Hybrid work boosts productivity only when paired with AI and automation

Productivity gains in the post-pandemic workplace are not coming from remote work alone, but from how firms combine it with automation and artificial intelligence, according to new research that challenges years of fragmented debate over hybrid work models. Evidence shows that companies treating work-from-home (WFH), AI, and digital tools as a single operating system achieve stronger and more durable performance gains than those relying on isolated policies.

The findings are detailed in the study New Intelligent Technologies: Are They Making the Workplace Productive?, published in Sustainability. The research analyzes firm-level data from nearly 4,000 large companies across countries and industries, offering one of the most comprehensive assessments to date of how intelligent workplace technologies shape productivity.

Remote work alone shows diminishing productivity returns

WFH delivers only limited productivity gains when implemented on its own. While moderate levels of remote work can improve efficiency by reducing commuting time and increasing flexibility, the benefits are not linear. As the share of remote work rises, coordination costs increase, communication weakens, and supervision becomes more complex, particularly for teamwork-intensive and creative tasks.

The analysis shows that productivity gains from remote work peak at moderate hybrid levels, roughly equivalent to one or two days per week away from the office. Beyond that range, productivity growth slows and can eventually turn negative if firms fail to invest in supporting technologies. This non-linear pattern helps explain why earlier studies reached sharply different conclusions about the effectiveness of remote work, with some reporting gains and others identifying losses.

Crucially, the research demonstrates that many estimates of remote work productivity are biased downward because they fail to account for complementary investments. When automation and digital collaboration tools are excluded from analysis, remote work appears less effective than it actually is within well-equipped organizations. In firms with weak digital infrastructure, remote work exposes coordination failures. In firms with strong infrastructure, those frictions are partially neutralized.

WFH is not simply a location choice but an operating model. Its effectiveness depends on reliable digital workflows, standardized processes, and tools that enable real-time coordination. Without these elements, remote work scales poorly and magnifies organizational inefficiencies rather than reducing them.

Automation and AI reshape task allocation, not just jobs

The strongest and most consistent productivity gains in the study are linked to automation and AI, particularly when deployed alongside remote work. Rather than eliminating jobs outright, automation reshapes workflows by reallocating routine and codifiable tasks from labor to capital. This frees human workers to focus on higher-value, non-routine activities that benefit more from judgment, creativity, and collaboration.

Firms are modeled as allocating individual tasks to the most cost-effective input, whether on-site labor, remote labor, or automated systems. Improvements in automation increase capital productivity, shifting the boundary between tasks performed by humans and machines.

Importantly, the study finds that automation can substitute for remote labor at the task level while remaining complementary at the firm level. In other words, automation may reduce the need for remote workers in routine tasks, but it simultaneously enhances overall productivity by reducing coordination burdens, standardizing workflows, and enabling more efficient use of labor across the organization.

Empirical results show that firms investing in AI and automation experienced higher labor productivity growth than those relying primarily on remote work tools. These gains were comparable in magnitude to traditional physical capital deepening, underscoring the role of intelligent technologies as a new form of productive capital rather than a marginal efficiency add-on.

However, the study also warns that automation benefits depend on organizational integration. Firms that deploy AI without redesigning workflows or aligning remote work practices risk fragmentation and diminishing returns. Automation functions as a coordination technology as much as a labor-saving one, and its impact depends on how well it is embedded in the broader work system.

Integrated technology systems drive sustainable productivity

Productivity gains are highest when firms adopt integrated bundles of workplace technologies. Companies combining work-from-home arrangements, automation, AI, and digital collaboration tools consistently outperform those pursuing isolated or sequential investments.

In these integrated systems, remote work lowers labor disutility and expands the effective labor supply, while automation and AI increase capital productivity and standardize task execution. Digital coordination tools reduce communication frictions, enabling tasks to be modularized and redistributed across locations and inputs. Together, these effects support capital deepening, resilient task reallocation, and sustained total factor productivity growth.

Quantitatively, the study shows that integrated workplace technologies contributed a substantial share of annual productivity growth during the 2018–2021 period, even amid the disruption caused by the pandemic. While traditional physical capital remained the largest single contributor, workplace technologies accounted for a growing and economically meaningful portion of productivity gains.

The analysis also reveals that only a minority of firms have fully realized these benefits. Many organizations remain stuck in pilot phases or partial deployments, limiting the returns on their technology investments. Incomplete rollout, weak integration, and lack of workflow redesign emerge as key barriers to productivity improvement.

From a managerial perspective, the findings suggest that decisions about remote work, automation, and AI should be evaluated as part of a single portfolio rather than as standalone initiatives. Underinvestment in one component can sharply reduce the returns on others. A firm that automates without investing in digital coordination, or that expands remote work without redesigning tasks, is unlikely to achieve sustainable gains.

The study also reframes debates over return-to-office mandates. Rather than asking whether remote work should be allowed or restricted, the evidence points to a more nuanced question: which tasks should be performed remotely, which should be automated, and which require on-site presence. Optimal arrangements vary by task type, skill intensity, and technological support, not by simple headcount ratios.

As for economic sustainability, integrated workplace technologies support durable productivity growth by enabling firms to adapt to shocks, reorganize work efficiently, and align worker preferences with performance constraints. They also contribute indirectly to social sustainability by supporting hybrid work models that balance flexibility and coordination.