In Search of Better Résumés

Today’s blog is about writing a better résumé.

Having run my own business for 12 years, I certainly saw my share of résumés.  In fact, in my current job, I’ve spent many months working on hiring.  Between the two, I’ve seen hundreds of résumés, and been involved in hiring dozens of candidates.  So I have a bit of experience in this area.

Of course, mine is only one opinion.  Some people are going to agree and others will disagree.  I’ve already been told by one person with some experience in these matters that he didn’t care for my personal résumé format ... too “fancy.”  But my format is informed by several rules that I have when personally reviewing résumés, and I have been, at several points in my career, the guy to impress when you wanted to get a job at my company.  So take that as you will.

Tip #1: Keep it short.  Résumés are almost universally too long.  The truth is that, when you’re faced with reading a dozen résumés a day, you can’t read them all anyway.  You’re going to just scan them.  And, even then, to be terribly terribly honest, I’m usually starting to drift off towards the top of page two.  Do everything in your power to reduce your résumé to one page.  And, realistically, unless you’ve been doing whatever it is you do professionally for a minimum of ten years, this shouldn’t even be difficult.  Having a two or even three page résumé when you’re just a year or two out of college isn’t impressive.  It’s pretentious.  Even at 10+ years, when it ceases to be unbelievable, it’s still unnecessary.

Let’s face it: the vast majority of résumé content is bullshit.  Everyone knows this.  Any decent résumé reviewer also knows this and will completely ignore most of the crap on your résumé anyway.  So don’t give them lots of crap to ignore.  Hit the highlights—that’s all they were really going to read in any case.  And this way you get to decide what the highlights are instead of having the reviewer take their best guess at it.

This year I’ll hit my 26th anniversary as a professional programmer.  I still got my résumé down to a single page.  If I can do it, you can too.  And people are far more likely to read the whole thing at that length.

Tip #2: Focus.  I’m a Perl programmer.  I generally am looking to hire Perl programemrs.  If you send me a résumé with a list of languages on it and Perl isn’t first in the list, I’m setting your résumé aside.  I’ve got plenty of other résumés where Perl is the first language in the list.  I want someone who’s passionate about Perl.  When you bury the lead in the middle of a rote list of languages you know, that doesn’t scream “passionate” to me.

Even worse, don’t put it in the wrong category, and don’t misspell it.  I have seen résumés for Perl jobs where Perl didn’t appear in the list of langauges at all, but in some other category like “Scripting.”  Sure, Perl is a scripting language.  Listing C++ and Java under “Languages” and Perl under “Scripting” isn’t going to win you points for being technically correct.  Even if I were to agree with you that you were technically correct—which I certainly would not—why on earth would I want to hire someone with so obvious a disdain for the language they were looking to be hired for?  And while misspelling anything on your résumé is pretty awful, misspelling the primary focus (e.g. “PERL” instead of “Perl”) is instant death.

And don’t give me any excuses about how you need a single résumé to submit to multiple different jobs.  If you’re seriously applying for more than one different kind of job—perhaps you’re both a Perl programmer and a C++ programmer, or perhaps both a programmer and a QA engineer—then make different résumés.  Even if the only difference is which language you list first, that’s a difference worth making.

Speaking of listing languages, don’t list every language you’ve ever dabbled in.  Hit the top 4 or 5 (or even fewer) and move on.  Remember: just the highlights.  I used to put Fortran on my résumé because I took a course in it once.  In college.  Thirty years ago.  I couldn’t program in Fortran if my life depended on it; why was I putting it on my résumé?  Just to pad.  And since it was tenth in a list of ten languages, I’m sure my reviewers had already decided they were drifting into bullshit territory long before they got there.  So why was I bothering?

Hopefully you can turn these specific examples into general advice.  If not, you probably have more issues than I can reasonably help you with.

