Executives from some of the biggest names in corporate America are still sending mixed signals on the value of flexible work, especially when it comes to recruiting and retaining talent to stay ahead of the competition.
The debate pitting remote versus in-office work that began in the early days of the pandemic resurfaced over the past week with news of the incoming Starbucks chief executive being permitted to work more than 1,000 miles away from the coffee giant's corporate headquarters in Seattle. It's a perk that ultimately helped sway the chain's new CEO, Brian Niccol, to agree to switch to Starbucks' souped-up lattes from his chief executive job overseeing Chipotle's burritos.
While Niccol’s primary office will be in the company’s corporate hub at 2401 Utah Ave. S in Seattle, a Starbucks spokesperson confirmed, the newly appointed executive won't be required to permanently relocate. Instead, he'll be able to remain based in the Newport Beach, California, area — home to his current employer — and only commute to the coffee chain’s base as needed, according to information filed with the Securities and Exchange Commission.
Starbucks employees have been required to head to an office at least three days a week, a policy the coffee giant rolled out in early 2023. It joined a number of other large companies that have called workers back on an increasingly frequent basis as they look to return to a schedule that more closely resembles the pre-pandemic workweek.
Niccol's predecessor, Laxman Narasimhan, was required to relocate to the company's main Seattle hub.
Nick Bloom, an economist at Stanford and a scholar on remote work, said Starbucks' willingness to bend its own flexible work policy to lure Niccol to more caffeinated pastures is "fascinating," yet it underscores the complications that can come with employers deciding who can operate remotely and how.
"It tells you how important work from home is for recruitment," Bloom told CoStar News of the agreement. "For some folks, it is nonnegotiable, and so Starbucks' new CEO managed to haggle a great set up. Full credit [to] Starbucks for being flexible with conditions to get the leader they want, but now they need to make sure other managerial employees get reasonably similar conditions to prevent troubling comparisons."
Remote vs. 'Winning'
For some company leaders, the debate over remote work is a nonstarter, regardless of whether the policy applies to top executives or the broader workforce.
Google's former CEO and Executive Chairman Eric Schmidt scrambled this week to walk back claims that the Silicon Valley tech giant was falling behind in the competitive artificial intelligence race because of the company's remote work policy. His comments that went viral this week were made at a Stanford lecture earlier this year, as the company scrambled to get ahead of big-name startups such as OpenAI.
"Google decided that work-life balance and going home early and working from home was more important than winning," Schmidt said in the recording. "And the reason the startups work is because the people work like hell. If you go found a company, you're not going to let people work from home and only come in one day a week if you want to compete against the other startups."
Both Google and San Francisco-based OpenAI have mandated that people commute to the office at least three days per week since 2022.
While Schmidt, who more recently served as a technical adviser to Google's parent company from 2018 to 2020, has since said he "misspoke about Google and their work hours,” his comments echo a growing sentiment among employers that more in-person time is crucial to their economic and cultural success.
Business software maker Salesforce, for example, was one of the nation's first companies to implement a pandemic-induced flexible work policy but will soon require some employees to commute to an office four to five days per week. The mandate takes effect in October, and joins other policies implemented at companies including Amazon, Kroger, TikTok and IBM.
“Salesforce has always been a hybrid work company,” a spokesperson said in the statement. “Our guidelines focus on in-person connection, while also recognizing the value of working away from the office.”
Muted Impact
Across the United States, the debate over flexible work policies has settled somewhat since the earlier years of the pandemic, but it continues to remain a sticking point between employers and their workers as well as the broader office market. Hybrid mandates have largely been attributed to contributing to the national vacancy rate rising to a record high of nearly 14%, according to CoStar data. The policies have fueled some space cuts among companies that have looked to adjust their corporate real estate footprints to accommodate workforces that don't commute as often as they once did.
Office attendance has largely flatlined, and employees are spending about 60% of their working days in a corporate office, a marginal increase compared to this time last year, according to Stanford University's Survey of Working Arrangements and Attitudes.
"Yes, some companies are focusing on folks cutting back on [work from home,] but just as many companies are increasing [work from home days] as office leases expire," Stanford's Bloom said.
Stricter in-office mandates aren't considered likely to meaningfully move the needle in terms of backfilling the glut of vacant office space tenants have offloaded in recent years. What's more, some aren't done figuring out just how much space they need and whether they need to make additional cuts.
"Most organizations now have a much clearer picture of how they want to use their office space," said Phil Mobley, CoStar Group's national director of market analytics. "Given how much pre-pandemic leased space still has yet to face expiration, there are surely more footprint adjustments to come. However, most of this has already happened or is reflected in the sublet market. Thus, it appears that job growth, rather than workplace policy, is resuming its role as the primary driver of office demand."