Do You Really Need An HQ?

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Hybrid offices are challenging old assumptions and putting CHROs at the middle of a revolution in how we work.

Over drinks on a recent rainy, early-Fall evening in Soho, the chief executive of a rapidly growing tech firm was debating the merits of leasing office space for a new global headquarters in Manhattan with an executive from a major stock exchange. Her company’s business was surging thanks to the peculiarities of the pandemic economy and large customers such as Amazon, and she had been on a hiring spree, snapping up tech workers in San Francisco, New York and Tel Aviv. The growth had translated into globe hopping travel for her as well. Wouldn’t it be nice to get everyone together in one place? But was it worth the price? And did anyone besides her actually want it?

The dilemma this executive faces is playing out in organizations large and small around the world. On the one hand, there are deals to be had on prime office space in high profile neighborhoods like Flatiron, FiDi and Hudson Yards in Manhattan. On the other hand, long lease terms and an increasingly diffuse white-collar workforce call in question whether many employees would actually use an office. Without a daily force of workers at desks, what is the purpose of an office, much less a headquarters? The executive mused that maybe a “Disneyland-type” experience would entice employees, or at least make all team meetings a little more tolerable. She’d seen a “human claw machine,” where a person dangled from a harness on a crane to scoop up armloads of stuffed animals and swag at a conference once. Perhaps something like that would make a difference?

There is a sense among CHROs and executives that they want an office, if only as a concrete representation that their companies and cultures are real. Yet the economics and shifting reality of labor during the dog days of the Covid-19 pandemic are making such decisions incredibly difficult.

Barbie Brewer, Chief People Officer, ClickUp

Office space that few will use in the near term seems like an increasingly poor investment, and many employees want to remain either entirely or mostly remote. According to Barbie Brewer, an HR consultant, Chief People Officer at ClickUp and former Vice President for Talent at Netflix, executive teams today are faced by a single dominant question: “Where do you want to put your money? Is it really having that beautiful, you know, Salesforce Tower downtown?”

With quit rates at all-time highs, HR departments are particularly wary of alienating employees they want to retain. One consequence of the shifting priorities is the embrace of so-called hybrid offices, flexible arrangements which, depending on the company, encompass everything from coworking spaces to rotating remote days to employees simply coming in whenever they want. Such hybrid policies allow companies to avoid making commitments to bring employees back permanently and can help protect against making unnecessary investments.

Although hybrid-work increasingly is simply work, there’s no single definition of what it means. “Telling an organization you’re going hybrid is like telling a waitress who wants to take your order that you’d like some food, right? It’s like, what do you mean? Warm food, cold food, vegan food, freshly prepared Italian? There are so many iterations of hybrid,” says HR consultant and former LinkedIn CHRO Steve Cadigan.

Naturally, discussions of hybrid offices or hybrid work arrangements only really apply to a white-collar workforce. There’s no such thing as hybrid work, much less remote, for baristas, factory line workers, janitors, construction workers, warehouse laborers or frontline workers of all stripes. At industrial companies, restaurants and retail chains, the remote versus hybrid versus all in-person debate only applies at the management and corporate level, if it applies at all. “You can’t do a microscope analysis from home very easily. And someone has to feed the mice, you know?” notes Tim Rowe, founder and CEO of Cambridge Innovation Center (CIC), a global coworking company with more than 1 million square feet of coworking space and wet labs servicing the biotech industry.

A few executives have decisively ordered employees back into offices, ignoring complaints or ongoing coronavirus concerns. JPMorgan Chase chairman and CEO Jamie Dimon famously began pushing his workforce to return to offices as early as May 2021, arguing that work-from-home didn’t work for young employees, culture creation or “those who want to hustle” and declaring that “everyone is going to be happy with it, and yes, the commute, you know people don’t like commuting, but so what.”

Steve Cadigan, HR consultant and former CHRO, LinkedIn

The instinct to return to offices is natural, although not necessarily correct, argues Cadigan. “We’re used to producing predictable outcomes within a known environment when we’re all in-person,” he says. “We’ve never been forced to reconcile with creating value in a different way. It fundamentally feels uncomfortable because we don’t know we can deliver in this new way.” Yet the coronavirus pandemic and the rapid advance of remote work technology has created fundamental changes in offices.

Even a return to the office at JPMorgan Chase and other big banks came with more flexibility like the ability to work from home some days but not others. In other words, while some companies may have declared a return to the office, hybrid arrangements have crept in nonetheless and seem to be here to stay for at least the medium term.

Though many companies remain totally remote, CHROs and employees (particularly, perhaps, those at JPMorgan Chase) recognize the value in hybrid work arrangements. “It’s pretty well understood that there is a higher risk if you don’t have the face time. Human relationships come from spending a lot of time together with people,” says Rowe.

The shifting terrain, quite literally, has left many corporate policies in flux, and CHROs are increasingly favoring flexibility over setting one-size-fits-all policies. Depending on the company and the time horizon their executives are working on, hybrid work takes different forms.

