Sunday, March 31, 2013

The Barefoot Philosophy Cornerstone #3: No Salaries

[This is part 4 of an 8 part series: The Barefoot Philosphy.  It is based on my experiences as the founder of a business—Barefoot Software—which I ran for 12 years.  Please start with the intro.]

Salary is one of my personal hang-ups.  I hate it so much that I’m not sure I can adequately describe it.  But of course I’m going to try.

The basic idea behind the concept of salary seems to be this:  We expect each employee to produce X hours of productivity (we’ll get to the sticky question of what “X” is in a bit).  Now, some weeks employees will produce exactly X hours.  But this is going to be the exception.  It’s far more likely that some employees, some weeks, will produce less than X.  In which case the company is getting screwed.  Whereas, other employees, or other weeks, will produce more than X.  In which case the employee is getting screwed.  Salary is, therefore, a system by which the vast majority of the time, someone is getting screwed.

If I were to come to you today, and you’d never heard of the concept of salary before, and I were to explain it to you, you’d look at me like I was insane.

And yet this is the way the vast majority of corporate workers are paid.  In fact, it’s become a status symbol in some weird way: hourly pay is for blue-collar workers.  White-collar employees get salaries.  It’s like you’re proud that you’re getting screwed.

It’s completely unfathomable.

The whole system seems to be predicated on the idea that the amounts that everyone is getting screwed will somehow balance out in the long run.  Perhaps ... for the company.  If it’s lucky.  But almost never for the employee, because it’s less likely that there’s variance over the weeks and more likely that there’s variance over the employees.  That is, some people are just prone to work more hours, and some people are just prone to work fewer.  So your underperformers are likely consistently screwing you, and your overperformers are likely consistently getting screwed.  And this is penalizing exactly the wrong batch of employees.  The last thing you want your most productive employees to do is wake up one day and wonder why they’re slaving away for you and getting paid the same amount as the people who slack off and only put in half as much time.

At Barefoot, we had a simple solution for this dilemma.  Everyone got paid hourly.  Everyone.  And we had a very simple policy: if you’re working, you’re getting paid.  Corollary: if you’re not working, you’re not getting paid.

Now, there were technical hurdles to overcome here as well.  We developed our very own “timer” program, and everyone had to remember to “start a timer” when they started working, and “pause the timer” when they stopped for the day.  Or when they got interrupted.  Or when they just moved on to a different task.  This was a difficult habit for us to form.  But we helped each other out.  Just as everyone knew what everyone else was making, everyone knew when you were running a timer.  (The timer program was run off a central server, so you could access anyone’s timer from anywhere.)  And it was everyone’s responsibility to police each other.  If you saw your coworker talking on the phone to his mom (or girlfriend, or bank, or whatever), you checked their timer to make sure they’d remembered to pause it.  If they hadn’t, you sent them an IM reminding them.  (Or just waved at them and pointed at your wrist, which was often sufficient.)  We did this to each other so often that we never got offended—after all, you weren’t accusing the other person of defrauding the company, which was never true.  It was always the case that they just forgot.  (If your employees are intentionally trying to rip you off, you’ve screwed up all the other cornerstones, and also your hiring process.)  So we were just being helpful.  The rule of thumb was: if you’re going to be away from the work for more than five minutes, pause the timer.  A quick trip to the bathroom was okay, or perhaps a dash to the kitchen to get a drink, but extended hallway conversations or smoke breaks meant you paused.  New people found this weird at first, but you rapidly get used to it and it becomes second nature.

Your timer, by the way, was not only what we used to pay you, but also what we used to bill the customer (assuming you were a billable employee, which most of us were).  So people were not only conscientious for their own sake, but also for the sake of the customers (more on why that would be true when we hit our last cornerstone).

Next, we have to consider what a reasonable value for “X” is.  This brings us to one of my favorite corporate myths: the myth of the 40-hour week.  I could probably write an entire blog post on this by itself.  In the interest of brevity, though, I’ll just hit the highlights here.  The fundamental problem that corporate managers seem to have when considering the 40-hour week is mixing up two fundamentally different measurements of time.  At Barefoot, we always kept them very distint, and we called them “work” and “availability.”

