Key Concept

Does paying attention to the work-life balance issues of employees increase productivity and the competitiveness of a business? Or, as pessimists might argue, is productivity and work-life balance (WLB) in direct conflict? New research shows that in fact WLB is more neutral than either proponents or pessimists believe — neither hurting nor particularly helping productivity. The decision on whether to implement WLB practices may rest on a completely different factor: the social norms of the countries in which the business activity takes place.

Idea Summary

Work-life balance issues bring out the optimist in some, the pessimist in others. For pessimists, the work-life balance concerns of employees will be undermined when a firm faces increased competition — and ‘improves’ its management practices in response to that competition. Examples of improved management practices include: the introduction of lean manufacturing techniques; better tracking and rewarding of individual performance; better goal-setting and more rigorous alignment between activities and these company goals; and more effective incentives for employees.

"Who is correct: Work-Life Balance pessimists or optimists?"

According to the pessimists, while it may be the right thing to do, WLB initiatives — for example, allowing some work from home, or family-friendly policies that allow employees to take time off for children or offer childcare subsidies — are costly to employers in terms of productivity. As a result, implementing improved management practices aimed at increasing productivity will inevitably require reducing the work-life balance opportunities of employees.

Optimists insist that productivity and work-life balance are not contradictory, and in fact that attention to work-life balance (WLB) issues will increase productivity. In their view, employees who are happier and more motivated will perform at a higher level. Thus, there is no conflict between improved management practices and WLB practices.

Who is correct: WLB pessimists or optimists? Much of the previous management literature supports the optimist position: improved management practices are correlated with better WLB. A team of researchers, using data from 700 companies, found however that in a sense neither group was completely right… or completely wrong.

Both pessimists and optimists agree that increased competition is going to lead to improved management practices: practices that increase efficiency and productivity in the firm. The data supported this conclusion. However, the researchers found no evidence to support the pessimist viewpoint that better management practices require reducing WLB for workers. Instead, better management practices are often associated with better employee work-life balance. Nor did the data support pessimist assertions that there is a negative correlation between competition and WLB.

That said, the optimist view that WLB will lead to greater productivity was not fully supported by the data neither. In fact, once the variable of better management practices was factored in, the data showed no correlation between WLB and greater productivity (in other words, previous research that argued for such a correlation was not taking into account whether or not the firm had implemented improved management practices). As the researchers explain, “Firms with better management practices will tend to have both higher productivity and better work-life balance. This gives rise to the mistaken impression that better WLB causes higher productivity.”

Business Application

Given the fact that, according to this research, both pessimists and optimists are overstating the connection between work-life balance, improved management practices, and productivity, what is a company to do?

The answer comes in a fascinating revelation from the same research team, as they examined work-life balance and management practices in multinationals.

As expected, the researchers found that WLB is higher in European firms than in U.S. firms. They also found that management practices in some European countries are worse than in the U.S. The intriguing result came in the examination of WLB practices in U.S. multinationals operating in Europe: while the U.S. firms brought in their better U.S. management practices, they did not transfer their worse WLB practices to Europe. Since most of these practices, such as childcare flexibility or subsidies, are not regulated in Europe, it seems that U.S. firms were motivated to localize their work-life balance practices by the social norms in the countries in which they operated.

Thus, what is a company to do? The answer appears to lie more in geography than productivity. What are the social norms in the country in which you operate? What do employees expect in terms of WLB? While, for proponents of WLB, the convenient blanket argument that WLB leads to better company results is not supported by the data, there remains the argument that the smartest companies adapt to societal expectations of the countries in which they are located — and that such an adaptation will not hurt results.