Many companies I have worked with have encouraged or tolerated a large degree of geographic dispersal among employees and management teams. “We’re virtual, and proud of it,” one firm told me. “It doesn’t matter where you live anymore,” many employees of virtualized companies have argued.

But I recently encountered a company that is moving the other way. Eclipsys makes software for health care providers. The company’s headquarters is in Atlanta. Recently, it changed CEOs. The previous CEO, Andrew Eckert, lived in Silicon Valley. By all accounts, he did a good job, and the company has been doing well. However, the board of directors felt that the company couldn’t be managed successfully from afar, and held discussions with Eckert about moving to Atlanta. He was committed to staying in California, however, and declined to move. The board decided to change leaders, and Philip Pead, who had previously headed and sold a health care software company in Atlanta, got the nod. Pead had moved to Miami, but is returning to Atlanta to run the company.

Pead said in a May address to customers, “You can’t deny how effective it is to be able to sit down and have lunch with another leader and resolve an issue quickly.” He’s right and we all know it. Yet many companies seem not to acknowledge the importance of proximity.

Of course, virtually every large company has some degree of geographical dispersion. Several Eclipsys managers told me that if they insisted that everyone live in Atlanta, they’d lose a lot of great people. I don’t get the feeling that there will be massive consolidation at the company, but it seems likely that the top management team will eventually be in Atlanta.

Senior managers, in particular, are a group that benefits from high-bandwidth interpersonal contact. Henry Mintzberg and other researchers have shown that their jobs typically consist of a variety of short, and frequently unplanned, interactions. It’s much easier to manage these interactions successfully when everyone works nearby.

Senior managers are not the only group returning to co-located offices. The big push that IT firms such as Sun, IBM and AT&T made a few years back toward virtual offices for everyone seems to have been dialed back. Many companies allow some work at home, but far fewer seem to support this arrangement five days a week, 50 weeks a year. It seems that “Out of sight, out of mind” has prevailed over “Absence makes the heart grow fonder.”

Tom Davenport holds the president’s chair in Information Technology and Management at Babson College, where he also leads the Process Management and Working Knowledge Research Centers.