If you work from 9 to 5, as is typical in the corporate world, then you are at work for 40 hours.  This is radically different, however, from producing 40 hours of work (or productivity, or however you want to phrase it).  You can’t possibly do 40 hours of work in 40 hours of clock-time.  It’s not physically possible.  You have to go to the bathroom, at the very least.  And you have to eat every now and again.  And your family is going to call you, and your coworkers are going to pop by to talk about the game this weekend or that party they’re having or whatever.  And, even if you could approach 40 hours of work in 40 hours of time, you shouldn’t: it kills your productivity.  You need those regular breaks to keep your mind fresh.

At Barefoot, our completely unscientific research showed us that almost all of our employees produced between 30 and 35 hours of actual, productive “work” if they gave us 40 hours of “availability.”  We defined “availability” as any time that you’re available to do work, even if you’re not actually doing it.  You were generally available while you were in the office, of course, but you were also allowed to be unavailable in the office.  Or you could be available at home (obviously we encouraged working from home), although most of the time you were unavailable.  Your availability was set when you logged in for work, and unset when you logged out.  So, just like anyone could see your timer, they could tell if you were available or not.  (In our case, your availability was tied to our IM client.  Everyone was required to be online in IM when they were availble.  That made working from home, as well as full-time telecommuting, feasible.)

So, if we expect that people are only going to put in about 30 hours a week, then we need to pay them accordingly.  Which is exactly what we did: to pay a competitive wage, we took an annual salary for what the employee was worth (remember: merit-based pay), turned that into a weekly salary, then divided by 30 to produce an hourly rate.  So if you worked 30 hours for us, you’d make about what you made elsewhere.  If you worked more, you made more.  If you worked less, you earned less.  Nice and simple.

Of course, employees had to pay for their own health benefits.  If they wanted to take vacation days, they didn’t get paid, so they had to set aside money for that too.  So we just made sure that our hourly rate was high enough to let people cover those things.  Isn’t it better to let people handle those things themselves than try to enforce ever more baroque company policies?

This solves so many problems it ain’t even funny.  First and possibly most obviously, it completely eliminates the need to yell at people for not working.  As long as their timer isn’t running, who cares?  You want to sit at your computer and play Doom, or Star Siege Tribes for a few hours?*  Fine.  Just clock out first.  You could even make it clear whether you were allowed to be disturbed during your game by setting your availability appropriately.

Just like merit-based pay, this is a self-regulating system.  People who slack off and never get enough work done also don’t earn enough to pay the rent: they either have to start working harder, or find another job that doesn’t mind their lack of productivity.  And the self-regulation is enhanced by the self-forming teams: no one wants the slacker on their team.  Well, unless you need someone to pitch in for like 10 hours a week.  And, hey, if you only want to work 10 hours a week, and you can afford to do that, and you can be useful to the company doing it, why shouldn’t we let you do that?

No salaries also completely eliminates the “death march.”  If we had some deadline and we needed people to put in extra hours, the first thing is, we never had to ask.  Partially because of the other cornerstones, but mainly because some people would want the extra cash in their pockets and they’d just volunteer.  If you weren’t one of those people—if you didn’t want the extra dough, or maybe you just couldn’t afford the extra time away from your family—that was cool too.  But more people would volunteer than not.  Because they knew that they might be putting in long hours, but at least they were getting paid for it.  And some of you more money-conscious entrepreneurs out there might be wondering: what about overtime?  Didn’t we have to pay time-and-a-half?  Well, first of all, if your normal work week is only 30 hours, that gives you a bit of headroom before you technically have to pay anyone overtime.  But, more importantly, the federal rule is, you don’t have to pay people time-and-a-half for overtime if they make more than six times the minimum wage.**  And we paid everyone so well that that was true for almost everyone in the company (certainly it was true for all our billable employees).

This was probably the most radical departure from traditional business practice for us, but honestly I feel it was one of the most important.  It put employees in charge of their own financial destiny in a way that would have been impossible with salaries, and it completely obliterated a whole slew of sources of corporate friction.

Next week we’ll see what the corporate structure looked like.

Part: << 1 2 3 4 5 6 7 8 >>

* Remember, this was the 90s.

