Countless weary workers and corporate leaders are relishing the typical summer recess in the northern hemisphere, assembling in numbers at holiday locations and scenic vistas. For Brian Niccol, the newly appointed CEO of Starbucks, a trip to the coast could be a regular occurrence throughout the year.
Niccol’s recent appointment was accompanied by an extraordinary benefit. Rather than relocating to the Seattle-based headquarters of the coffee giant, Niccol has convinced the firm to establish a “miniature outstation” in Newport Beach, California.
Breaking away from his removed predecessor, Laxman Narasimhan’s approach – who went as far as spending a month working alongside front-line staff to secure his barista qualification in an attempt to grasp the essence of Starbucks. Niccol’s idea of having a base in Newport Beach, where he had relocated the head office of his past employer, Chipotle Mexican Grill, has elicited mixed reactions.
“Regrettably, this sets a very poor precedence,” commented Samuel Johar, the head of board advisory enterprise Buchanan Harvey. He criticised the arrangement, implying it created different rules for CEOs and other employees. Johar further suggested this decision, given the size of the hurdles Starbucks is facing, seems “somewhat apathetic”.
Employees at Starbucks’ Seattle office are anticipated to turn up three days a week. Numerous companies are making endeavours to boost attendance frequency in the quest for enhanced unity and productivity.
“It will be challenging getting others to come in if the CEO isn’t required to,” opinioned Peter Cappelli, George W Taylor professor of management at the Wharton School. Striving to alter company culture remotely would be a part of Niccol’s objective at Starbucks, remarked Cappelli.
The unique agreement made with Niccol might indicate that for top executives, lifestyle-related incentives are gaining priority in the same manner as for ordinary employees. However, other boardroom experts agreed that when a leader works distantly while the team are stationed at the company’s primary base, it risks demotivating the team and restricting the head’s impact.
“A large part of leadership encompasses casual exchanges like networking, observing, and non-verbal communication. Being physically present can often play a crucial role in this,” argued André Spicer, executive dean of Bayes Business School and professor of organisational behaviour.
Mark Freebairn, the head of board practice at Odgers Berndtson, the largest UK headhunting firm, questioned the effectiveness of a cultural leader devoid of cultural immersion. Contrarily, some aren’t overly concerned by such an arrangement, and in fact, the appointment of Niccol saw a positive response from investors with a substantial increase in share price.
Job van der Voort, CEO and co-founder of IT firm remote, working full-time remotely himself, believes such a setup mirrors the modern-day work culture. He suggests that executives are practically perpetually available, and many work remotely or while on the move; hence normalising this would indeed be logical.
A common belief among several experts is that for any large corporation, the CEO invariably spends substantial time in transit, irrespective of their official location. “CEOs of multinational corporations like Starbucks are bound to be extensively mobile, for instance, visiting branch offices, liaising with suppliers, interacting with shareholders or government officials,” remarked Lynda Gratton, a management practice professor at London Business School. She emphasised that despite being posted at the headquarters, their amount of time spent onsite would be limited.
An official document revealed that Niccol need not move to Seattle but will need to commute to the Starbucks headquarters for duty, with the provision of a company aircraft at his disposal.
Starbucks made it clear via an official statement that Niccol will spend a major portion of his time in Seattle or visiting staff and customers at stores, offices, and various worldwide facilities. The corporation expects him to go beyond the standard hybrid work policies and workplace norms that apply to every employee. Additionally, there’s also a likelihood of him acquiring a home in Seattle.
A 2021 research on the financial implications of remote CEOs concluded that even though there are certain perks, they’re predominantly overpowered by the associated drawbacks. Ran Duchin, a finance professor at Boston College’s Carroll School of Management, expressed that while remote management’s versatility allows high-profile CEOs who would otherwise refuse to relocate, some believe this might be more in the CEO’s interest than the shareholders’.
Duchin’s studies on remote leadership prior to the Covid-19 outbreak found diminished operational performance and company valuations when CEOs worked remotely. He suggested that CEOs who lived near leisure activities, like the seashore or a golf course or who owned boats, tended to enjoy additional leisure time, which often translated to weaker business performance. However, this trend was less evident in organisations that were spread out geographically or when the CEO was located close to a branch office.
The idea of a fully remote CEO is not a common practice, according to recruiters, but Niccol is not pioneering this approach. For instance, Charles Scharf, CEO of Wells Fargo, has been managing the San Francisco-based bank from New York since 2019. Similarly, HSBC’s non-executive Chairman Mark Tucker and Barclays’ CEO CS Venkatakrishnan who divides his time between London and New York have residences in New York. During the lockdown, Pascal Soriot, the highest-paid CEO on the FTSE, worked from his home in Australia but kept European and North American business hours before returning to the UK.
However, not all investors are comfortable with this business model. For instance, Jack Dorsey discarded his 2020 plans to move temporarily to Africa whilst managing Twitter and Square following pressure from Elliott Management.
The necessity for a central office presence has lessened in the last few years, a trend that the pandemic has only hastened, accordimg to Kit Bingham, a partner at executive search firm Heidrick & Struggles. He says, “A massive, central office is now a thing of the past. When I visit large company headquarters in London, it’s not unusual to find just a few people there.”
Nevertheless, some people doubt that Niccol’s setup signals a significant shift. Freebairn says he’d be “astonished if it becomes any more usual than it currently is.” – Financial Times Limited 2024 copyright.