Tip #3: Dates.  I don’t read most of the details on a résumé.  You know the one thing I do read?  The dates.  The dates on a job.  I look for particularly long gaps.  I look for how long ago you last worked with this or that.  I look for how long ago your first job was, because that tells me far more precisely how long you’ve been at this than some general “blah-di-blah years of experience” up at the top.

Every job should have a month and year that you started, and a month and year that you ended.  The most recent job (i.e. your current job, if you’re currently employed) should be first, and they should go in reverse chronological order, and your first job should be last.  I may very well jump to the end to see the start date on that first job.  Don’t bother with the exact day; I don’t care that much.  On the other hand, just years may not be fine-grained enough.

If you do have a large gap in employment, don’t try to hide it by leaving dates off altogether.  However bad it may look, I can always imagine worse.  When you don’t put dates on your résumé at all, I can’t see when you did what.  This irks me.  Don’t irk me.

Oh, and by the way: include every job you’ve held in the field you’re trying to get a job in now.  Some people will tell you not to do this.  I’ve been told, for instance, that I shouldn’t bother with my first couple of jobs.  They were a long time ago, after all, and there isn’t much there that’s relevant to my career now.  But when I review résumés, as I said above, I’m going to jump to the end at some point and look at the date on your oldest job.  That’s how long you’ve been in the business.  If you leave off your first job in the field, then I don’t know how long you’ve been doing this.  Do you not want me to know how long you’ve been doing this?

Now, don’t get me wrong: I don’t need to see (and actively don’t want to see) your jobs outside the field.  It doesn’t matter that you were a dishwasher or a pizza delivery guy or a construction worker or a paperboy.  I could care less.  But if it’s related to what you want to do—even tangentially—put it in there.  Be very brief in your description, since it doesn’t much matter and I’m likely not going to read it anyway, but put it in there.

Tip #4: Nobody cares about ...  Remember how, in high school, your teachers and your principal and your guidance counselor told you that your school record would follow you around for the rest of your life?  They lied.  I have never told a single person in my entire life what my high school grade point average was.  I never even put it on my college applications, although I’m sure they got it from the high school records upon request.  I have also never told a single person what my college grade point average was.  I don’t even remember what either of them were any more, to be honest.  I used to tell people what I made on the SATs every now and again, until I realized there were plenty of people in the world who had done better than I had and I should just shut up about it.  But I’ve never told an employer what it was, and I’ve never been asked.

I do not care what your grade on anything was.  It’s beyond irrelevant.  I also do not care what your hobbies are.  Some people will tell you that interesting personal details like this make you stand out.  They do not.  They make reviewers wonder why the hell you are telling them this.

One other thing: I have never called a personal reference.  Ever.  And I never will.  If you put them down on your résumé, they like you.  No, more than that: they adore you.  If you put someone down on your résumé as a personal reference who does not adore you, then you are a moron.  If you are a moron, I’m not going to hire you anyway, and I don’t need a bad personal reference to figure that out, so it’s a waste of time to call them.  If you are not a moron, any personal reference I call is going to tell me how utterly awesome you are, and I know they’re going to say that ahead of time, so it’s a waste of time to call them.  I don’t have time to waste.  I have hundreds of résumés to review, remember?

Tip #5: But they do care about ...  Every field is going to have a few unique things that don’t fit into a standard résumé format.  For me, it’s a link to my blog (my technical blog) and a list of the CPAN modules I maintain.  For you it might be professional organizations, or certifications, or who knows what all.  Put yourself in the reviewer’s shoes.  Pretend that you were going to hire a coworker.  If you had to work with someone for the next several years, what would you want to know about them besides all the other places they’d worked?  Would you really care where they went to school and what they majored in?  (There are perhaps some jobs where you would, but probably not.)  What about articles they’d written?  (Probably so, but then again maybe not.)  Only you, or someone else in your field, can answer this question.