** At least that was the rule at the time; I assume it’s still true.

Sunday, March 24, 2013

The Barefoot Philosophy Cornerstone #2: Merit-Based Pay

[This is part 3 of an 8 part series: The Barefoot Philosphy.  It is based on my experiences as the founder of a business—Barefoot Software—which I ran for 12 years.  Please start with the intro.]

Last week I promised I’d tell you why it doesn’t matter if everyone knows how much everyone else makes.  The answer, of course, is simple: pay everyone what they’re worth.

Netflix puts this slightly differently: they call it “paying top-of-market.”  They encourage their managers to ask this question:

What would we pay to keep that person?
— If they had a bigger offer elsewhere1

I don’t like this quite as much as the Barefoot philosophy.  For instance, Netflix goes on to say:

Some people will move up in comp very quickly because their value in the marketplace is moving up quickly, driven by increasing skills and/or great demand for their area
Some people will stay flat because their value in the marketplace has done that
—Depends in part on inflation and economy
—Always top of market, though, for that person2

This makes good economic sense, but I ain’t here to tell you how to make good economic sense.  I’m here to tell you, in case you’ve forgotten, how to make your employees deliriously, ecstatically happy.  Here’s how we did it at Barefoot.

In order to get hired as a programmer,3 you had to write some code for me.  I reviewed this code with you, and we talked about it.  I pointed out things you’d done wrong, and you told me why you made those decisions.  Perhaps there were factors I couldn’t know about just from reading the code.  Perhaps you just didn’t know any better.  At the end of this process, I knew how good a programmer you were, relative to me.

If you were, for instance, half as good as I was, you made half as much.  If you were twice as good as I was, you made twice as much.  Or whatever percentage was appropriate.  That simple.

There are a few technical details you have to contend with if you want to make this work.  First of all, you have to jettison the silly notion that you can only give raises once a year.  This is a terrible idea anyway.  It produces what I like to call “Academy Award syndrome.”  You ever notice that powerful, serious dramas only ever show up just before the Oscar nominations are announced?  Meanwhile, the period just after the Oscars are awarded generally sees the worst cinematic dreck ever regurgitated hit the movie screens.  Do you really want your employees doing their best work in the month or so leading up to raise annoucements, and slacking off all the rest of the time?  Hell no.

Barefoot had what I call “anytime raises.”  You could get a raise any time, for any amount.  From my Employees First manifesto:

I gave raises whenever you showed me you were better than your rate said you were, and the raise was for as much as you deserved.  I gave someone a 50% raise once.  I gave someone a raise once before he ever got his first paycheck, and I made it retroactive to his first day, because he demonstrated that he was better than I thought he was when I hired him.

Which also demonstrates that you have to be willing to admit you screwed up in your initial evaluation.  If you underestimated, you just fix that by raising their rate appropriately.

But what if you overestimated?  Well, I tried to be very conservative when evaluating for that very reason.  It’s always easier to give someone a raise than a pay cut.  But, if you’re committed to merit-based pay, you have be willing to do just that.  Not only can you overestimate someone initially, people can become less productive over time.  In an environment like the one we had at Barefoot, that was very rare.  The whole point of an employee-focussed workplace is to get everyone doing their utmost to push themselves to be the very best they can be.  But sometimes it just happens that people slip.  When that happens, you just have to sit them down and say, “I’m sorry, but I have to reduce your pay right now.  When you get back to where you were, we’ll put it back.  But right now this is what you’re worth.”  Remember: you aren’t doing anyone any favors by overpaying them either.

Valve does this even better, I think.  They use what they call “stack ranking,”4 which takes into consideration a lot of different factors, from technical ability to group contribution.  I’ll freely admit that they have a more complete handle on this, although at Barefoot certain things (such as productivity) were factored in to pay scale, but only after initial evaluation (which was completely based on technical ability).  But, the point is, your pay rate reflects your value to the company.

This is important, and it not only made it okay that you knew what everyone else made, it made it vital.  Your pay rate was what you used to assess your position within the company (in a couple of weeks we’ll talk about why you couldn’t use your job title for this).  By comparing how much you made to how much that guy over there made, you could tell if he or she was better than you.  At every other company I’ve ever worked for, the fight (silent, but deadly serious) over who is the “top dog” programmer was an ever-present distraction from getting the work done.  Not at Barefoot.  You knew who was better than you were, and you either accepted it, or you didn’t.  If you didn’t, there were two possibilities.  Either you thought the ranking was wrong, which inspired you to prove to me (or one of the other top guys) that you were better than we thought you were.  Or you knew the ranking was right, but you wished it was wrong, which inspired you to improve your skills and earn a better ranking.

