Remote work is hurting productivity and innovation, says RBC CEO

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The stunted pace of workers returning to the office is taking a notch out of productivity and innovation, Royal Bank of Canada RY-T chief executive officer Dave McKay says.

The head of Canada’s largest lender made the comments during a conference call to discuss the bank’s first-quarter earnings. While some employers in Canada have mandated that staff work at offices more often, corporate leaders have grappled with employees resisting calls for teams to return to the workplace.

“Society isn’t back together enough,” Mr. McKay said in response to an analyst question about risks in the commercial real estate market.

“All CEOs in every sector I talk to are struggling with a balance of developing talent, promoting talent, building culture, creating productivity. It’s tough, we don’t have the final model yet.”

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The Toronto-based bank employs 97,000 people across Canada and the United States, as well as at offices in Europe, Asia and Australia. Mr. McKay said that CEOs globally have been focused on how hybrid work models could evolve, and the impact that could have on the efficiency and creativity of their teams.

“We’re in a discovery area and trying to find balance with employees and you hear a lot of commentary about it,” Mr. McKay said. “I think most CEOs would tell you that there is a productivity loss.”

As employees continue to work from home for at least a portion of the week, Mr. McKay said that productivity gains and losses depend on the department and the nature of the work. While staff may not need to work from the office five days a week, companies likely need more people in offices than current levels, he added.

Mr. McKay did not provide specific updates about RBC’s new initiatives to incentivize or mandate a return to office. In an internal memo in August, he asked employees to “come together more often in person to work and collaborate.” At the time, a spokesperson for RBC said that the bank had asked most of its employees to work from the office two or three times a week by the end of September.

The issue is also weighing on commercial real estate. In part, higher interest rates are putting pressure on investments in the sector and on loan demand. In addition to that trend, if employees continue to opt to work from home, demand for office space could fall, RBC chief risk officer Graeme Hepworth said on the call.

“It’s not going to be a return to prepandemic levels either, so there will be some dislocation,” Mr. McKay said. “There will be companies, like us, that release some real estate. I don’t think we’ll have 100 per cent of the portfolio we had before. We’re finding our way towards that and it’s a balance that creates an overall environment that’s constructive.”