Tip #6: Contact info.  Please, for the love of all that is holy, put your phone number and your email address on your résumé.  And absolutely under no circumstances allow your recruiter, if you must use one, to remove them.  Nothing frustrates me more than a résumé for someone I can’t contact.  And do not put either one or the other.  Put both.  Some people like phone calls.  Some people (like me) prefer emails.  You don’t know which type is going to end up with your résumé; don’t risk pissing off half of your potential reviewers.

Tip #7: Review.  Everything you ever write you must review.  Never, ever, under any circumstances, let a single thing that you write leave your possession without rereading it.  Nothing.  Not a letter, not a report, not an email, not an instant message.  And absolutely positively not something as vital as a résumé.  A résumé should be reread several times.  In fact, you should reread it before you send it to anyone.  Every time you send it to anyone.  You will constantly find mistakes or areas of improvement in your résumé, even when it’s been around for years and you’ve read over it hundreds of times.  Read it again.  You’ll find something else.  Pick apart the spelling, the punctuation, the grammar.  Give it to friends to read for you.  Pick the people you know who write the best and make them help you.  Read it aloud to yourself and listen to yourself.  Any time you hear yourself stumble over something, change it.

Tip #8: Don’t be afraid to experiment.  There is something to the idea that your résumé can be too over-the-top.  But there’s a long way to go before you go too far.  Résumés are depressingly similar, and when you have to go through hundreds of them, they all start to blur.  Anything that sets yours apart is far more likely to be positive than negative.  Look at it this way: even if the reviewer doesn’t like the risks you take, they’ll remember them.  I got a résumé once completely written in a strange, futuristic font.  I made fun of it mercilessly, but I still remember that candidate’s name.  Moreover, in the process of making fun of it mercilessly, I showed it to everyone in the office.  That’s the sort of exposure you can’t buy.

Once upon a time, people might recommend that you put your résumé on some sort of unique paper: pink, perhaps, or a heavier bond.  Nowadays everything is electronic, though.  Of course, you can do things with an electronic format that would be difficult or impractical to do on paper, if you have the skills.  You could, for instance, make your own watermark.  Or add a detailed image to your résumé, if that might have value.  You can definitely take this one too far—if you could somehow rig it so that, whenever I opened your résumé, a .wav file of the 1812 Overture played, I would consider that to be the résumé equivalent of the dreaded blink tag, and I would see you in hell before I saw you in the workplace.  But there’s a hell of a lot of room to play in before you reach that point.  Try it out on your friends before you try it out on an employer, if you’re worried.

Putting it all together.  So do I practice what I preach?  Well, here’s my résumé so you can judge for yourself.  Note that it all fits on one page, despite having quite a few years to fit on there.  In order to make that happen, I went with the two-column format, which is the experimental part.  I included a few things that some résumés don’t; I excluded a bunch of things many résumés have.  All my programming jobs are listed, and they all have dates.  Every job (except the first few, which are listed last) also includes exactly what technical things I was doing, so that anyone can see how old my experience with this or that is, or how long I’ve been continuously working with something.  My technical skills section has gone from being a long list of long lists to being a short, singular batch of bullet points, with only the top-tier skills listed.  And Perl is first, because that’s the sort of job I want to get.  And I’ve read it over and over again a hundred times.  At least.

In fact, the only piece of my own advice I didn’t take was including my phone number.  This is because I am a grumpy old man who doesn’t particularly care for phone calls, and I can afford to eliminate those people who can’t operate their email.  But this is definitely one of those do-what-I-say-not-what-I-do things.

So, there’s some advice on how to present your résumé, from someone who has some experience in those sorts of things.  Take it or not, as you please.  In fact, now that I think on it, the more people who listen to this advice, the fewer résumés I can toss aside without having to do phone screens.  So, actually, don’t take my advice.  Haven’t I told you not to read this damn blog?  Stubborn bastards.

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.

The Barefoot Philosophy: What Employees Want

[This is part 7 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.]


We’ve described all the cornerstones of the Barefoot Philosophy.  So, when you put it all together, what does it all mean?