And knowing where everyone stands in relation to each other is important if you want to have self-forming teams.  (Valve talks about this briefly.5)  Every team needs to know the relative skills of the people they’re recruiting.  And don’t worry about the less experienced people never finding a spot.  It only takes a very small amount of exposure to self-formed teams to figure out that you need those “junior” folks.  Lead singers get all the attention, but drummers and bass players keep the songs moving.  A team composed of nothing but “senior architects” is the most disastrously useless thing in the known universe: they all know exactly which direction the team should go in, and it’s never the same one.

Merit-based pay is also a self-regulating system.  People who aren’t that productive either get better, or they get gone—they have to, in order to pay the rent.  On top of that, with self-forming teams, the underperformers never get “picked.”  I never fired a single person in all my years at Barefoot, but that doesn’t mean that we never let anyone go.  There just wasn’t any work for them, eventually (which works because of next week’s cornerstone).

It also goes even further along the path that we started with financial transparency: there is no division between the people who run the company and those who work for it.  Myself and the various people who served as CEO, or COO, or CFO, got the same merit-based pay as everyone else.  We weren’t “special” because we had been there longer, or because we were nominally in “charge.”

This theme of equality also extended to benefits.  I note that Netflix figured this out as well: they offer a flat yearly amount for health care coverage; if you don’t use it all, you pocket the difference.6  At Barefoot, it was even simpler: we didn’t pay for any of your health care.7  Of course, our pay rates were higher to help compensate for that (but then, as we’ll see next week, they were higher for other reasons as well), but the point was the same as it is at Netflix: you pay for what you need, nothing more.  And you aren’t entitled to more health care just because you’re married, or you have children.  Why should you compensate your unmarried employees less?

Now that we know how to compensate employees relative to each other, we can look at the technical details of how to express pay rates.  Next week.

Part: << 1 2 3 4 5 6 7 8 >>

1 Netflix Culture: Freedom & Responsibility, slide 97.

2 Netflix Culture: Freedom & Responsibility, slide 102.

3 The process was different for non-programmers, but the philosophy remained the same.

4 Valve Handbook for New Employees, page 27.

5 Valve Handbook for New Employees, page 10.

6 Netflix Culture: Freedom & Responsibility, slide 109.

7 This is not quite true.  There was a way to get the company to cover part of it.  But we’ll come to that towards the end.

Sunday, March 17, 2013

The Barefoot Philosophy Cornerstone #1: Financial Transparency

[This is part 2 of an 8 part series: The Barefoot Philosphy.  It is based on my experiences as the founder of a business—Barefoot Software—which I ran for 12 years.  Please start with the intro.]

My business preceded a lot of those that have made a splash in the business world for doing things in an unconventional fashion.  One that I didn’t precede was SRC, which was founded in 1983, while I was still in high school.  But that company is still around today, and, according to Wikipedia, its revenue is $400 million.  Its founder, Jack Stack, championed a new business philosophy which has since come to be called “open book management.”  What it means is very simple: you open your financials to your employees.

There are no closed-door meetings among the senior team.  There are no secrets.  Everyone knows everything.  Everyone knows exactly how much the company is earning off of their labor at any given moment, and maximizing that is everyone’s business.

Article after article reaffirms that this works.  And yet very few businesses are run this way.  I actually suggested this methodology to my current employer once.  It wasn’t a pretty conversation.

I’ve yet to understand exactly why, though.  Does upper management imagine that they are the only ones smart enough to understand the financial intricacies of the business?  Do they perhaps not trust the employees to be responsible with the company’s money?  Well, I hate to be the one to break it to them, but this lack of trust is one of the major reasons for low employee productivity.  To quote one of those many articles:

High performers don’t thrive in an atmosphere of secrecy and uncertainty.  They want to work for a company that treats them with respect and values their problem-solving skills.1

Perhaps some people are worried that employees will be unhappy once they realize how much money the company is making off them.  First of all, if you have to worry about this, you probably are making too much money off your employees (and you should fix that).  But we’re also going to discuss how to fix that perception in later cornerstones.

