Impact of Teleworking on Innovation

This study seeks to explore the relationship between high-tech firms, innovation, and the teleworking trend. Specifically, an examination of the high-technology sector in the UK is provided, followed by explanations of teleworking, innovation, and high-tech firms as they relate to the scope and focus of this study.  The above is based on published findings of empirical research and published reports.  This study then considers how teleworking has impacted innovation at the Intel Corporation, a leading manufacturer of semiconductors who allows employees in certain positions to telework part or all of their workweek.  Innovation and impact are considered at an overall corporate level, rather than at an individual level.

Findings of this research indicate that teleworking one to two dayseach week has no discernibly negative impact on innovation, and mayactually enhance innovation, provided systems to encourage andfacilitate innovation are in place.  Implications for organisationsentering the teleworking arena and the sector as a whole are followed by recommendations for high-tech companies and for future research.

Teleworking is a cultural trend in much of Europe and the Americas.  While it provides many plusses and a few minuses to theindividual teleworkers, its impact on organisations and particularlyinnovation at those organisations has not been sufficiently explored. This study seeks to consider the impact teleworking has onorganisations, specifically high-technology organisations, and theirability to generate, initiate, and implement innovative products,processes and administrative ideas.

A review of previously published findings related to teleworking,innovation, and high-technology is provided, covering these topics ingeneral.  The focus of the study then narrows, addressing organisationsthat both use and produce high-tech products or services, and finallyconcentrating on innovation in the computer hardware and softwaresector.  Ideas and conclusions from these studies are then combinedwith information from Intel Corporation, a leading manufacturer ofsemi-conductors and similar computer products, to analyse the specificimpact of teleworking at Intel. 

It is hoped the conclusions drawn from Intel’s experiences will beuseful to other high-tech firms practicing or considering teleworking,as well as encourage others to pursue related research.

High-technology has evolved in the past thirty years from something outof a science fiction novel to part of the average Britain’s everydaylife.  The UK contributes over 5% of the world’s research anddevelopment, although it has less than one percent of the world’spopulation.   The UK additionally has the larges software and computerservices sector in the EU, and a significant semiconductor industry(Anon 2005).  From Bristol, at the end of the M4 hi-tech corridor, toSheffield, where software has replaced steel, to the hi-tech centres inCambridge and Hertfordshire, high-tech is replacing and revitalisingthe declining UK industrial sector.

It is important to note that the high-tech sector differs in severaldistinct ways from other sectors of the economy.  First, the speed atwhich technology changes is simply unmatched in other productionsectors.  This requires not only constant innovation in product, butconstant innovation in the process and administrative arenas as well(Edquist 2003).  Property rights considerations have starkly differentapplications in high-tech organisations.  If companies wait until theirnew ideas were licensed or patented before progressing into production,the market will likely pass by them and their product before it evenmoves into sale (Cohan 1997).  High-tech organisations are also morelikely to share information and partner on products, particularly intheir non-core technologies, and share the profits with another firmrather than miss a market entirely (Edquist 2003).

The local high-technology sector differs in some ways from that inother countries.  The UK has historically lagged behind the UnitedStates and Japan in its ability to move a product from idea toproduction in the high-tech arena.  UK firms, unless part of aninternational company who mandates certain practices, have not made asmuch effort to design intra-organisational systems to encourageinnovation (Surrey 2004).  In a study by the University of Surrey,Ellie Runcie stated that after studying UK and U.S. high-tech firms,she found UK organisations have “often no discussion at all is made ofthe role of user research in innovation” (Surrey 2004).  This is aconcern regarding the UK high-tech sector that needs to be considered.

The UK also has a lower per-capital computer literacy and computer use,particularly in the home sector, than most other high-tech nations.  Ona more positive note, the UK government has launched a campaign toincrease computer literacy and home computer use.  Intel, BT, andMicrosoft are the three major organisations working with the OeE, DTIand DfES on this campaign (Intel 2004).

One of these leaders from the high-technology sector, the IntelCorporation, will be considered in greater detail.  Although aU.S.-headquartered firm, Intel has facilities in several places in theUK, as well as worldwide.  Intel is a major manufacturer ofsemi-conductors and computer processors, and will be used as an examplein this research of how teleworking can contribute to innovation in thehigh-tech environment.