That’s a tough question.  As I say, at the time I was involved in “the Grand Experiement.”  I was interested in proving a bunch of people wrong, and making a bunch of other people happy, and providing a kickass workplace (and a comfortable living) to as many people as I could manage.  I didn’t look much beyond that.

Now that I’ve had time to reflect, and now that I’ve gone back to working for others, and had a chance to find a few not-so-terrible (if still imperfect) workplaces to compare against, I think I can finally put my finger on what it all means.  I think that all employees want three things out of their jobs:

1. Respect
2. Trust
3. Freedom

And, when you think about it, those three things are not so much to ask.  They’re essential to basic human dignity, in fact.  But they’re mighty rare in today’s corporate workplaces.

Of course, none of those things can be unconditional.  Respect and trust must be earned; it isn’t just handed out to anyone who walks in the door.  Freedom is not absolute: it doesn’t mean that anyone can do anything they want.  There are caveats aplenty with all three.  But let’s consider each one briefly.

Respect means you listen to what people have to say.  In my line of work, we’re talking about programmers, or other technical professions.  In general, these people are highly trained, and very well-compensated.  In other words, you’re paying them a shit-ton of money.  Why would you not listen to them?  You don’t always have to do everything they suggest.  (In fact, they wouldn’t respect you if you did that.)  But when you ignore them, you make them crazy.  They’re not going to be content with just earning a bunch of money and not caring whether you ignore their highly trained advice.  And if they were content with that, why would you want people like that working for you anyway?

Trust means you believe that people want to do their jobs.  You don’t stand over them to make sure they’re doing it.  You don’t micromanage.  You don’t tell them they can’t work from home when they need to, or when they just feel like it.  You don’t insitute silly policies to try to control them.  You don’t ask them to justify every hour of their day.  I left my last job because of lack of trust, and, when I leave my current job, it will be for the same reason.  So if you’re trying to figure out how much trust is going to cost you, better factor in how much distrust is going to cost.

Freedom means giving people latitude to pursue their own ideas.  How can you expect to have any innovation without allowing freedom?  Google is probably the leader in this particular area, with their formalized “20% of your time on personal projects” policy, but very few companies have followed that lead.  Trying to direct the every move of your employees is doomed to failure on so many fronts: it’s distrustful, as we already covered, and it takes up way too much of your time.  Don’t you have better things to do?  And, in the end, you close off the avenues of exploration that lead your company to new and exciting places ahead of your competition.

You want highly motivated employees.  “High-performance people,” as they are referred to both by Netflix and Valve.  In fact, both the documents we’ve been dissecting contain this exact phrase: “high-performance people are generally self-improving.”¹  In other words, the best thing you can do to encourage these employees is just leave them the fuck alone.  As Netflix points out (emphasis in the original):

Responsible people thrive on freedom, and are worthy of freedom.²

What would you rather have: people that need constant coddling, or people who will take initiative, innovate, and get things done?  If you want the latter, you have to give to receive.  And what you have to give is respect, trust, and freedom.

And beware of rules.  Policies, and guidelines, and structure.  It has a tendency to multiply uncontrollably; don’t let it get a foothold.  We already talked about what what Valve thinks of corporate structure.  Netflix is more blunt:

Process-focus drives more talent out³

All those little rules and policies are going to drive your top employees—the ones who think out of the box and aren’t willing to be constrained by your rules—absolutely batshit crazy.  To people who think Netflix’s policy on vacation tracking (“there is no policy or tracking”) is insane, they respond:

There is also no clothing policy at Netflix, but no one comes to work naked

Lesson: you don’t need policies for everything⁴

Think about that for a minute.  I know, it sounds flip—it sounds like it’s supposed to be cute, and a little amusing, but not to be taken seriously.  But actually think about it.  Do you need to tell your employees not to come to work naked?  No?  Now go back and think about how many of the company policies you do have implicitly treat your employees like idiots.