While I was running Barefoot, my attitude was always, “I need to understand how everything works financially.”  I broke things down all the time.  I was very influenced by an article I read in a doctor’s waiting room somewhere2 that talked about calculating profit, and all the things most people forget to consider.  I started creating all these Excel spreadsheets with profit calculations and models on them.  Everything went into them: even the money I paid our office manager to generate biweekly payroll was spread out amongst all our billable employees and turned into a line item.  Without those numbers, how could I know whether we were making money or not?  And, once I had the numbers all laid out, why should I be scared to show them to everyone?  Hell, some of my employees were smarter than I was; they might help me find mistakes.

So all those profit spreadsheets were on a network drive where everyone in the company had access to them.  But we didn’t stop there.  Our accounting info was in QuickBooks.  It was, of course, password protected.  But everyone in the company knew the password.  Or at least could know the password, if they were so inclined (some were, some weren’t).

The first objection that some of you are going to have is:  Doesn’t that mean that everyone knew how much everyone else made?  Yes, it does.  This isn’t as bad as you think it is.  Mainly that’s because of the cornerstone we’ll cover next week.  But the bigger issue is, what problem do you think you’re solving by keeping everyone’s salaries a secret?  Perhaps you think that, if no one knows what anyone else makes, there will never be any jealousy over compensation.  Unfortunately for you, keeping salaries secret and no one knowing what anyone else makes are two entirely different things.  You see, each employee knows what he or she makes, and employees talk.  Managers usually know how much the employees that work for them make, and managers are employees too, and employees talk.  There really is no way to keep these things secret, no matter how few people you tell.  Worse, when people don’t know how much their coworkers make, they speculate.  And they’re often wildly wrong.  Now all of a sudden you can have people being jealous of coworkers who actually make less than they do.

Quite simply, this is one of those cases where honesty really is the best policy.  Honesty with all your employees means that they understand things.  When things are bad, you just tell them things are bad.  Not only do they have the financial background to be understanding about it, they often have the knowledge to actually do something about it.  And, when senior management treats their employees like mushrooms,3 the employees aren’t going to assume that everything is fine since no one is telling them anything.  They will often imagine things are much worse than they are and start panicking.

Most importantly, employees (human beings in general, really) need to understand why.  Why does the company do this?  Why does the company set the margins here?  Why won’t the company spend money there?  Why does this project need to be done so badly?  “Because I said so,” is an answer for children (and not a very good one even for them).  Tell them the real reason, and they’ll respect you more, and they’ll do better work, and they’ll do it more efficiently, and they may even fix the problem for you when you aren’t looking.

Maybe your fear is that employees just won’t understand all that financial mumbo-jumbo.  But this is just conceit, plain and simple.  None of us understood the financial mumbo-jumbo, at first.  We had to learn it.  Your employees won’t understand it either, at first.  Teach it to them.  This is an investment which will repay itself tenfold and more.  And while some of them will be annoyed at having to learn something they don’t particularly have any interest in, not a damn one will ever curse you in later years for forcing them to learn it.  It will always serve them well, in every job they ever have, for the rest of their lives.

I’ll tell you one last thing about Barefoot’s financials that I’ve found superior to every other corporation I’ve had the opportunity to work for or with—how we did bonuses.

We had sales commissions, and we had referral commissions.  Those worked pretty similarly to how they work in other companies.  We also had another type of commission: employee commission.4  Employee commission was based on what we called the “direct profit,” or sometimes just “the diff.”  It was basically just the difference between how much we charged the customer and how much we paid the employee doing the work, with just a few other direct costs subtracted (specifically, sales and referral commissions, if applicable).  The commission wasn’t a straight percentage though; it was a more complex formula, and one of the factors in it was squared, resulting in a quadratic progression.  So if the diff was very low (say, $5 per hour), the employee commission might be miniscule (say, 10¢ an hour).  But if the diff was very large (say, $50 per hour), the employee commission would be substantial (perhaps $10/hour).

