The future of (hybrid) work

The future of work is front of mind for businesses, large or small, across the world. The COVID-19 pandemic forced us to adjust quickly to remote working—remarkably successfully. Now leaders are faced with employees who do not necessarily want to come back to the office and new talent hires who expect certain working conditions. This is particularly pertinent in Asia, a region that dominates the world economy. In this episode, we explore what the future of work in Asia will look like, and how businesses can respond to these latest developments. Our guests, Ahmed Mazhari, president of Microsoft Asia, and Paul Marriott, president of SAP Asia Pacific Japan, shared their insightful opinions with host Diaan-Yi Lin, a senior partner at McKinsey & Company.

Podcast transcript

Gautam Kumra: I am Gautam Kumra, Chairman of McKinsey Asia, and you’re listening to the Future of Asia Podcasts series. The Asian century has begun. The region is now the world's largest economy. As Asia’s economies evolve further, the region has the potential to fuel and shape the next normal. In each episode, we are going to feature conversations with leaders from across the region to discuss what Asia’s rise means for businesses across the globe. Join us.

Diaan-Yi Lin: Hello, and welcome to a new episode of the McKinsey Future of Asia Podcasts. I am DY Lin, a senior partner at McKinsey & Company, and I am your host for today. In this episode, we will be talking about the big trends affecting the future of work, and how companies can respond to these latest developments. I am excited to be joined by two distinguished guests—Ahmed Mazhari, president of Microsoft Asia, as well as Paul Marriott, president of SAP Asia Pacific Japan. It’s great to have you both with us today. Before we delve into the topic at hand, could the both of you briefly introduce yourselves to our listeners?

Ahmed Mazhari: Hi, my name is Ahmed Mazhari. I’m president of Microsoft Asia. We call it Asia, but in fact the organization covers Australia and New Zealand, Greater China, India, Korea, Japan, and Southeast Asia. It is probably the most vibrant and diverse region of the world and we’re proud to be based here. Our success really is dependent on our ability to advance progress and create more inclusive growth sustainably. We are passionate about helping customers transform and about accelerating innovation—we call this “Born in Asia”. This is really a shift from solutions or products simply being “made in Asia” to being “born in Asia”. This region is no longer seen just as the factory of the world, but a place where ideas and innovations originate. It enjoys the upcoming digital native generations, consumers, and future leaders who are mobile first and have grown up online. And it will be the key to talent and the future of work.

Paul Marriott: Hi, I’m Paul Marriott, president of SAP Asia Pacific Japan. We are of a similar geographic scope to Ahmed, but I’m not responsible for China—that is a separate business in SAP that reports to our board. I have a very long heritage here, having lived in the region for 25 years. And I echo the comments made by Ahmed; it’s an incredible region. I think, unfortunately, we’re the biggest polluter in the world because of factories and manufacturing, but that presents us with a really interesting opportunity to solve some of the biggest climate-change challenges—with great people and technology. I think also that in the long term, globally, 70 percent of the world’s STEM talent will come from Asia. So, as Asia is the hotbed of innovation, there’s a huge opportunity for us to help the world build more capability and capacity in the technology sector.

So, with Asia being the center of innovation for the rest of the world, the closer that software companies like Microsoft and SAP can get to our customers in region, I think the greater impact we can have—not only on sustainability, but also digital transformation. And then obviously building the future supply chain of talent, given the significant number of STEM students coming out of universities here. So, it’s great to be here and looking forward to the conversation.

Diaan-Yi Lin: Thank you both for the introductions. Let’s dive straight in. I think that even before COVID-19 hit us in early 2020, we were experiencing a shift in the way we worked. But now that so much has changed in the last couple of years, what are some of the key trends defining the future of work in Asia today?

Ahmed Mazhari: It has been a great pleasure partnering with SAP. We’ve done a lot of transformational work over the last several years and, as Paul rightly pointed out, people and talent are at the core of transformation. And 70 percent of STEM talent, as Paul said, sits in Asia. But that’s the market that has been the most severely impacted by the pandemic. Labor shifts have happened, people have had to remain either in their homes for a long time, or in cities or countries where they didn’t live. The collective experience of the last two years has left a lasting imprint, fundamentally reshaping the way people think about work, think about life, where they live—and that really has been the origin of hybrid work.