In my experience, too many managers think their employees incapable of getting anything done on their own.  Even if they don’t believe that consciously, their actions scream it.  This why they come up with artificial deadlines, and guilt trips, and threats, and austerity policies.  These things are designed to put pressure on employees in order to get them to complete their work.  But these things are stupid: properly motivated employees don’t need pressure to do their work.  They want to do the work.  Now, perhaps you’re not properly motivating them (although that’s what the last 5 posts have been about, so you really have no excuse at this point).  But that’s not their fault.  It’s yours.

The only “pressure” I ever put on my employees was to foster some competition amongst them.  And even then I was very careful.  What you want is constructive competition, not destructive competition.  What’s the difference?  Simple:  Destructive competition is working hard to look better than the next guy.  Constructive competition is working hard to be better.  Looking better is most easily achieved by making the other guy look worse.  Being better requires self-improvement.  Merit-based pay and open pay rates and anytime raises and self-forming teams foster constructive competition.  Calibration and empty titles and infrequent compensation rewards and salary secrecy foster destructive competition.

At Barefoot, employees had a workplace that they valued.  They would do anything to protect that.  They understood the financial situation well enough to know how to protect it.  They knew where they needed to save money, and they knew exactly how valuable each customer was.  They fought to keep those customers: to keep them happy, to deliver top value, to go above and beyond and add personal touches.  When there was no work, they didn’t get paid, so they did everything in their power to make sure the work kept coming in.  I never had to stand up at a company meeting and remind everyone that it was their job to make the company successful; they knew it.  It was their company, after all.  There was no one “above” them whose job it was to take care of those things; it was their job.  Each and every one of them.  Every single one was a benefactor of the Grand Experiment, and they would do anything to keep it from failing.

I thought I was creating a utopia for workers.  It turned out I was creating a productivity juggernaut.

Next week we’ll climb down off our high horse and look at whether there are any downsides to this philosophy.

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

1 Valve Handbook for New Employees, page 38, Netflix Culture: Freedom & Responsibility, slide 122.

2 Netflix Culture: Freedom & Responsibility, slide 41.

3 Netflix Culture: Freedom & Responsibility, slide 50.

4 Netflix Culture: Freedom & Responsibility, slide 70.

The Barefoot Philosophy Cornerstone #5: Employee Ownership

[This is part 6 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.]


It’s time for the final cornerstone.  (Yes, I know that makes five cornerstones.  It’s sort of a pentagon thing.)  Merit-based pay and no salaries gave our employees a sense of financial independence and responsibility.  Financial transparency gave them the knowledge of how to run the company themselves, and no org chart gave them the ability to do so.  Now they just need the motivation to do it.

So give them the company.

I can’t tell you how many times I’ve heard people running a company say that they were frustrated because they couldn’t get their employees to act like this was their company.  I can, however, tell you how many times I’ve heard people running a company suggest that they solve this problem by actually giving their employees an ownership stake in the company: zero.  It’s done, obviously; I started out with cornerstone #1 talking about Jack Stack and SRC, which is an employee-owned company.  But none of the corporations I ever worked for considered it.  Occasionally, stock options were offered, but it’s just not the same thing.  Giving up ownership means giving up control, and giving up equity, and those are two things that most entrepreneurs just don’t cede.

Of course, I’m not most entrepreneurs.

I say, if you want your employees to act like this is their company, make it so this is their company.  Here’s how we did it at Barefoot.

When you first came to work at Barefoot, you were a probationary employee for 90 days.  At the end of that period, you were awarded one share of stock.  Not a stock option; an actual share.  It wasn’t much, but you were now a shareholder.  You had the right (and, again, the responsibility) to vote at the annual shareholder’s meetings, where we elected board members and occasionally approved tweaks to our articles of incorporation.

