These CEOs swear by a five-hour working day — even though it made employees quit

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Reducing the time employees spend in the office is becoming an increasingly popular policy, with companies around the world experimenting with shorter working hours.

Productivity jumped 40% when Microsoft Japan tested a four-day working week in August, while New Zealand firm Perpetual Guardian found engagement levels rose when the company trialed a three-day weekend earlier this year.

Another approach being taken by employers around the world is working five-hour days over a five-day week.

But according to two CEOs who have implemented the five-hour day, slashing hours created unprecedented challenges in terms of recruiting and retaining talent.

Stephan Aarstol, founder and CEO of Tower Paddle Boards — a California-based start-up backed by billionaire investor Mark Cuban — began trialing a five-hour day across the company in June 2015.

Aarstol told CNBC in a phone interview that he wanted to attract people to the company who could work three times faster than others — but he noted the five-hour day "can certainly attract the wrong people."

"We started attracting two types of people," he said. "One was the type we wanted, and we also attracted these sloth-like people. We had to very quickly distinguish which type of person each applicant was."

As well as having to adapt to recruitment challenges, Aarstol said cutting the workday also led to an even bigger problem — he was losing workers, despite their earning high salaries and working fewer hours.

"I had a team of nine, and I lost four people within a 90-day period," he said. "One of them I fired, but the other three left. So I had all these great people that had five-hour workdays, and they were leaving the company."

Initially, Aarstol didn't understand why shorter days were failing as a retention tactic, particularly because productivity remained strong. He speculated that it came down to company culture.

"We're a start-up company where you're kind of in the trenches with everybody, and you form really strong bonds with people," Aarstol told CNBC. "We developed a really strong culture because of that. And when all of a sudden you're walking out of work at one o'clock, your outside world becomes much bigger — you don't have a strong bond with co-workers. And I think that's why it was very easy for people to leave."

"People don't leave a company; I think they leave the people they work with," he added. "So company culture sort of trumps everything else there, and we were sacrificing that for the five-hour workday."

He addressed that issue by modifying the policy in 2017, with Tower Paddle Boards now offering the five-hour day to employees for four months over the summer.

"Now I feel we're getting the bulk of the benefits," he said. "We're getting that start-up culture in the off season, and we're getting the benefits of squeezing people for time in the summer and all the productivity gains we realized there."

Across the Atlantic, Lasse Rheingans, CEO of Rheingans Digital Enabler — a marketing agency based in the German city of Bielefeld — encountered similar issues when he cut working hours in 2017. After introducing the policy, two of his employees left the company.

"I think for the first time in their career, they had the time to go home and really consider 'What do I want to do for myself?'" he said. "Some of them came to the conclusion, 'Hey, I would really love to do something else.' One of them started studying again — something completely different than he did before — and the other changed industries."

"I'm happy for them and I'm happy for the company, because they found their path," he added. "And they're not here not living up to their full potential."

However, Steve Glaveski, CEO of Australian consulting firm Collective Campus, argued poor retention rates were usually a sign of workers being a bad fit with a company. Collective Campus rolled out a five-hour day in October 2018, which has since evolved into an "ad hoc" approach that allows employees to be flexible with the length of their workday.

"If you hire people who are aligned with the values and mission of your organization, if they're motivated to do great work and contribute, then giving them time to pursue other hobbies or interests rarely results in them bailing," he told CNBC. "The only departures we've had since we made the move was terminations that we instigated, as opposed to resignations, and I think it's because we aim to hire values-aligned people and embody a hire slow, fire fast philosophy."

Redefining work

Both Aarstol and Rheingans, despite facing retention challenges, were advocates of the five-hour day and told CNBC they believed the traditional eight-hour workday would eventually become a thing of the past.

"I think the shorter day will catch on everywhere 20 years from now," Aarstol said. "There will be different ways of doing it, there's going to be a bunch of experiments. It's just part of the advance of society."

"Every job is undergoing drastic changes because of automation and technology," Rheingans added. "We really have to reconsider what work is. I'm not saying the five-hour workday is feasible for everyone, but we have to consider alternatives to the eight-hour workday because that doesn't make sense."

According to Glaveski of Collective Campus, the feasibility of a five-hour day comes down to individual industries.

"In certain industries it makes sense to work more hours, up to a certain point — but in a knowledge work economy, it's not about widgets coming off an assembly line," he said.

Glaveski added that his workforce had a more positive attitude since hours had been reduced.

"Their emotional wellbeing is higher, they have more time to invest into personal relationships and more time to explore things that fill them with joy," he told CNBC. "This comes back into how they perform. I haven't noticed a dip in productivity — while the team has gotten smaller, revenue is higher."

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