We would take the employee commission and put it in a pool, and that pool was what went to pay your quarterly bonus.  You got rated on a scale of 1 to 5.  I don’t remember the exact percentages, but it was something like, 1 was 80%, 2 was 90%, 3 was 95%, 4 was 100%, and 5 was 110%—something along those lines.  Whatever percentage you got, you got that much of your employee commission.

Now, there’s a number of things going on here.  First of all, the more the company makes off you, the more you get back on your bonus, and the quadratic progression means that your “cut” is going up faster than the company’s.  So that makes employees happy, first off.  But probably what’s more important is that we’ve guaranteed that the bonus pool is paid for out of the profits.  This avoids things such as “calibration.”

“Calibration” is what it was called at eBay, at any rate.  Under this plan, there is a certain amount of money available to give out to employees.  The performance is also 1 to 5, but the percentages are different: 3 is 100%, while 5 goes up to 150% and 1 gets nothing at all.  The “calibration” part is what you have to do when everyone on your team is really good at what they do.  Instead of a performance rating reflecting an employee’s actual skills and utility to the company, the ratings are forced to fit a curve: only so many 5s allowed, only so many 4s, and so on down to the 1s, which you are required to have some of.  This is moronic.  This actually encourages managers to keep underperformers around so they have somewhere to dump their 1s.  And how discouraging is it to tell some of your top performers that you can’t actually rate them as top performers because too many of their coworkers are top performers too?  It’s like being penalized for building a superior team.  Netflix addresses this in their culture document (emphasis added):

We avoid “top 30%” and “bottom 10%” rankings amongst employees  ...  We want all of our employees to be “top 10%” relative to the pool of global candidates5

In the end, financial transparency avoids creating an artificial gulf between “senior executives” and “low-level employees,” keeps employees in the loop and engaged, and demonstrates respect and trust, which in turn keeps your best and brightest from looking elsewhere for those things.  It’s the first step, but not the last.

Part: << 1 2 3 4 5 6 7 8 >>

1 “How much should you tell employees about the financials?”, ReliablePlant, Quint Studernot.

2 After doing a bit of research, I’m pretty sure it was this one.

3 I.e., keeps them in the dark and feeds them bullshit.

4 Employee commission was for our billable employees.  Non-billable employees had a separate sort of commission—admin commission—based on the gross profit of the entire company.

5 Netflix Culture: Freedom & Responsibility, slide 113.

Sunday, March 10, 2013

The Barefoot Philosophy: An Introduction

[This is part 1 of an 8 part series on business philosophy.]

Twice in the past few weeks, someone has sent me the manifesto of a company, explaining why they do the things they do, which things are radically different from the way other companies do them.  The first was a culture statement from Netflix.  And the second was the employee handbook of Valve.  I’ve read both of these, and you know what I kept thinking the whole time I was reading them?

This sounds familiar ...

You see, I founded my own business—Barefoot Software—in 1992, four years before Valve, and five years before Netflix.  I ran my business in ways that were considered radical at the time: in fact, one of the reasons I worked so hard at it was undoubtedly just the satisfaction of proving a bunch of people wrong.  At Barefoot, we referred to our way of doing business as “the Grand Experiment” exactly because it was so different from how anyone else had done things.  Now it seems like everyone is jumping on that bandwagon.

Now, don’t get me wrong; I’m not saying that either of those companies (or any other company) stole my ideas.  You see, those companies have one major advantage over mine: they succeeded.  My company was mildly successful for a while, but in the end it didn’t last.  Thus you’ve never heard of it, and thus the people who founded Netflix and Valve have never heard of it, and thus it isn’t sensible to imagine that anyone stole my ideas.  On the other hand, those companies (and others who have championed radical business approaches, such as Google, Zappos, or GitHub) not only lasted, but managed to make shit-tons of money.  So in one sense, you should listen to those guys and not to me.

Still, I wonder if my experiences have some merit.  Many of the things I did are similar to the policies of those companies that followed me (yes, I preceded all those other guys too).  But I also did a few things differently, and I think that, supposing you were someone who was interested in creating your own personal business philosophy for whatever reason, you would want to study as many different examples as possible and look to combine all the best points.  So perhaps my offering will be useful.