Of course, there isn’t much you can do with a single share of stock.  We were always privately held, so you couldn’t trade it on the open market.  You could sell it, but only to another shareholder—never to an outsider.  You could sell it back to the company for the current stock price (set by the board),¹ although the company could decline to buy it if it was economically infeasible.²  You could vote it, but one vote didn’t carry much weight.

But every year, at the end of the year (before the annual shareholder’s meeting), every current employee received another stock bonus.  This bonus was based on how long you had been with the company, and whether you held multiple roles (e.g., employees got stock, and board members got stock; if you were both, you got double shares), and a few other factors.  This stock distribution was mostly additional stock added to the general pool, so it diluted everyone’s percentage, but then everyone also received more stock, and in practice everyone always came out ahead.

Of course, the majority shareholder was me.  But, every year, I proxied the majority of my stock to the employees.  I split the proxies evenly amongst them, based on their current percentages.  So if you owned 10% of however much stock I didn’t own, you’d get 10% of the proxy.  I kept enough for myself that I was still a significant factor in the votes, but never so much that no one else’s vote mattered.  It would take a pretty serious coalition to go against me, but it was possible.

Also, every year I donated a chunk of my stock back to the company, which it used for part of the new shares it distributed.  I was slowly handing my company over to its employees.  I did it slowly and carefully, because I wanted to make sure I had the system right before I lept into it; the ability to squash any vote in an emergency situation was my safety net.  But, as the company finally ended, I was right on the verge of becoming a minority shareholder in the company I founded.

Is this crazy?  Jack Stack apparently doesn’t think so.

I don’t own 100% of SRC. I own 19%. The rest is owned by the employee stock ownership plan and various employees. I could have had more, but that was plenty for me. Not wanting to be accused of being greedy probably had something to do with it. But more important, I didn’t want to be alone. I was going to be leading the charge up the hill. I wanted to make sure that when I got to the top of the hill and turned around, there was a bunch of people coming with me.³

Netflix has a different approach.  Employees can choose to receive part of their compensation as stock options (not stock).⁴  Netflix points out that this lets the employees decide how much they want to invest in the company’s future.

But I didn’t want my employees to have to decide that.  I didn’t want them deciding that they didn’t care, or not having the money to invest.  So I just gave them the stock, whether they liked it or not.  I didn’t say to them, “act like this is your company.”  I said, “here: this is your company now.”

Now you see why I never worried about my employees ripping me off, or doing something that would be detrimental to the customers.  They would have been ripping off themselves; it was their customers they were looking out for.  With great power comes great responsibility, as the mantra goes, and I put that to work for my company and my customers.  Which were now my employees’ company and my employees’ customers.  Their reputation was on the line as much as mine was.  It was their money as much as mine that they were playing with when they made financial decisions.  They were not only earning top pay rates, plus a commission-based bonus, but any profit left over after all that was partially theirs too.

Did it work?  Well, I can prove that it did.  Because I had employees who would do some work for free.

In any company, there’s work that needs to get done that it just isn’t practical to pay someone to do.  Typically, the founders of the company do this work themselves.  This is why starting a business is such a time sink: you not only can’t pay anyone else to do it, you can’t really afford to pay yourself to do it either.  So it’s just extra work that somebody has to do after hours.

But, at Barefoot, there were no salaries.  Remember: if you’re working, you’re getting paid.  If that extra work was going to get done, either someone had to get paid, or ... someone had to agree to work for free.

Naturally, I was constantly putting in free work.  But I certainly never expected any of my employees to join me.  And, yet, that’s exactly what happened.

At Barefoot, you were allowed to work for free on company business as often as you liked.  You would still run a timer and track that time; you just attached the timer to a special internal “customer” which guaranteed that that time never hit your payroll.  At first, it was nothing more than a mark of pride: self-forming teams might take it into consideration when trying to decide between two close candidates (go with the person who’s more dedicated to the company), but it was mostly just for bragging rights.  We did eventually start using that time for other things, though: put in enough unpaid time and the company would start covering part of your health benefits; put in even more, and you’d increase the amount of stock you got at the end of the year.  We had to start adding these perks, because there were so many people doing it towards the end there that I was starting to feel guilty about it.  So if you ask me if know that my employees felt like this was truly their company, I can answer without a single doubt or hesitation.  Yeah, they knew it was theirs.

