Behind REI’s Decision to Abandon Its New State-of-the-Art Campus
After a pandemic-prompted trial run, the retailer will deconstruct the traditional idea of "headquarters" in favor of remote, flexible work
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Before the pandemic hit, summer 2020 was supposed to mark the grand opening of REI’s new eight-acre headquarters in Bellevue, Washington. The move was long awaited and eagerly hyped. Plans for the new location, which included a 380,000-square-foot office building and trendy features like rooftop terraces and blueberry bogs, were drawn up in 2016. Construction began two years later.
Now, just months after the project’s completion, REI has announced plans to sell the new location—terraces, bogs, and all. The coronavirus crisis forced the retailer to implement a remote working policy for its 1,200 headquarters employees on March 2 (some of whom were subsequently laid off) and close all of its stores on March 16, moves that rapidly changed the way the company operates.
“The dramatic events of 2020 have challenged us to reexamine and rethink every aspect of our business and many of the assumptions of the past. That includes where and how we work,” said CEO Eric Artz in a video conference with employees today. “As a result, our new experience of ‘headquarters’ will be very different than the one we imagined more than four years ago.”
Instead of a single location, the company’s new headquarters will consist of multiple smaller offices, including one currently operating in Georgetown. Executives are scouting new campuses on the Eastside and in South Puget Sound. The goal, REI says, is to allow employees maximum flexibility in how and where they work.
Outside Business Journal spoke with REI chief customer officer Ben Steele about the strategic shift and what it means for the future of the company.
How have employees responded to the news so far?
The initial feedback I’m getting is very positive. At the same time, it’s big news. So we want to give people time to process it. Obviously, we’re getting lots of questions and we’ve got work to do helping people understand how this will operate, but I think people absolutely appreciate that we’re focusing on flexibility. Our model for the future of the company is going to center on maximizing flexibility, allowing people to work the way they want. On that front, I think our employees can see the huge potential that we see.
How did the team come to this decision?
It took a long time and we thought through it carefully. In the end, it came down to strategy. It’s really the right move. We looked at the impact of 2020, and like many businesses, we were forced to step back and question assumptions we held in the past. That included how we work every day. Over the past few months, we had a lot of success in developing new ways to collaborate and innovate in a remote way. That gave us confidence that a more permanent remote model could work. We also saw a strategic opportunity to stabilize the business and add dollars to our balance sheet in a way we feel good about. This is going to allow us to shift our financial thinking and make investments in parts of the business where we see new opportunities for growth.
What kind of new opportunities for growth?
Over the last few months, our teams have worked incredibly hard to build strong online capabilities so that even when our stores were closed, we were still able to meet customer demand through efforts like curbside pickup. We’ve seen new innovations like virtual outfitting and consultative online sales really take off. People are really excited about these things, and we think that excitement is going to persist even in a post-COVID environment. So we’re trying to think about how to invest in those efforts and accelerate them even when things are back to “normal.”
How does this impact the business financially? Is there going to be any short-term pain?
We made really good decisions—tough decisions, but good ones—at the beginning of the crisis to make sure REI was stable and we would see our way through this. We entered the crisis with a really strong balance sheet, and in many ways we’ve outperformed our expectations as we’ve moved through this. This potential sale of the new campus gives us a chance to see significant return on our investment in building it. Given the quality of the campus that we built, and given the real estate market that we’re in, we expect to see premium pricing and a significant return, which again helps us pursue those other strategic investments I mentioned.
How will the new system work logistically? Will specific groups be assigned to specific buildings?
It’s a great question. In the last four years, we designed and built a campus around the idea that strong collaboration required a single location. One of the things we’ve learned is that collaboration can happen in lots of ways, using a lot of different tools and venues. I think it’s possible we’ll see teams and work groups center in specific buildings with this new model, but that doesn’t mean there will be any sort of hierarchy between campus locations.
We haven’t identified locations yet, but we’ll be looking for flexibility as the core design principle of each one. If you’re an employee, there are days when you’re going to want to be in the office, collaborating closely with your partners. There are days where you’re going to want uninterrupted focus and remote work may be the best option. The ability to flex toward what’s best for you is pretty exciting, especially when you start to think about the potential for expanding the headquarters team beyond the Puget Sound region.
Will employees have to be retrained to work this way?
We’re fortunate in that we started doing a lot of strategizing about remote work ahead of our planned campus move. That meant using new technologies, implementing mobile work policies, giving new training, and adjusting the culture to one that embraces remote work. A big question we’ve been asking is, what’s the culture of a mobile work environment? Coming into 2020, we had remote working policies in place and a lot of people utilizing them across our multiple campuses in the [Seattle] area. So we had been doing a lot of that retraining work before this decision. That will certainly make this transition easier.