As this study considers the topics of teleworking, innovation, andhigh-technology, it was felt necessary to define and set parameters foreach.  The following literature is considered in the scope of thisresearch, with specific delineations of the three main study componentsoutlined in detail. 

We have recently entered an important new phase in the ongoinginformation technology revolution. It is difficult to pick up abusiness magazine or newspaper today without reading about anorganisation offering teleworking and virtual offices for remoteworkers. There has been fair media coverage in how companies haveembraced the idea of teleworking, including the likes of AT&T,Ernst and Young and IBM.  A monthly magazine is even devoted to“today’s flexible workplace,” Telecommute, published by the nationaltrade organisation, the International Telecommuting Advisory Council(ITAC).

Part of a general trend towards remote work, teleworking is a naturalresult of the information revolution, fuelled by the growth ofknowledge work and the rapid advance in technology.  The trend isconsistent with predictions made by futurist Alvin Toffler in his 1980book The Third Wave, that the location of work would outgrow typicalsites such as offices or factories, and begin to take place in alllocations.

Teleworking is especially becoming popular in high-technologyorganisations.  During my work placement at Intel Corporation, I wasalso exposed to various team members teleworking from home one to twodays per week. While this trend is popular with employees, it behovestoday’s high-technology company to consider the impact of teleworkingon innovation.  This sector of the business environment is particularlydependent on innovation to remain viable, and it is important,therefore, that the initiation and implementation of innovation not besacrificed to worker preference.

Examination of various sources reveals a lack of consensus as to thedefinition of teleworking, or as it is sometimes called,telecommuting.  ‘Teleworking’ is more common in European literature,while ‘telecommuting’ is more common in but not limited to Americanliterature.  Unfortunately, this lack of a universally accepteddefinition of teleworking causes problems academically; as either termcan be used to mean ‘home-working’, ‘working-at-a-distance’, ‘off-siteworkers’, or ‘remote-workers,’ it hinders the ability to comparefindings from different sources. Therefore, it is necessary to chooseand define a single term before proceeding.

The term ‘telework’ is generally preferred on this side of theAtlantic, and will be used here.  Huws, Korte, and Robinson (1990)define telework as work “which is independent of the location of theemployer or contractor and can be changed according to the wishes ofthe individual teleworkers and/or the organisation for which he or sheis working” (10).  Olson (1988) argues, “the term telework is used torefer to organisational work performed outside of the normalorganisational confines of space and time, augmented by computer andcommunications technology. The work is not necessarily performed in thehome (77).  The EU holds that ‘telework’ “covers a range of new ways ofworking, using the telecommunications as a tool and, for at least partof the time, outside a traditional office environment (EuropeanCommission, 1996, 11). 
Jack Nilles defined telecommuting as “an arrangement that entailsworking outside the conventional workplace and communication by way oftelecommunications or computer-based technology” (Bailey and Kurkland,2000).  According to The American Telecommuting Association, 2002,telecommuting is “ replacing or supplementing physical travel to theoffice by using modern telecommunications equipment to bring officeresources to the employee. While computers serve to augmenttelecommuting, it is possible to telecommute with only paper, penciland telephone.”

Distilling the above into a workable definition, important elements of telework for the purpose of this study include:
â–«    the person doing the telework is an employee of the organisation for which she or he works
â–«    computers and communication technology are used
â–«    it is not necessarily performed in the home, but does occur outside a traditional office environment

Telework is therefore defined as any substantial part of an employee’swork performed by employees that is physically separated from thelocation of their employer using information technology (IT) foroperation and communication.  

Three groups are affected by teleworking:  the employers ororganisations, the individual teleworkers, and society as a whole. Benefits and drawbacks to individual teleworkers vary greatly fromperson to person, and are difficult to evaluate.  Benefits to societyare primarily environmental, as reduced commuting decreases pollutionand reduces transportation-related injury.  This study will thereforefocus on the affect of teleworking on the employer or organisation. Areas of benefit include increased productivity and financialadvantages.  Drawbacks security concerns, management issues, andreduction in interaction and exchanged of ideas.  Each of thesebenefits and drawbacks will have impact on innovation inhigh-technology environments.