I set out to make my business employee-focussed.  To make it employee-owned was a natural outgrowth of that.  I never questioned whether that was the right thing to do or not.  I never meant to get rich, so I didn’t care about giving up the money.  I never wanted to be in charge, so I didn’t care about giving up the control.  I just wanted to love coming to work every day, and I wanted my employees to love it too.  The fact that it made my company financially stronger—because all the employees were now focussed on making their company run more smoothly and earn more money—was just a bonus, as far as I was concerned.

That’s all five cornerstones.  Next week we tie everything up and put a little bow on it.

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1 In fact, technically you had to offer to sell it to the company first.  That is, the corporation retained “right of first refusal.”

2 Technically the company could decline.  In practice, I don’t think that ever actually happened.

3 “Being the Boss”, Inc., Bo Burlingham, October 1989.

4 Netflix Culture: Freedom & Responsibility, slides 103, 110.

The Barefoot Philosophy Cornerstone #4: No Org Chart

[This is part 5 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.]


Valve has a more colorful phrase for this: “Welcome to Flatland!”¹  Either way, it amounts the same thing: there’s no real corporate structure, no titles, no heirarchy.  No org chart.

For Barefoot, this was an oversimplification.  The truth was, we had managers, just like anyplace else.  But your position as a manager was on a given project.  Today you might be a manager; tomorrow you might be back to a grunt coder, and the person you were managing yesterday is now your boss.  Even more weirdly (well, it was weird for some people), you might be both a manager and a managee at the same time, if you were working on two projects at once (which happened sometimes).  So we actually had titles, and positions, and structure; it was just fluid, and not really relevant in the bigger picture.

There are a hell of a lot of advantages to this approach (just as there are for the other cornerstones).  For one thing, it gives people a chance to try out new things.  Maybe you think you’d like to try your hand at project management.  In a corporate system with a traditional org chart, you’d need to give up your current job and try out for a new one as a project manager, possibly in a whole different department, with a whole new boss, and all new politics to learn.  At Barefoot, if you wanted to try out being a project manager, you just had to convince a self-forming team that you could handle the job, then you did it for one project.  If you liked it, and were any good at it, it would be easy to convince the next team to let you do it again.  If you didn’t like it, no worries: you never had to do it again.

It also further reinforces the theme of equality.  There were many occasions when I was working right at the bottom rung of a project team.  Sure, I was often the boss, but I was just as often (okay, almost as often) working for one of my employees.  See, we’re all the same here.

In fact, our positions within the company were so fluid that we actively discouraged nesting.  That is, no one had their own desk.  All the computers were basically just terminals: all your files and configuration and all the technical bits that make your workstation yours were on the network, so you could walk in, pick any old computer, and just get to work.  Of course, this wasn’t ideal; some people felt a bit too transient, not having a permanent place to call their own.  I notice that Valve solves this problem rather neatly: everyone has their own desk, but all the desks have wheels.²  Instead of moving from desk to desk, you just move the whole desk around.  If I were going to start a new company today, I’d totally steal that idea.

What’s wrong with corporate structure?  I can’t say it better than the Valve handbook:

Valve is not averse to all organizational structure—it crops up in many forms all the time, temporarily. But problems show up when hierarchy or codified divisions of labor either haven’t been created by the group’s members or when those structures persist for long periods of time.  We believe those structures inevitably begin to serve their own needs rather than those of Valve’s customers. The hierarchy will begin to reinforce its own structure by hiring people who fit its shape, adding people to fill subordinate support roles. Its members are also incented to engage in rent-seeking behaviors that take advantage of the power structure rather than focusing on simply delivering value to customers.³

