Sunday, April 28, 2013

The Barefoot Philosophy: Final Thoughts

[This is the final installment 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.]

For the past seven weeks I’ve been telling you how awesome this philosophy is.  But it can’t be all good, can it?  No, of course not.  There are some downsides, and it’s only fair to point out what they are.

The first question that gets asked a lot is, if this is so cool, why doesn’t everyone do it?  My first answer is, this ain’t the way to get rich, and a lot of people seem to want that out of a business.  To be more explicit, I believe that you can use these techniques to build a very successful business, and the business will make a lot of money.  But not you personally.  There is a lot of sharing built into this model, and some people don’t like to share.

The second most obvious answer is that it’s hard.  It takes a lot of work to do all these things, especially since you’re going against the grain.  A lot of people will tell you you’re crazy.  Sometimes the talent you want to attract won’t be able to handle your “weird” business practices.  If you need to attract venture capital, you almost certainly won’t get it, or else you’ll have to compromise the model to do so.  People may applaud mavericks in public, but in private they want to hear the same old shit that’s “worked” for centuries.  They don’t hear it, their pocketbooks snap shut.  So following this philosophy is not going to be a walk in the park.  Valve puts it thusly:

... it’s really hard.  Mainly because, from day one, it requires a commitment to hiring in a way that’s very different from the way most companies hire.  It also requires the discipline to make the design of the company more important than any one short-term business goal.   And it requires a great deal of freedom from outside pressure—being self-funded was key.  And having a founder who was confident enough to build this kind of place is rare, indeed.1

Notice how I put “worked” in quotes when I talked about the business practices that are considered tried and true.  This is because I don’t feel that those practices do work, in the long-run.  Of course, your average venture capitalist isn’t in it for the long haul.  There’s a fairly short window where they build the business up, then they sell it or go public, make themselves a tidy sum, and proclaim the process a success.  How often have you seen advice on planning your exit strategy when starting up your business?  If that’s your goal, this is definitely not the method for you.  It won’t work, first of all.  But secondly, it’s contraty to the spirit of the whole thing.  What happens to the poor employees after you’ve made your millions and absconded yourself off to the Caribbean?  The “tried and true” business practices may work for the venture capitalists and the founders looking for an exit strategy, but they don’t work for the employees, and that’s what this is all about.2

In fact, this methodology is pretty crappy at any short-term goals.  Giving employees the freedom and latitude to explore their own ideas means not being able to predict where they’re going to end up with any great accuracy.  On Valve’s list of “What is Valve Not Good At?”, number 5 is: “making predictions longer than a few months out.”3  You’re going to have to accept a little short-term volatility in exchange for long-term stability.

And, of course, never forget what I said at the very beginning: none of this is a substitute for having good sales and marketing.  You still need that stuff.  Only now you need to find salespeople willing to sign up to your crazy ideas on culture.

Can this work for all kinds of employees?  Hard to say.  My experience is primarily with technical people, mostly with managing programmers.  Valve and Netflix (and Google) are the same.  Netflix even draws a distinction explicitly:

In procedural work, the best are 2x better than the average.  In creative/inventive work, the best are 10x better than the average ...4

On the other hand, SRC, who is often credited with starting the move toward financial transparency and is certainly a proponent of employee ownership, is a manufacturing business, and Zappos5 is primarily a customer service business, so that at least gives us some belief that these are ideas that can be put to use regardless of what type of workers you primarily employ.

It’s also fair to note that most of my employees were doing hourly billable work.  If you’re charging your customers by the hour, it’s much easier to sell your employees on getting paid by the hour.  We experiemented with variations on the hourly pay—specifically a “salary bank,” where employees still got paid hourly, but that pay went into a virtual account from which they drew a regular salary—to help alleviate concerns over paycheck instability.  But it’s admittedly a harder sell to pay modern workers hourly when you’re not charging by the hour, and it makes determining profit figures (for calculating bonuses) tougher too.

The final question, of course, is “can it scale?”

Both Netflix and Valve are concerned with this question.6  As well they should be: according to Wikipedia, Valve has 400 employees and Netflix has 2,348.  SRC has 1,200.  Google has 53,861.  So at least some of these ideas actually are scaling.  Of course, no one is doing all the things I propose here, so I can’t answer the question definitively.  And even those success stories have their flaws: at least half of the things on the aforementioned “What is Valve Not Good At?” list are scaling problems.  But hiring high-performance employees and keeping them motivated (not to mention deliriously, ecstatically happy) goes a long way toward solving pretty much any problem—because the employees will solve the problems for you.  And I have no reason to believe scaling problems are somehow an exception to that.

But there is actually another question, one which might be the most interesting of all.  Would I use this philosophy again?

Well, in part that question devolves into “would I ever want to start my own business again?”  I’ve ruminated on this question before, and I didn’t come to a firm conclusion.  So I’m not sure about that aspect of it.  But I can say with absolute certainty that if I were to do it again, I would definitely use the Barefoot Philosophy.  The one thing that my experience taught me which I hold more dearly than any other lesson is that it is possible to create a company where the employees have fun, value their customers, focus on the bottom line, and still love coming to work every day.  It’s hard, but it’s possible.  And, once you achieve it, those same employees will fight fiercely to keep it going.  There will be never be a need to inspire them; they’ll show up that way every day.  There will never be a need to have them fill out surveys trying to ascertain their satisfaction; you’ll see it in every one of their smiling faces.  There are many things I do not miss about running my own business, but that one I do miss.  A lot.  Almost all my former employees are three thousand miles away from me now, so I rarely get to see them.  I miss seeing those expressions of delirious, ecstatic happiness that told me that, no matter how bad the stress was, it was all worth it.  So far, I haven’t found a place that could replicate it.  I want to see it again, that transportive joy to be at work with people you love, doing work that that you value, with respect, trust, and the freedom to make things happen.  I want to see it badly.

Perhaps one day I will.

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

1 Valve Handbook for New Employees, page 49.

2 In fact, I just read an article that shows me that at least some tech entrepreneurs are starting to understand the downsides of the exit strategy, even for themselves.

3 Valve Handbook for New Employees, page 52.

4 Netflix Culture: Freedom & Responsibility, slide 36.

5 I didn’t go deeply into the Zappos business philosophy, but it’s focussed on employee happiness.

6 Netflix Culture: Freedom & Responsibility, slide 76, Valve Handbook for New Employees, page 42.

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