INCREASED PRODUCTIVITY

According to The American Telecommuting Association, various surveyshave documented teleworking employees’ productivity gains of up to 60%(1992).  They claim that extra productivity is consistently clocked at10-15% in nearly every study in the past two decades.  The SocialMarket Foundation (2004) argues that teleworking can increaseproductivity by up to 30%. They further claim that the more than twomillion UK workers now regularly telecommute with employees use thetime saved from commuting and meetings for extra work.  Huws (1992),Salmon and Shamir (1985), Caudron (1992), and Metzger and Von Glinow(1998) all report indications of improved productivity, reliability andwork quality among teleworkers.

The increase in employee productivity resulted from teleworking isalso supported by G. E. Gordon, who claims there are a variety ofreasons for increased productivity in employees who telework.  Theseinclude decreased time spent commuting to work, fewer distractions inthe workplace, and giving telecommuters the opportunity to better matchtheir work times with their peak productive periods.  He notes thatproductivity gains ranging from 15-30% are common with such programs(Gordon 1986).

Employee motivation is another cited reason for improved productivity. Employees perceive being the ability to telework as an indication thattheir employers have sufficient trust and faith in them to workindependently.  It could also be argued that teleworkers in fact workharder than non-teleworking employees as they feel the need to prove totheir office peers that they are not indolent as a result of working athome without supervision. Teleworkers may also feel the need to workharder to achieve promotions ().

However, various theorists argue that some employees find that becausethey have their work resources at home, they tend to work more. Thiscould interfere with family life.  In addition, telework can be viewedas an intrusion of the workplace in the home. The office at home is aconstant reminder of work.  There is the real problem of definingconcrete working hours when the distraction of home life is a constantpresence.  Working hours and social versus home time can becomeblurred.  Another form of intrusion is when family members or socialinterruptions constantly disrupt teleworkers from completing work. This may add extra pressures and stress.  Teleworking employees whoexperience such disruption and time management issues may actually havedecreased motivation and productivity due to these outside factors. Therefore, it is important that employees exercising their option totelework draw strong boundaries that will enable them to workeffectively.  Guidance from the organisation and possiblity sometraining in effective teleworking should be included by an organisationemploying teleworkers.

Smith (1997) suggests telecommuting reduces absenteeism amongstemployees.  For example, employees who may feel too ill to complete afull day and commute, may be well enough to work a partial day. Individuals are more likely to continue working even when feelingunwell due to being in a more comfortable and relaxed work environment,i.e. their home.  Smith counters that teleworkers often havedifficulty, especially at first, with separating home and work time. This increases if children are in the teleworking location, most likelythe home.  However, adjustments are usually successful in the long term.
Further, the Bureau of Labour Statistics reports that businessproductivity, the measure or output per work hour, has risen 2.8% since1998.  This correlates positively and directly with an increase inteleworking. Teleworking has been perhaps, therefore, most effective inincreasing productivity.
Clearly, these human resource managers are very satisfied with theirprograms and believe their telecommuters are satisfied as well.  Ifhalf of the firms included in the above research are reporting morework done at a better quality in comparison to the traditional workforce, there must be considerable merit to teleworking increasingproductivity.

FINANCIAL SAVINGS

Teleworking can also save firms money in a number of ways.  It providesthe employer with an expanded pool of potential employees. The skillsof employees with commuting difficulties, childcare conflict,disabilities and geographical barriers employees are all made availableto the employer who adopts the telecommuting practice.  Smith (1997)supports this, claiming teleworking offers attractive workingconditions, which aid in the recruitment and retention of skilledemployees and help to reduce voluntary separation of key employees. This represents considerable savings to the employer in terms ofreduced hiring and training costs.

Reduced overhead is another financial benefit.  Teleworking reducestime and travel costs for meetings, conferences and training thusminimising organisational overheads.  Individual teleworkers alsobenefit from reduced costs in transportation, clothing, childcare, andreduced absenteeism. 

