No, Remote Work Didn’t Bring About SVB’s Demise

The stories about Silicon Valley Bank pour forth, and now take a turn to explain what went wrong. One example is the Financial Times, which profiled the failed bank’s culture and how it might have led things astray.

One problem was there was too much emphasis on working from home, the piece said. Indeed, SVB warned in its annual report that it “may experience negative effects of a prolonged work-from-home arrangement as well as our implementation of a broader plan to return to the office.”

It was a point picked up by other publications as well, such as Axios, which wrote “Whether remote work led directly to a bank failure, or whether poorly-managed remote work was simply a sign of bigger problems at the company, we may never know. Either way, what happened at SVB will likely enter the broader debate about returning to the office.”

Productivity Paranoia 

‘Remote work leads to corporate failure’ is no doubt a tempting argument for companies that want their employees back in the office to say nothing of office landlords. It also plays on the fears many managers have that their remote workers are just not, well, working. Last fall Microsoft reported that 85% of leaders told it that the shift to hybrid work has made it challenging to have confidence that employees are being productive. Also, compared to in-person managers, hybrid managers are more likely to say they struggle to trust their employees to do their best work (49% vs. 36%) and report that they have less visibility into the work their employees do (54% vs. 38%).  “This has led to productivity paranoia: where leaders fear that lost productivity is due to employees not working, even though hours worked, number of meetings, and other activity metrics have increased,” Microsoft said.

However, the FT debunked the theory that remote work was part of the cause for SVB’s demise as the piece went on. 

“Now, SVB’s governance, strategy and culture are in the spotlight as regulators examine what led to the largest US banking collapse since the 2008 financial crisis. At the centre of SVB’s demise is a decision by management at the height of the pandemic — when a tech investment boom meant it was flooded with new deposits — to lock up half of its assets in a $91bn portfolio of securities that made it vulnerable to rising interest rates. At the time, its share price valued it at a record $44bn, more closely resembling a surging tech company rather than a regional bank stock. However, the success made it complacent to the risks, insiders told the Financial Times.”

And even Axios hedged its bets about whether remote work played a role in SVB’s collapse. It wrote: 

“It’s certainly possible that if more executives were working in closer proximity those missteps would’ve been avoided. But it’s hard to really know.” 

Experts interviewed by CNBC, for their part, heaped scorn on the theory. 

“Companies did very well through Covid [when employees were largely working remotely] and began to stumble over the past seven to eight months as financial pressures increased, but remote had nothing to do with it,” noted Michael Bush, CEO of Great Place to Work, a global research and analytics firm that evaluates corporate culture, and added that other financial institutions like Bank of America and American Express continue to be profitable while embracing remote work.

The upshot these and other commentators say: While some companies may have good reasons to have their employees return to the office – although their workers likely don’t agree with them – corporate failure should not be one of them.