If you’re completely wedded to the idea of the org chart, this may seem bizarre to you.  What about performance evaluations, you may ask?  With no bosses, who evaluates the employees?  Well, the way we did it was that evals were done quarterly, and were conducted by three of your coworkers.  One of the employees had to be someone who had managed you that quarter, unless no one had.  One of the employees had to be someone you had managed that quarter, unless you hadn’t managed anyone.  And the final employee had to be someone who had worked alongside you in a parallel position.  (If you were only at the top or bottom of your projects, we filled in with another of your reports or another of your parallels, as appropriate.)  Nowadays we’d call that “360-degree feedback”.  At the time, we weren’t aware of that term; this just made sense.

Even more crucially: without organizational structure, how are decisions made?  Well, generally we made decisions by concensus.  This is easier to arrange than you might think.  But, if we couldn’t reach concensus for a project decision, the manager for the project made the call (after all, that’s what they were there for).  But what about decisions on the company’s future in general?

We’ll have to start with the staff meeting.  Staff meetings at Barefoot were held monthly.  All employees were required to attend (contractors could attend if they chose, but didn’t have to).  It was more than just required attendance though: it was required participation.  Participation in staff meetings was considered akin to voting: not just a right, but a responsibility.  Every staff meeting followed a simple, three-point agenda:

1. What are we doing right?
2. What are we doing wrong?
3. What can Barefoot do for you?

Point #1 is #1 for a good reason: always lead off with the positive feedback.  Get everyone in a good mood, give out those well-deserved kudos right off the bat.  Recognition is important.

Point #2 is where we did our soul-searching, what some businesses will call a “retrospective” or a “post-mortem.”  Only this isn’t for a particular agile iteration, or even for a whole project.  This is for our everyday, day-to-day business activities.  And we resisted the need to rephrase it to “what could we do better?”  If we’re wrong, let’s admit we’re wrong and not try to couch it in softer words.  More important that identification of the wrongs, however, is figuring out how to do better in the future.  This is really hard to do.  In every other corporation I’ve worked with, this has always been the stated goal, and it always devolves into the blame game.  Since I’ve moved from the East Coast to the West, it’s changed from open finger-pointing to an odd little dance where we try to point out that it wasn’t our fault while carefully not offending whosever fault it actually was, but that’s not materially different.  Only at Barefoot have I seen people actually put in the effort to avoid discussion of whose fault it was (which, after all, doesn’t really matter, as long as they’re aware of their mistake) and concentrate on how to make it better.

Point #3 is simply a verbal suggestion box.  What are we not doing at all that we should be doing?  What can the company do to make you a little happier?  What new policies would you like to see?  What new resources would you like to see the company buy?  (And here you can see how the financial transparency comes in handy; every employee knows that they need to—and how to—figure out whether the company can afford something before suggesting that we buy it.)

Everyone is (or at least can be) involved in every decision.  Valve puts it more succinctly: “it’s your job to insert yourself wherever you think you should be.”⁴  Now, we also had meetings of our executives, and we also had board meetings.  But employees were always invited to attend those too, if they liked, and offer their input.  (And sometimes employees would get elected to the board and participate even more directly.)

I’ve likened my own role at Barefoot to open-source “benevolent dictators” such as Larry Wall or Linus Torvalds.  At the end of the day, it was my company and I could make the call if I wanted to.  But everyone got a chance to contribute, and really be heard, and actually influence the direction, if they so chose.  And even my benevolent dictatorship was open to change, as we’ll see next week.

Lack of an org chart meant that everyone was responsible for the success or failure of the company.  And everyone took that responsibility very seriously.  Next week we’ll look at the final piece of the puzzle that explains why.

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

1 Valve Handbook for New Employees, page 4.

2 Valve Handbook for New Employees, page 6.

3 Valve Handbook for New Employees, pages 16-17.

4 Valve Handbook for New Employees, page 14.

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.

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* Remember, this was the 90s.

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

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.

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.