But the biggest insight we have today is that employees are rethinking the “Is it worth it?” question. In essence, what do people want from work and what are they willing to give in return? So, bearing this in mind, we see three key trends that I thought we could touch on. I would also love to get Paul’s input. I’ll share with you some annual work trend index data from research that we have conducted. We surveyed 31,000 full-time employees and self-employed workers in early 2022 across 31 markets globally, 14 of which were in Asia. Three broad trends emerged. First, leaders need to be flexible and embrace hybrid work; there’s no going back. For example, I now live in Japan, where we yesterday opened our new office.

People are looking for flexible options. Seventy percent of the workers surveyed want flexible remote options to continue. But equally, about two-thirds want in-person time with their teams, who really want to come and be part of the work, part of the lunch session. But at the same time, they want to be able to participate online. So, as decision makers, we need to consider redesigning our physical spaces. These will create hybrid environments like hot desks, meeting pods, rooms to cater to virtual meetings. And we need to have the right collaboration tools.

If done right, flexible work arrangements could be a very powerful tool for inclusion and for companies to benefit from a more diverse talent pool. At Microsoft Asia, we believe in what we call “free-dimensional work”. We empower our colleagues with the flexibility to work from anywhere, but at the same time, to benefit from the in- person connections we’ve all been missing. We call it that free-dimensional work because work no longer consists of two-dimensional interactions between screens or only one-dimensional, in-person meetings, but it’s free-dimensional: synchronous, asynchronous, in person, or remote.

Second, productivity needs to be redefined and measured more accurately. There’s a disconnect between employees and employers on how they perceive productivity. Four out of five Asian workers—80 percent—say that they’re as productive or even more productive at home. But then, two-thirds of leaders say that productivity has been negatively impacted. Leaders perceive that this stems from reasons such as having to care for family at home, missing the sense of community, or even struggling with a dependency on technology. And the tendency sometimes to micromanage. To allay these concerns, business leaders need to communicate openly with their employees and look for concrete measures of productivity. Productivity is critical for the world to progress towards more inclusive growth.

Third, businesses in Asia need to embrace an inclusive culture, so employees feel supported. Relationships have suffered in the pandemic; more than half of hybrid workers—57 percent—in the Asia-Pacific region report feeling lonelier at work. And 68 percent say they have fewer work friendships since the pandemic. So, business leaders ought to create a working environment and employee experience where employees feel connected to one another. And the purpose of the business, wherever employees are based, is to bring them together effectively as a team.

Paul Marriott: Maybe I build on that, particularly the productivity aspect that Ahmed talked about. If you think about work prepandemic, it’s interesting that in the tech sector, we were not as sophisticated in how we worked. Hybrid was forced upon us. We suddenly had to go remote. Now we’ve found a nice balance between physical, remote, and hybrid. I think the key thing, as Ahmed describes in terms of some of those data points and characteristics, is whether it is now the default working model. Companies want to provide flexibility for their workforce to work out what they want and to deliver an outcome, which I link to productivity. It’s often about how you help the workforce to find that balance in hybrid models, so that they maximize personal and professional life. But then also it is important that teams, and then teams at scale in large organizations like SAP and Microsoft, continue to deliver the bigger outcomes.

So, in future, this is going to be the way. When we talk to our employees, 80 percent of them want a hybrid model, whereas only single digits want to be 100 percent remote. It’s fascinating that so few employees want to be fully remote. It is interesting here to understand the different demographics in your organization and what affects how employees want to work—it could be generational, gender, cultural, or it could be nationality or location. I think a way to empower an organization is to use a trust-based model, in which employees decide and define how they work. I think this is crucial because we see so much diversity in terms of those different demographics. For example, younger people tend to want to be in the office more than perhaps more tenured employees. People in locations like India, where the travel time to the office is significant, may have a greater preference—no surprise—to be working remotely more regularly.

