03/19/2013 03:59 pm ET Updated May 19, 2013

The Price of Adult Supervision at Yahoo!

According to a recent Business Insider article, Yahoo! CEO Melissa Mayer reportedly leaned on internal virtual private network (VPN) data when making the controversial decision to recall 200 home workers back to the home office. Ms. Mayer, a purported data wonk, used counts of VPN connections to gauge work-at-home employees' productivity. However, while busy counting employee VPN pings, Ms. Mayer may have overlooked the most important productivity data of all.

Per HR boss Jackie Reses' leaked internal memo to Yahoo! employees, a key reason cited for recalling home workers was that: "Speed and quality are often sacrificed when we work from home."

Here's the only problem: the memo's facts are wrong.

While there may be VPN data to suggest Yahoo! home employees are slackers, there is no hard data to support the notion that a traditional office is more productive than the virtual variety. To the contrary, a multitude of studies from companies, like Cisco, Basex, and others clearly show that traditional bricks and mortar offices are among the very worst places to get work done.

A 2005 Basex study of 1,000 high-level knowledge workers and senior executives found that workers lost 2.1 hours of productivity each day to office interruptions and distractions, consuming $588 billion annually in lost productivity in the U.S. alone. The study projected that time lost to office interruptions would grow to 2.68 hours by 2010. Per the survey, workers cited desperate techniques to avoid interruptions, including: refusing eye contact, "hiding" in conference rooms, and using chairs as barriers to cubical entrances. Not surprisingly workers frequently cited working from home as an effective way to get work done. In a hypothetical professional services firm with 10,000 employees, Basex estimated that the annual cost of interruptions to the firm to be a staggering $400 million (by comparison, Yahoo! employs 11,500 employees).

On the plus side of the productivity ledger, as reported in my book, Going Virtual, studies show substantial measurable gains in productivity, and simultaneous reductions in cost as a result of working at home:

  • Productivity: reported gains of as much as 200 percent -- achieved through a combination of reclaiming lost commute time, eliminating interruptions, and reduced absenteeism
  • Cost savings: net cost savings of42K per employee annually from reduced office expenses, reduced absenteeism and turnover
  • Employee benefits: employees realize the equivalent of a 23 percent raise through cost savings associated with commute and prep for work

There are other benefits as well -- if all American knowledge workers went virtual, the U.S. could completely eliminate oil imports from the Middle East, as well as reduce our national carbon emissions by 8 percent.

Despite the data, some companies like Yahoo! and Best Buy are cutting back their virtual office programs in favor of traditional bricks and mortar. Why do these companies' virtual offices fail while Cisco's succeeds? As it turns out, the reasons are typically the same as why any company fails. The key determinant to the success of any company -- virtual or otherwise -- is the quality of its management. Whether employees are motivated and productive has little to do with where they work or how closely they're supervised. Instead, what makes a company turn and burn is its leadership -- its ability to inspire employees with a compelling vision, translated into crisply defined goals and objectives. If employees understand where the company is going, are excited about that direction, and understand clearly how they're contributing to its success, they are an overwhelmingly powerful force, propelling the juggernaut forward.

By contrast, using Yahoo!-style analytics to secretly police productivity completely misses the point of inspired management. The goal is not to measure the galley slaves' drumbeat. The metrics that really matter are objectives. Enlightened management will set targets, then let their employees achieve them how (and where) they choose. Leaders that manage via Yahoo!-style productivity analytics are more likely to lose because their focus is on the microbial details of their businesses instead of the more Olympian Steve Jobs-esque vision of the next great thing. When it comes to success, big vision usually trumps big data.

At the end of the day, whether or not 200 unproductive employees start producing at Yahoo! will have little to do with the company's odds of success. What matters more are the other 11,000+ employees -- do they have a clear mission? Are they inspired? Do they clearly understand what they need to do in order for the company to realize its mission? These are the things that matter to any company -- far more than VPN connections. Ultimately, what will determine whether Yahoo! succeeds or fails is the very same thing that determines whether any company prevails -- the quality of its leadership.