Millions of jaded employees and executives are enjoying the northern hemisphere’s traditional summer break, flocking to beaches and beauty spots. But for incoming Starbucks chief executive Brian Niccol a visit to the seaside may be within reach year-round.
Niccol’s appointment, announced last week, came with an unusual perk. Instead of moving to the coffee business’s Seattle headquarters the new boss has persuaded the company to set up a “small remote office” in Newport Beach, California.
The arrangement is a departure from that of his ousted predecessor Laxman Narasimhan, whose quest to get under the skin of Starbucks included four weeks working with frontline staff to earn his barista certification.
Niccol’s plan for a base in Newport Beach, California – where he moved the headquarters of his previous employer Chipotle Mexican Grill – has divided opinion.
“It is not wise and sets a terrible example,” said Samuel Johar, chairman of board advisory firm Buchanan Harvey. “It smacks of one rule for CEOs and another for everybody else,” he argued, adding that, given the extent of the challenges facing Starbucks, the remote arrangement looked “a little complacent”.
Starbucks’ desk-based staff in Seattle are expected to come to the office three days a week. Many employers are trying to increase the rate of attendance in pursuit of greater cohesion and productivity.
“Good luck trying to get anyone else to come into the office if your CEO doesn’t have to do it,” said Peter Cappelli, George W Taylor professor of management at the Wharton School. It is “hard to change organisational culture” remotely but this would be part of Niccol’s goal at Starbucks, said Cappelli.
Niccol’s arrangement may signal that lifestyle perks are becoming more important in attracting top executives as they have for rank-and-file staff. However, other boardroom experts agreed that having a boss working remotely while colleagues were based at the company headquarters risked demoralising teams and limiting the leader’s effectiveness.
“Leadership often involves a lot of ambient interactions such as networking, observation and non-verbal forms of communication. Physical presence can be an important part of this,” said André Spicer, executive dean of Bayes Business School and professor of organisational behaviour.
Mark Freebairn, partner and head of board practice at Odgers Berndtson, the UK’s biggest headhunting firm, added: “What is a cultural leader if they’re not in the culture?”
Others are less alarmed by the arrangement, while investors welcomed Niccol’s appointment with the share price rising sharply after it was announced.
“It’s just a sign of the times,” said Job van der Voort, chief executive and co-founder of payroll and workforce management IT firm Remote. Company bosses are “basically always on and a lot of people are always working from their phone or in transit so making this formal makes a lot of sense”, said van der Voort, who works remotely full time.
Several experts argued that at large companies CEOs inevitably spent vast amounts of time travelling regardless of their formal base.
“[At] a multinational like Starbucks the CEO is going to be on the road a lot visiting subsidiaries, suppliers, talking to shareholders and government representatives,” said Lynda Gratton, professor of management practice at London Business School. So even if they are based in the HQ they will not be there for much of the time.
A public filing showed Niccol would not be required to relocate to Seattle but must commute to the company’s headquarters “as is required to perform [his] duties” and may use company aircraft to make the trips.
Starbucks said in a statement that Niccol’s “primary office and a majority of his time” would be spent in Seattle or visiting staff and customers in stores, offices and other facilities around the world. He would “exceed the hybrid work guidelines and workplace expectations” that apply to all employees and was also likely to get a home in Seattle.
A 2021 study of the economics of long-distance chief executives found there were benefits to the arrangement but that these were generally outweighed by the drawbacks.
“On the one hand the flexibility of remote management can allow boards to attain high-profile CEOs who would otherwise be unwilling to relocate for the job,” said Ran Duchin, a professor of finance at the Carroll School of Management in Boston College, who co-authored the study. “On the other hand some argue that managing from a distance can serve the CEO’s own interests at the shareholders’ expense.”
Duchin said his research on long-distance leaders before the pandemic had found “lower operating performance and valuations when the CEO has a remote working arrangement”. In specific cases, such as being “close to the beach or a golf course, or owning a boat, CEOs consume more leisure, and this corresponds to a weaker firm”.
The downside was mitigated, he said, for companies that were geographically dispersed and in cases where the CEO lived near a field office.
While recruiters say fully remote CEOs are uncommon Niccol is not the first to attempt the arrangement.
Wells Fargo’s chief executive Charles Scharf has led the San Francisco-based bank from New York since his appointment in 2019. HSBC’s non-executive chairman Mark Tucker also has a home in New York, while Barclays’ chief executive CS Venkatakrishnan splits his time between London and New York.
AstraZeneca boss Pascal Soriot, the FTSE’s best-paid CEO, was temporarily based in Australia during pandemic restrictions – though he worked through the night to stay in sync with colleagues in Europe and North America before moving back to the UK.
Some investors have pushed back: Jack Dorsey abandoned a plan in 2020 to temporarily relocate to Africa while continuing to run Twitter and Square after pressure from Elliott Management.
But the importance of central offices has waned in recent years, a trend that has accelerated since the pandemic, said Kit Bingham, partner at headhunter Heidrick & Struggles. “The model of a giant central office where everyone needs to be is historic. Very regularly in London I’ll go to a big company HQ and it’s got six people rattling around.”
Others are sceptical that Niccol’s arrangement signals a sea-change. “I would be staggered if it becomes any more normal than it is now,” said Freebairn. – Copyright The Financial Times Limited 2024
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