So, I believe the future is hybrid all the way, and about empowering employees to find what works best for them. But then at an organizational level and from a productivity perspective, you still need to make sure that the business outcomes are being delivered. I won’t deny, and I’m sure Ahmed won’t as well, that finding that balance is difficult. We have seen a lot of data that suggests that, in a hybrid model, finding the balance between professional and personal is still a challenge. But what I will say, interestingly, now I have been traveling again over the past few months, I actually think hybrid helps you get the balance. When you’re 100 percent remote, digital fatigue certainly sets in in a really big way. I think a lot of the data points that Ahmed called out in terms of some of the social challenges for individuals are now becoming apparent and accentuated.

What’s great about hybrid is you get the best of both worlds, right? You can work remotely, if the type of work you’re doing is maximized through a remote model, but equally when you want to come together and have more interaction (which also creates social opportunity that is important in the workplace and in life in general), you get this brilliant balance. I think the new model is helping people find their feet again. We’re not there yet; we’re still refining and learning as we go, so pulsing and communicating with employees at scale is crucially important. And there is a lot of technology out there that can help you understand where your organization stands across Asia or globally. In this way, you’re constantly course-correcting from crowdsourcing feedback so that you can get the best possible model for your organization.

Diaan-Yi Lin: What we have been talking about so far are the three key trends that are impacting your specific companies. Do you think that what you’re seeing within SAP and Microsoft will extrapolate to other sectors and companies as well?

Ahmed Mazhari: I think it’s an interesting question. Sadly, Paul and I belong to the same industry so I think we are probably singing to the same tune. But I think what I would take away from what Paul just said, and articulated very well, is finding the right balance is important. We think about hybrid as a dial—and the dial is at different stages in different geographies, different industries, and different locations, based on people’s needs. As Paul rightly pointed out, as a manager and a leader, I am constantly seeking new inputs, finding new ways of thinking about those, and reacting to them. Some days, my mind tells me that we have swung too far and we are losing out on creativity. On other days, my mind says, “Hey you know, we have to as leaders seek these inputs, evolve, and there will come a time where it’ll become a norm of the future”.

But for now, I would encourage that we think about this as an evolutionary trend, which has different meanings for different sectors—for example, think about frontline workers. Frontline workers in many industries had no option of hybrid in the pandemic; they had to remain frontline. For a special edition of the work-trend report that we did on the frontline, we surveyed people in healthcare institutions, schools, construction, and warehouses. It really was very revealing. Companies are now investing heavily in digital tools for frontline workers to modernize workflows, enhance job performance, and work culture and communication. But organizations really need to bridge the tech-equity gap, as some people still don’t have the right technology to do their jobs or learn. Technology is evolving rapidly and people aren’t being trained how to use it.

This training is crucial for hybrid work, company effectiveness, and the digital economy. We’ve also found that hybrid work has weakened workplace culture, and, as I pointed out, for frontline employees who feel less of a connection with leadership. So, there has been a shift in mindset postpandemic. The frontline workers are starting to embrace technology more. Previously, many were concerned that technology was an automation tool that would make their jobs obsolete. But now they’re excited, they want to learn as technology can create new job opportunities. In fact, there are many sectors where adoption of technology has actually streamlined existing tasks and reduced stress.

Finally—and I’m sure Paul will have a view about the future of work from a software standpoint and from his customers—it’s not really about working from home or working from the office, but about working in a balanced way, such that organizations can adapt to changing employee expectations, as well as adopt technology across the board to make it more effective. Whether the workforce is made up of knowledge, frontline, or operational workers, it’s all new, it’s evolving, and we’re learning each day.

Gautam Kumra: For years, observers talked about Asia’s massive future potential, but the future arrived even faster than expected. The question is no longer how quickly Asia will rise; it is how Asia will lead. Keep listening to the Future of Asia Podcasts.

Paul Marriott: Maybe I can offer a different spin on what Ahmed shared. So, we’re in the same industry. Microsoft and SAP and the tech industry have a very good level of tech readiness, right? The pandemic forced us to learn quickly. It was a bit of a jolt, it was a little painful, but we got there quickly. And I think that there are different levels of technological readiness by organizational size, geography, and location. The good news is that the entry point for the use of tech is getting lower and lower. Connectivity is getting easier for more people—the pervasiveness of internet access, I mean. Sometimes these things are assumed in more mature markets, but it’s still challenging in Asia either from a geographic accessibility or a cost perspective. Now that it’s improving, it’s creating greater inclusion.

