those arguments and this is where an FP&A team needs to provide support. However, coming out with those numbers may be difficult especially if productivity has been sustained during the health crisis.

An opportunity to update your company

Not all FP&A teams will need to deal with the challenges we mentioned above. For some companies, the decision to bring their employees back to the office has been already made with hardly any single financial consideration other than a space cost-saving strategy. In a world where so many people are scared to death to lose their jobs and so many managers need physical control to legitimize their roles, companies have found little to no resistance when ordering people to go back to the office.

However, companies that are truly interested in improving their KPIs, building a healthy corporate culture, and saving costs through a well-defined budget strategy and financial planning, need FP&A teams that are strategic and able to quantify (with the right tools) all the possible options to move forward. By doing that, they will not only provide valuable insights into the organization, but they’ll also reinforce the business case that companies need to persuade employees to do their best. Meeting the challenges we mentioned throughout this article represents a great opportunity to update and prepare your company for the future.