Of course, it may occur to you to wonder why you should listen to me if I freely admit that my business failed.  There are two reasons that I think you should.  First, failure is how we learn.  In my experience, and in my research, I find that the best and most successful business owners have a failed company or two in their past.  But, more importantly, it’s crucial to note why my business failed.  I was good at a lot of things, but not everything.  In particular, I was pretty awful at the sales and marketing side, and that’s one of those things that you can’t neglect.  If the way you get all your new cusomters is mostly by luck, eventually your luck runs out.  The fact that I made it for 12 years is actually pretty impressive, if you look at it that way.  But the main point is, I’m not going to offer you any advice on how to attract new customers, since that’s obviously an area I’m not particularly qualified to comment on.  You’ll have to handle that side of it yourself.  What I want to talk about is how to run the company on a day-to-day basis.

In researching this article, I looked around to see if I could find any of the original stuff we wrote about the “Barefoot Philosophy.”  I remember doing a sort of “mission statement” ... such things were just getting popular back in those days, and, even though on the one hand it seemed a bit silly and unnecessary, on the other hand I was an English major, with an inherent understanding of the power of words, and I thought maybe there might be something to it after all.  So we came up with something.  I don’t seem to be able to locate it in my files (no doubt it’s on one or more of the hard drives I have sitting around in boxes somewhere, which are all that remains of the many Barefoot servers), but you know what they say: the Internet is forever.  Yay, Wayback Machine!

So, looking at the most recent version of the Barefoot Philosophy I could find, I notice several things.  First of all, it’s crap.  That is, it’s sincere enough, but it’s all fluff.  There’s very little substance there.  There are a few important concepts, and I encourage you to read through it, but I think you’ll come away with the same assessment as I did: it’s almost entirely content-free.  All talk and no action.  Now, in my defense, most company mission statements are, in my experience.  Also, at least back then, most entire web sites were.  Having your web site actually do stuff came later.  At that time it was all about looking pretty and soundy lofty.  Which that page achieves about half of.

The other thing I notice is that, back then, pretty much anything you wrote to describe your company’s way of doing business could be called a “mission statement.”  Nowadays, there are mission statements, vision statements, value statements, culture statements, and all sorts of other statements.  What we called our “mission statement” is actually closer to a values statement in today’s terminology.  Which is nice and all, but values statements are pretty abstract.  I already mentioned that I think mission statements are almost always content-free, and I think vision statements are even more so, almost by definition.  But culture statements, on the other hand, can be useful.

Both of the documents I referenced at the beginning are culture statements: one explicitly so, and one disguised as an employee handbook.  The values statement of Barefoot’s that I found on the Wayback Machine can give you some vague insight into what sort of lofty goals we aspired to.  But a culture statement is more useful: it tells you how you’re going to get there.  What specific policies are you going to enact (and enforce) in order to achieve those lofty-sounding goals?  What are you going to do when a problem crops up? or when something threatens your business philosphy?  How will you ensure that the policies are embedded into the organization and will outlive you, whether by death, disenfranchisement, or just plain disinterest?  Those are the things which interest me in the two documents I read, and Barefoot never had those things written down for it.

So I’m going to write them down now.  And share them with you.

Now, I’ve written about my business experience before, so I’ll take advantage of that and refer back to a few things I’ve written previously, just to save time and not have to repeat myself.  The primary culture of Barefoot can be summed up in two words: Employees First.  As I said more recently when I was talking about managing programmers:

I ran my own software development business for 12 years, and I followed one simple philosophy: keep your employees happy.  I never worried about keeping my customers happy, because I found that, if you keep your employees happy—and not just content, but deliriously, ecstatically happy; happy to the point where, at the end of the day, they’d rather stay at work because it’s more fun than going home—they’ll produce such amazing software that the customer satisfaction thing just takes care of itself.  I had more than one employee tell me that it was the best job they’d ever had.  Very few of my employees ever left for any other reason than I’d run out of work for them, and nearly all the ones that left because of that ended up coming back later.  I had an employee once sit at home jobless for a year and a half because he was just waiting for me to call with more work (and also because I’d paid him well enough that he could afford to do that).