What I would say, though, when looking at organizations—large organizations like SAP and Microsoft, but also small ones—Asia is a mid-market. You see small companies facing exactly the same challenge about the future of work, and these are potentially even more pronounced because they’ve got a higher risk, right? They have a small number of employees that they’re highly dependent on. And there’s no doubt that if you don’t get this model right, you are faced with the “Great Resignation”—we see a significant shift in the workforce and high attrition rates happening. For small organizations, we certainly hear that one of their greatest risks is finding the right talent, securing it, and sustaining and maintaining it. And employees, as we’ve been describing, are now looking for this new type of modern flexible workplace. So, small organizations face the same challenges here as big ones, but they are more susceptible.

The flipside of that is that small organizations can be more agile. If they quickly pivot, they can get there faster and course-correct more quickly. We’re seeing that 90 percent of small organizations are looking to drive workforce engagement models, where they get maximum productivity and engagement. And looking at hybrid, I think the other thing—and Ahmed, you were alluding to inclusion—is that when there is a fight for talent and only a certain talent pool, technology can enable you to access new pools of talent. A great example of this is, say that I met you in Japan, we ran a social impact initiative with our contingent labor networks and our business networks, and this provided us with access to talent that is available around the world. It’s a global network.

We use that network, for instance, in Japan to tap into less-privileged communities. So, it could be underprivileged people, it could be single mothers, but whoever it is, we use the platform to engage, provide a level of digital capability and readiness, and then allow the network to be used by that community to contribute to the contingent labor network. This is very powerful for two reasons. It can be life changing for individuals (and we’re seeing fantastic adoption of it in Japan, and similar projects in the region). But also it addresses capacity—for example, in SAP we have 100,000 plus full-time employees, but we have another 50,000 that we leverage in the contingent labor network. The network’s all about outcomes. I have a requirement, I pass it into the network, and then I choose to select how that work is done by location, price, quality, delivery time; all of these different criteria. The network finds the talent you need, and then, obviously, you pay for that outcome.

It’s not a new model; it existed well before the pandemic. But I think there’s a lot to be learned here—the supply of talent globally is being made available from permanent employees, contingent labor, and business networks. And it allows for greater inclusion, so more people can enter the sector that previously had a technological barrier. There are so many really positive things that came out of the pandemic and now we are working in a hybrid model postpandemic, not just with the existing talent, but also the new pools of talent that we’re tapping into. And, of course, embedding this into universities. We keep talking about all the STEM graduates who are flooding out of Asia. Just to give you a data point—if I were able to get just 5 percent of the STEM talent between now and say 2025, over the next three years, I would be able to certify another million consultants into the SAP ecosystem, which actually we desperately need.

So, a relatively small investment into those universities and academic institutes with digital technology could connect people to SAP, in partnership with Microsoft, and drive that capacity in the marketplace to support this tremendous amount of digital transformation. And also fuel talent globally from Asia because the contingent labor networks will be picked up around the world, not just from here. So there are many different things with great positives that have come out of what has been a very difficult period. I think we all have thought very differently about how we can work, how we can use technology, how we can create greater inclusion, and how we can operate globally through these networks, to how we did prepandemic.

Diaan-Yi Lin: What I’m hearing now is that hybrid and remote working have been key to attracting core talent to your companies. On the other end of the spectrum, some companies have been more skeptical about the impact of hybrid work on the productivity of their employees. Why do you think some companies have been so reticent to embrace remote working arrangements?

Paul Marriott: I don’t necessarily think there is a right or a wrong way of doing this. I have talked to a lot of my customers who have set policies where they’re asking their employees to come in on two fixed days a week. Now, the upside of that model is that, if you say that people must come in on a Tuesday and Thursday, you have more office space Monday, Wednesday, and Friday. You drive more people into the office space where you can have face-to-face collaboration and social interaction. So, I’m not against that as an approach, because it probably is a faster way to get people back physically into the office. I think the downside, though, is that by mandating this, you don’t empower employees, and essentially, you’re not creating a trust-based workforce because you’re telling them what to do and how to work. I honestly believe that a more flexible trust-based, empowered-based model will be what wins in the long term as to how employees want to work.

