Home >Companies >News >How important is headquarters? One CEO considers getting rid of it

Freeport-McMoRan Inc. Chief Executive Richard Adkerson says he has a fine office at the mining company’s Phoenix headquarters, looking out across the city. He just isn’t sure he wants to return to it.

Covid-19 has left companies around the world looking at when, and in what numbers, they will return to headquarters. Freeport-McMoRan is pondering whether it even needs one.

Businesses including JP Morgan Chase & Co. and Netflix Inc. have pushed to get employees back into the office, with some executives saying workers aren’t as productive at home. Others, including Apple Inc. and BlackRock Inc., say they plan to go back, but in a limited way, after success with remote working.

At Freeport-McMoRan, a global copper miner, some senior executives are exploring going a step further and ditching their downtown Phoenix headquarters. They say that remote working has worked well so far, and employees are saving time by not commuting. Staff can meet when needed at an existing, open-plan satellite office on the outskirts of the city, they say.

“We are showing we can get the work done remotely…we are questioning ourselves—do we really need the headquarters?" Mr. Adkerson said. “People went into the office as a matter of routine."

Mr. Adkerson and other senior executives say that such a move could have downsides, and the company hasn’t made a final call. Before any decision, the company plans to test different concepts for using the main office when it is safe for people to return.

Executives say they also need to determine how the absence of an office would affect collaboration and teamwork, and affect new employees joining the organization. “They are two big questions we have not answered to our satisfaction," Mr. Adkerson said.

The conversations under way at Freeport echo debate at companies around the world as they measure what, if anything, has changed for good as the coronavirus pandemic has disrupted life and business. The discussions are pivotal not only for big companies and workers but also for city tax revenues and the businesses and jobs that depend on downtown workers.

Headquarters still have plenty of corporate fans. “There is still going to be a need for humans to interact," said Tom Palmer, the CEO of Newmont Corp., another big mining company, based in Denver, “even if you will need a lot less floor space."

At Freeport, only about 5% of its 28,000 global employees work in office settings. The mining company’s name is emblazoned on the top of the Freeport-McMoRan Center in Phoenix, a leased space where about 850 employees and contractors take up the top eight of the glass tower’s 26 floors.

The challenge is figuring out exactly how much in-person office time these workers need to nurture the sort of stimulation that comes with being around people. Freeport executives say the pandemic has shown that technology allows workers to get by without being in the office. The company has conducted several employee surveys in which a majority of employees view remote work positively, too.

“Rather than standing over somebody’s shoulder looking at their computer and the spreadsheet, you share the screen, and people are looking at it together," said Kathleen Quirk, Freeport’s chief financial officer. Preparing the company’s first-quarter results from home was difficult and involved late nights. The second quarter “was very close to routine," she said.

Another big selling point is the lack of a commute. Workers can spend upward of two hours a day commuting to downtown Phoenix. Freeport points to employees such as Clayton Davis, a manager in the communications department, who used to spend an hour each way driving into headquarters from the Phoenix suburbs. Now, he is using those hours working and getting more exercise.

Executives often spent lots of time out of the office anyway, not least with the company’s main mine almost 8,000 miles away in Indonesia.

“I was in the air 40 to 50 hours a month," Mr. Adkerson said.

Another incentive is costs. The S&P 500 company declined to say how much money it would save by leaving its headquarters, but Ms. Quirk said it has been part of the conversation. It cost an average of $26.77 in the third quarter to rent a square foot of office space in Phoenix, according to Newmark Knight Frank, a real-estate advisory firm. While rents in some bigger cities, such as New York and Los Angeles, have fallen amid the pandemic, Phoenix is holding up.

Property owners and investors are watching companies closely as they assess the longer-term prospects for downtown office buildings, a cornerstone holding for many big real-estate firms. It isn’t only the pull of work from home that could upend demand for big base locations. Some companies are also looking to open smaller satellite offices, like Freeport’s, closer to where employees live outside cities. These satellite offices are likely to command lower rents for landlords than city-center office towers.

Some smaller companies have already abandoned their headquarters. Skift Inc., a roughly 60-person business-media company, gave up its office in midtown Manhattan in late July to save cash. The outdoor-clothing and -gear retailer Recreational Equipment Inc. sold its never-used headquarters to Facebook Inc., with CEO Eric Artz telling employees that rather than one location, the company’s headquarters will span multiple satellites.

Tata Consultancy Services Ltd., an India-based information-technology consulting company, plans to have its employees spend only 25% of their time in an office by 2025, a plan spurred by the pandemic. The company says it will keep its Mumbai headquarters and other offices, though. Some more technical workers, such as computer programmers, might opt to spend 90% of their time away from an office. Others, such as senior executives and human-resources employees, will want to spend more time in the office, Tata figures.

“For a lot of very strategic back and forth, negotiating and making critical decisions, leaders want to head to the meeting room and a white board," said Ashok Krish, the company’s global head of digital workplace—a role that predates the pandemic.

Prithwiraj Choudhury, an associate professor of business administration at Harvard Business School, warns that companies shouldn’t send workers home but keep a core of senior managers in a physical headquarters.

“If you have the entire company working remotely, but only the senior management in a headquarters, all the middle managers will turn up to get face time," he said. “So, the model will break."

This story has been published from a wire agency feed without modifications to the text.

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