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I've worked from home at various times and it's worked well for me. As it was mostly for domestic reasons (additions to the family etc) so my experience may not be typical. However, there are a few points I'd like to make:
Teleworking isn't for everyone. I have a friend who works in the gardening business and the idea of spending days cooped up in an office is a total anathma to him - he couldn't do it, he needs his daily fix of the great outdoors. Similarly there are people who can't work on their own - they are essentially social animals and need the daily contact provided in-house.
Even for those who ARE teleworking material, there are a lot of distractions at home - garden, kids, radio etc. When I did it I found I did odd hours - less during the day and more at night. If I was to do it on a regular basis I'd need to sort out an office for myself so I'd effectively 'go to work' thus maing a break between work and home.
Because people aren't working doesn't mean they're lazy. Most places I've worked, the level of work fluctuates. At some places people played computer games on extended lunch breaks, messed about a bit etc when things were fairly quiet. Management took a fairly relaxed view to this (as long as it wasn't too blatant) as they knew that got done with people working through lunch, unpaid overtime etc. Basically they knew that the work got DONE ON TIME.
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