Teleworking can also help firms remain in the same location and avoidfuture relocation to larger premises.  This particular cost saving ishighly remunerative due to the increasing real estate prices in urbanareas today and the substantial cost savings in office space.  Peoplewho telework do not use office space and do not create overheads.  Evenin case of part-time teleworking space savings are generated.  This isevident at IBM, who is expected to save between 15 to 20 percent inspace requirements by taking away the desks of more than five thousandof its employees and telling them to work at home, in their car, or attheir clients’ offices (Swinton 2002).

The claim that teleworking reduces organisational overheads is alsosupported by BT who introduced its “Workstyle 2000 flexible working”programme ten years ago.  The claim that the programme has saved them134m as a result of teleworking practices.  This includes reducing thenumber of employee desks in London from 10,000 to 3,000, saving £6,000per desk per year.  There has also been a five% reduction in companycar mileage, resulting in fuel savings of £9.7m this year alone.  BTalso reports a 20% increase in productivity and that 75% of alltelephone conferences are replacements of face-to-face meetings.
Opponents of teleworking argue there are often some initial increasedcosts due to outfitting the teleworkers and making adjustments tocompany computers to accommodate them.  Ford (1995) claims thattelecommuting programs lead to extra costs. He claims that extra coststypically involve additional equipment requirements and funding theprovision of human resource services, training, fringe benefits, andrelocating. He continued to argue that the question of cost alsoincludes the equipment and space costs associated with telecommutingprogram and that telephones and electronic equipment cost more fortelecommuters than for traditional workers.

It is important that hardware and software provided to teleworkersstarts out and remains uniform because this simplifies supportimmensely.  The required initial investment and length of time forpayback will vary sharply from company to company, however, with themost technologically advanced incurring the least upfront costs.  Giventhat high-tech firms are those under consideration in this study andthey have the most access to the latest and most efficient technology,it then follows that these expenditures do not detract from the savingsfor high-tech firms adopting or practicing teleworking.
Additionally, many companies report current pressures on their supportdesk and according to Classe (2000) this will intensify by theintroduction of a remote workforce.  As teleworkers usually worknon-standards hours, longer hours of support cover may be required,which will confer additional associated costs to the employer.  Thecost factor for such support spread across a larger high-tech companywill have little impact; the same costs spread across a smaller companymay be significant and should be considered a potential drain onresources that could support innovation implementation.

SECURITY

Security is a major concern for high-tech companies with teleworkingemployees.  Confidential information must be accessible to theteleworkers remotely, information that may range from a product indevelopment to a change in production methods to sensitive profiles offuture customer bases.  This makes the same information more accessibleto hackers and competitors; it is highly unlikely a company couldafford or an employee would want equal security measures on theirprofessional facilities and residences. 

In addition, information used and generated by teleworkers willtypically be uploaded to a server for accessibility.  Others within thecompany then have increased chance of access, compromisingintra-company security.

Eric von Hippel, however, in his study of knowledge location andinnovation solving, noted “conducting innovation-related problemsolving at remote sites need not compromise an innovator’s ability toprotect commercially important secrets” (1994).  While greaterpotential for security breaches exist, this in no way indicatessecurity need be compromised by teleworkers.

MANAGEMENT

One of the biggest problems for managers and staff involved withtelework is measuring and monitoring the work done by employees.Management recognise that it is easier to monitor the level of workdone by employees when they are in the office and managers often worrythat their staff will not work as hard from home.  Teleworking presentspotential issues with the ability to discipline telecommutingemployees, provide a career path, and provide promotionalopportunities.  Those in supervisory positions often see difficultiesin relation to mangers’ human resource management responsibilities(Werdigier and Neibuhr 2002).
Ford (1995) also raisies the issue of the telecommutting impact on thesupervisor’s span of control.  Due to the workers being so spread out,Ford claims that many companies will be forced to reduce the averagespan of supervisory and will not have sufficent control to accommodatethe unique problems of telecommuters.  Ford suggests that another majoraspect of the supervisory issue is the ability of the manager tocontrol distractions in the work setting and to ensure that theemployee does not become displaced from the informal help and adviceavailable through interaction with a work group.

Clearly, managers of such programs need to be trained in remotesupervision.  In addition, they should recognise the possibility thattheir teleworking employees may not have adequate access to training,career and promotional opportunities.  More importantly, theseemployees may miss the informal information sharing that occurs in atraditional work environment.  This will be shown to have a significantimpact on innovation.
 