Everybody wants empowerment of their own life, right? So, there are pros and cons. Obviously, in SAP, I don’t mandate talent to come into the office. What I do is create impetus to come to work, because our employees are then motivated. And I look at the type of work. So, for example, if you’re doing product design of software, it’s definitely more conducive to be working in a highly collaborative office space that’s been designed for innovation to get greater productivity. Strategy is another aspect of work that benefits from in-office. Ahmed will definitely be doing similar to what I’m doing with my leadership team—bring them together physically, and you get greater productivity and creativity.

Now the flipside is that by working remotely I can start very early in the morning meeting with New Zealand, then through Southeast Asia, and then through Japan, Korea, India; I can cover a whole region. I can meet all my customers in a day, which is impossible to do in the physical world. So, again, massive productivity is gained by working remotely based on the type of work and the type of engagement. Though I would say the flipside, again, is that meeting new customers digitally is more difficult than maintaining a relationship with a customer how you’ve met physically. This brings the hybrid model back again, right? So, for establishing relationships, that physical connection or the social side of the relationship is crucially important. If you get that right, with the physical and in-person and then with the remote, you can actually get really, really good scale.

So, whichever model you choose, what’s the most important takeaway? What is the wellness- and business- health index, if you like, of your employees? We run an SAP platform called “Qualtrics” around employee engagement, and one of the metrics that we track is the business-health index. It looks at stress levels and engagement levels. Whatever model you’re running, make sure you’ve got transparency on where your employees stand and then reflect on your model, and crowdsource feedback from them to continually refine their well-being. Because I think the greatest challenges we saw through the pandemic were massive digital fatigue, loneliness, and mental-health issues—pockets of employees could go for months without interaction.

And by the way, we don’t just see that in adults; we see it in a very significant way with a generation of children that has witnessed firsthand the difficulties of working remotely for things like schoolwork. I think we’ve still got the challenges of that demographic ahead of us, and we will need to find solutions for them. But the more you can get visibility and transparency around these issues, you can at least see what’s going on. Then you can continually course-correct whichever the hybrid model is best for you and your organization.

Ahmed Mazhari: Paul, I think your point on people and talent is a really good one. We’ve often used the term the “Great Reshuffle”, which is a lift off of the “Great Resignation,” actually. One of the things that we are observing more is that there’s a huge supply-demand issue for the talent that you just alluded to. Sometimes people are asked, “Is there a case for a hybrid work environment?” I think if you get it right, you have will have a competitive advantage. Our surveys suggest that there are about 700 million jobs that will get created in tech until the end of the decade—essentially the digitization of the global economy. And participation of the workforce will become one of the most important criteria between success and failure.

What a great example that you shared, Paul, about accessing talent. As I sit here in Japan, we are faced with a declining workforce. So, the only way for us to continue to grow and create impact, as Microsoft or SAP, is to find new pockets of talent that we’ve not traditionally accessed. Hybrid is a great example of how do to that, which is why at Microsoft Asia, our slogans of “works for me” and “free-dimensional work” are actually finding resonance. I don’t get to work every day; there are days when I just decide that, okay, today I’m going to work from home. And it’s more effective. It helps me balance time zones, like you said, and not lose time on the commute, et cetera. But I am also energized when I’m with people. Yesterday, for example, we had about 198 people at lunch in the cafeteria and there was just so much great energy.

But as I think about the opportunity, it’s the fine balance of where we put that dial, right? There are certain jobs where the dial will be, “Hey, it’s probably more valuable for us to come together in a group, sit down for four hours, and then disperse.” And there will be some other groups where the dial could be more on the home side. So yeah, I think we’ll all learn. I think we should just keep an open mind and growth mindset, as well as learn and evolve. We should continue to find new ways for people to participate in the workforce, because that’s the only way for the progress that we so desire.

Paul Marriott: Just to add, because I think, Ahmed, you said in your opening, that you have opened a new office in Tokyo. We're doing the same—we’re opening a new office in Tokyo in a few months from now, but we’ve also opened here in Singapore and in Sydney, and we’re renovating many of the offices around the region. And I guess the question is, “Will people come back to the office?” Well, we wouldn’t invest in that level of real-estate renovation if we were not expecting to get this hybrid model fully optimized for productivity. So, one of the things I think is important for organizations to consider is the workspace. Employees want really vibrant, creative, collaborative, innovative, fun places to work. You see a lot of organizations now slightly downsizing physical capacity, but maintaining the same level of investment in terms of having a higher quality workspace—that drives engagement in the office.