Most business advice you’re going to see out there tells you to listen to your customers, to worry about keeping your customers happy.  Which you should.  But I’m going to advance a pretty radical departure: that shouldn’t be your first priority.  Why not?

When I started my own business, it wasn’t to get rich (and good thing too, since I didn’t).  It wasn’t so that I could be in charge and tell everyone what to do: in fact, I spent a good deal of time trying to hire someone to be my boss.  It was mainly because I felt that most of the companies I’d worked for treated their employees like shit.  And I thought that was a terrible thing to do.  Even though I never actually wanted to run my own company—never wanted to be in charge of anyone—I did so because I felt it was the only way to create a workplace where the employees would be valued, treated with respect and dignity.  I never tried to get rich.  I only wanted to make enough money for me and a bunch of my friends to have a cool place to come to work every day.

But despite the fact that I started out with very anti-business motivations, I soon discovered that this was an excellent way to run a business even if you’re very profit-centered.  I explained the financial aspects of this a bit more clearly in my Employees First manifesto:

Your customers want excellent work done for reasonable rates.  And here’s what I discovered when I ran my own company: if you make your employees happy—not just a little happy, but deliriously, ecstatically happy, or as close as you can damn well come—they will do excellent work, and they will do it for reasonable pay.  If they get reasonable pay, I can charge reasonable rates.  Now I have excellent work for reasonable rates, and that’s called outstanding value.  If I put my employees first, I can make my customers happy without even trying.  If I put my customers first, my employees are not as happy, and they won’t do their best work for reasonable pay, and I can’t make my customers happy.

Note the repitition of the phrase “deliriously, ecstatically happy.”  I use that phrase nearly every time I broach this topic, and for good reason.  This is what you want to achieve if you want to have an awesome company.  Now, I was working with creative people (primarily programmers), but I tend to think this applies to all employees (although admittedly I lack the experience to back that up).  When your employees are deliriously, ecstatically happy, you will produce value that is so outstanding that your competition will cringe.  Your customers’ loyalty will be unbounded.  Of course, as I mentioned above, this is not sufficient to creating a very successful business.  You’ve still got to think about marketing, and how you attract interest, and how you create buzz, and all that other stuff that nowadays is generally lumped under “branding.”  I don’t mean to downplay that stuff at all.  But while keeping your employees deliriously, ecstaticaly happy is not sufficient, I believe it damn well is necessary.

In the next 5 parts of this series, I’m going to tell you exactly how to do it.

Part: 1 2 3 4 5 6 7 8 >>

Sunday, March 3, 2013

Birthday Musings

Yesterday we celebrated the 7th birthday of our middle child, who we sometimes refer to as the Smaller Animal.  It was a double party, the other half being the younger daughter of our Sister Family.  I’ve mentioned them before, and it’s perhaps occurred to you to wonder why we refer to them that way.  A brief summary then:

The Mother and their matriarch are best friends.  Our elder son and their elder son are best friends.  Our younger son and their younger daughter are best friends, and also only ten days apart in age (which explains the double birthday party).  The father and I are both programmers.  Their children and our children are all homeschooled, and currently both attending the same charter school program.  We have three cats, a guinea pig, some fish, and a ball python.  They have a dog, some frogs, and a bearded dragon, and their elder daughter raises ball pythons.  We share similar tastes in music, movies, and books.  We have similar outlooks on politics, institutions, housecleaning, and punctuality.  We are, as they say, simpatico.

So, you know, when your two families both have children turning 7 within 10 days of each other, and they’re best friends, it only makes sense to have a double birthday party, right?  We chose a local children’s museum as the venue; our Sister Family’s elder daughter works there and got us a sweet discount.  It’s a pretty awesome place for a birthday party, especially for kids at about that age.  There were cupcake cakes (if you don’t know what that is, here’s a picture of one that’s very similar to one we had yesterday), and snacks, and presents, and the kids all got to pet bunnies and bearded dragons and starfish.

All of which is mostly a long-winded way to say that I’m not going to do a longer post this week.  Or you could look at it as a recommendation for a cool place to take your kids, if you happen to live near me.  Or you could look at it as my finally explaining what the hell I mean when I say “Sister Family,” and giving me a post to link that phrase to forevermore.  Or you could look at it as yet another proof that you really shouldn’t be reading this blog.