REDUCED SOCIAL INTERACTION AND POLITICAL INFLUENCE

Social isolation seems to be mostly acknowledged by scholars as themost significant potential or actual drawback of teleworking.   Whilesome employees welcome the new freedom that comes with lesssupervision, others say they miss the camaraderie and socialinteraction that comes with face-to-face office operations.  However,this usually depends on the professional level of the employee.  Smith(1997) argues that the higher the level, then the more electroniccontacts and networks; hence, less social isolation is experienced.

Video conferencing could help ease the psychological trauma that comeswith social isolation, allowing multiple numbers of people to converseand perform work together in an electronic version of face-to-facecommunication.  This may allow teleworkers to increase the humanemotion and communicational flexibility often lacking in electroniccommunication.  Social isolation also implies that for teleworkersthere is minimal peer availability for informal work relateddiscussions as one might get, for example, in a staff cafeteria atlunch times.

In addition, teleworkers may lack the political connections and cloutto get innovations approved or funded.  With reduced opportunities tobuild relationships on the job, they are forced to propose or supportinnovation solely on the merits of the proposal (Werdigier and Neibuhr2002).  While this theoretically could be a positive result ofteleworking, in practice it reduces the chance of innovative input fromteleworkers being initiated or implemented.

DECREASED KNOWLEDGE EXCHANGE

It could similarly be argued that the largest detraction of teleworkingon innovation in high-technology organisations is the reduction ofknowledge exchange from employee interaction.  Informal and proximitylearning is an ongoing opportunity for training in the traditionaloffice environment not available to teleworkers.  If both are in thesame location, an inexperienced worker can observe another moreexperienced worker and learn from this observation.  This is asignificant training tool for office-based or facility-based workersand one of the main ways knowledge is acquired and exchanged in anorganisation (Classe 2000).

CASE STUDY – BT

The various benefits of telecommuting to the employer can be supportedby the findings of a study conducted amongst 2000 BT employees (2002). The study revealed that enabling staff to work from home resulted inincreased company productivity and better employee health and qualityof life.  BT claimed that telecommuting saved them £35m a year inaccommodation, recruitment costs and absenteeism and that teleworkerswere four times less likely to take sick days, averaging three days offa year compared with twelve for office-based staff.

The study also revealed that almost 80% of teleworkers claimed to bemore productive thanks to reduced disruption, commuting time andstress, and greater flexibility about when and where to work. According to Alison Garner, marketing manager for social responsibilityat BT making staff feel part of the BT community was key to thescheme’s success.

Although a small number of teleworkers complain about increased workinghours, four out of five survey respondents claimed that teleworking is’important’ or ‘very important’ for their quality of life.  Almostthree-quarters described their work/life balance as ‘good’ or ‘verygood’.  BT also maintained that its teleworking policies paid off interms of staff recruitment and retention.

CASE STUDY – THE SUSTEL PROJECT

The Sustel Project, created in 2002 by the EU’s Information SocietyTechnologies programme, found that telework increases businessresilience since it allows work to be done when building operations aredisrupted by factors such as the weather.

The Project also showed that the influence of telework on human capitaldevelopment, the personal competencies and skills needed to createwealth, was mostly positive.  Seven of the studies found that teleworkhad a significantly positive effect on internal communication andknowledge sharing, often due to the conscious implementation oftechnological tools during telework program deployment.  At theindividual level, the main financial benefit of telework was reducedcommuting costs, which almost all respondents saw as being greater thanthe increased cost of energy in their home.

BENEFITS AND DRAWBACKS – CONCLUSION

At the present time there is a lot of controversy in both academic andpractitioner literatures with respect to how telecommuting affectsorganisation employees.  At one extreme, telecommuting is considered aflexible work arrangement that will solve a multitude of problems.  Atthe other extreme, authors have implicated telecommuting causing anumber of negative consequences including loneliness, isolation,exploitation and increased stress.  While there are a legitimate numberof potentially negative effects of telework, these effects can beminimized by proper program management.