I think this office infrastructure is really important and is why you’re seeing a lot of organizations investing in it, even to the point where we’ve moved offices to minimize commute times to make it easier for people to come into the office. So, there are lots of perspectives on this topic, but I think that is an important one. The office is not going anywhere, but the office is getting a major upgrade to become a highly collaborative, engaging workplace. Again, that’s what the great economy particularly and earlier talents expect by default. That’s the table stakes, I think, going into the future.

Diaan-Yi Lin: Let me bring this all together in one overarching question, which is, “What advice would you give a business leader who is keen to translate these trends into tangible steps or solutions? What are one or two things you would want them to take away from this episode?”

Ahmed Mazhari: That’s a very, very hard question, because frankly, we’re learning so much each day. I think what Paul and I kept saying is important—flexibility, openness, and agility both in how you act and behave. But for me, open communication and empathy are probably the foundation of a positive culture. I see those as part of our Microsoft framework of coaching care. To shape a successful future-of-work strategy, we must ensure that we empathize with the needs of the workforce, and then communicate clearly. Because a lack of clear direction from the top creates uncertainty, with employees wondering where they stand and feeling disconnected from management. So, I would say empathy and honest communication are probably the two things that are really top of mind.

And finally, I will confess that, as a leader, I’m very open to being vulnerable and saying, “Look, I don’t know stuff.” People will ask me, “How do you act on this or how do you behave in this situation, or what’s your reaction when someone says, ‘I’m not coming to work’?” I’m learning. I’m learning myself how to deal with it. And it will be an evolution. But finally, it will be tested on what I call the “worth it” equation. Employees have more choices than ever before and they will value where they feel that they have the right balance between their ability to either work at home, in a different location, at customers, or at partner locations. And I’m really looking forward to making free-dimensional work real. But equally, I think human connection is really fundamental to our evolution.

Paul Marriott: If I were to try to boil it down to three things, I think that definitely the future is all about flexibility. In SAP, we call it the “SAP Pledge to Flex”. So, I think it’s really important that you define a framework and create a brand around it, right? So, if you don’t have that already, you need to create it, you need to stick to it, and then start to evolve the model. And so we will continue to refine and sustain “SAP Pledge to Flex”.

I think then, second, I’m going to come back to productivity. Businesses are becoming more sustainable but, really, businesses fundamentally are about productivity. SAP has been a business process company for 50 years, right? We’re all about creating great productivity. But productivity in this context is creating hybrid working models. So, think about your organization, the teams, roles, responsibilities, and the type of work.

And then the third, I think, has to be tech, right? You can do amazing things with technology in this space. You need to constantly listen to your organization. And then, as Ahmed said, it’s about communication with empathy. When you get the feedback, analyze it, recognize where the gaps are, be clear about action plans you're putting in place, and show how you’ve closed the gap based on that feedback.

So, have a high-level brand, like “Pledge to Flex”, look at productivity, the types of work, and start to create a playbook that people can follow. Use that to get the rhythm of the business going and drive productivity in the best possible way with the right balance. And then you’ve got to use tech. The Metaverse is coming, for example. The ways we can work physically and virtually are just going to get more and more sophisticated. It’s exciting! And as for Ahmed and me, we will get a little bit older. It is daunting that tech is going to be at the foundation of everything you do in this model over the next five to ten years.

Diaan-Yi Lin: Thank you both for your time today. We have come to the end of this episode of the McKinsey Future of Asia Podcasts. If you enjoyed it, keep a lookout for more to come. And if this topic of the Future of Work interested you, and you would like to read our reports on it, please go to www.mckinsey.com/futureofasia for more.

Gautam Kumra: You have been listening to the Future of Asia Podcasts by McKinsey & Company. To learn more about McKinsey, our people, our latest thinking, visit us at mckinsey.com/FutureofAsia or find us on LinkedIn, Twitter, and Facebook.