While the likes of Amazon and Dell are urging workers back to the office, Spotify is retaining its work-from-anywhere policy.
The music-streaming company first introduced this model – which lets staff determine how often they work from home or in the office – in February 2021, as countries began easing their Covid-19 restrictions. Now, at a time when many other companies are rowing back on these pandemic-era perks, Spotify is committing to keeping them.
“You can’t spend a lot of time hiring grown-ups and then treat them like children,” says Katarina Berg, Spotify’s CHRO. While she says she understands why some companies have returned to the office, “they are going back to what they know”, Berg is yet to find a reason to enforce a mandate for Spotify’s employees.
“We are a business that’s been digital from birth, so why shouldn’t we give our people flexibility and freedom?” she says. “Work is not a place you come to, it’s something you do.”
So far, Spotify has noticed no impact on productivity or efficiency since moving to a distributed way of working. However, there are concerns about the potential impact remote working can have on collaboration and innovation. Spotify has begun working with the Stockholm School of Economics to conduct further research into this.
“It is harder and we all struggle to collaborate in a virtual environment,” Berg says. “But does that mean that we will start forcing people to come into the office as soon as there is a trend for it? No.”
Making the office a destination
Despite this commitment to letting people choose their own working location, Spotify is retaining its office space – although it may look to downsize its real estate footprint.
Part of this is due to mental-health and wellbeing concerns. “We know what happens when people sit down and you can actually look each other in the eye. It’s different to being on screen,” Berg explains. “Some people like to come into the office and meet people.”
We find things that make people want to come into the office rather than forcing them to
Spotify is the largest music-streaming service in the world, by subscriber market share. Its regular ‘listening lounge’ sessions, where popular artists come into its offices to perform, are one of the added perks of working there. Recent visitors to Spotify’s London offices include Rag ‘n’ Bone Man, Olivia Dean, Tom Grennan and Cat Burns.
“People who work here tend to love music,” Berg says. “We try to find things that make people want to come into the office rather than forcing them to.”
The one week of the year when Spotify employees are encouraged to meet in person is during ‘core week’. During this time, each team is expected to come together to collaborate and discuss strategy.
“By having one week where small teams travel to meet up, we can energise people and still have a low impact on the climate,” Berg says. “It has worked really well.”
CEOs get in tune with HR
Spotify’s distributed working approach has had a positive effect on retention rates too. Attrition rates dropped by 15% following its decision to allow employees to work from anywhere. In the C-suite and senior leadership team, the average tenure is just over seven years.
CEOs realise you can’t develop a great product if you don’t have great people
While talent retention, culture and employee engagement are usually the responsibility of HR leaders, CEOs are beginning to show more interest in these topics, according to Berg.
“While most CEOs were previously interested in the product and finances, they now realise you can’t develop a great product if you don’t have great people,” Berg adds. “That is why more CEOs are trying to understand what motivates people.”
HR leaders and CHROs are also becoming better at selling their ideas and demonstrating the positive impact they can have to their chief executives, Berg adds. “HR can be quite similar to marketing,” she says. “When selling a new HR project or plan, you have to explain what it will do for the business and how it will attract people or improve productivity and organisational effectiveness.”
How Spotify is moving on from its layoffs
Despite Spotify’s success in growing from a plucky Stockholm-based startup in 2006 to a multinational business with a $75bn (£57bn) valuation, it faced several challenges last year.
In December, the organisation made 1,500 job cuts, reducing its total headcount by 17%. It was among a number of tech companies to make large-scale redundancies that year as interest rates rose and investors pushed for cuts to preserve profits.
“It wasn’t pleasant to do but it was a business decision,” Berg says. “We wanted to mature and we need to become a great business as well as a great product. We had to say goodbye to people that had done really well for us.”
Although Spotify has not implemented a hiring freeze, recruitment will likely remain in the “lower numbers” in the near future. “Being a people-first organisation doesn’t shield you from macroeconomics,” she adds.
Being a people-first organisation doesn’t shield you from macroeconomics
In April, Spotify CEO and co-founder Daniel Ek told investors that these cuts had disrupted day-to-day operations “more than we anticipated”. Berg explains the layoffs came as a “shock to the system” for some staff. “Spotify had been in hypergrowth and this was the only thing people knew,” she adds. “A lot of people at Spotify had never seen a recession and it was a lot to absorb and digest.”
Downsizing also required a change to the ways people worked. “We were a bit spoiled at Spotify,” Berg says. During the company’s scaleup phase, a new team was often hired to build each new feature. “If you have to always have more to do more, you can end up being a one-trick pony,” she explains. “All of a sudden we had to learn to prioritise, which is good for any business.”
However, there were some criticisms of Spotify’s decision to host its Wrapped party, which featured headline performances from Sam Smith and Charli XCX, and its Spotifest music festival for staff in such close proximity to these job cuts.
Some former staff told Business Insider they were “surprised” to see the company continue to spend money on these events when cuts were being made to other parts of the business.
But Berg doesn’t regret this decision. “You need to let people know that life goes on,” she says. “It might sound harsh but it’s important. We closed down a lot of events last year but we kept our hero events which are important for our people and our culture.”
Hosting these events was an effective way of helping “calm people down” and reassure staff that there wouldn’t be further rounds of job cuts, Berg adds. “By doing this, we were telling people that we think we’ve done enough.”
Reaching business maturity
Although Berg says it would be “foolish” to say Spotify will not make any further layoffs, she remains confident the business is at an “optimal” size and well positioned for further growth.
The focus now is on transitioning from a business in hypergrowth to a mature company. Berg will once again be at the forefront of this change as the company reassesses its organisational setup, ways of working and culture.
“The things that were really successful when we were a startup are usually not a winning bet later on,” Berg says. “You need to shift.”