Coworking Comes of Age

In the new era of hybrid offices, coworking spaces are no longer the exclusive province of startups, consultants and freelancers. Increasingly, larger companies are turning to flexible office space on demand as a replacement for the large, permanent blocks of offices and cubes which they used to inhabit. “Everybody’s asking for hybrid. Everybody comes in the door and says, ‘I want space,’” says Rowe. “In the majority of our sites, we have more inquiries, more tours and more sales than before Covid.”

Not only are the number of inquiries for coworking space climbing, the headcount of the organizations looking for space is “much larger on average” as well, according to Rowe. In other words, not only are more companies looking for coworking space than pre-pandemic, they’re larger companies than would have previously considered such flexible options. CIC’s revenue per location has surged from 58 percent of pre-Covid revenue in January 2021 to 77 percent by October 2021, with the bulk of that growth coming since August. As of November, CIC’s inquiries had reached 101 percent of pre-Covid levels, tours were at 109 percent compared to before the pandemic, and the number of sales by client had surged to 119 percent of pre-Covid levels.

Tim Rowe, CEO, Cambridge Innovation Center

Previously CHROs at large companies did not even consider coworking spaces as options, Rowe says, but “shared workspace is perfect for hybrid because you don’t have to do any work to maintain your office. You can change your mind about how much space, how many people you need to support, and it doesn’t cost you.” While leases for office space are typically done on long-term commitments between five and 10 years, commitments at coworking spaces such as CIC can be adjusted month-to-month. Rowe says CHROs are increasingly seeking this flexibility because “nobody knows what their future needs are going to be.”

Reading the Room

There are several reasons for the lack of clarity around what kind of offices companies will need. For one thing, with quit rates and wages elevated, CHROs are particularly concerned with hiring and retention right now. Rocking the boat by demanding that workers return to offices full-time is seen as an unnecessary risk in the current labor market. Indeed, Rowe notes that companies are reluctant to “go to war with employees” over remote and hybrid work because “taking any kind of stance other than a super flexible one seems likely to lead to people quitting in record numbers.”

The reasons people may not want to return to offices can seem somewhat parochial, but they are real nonetheless. For instance, “the amount of people owning dogs has increased,” says Brewer. “I’m a crazy dog lady. I love my dogs. But now you see a lot of people wanting their dogs in the office because they purchased these dogs during Covid. And now what can they do with them if they’re going back to the office? There’s all these little things that companies haven’t really thoroughly thought out.”

Beyond companies being acutely aware of employee preferences right now, there’s also the reality that the coronavirus continues to evolve, and the trajectory of the pandemic is far from fixed. While vaccines looked like they would quickly send the world back to normal at the beginning of the summer, by August and September, the highly contagious Delta variant—accompanied by dramatic headlines about breakthrough infections—had many people questioning a rapid return to the office. “New strains became a real thing, not just a theoretical possibility,” Rowe says. “Every company that said you had to be back in the office by September said, ‘Oh no, we’re putting that off.’” For CHROs, hybrid office arrangements provide a way to avoid over-committing one way or another and either alienating employees or whipsawing between office openings and closures.

Hidden Benefits

The most obvious benefit to hybrid offices are the potentially huge savings on real estate. With fewer workers in the office on any given day and the ability to use flexible coworking spaces, many companies could greatly reduce costs so long as work-from-home productivity doesn’t crater. Yet there are other frequently overlooked benefits to hybrid work.

“What is really the best use of real estate? Imagine turning every Salesforce tower into a mental health facility and drug treatment center and housing complex, and let your employees work remotely,” Brewer suggests. Money being spent on unused office space could be reallocated to annual gatherings for employees and their partners to help generate a shared culture. And with fewer employees commuting in heavily congested places like the Bay Area, there would be knock-on benefits to reduced emissions and easier commutes for essential workers—everyone from nurses to teachers to cooks—who live outside of the most expensive urban cores.

The Way Forward

Nineteen months into the coronavirus pandemic in the United States, many companies continue to avoid making concrete plans, even as they post strong profits and revenue. The fastest to adapt to hybrid and remote work arrangements by and large have been tech companies, which tend to be younger and were already intensely competing for talent pre-pandemic, while older companies and those in more conservative industries—think big finance—have generally struggled to adapt their office policies. “We’re going to have to navigate an uncertain course, and that feels scary for a lot of organizations,” says Cadigan, whose recent book Workquake: Embracing the Aftershocks of COVID-19 to Create a Better Model of Working delves into best practices for companies still struggling to adapt.

Brewer, Cadigan and Rowe all cited flexibility as the key ingredient for success in devising hybrid work programs. Top-down, blanket policies risk committing companies to unsustainable paths, may fail to account for the unique pressures employees are feeling, and risk prioritizing business-as-usual over creative solutions. While chief executives often want to act decisively, “the best practice right now is experimentation,” Cadigan says. That means trying out a range of options, collecting feedback from employees, and adjusting to a faster cadence of business than many are used to. All of these actions, regardless of the hybrid office model companies ultimately settle on, will make their businesses stronger in the long run.

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