A balanced view is presented from Baruch and Nicholson (1997) andGoodrich (1990) who claim that the best output from telecommuting isachieved if it is conducted on a part-time basis. They argue,teleworking on a part-time basis can prevent or significantly reducethe social isolation of teleworkers.

There are a number of benefits and drawbacks that should be consideredspecifically by high-tech organisations implementing teleworkprogrammes.  From a broad organisational perspective, the positives ofsuch a programme seem to outweigh the negatives.  However, the twodrawbacks of teleworking with legitimate effect on innovation in thehigh-technology sector are reduced political influence, and knowledgeavailability and exchange.  As these have been identified as ofgreatest impact, these areas will be focused on in this study. 

As with teleworking, there are a number of different proposeddefinitions of innovation.  One of the most complete is offered byDamanpour (1996), who defines innovation as “the adoption of an idea orbehaviour new to the adopting organisation,” which usually occurs as “aresponse to changes in the external environment or as a pre-emptiveaction to influence the environment” (694).  Innovation is “departingfrom existing norms and practices,” and “requires risk taking”(Damanpour 1996, 698).  Edquist (2003) defines innovation as “newcreations of economic significance, primarily carried out by firms”(2). 
Depending on the researcher, innovation is held to require either twoor four steps to implementation.  In the four-step model, theinnovative idea is first discovered or created.  This usually happenswith one individual or a small number of individuals working as ateam.  The idea is then presented to and accepted by a decision-makingleader or body.  Initial adoption of the innovative idea by theorganisation is the next step, with the company allocating someresources to the development of the idea, such as pilots or testcases.  Implementation occurs when the innovative idea reaches broadacceptance within the organisation and becomes part of its regularproduct, process, or routine (Styles and Goddard 2004).  The two-stepcombines the first three steps of the four-step model under oneheading, initiation (Damanpour 1996).

There are three types of innovation:  product innovation, processinnovation and administrative innovation (Edquist 2003).  Allcompanies, and small firms in particular, are more likely to innovatein the product arena, where results are tangible and measurable. Larger firms will also innovate in process areas.  However, processinnovation is more difficult to implement than product, as it requireschange across multiple systems.  Administration innovation occurs mostfrequently in large, structurally complex companies, as it requires themost widespread changes to the organisation (Damanpour 1996).  
Innovation within these three areas can be radical or incremental. Radical innovation “produces fundamental changes in the activities ofthe organisation and represent a large departure from existingpractices” (Damanpour 1996, 699).  Radial innovation requires a largerknowledge base and free resources.  Incremental innovation is adoptedmore slowly, and produces less pronounced changes to organisationalsystems and activities.

Innovation, therefore, is defined in this study as a change in theproduct, process or administration of an organisation; a new idea thatdeparts from existing norms and practices to respond to the firm’scurrent or future environment. 

Innovation implementation requires knowledge, creativity, politicalsupport (within the organisation), and adequate resources.  Increasingany of the above or making the systems that control them moreeffective, therefore, has a positive effect on innovation.  Asinnovation requires both change and risk, companies will only undertakeinnovation if it is perceived as necessary to their survival or can beshown to have financial incentives. 

Recognizing the forces driving the organisation to innovate isimportant.  For example, environmental uncertainty and environmentalcomplexity both contribute to increased innovation.  Uncertainty aboutthe future leads directly to a concerted effort to increase knowledgebase and exchange.  This influx of information then leads to increasedinnovation (Damanpour 1996).  This is especially evident inhigh-technology firms, where a market leader product today may becompletely obsolete by next year.  Definite, articulated identificationof the need for and support of innovation within the organisationgreatly enhances the chance of implementation of an innovative idea.

Similarly, development or adjusting organisational systems to encourageand support innovation increases the chance of innovative success. Damanpour found that “large organisations can facilitate theimplementation of innovations by adopting more flexible structures andorganising themselves into smaller units” (1996, 700).  Creation ofinnovative ideas is more likely in complex organizations, where thereis a larger knowledge base and an increase in knowledge exchange(Damanpour 1996).   However, larger organisations are less likely tomove innovative ideas to implementation as they are typically moreformalized, with lower managerial incentive to innovation (Hitt,Hoskisson and Ireland 1990). 

An example of this is IBM, which made a sy