How remote work, social entrepreneurship, and the sharing economy are colliding to drive us towards community based, self-managed organizations
I’ve written previously about how we’re embracing self-management as we build Outseta. Frederic Laloux’s book Reinventing Organizations has had a significant influence on how we want to build and operate our company, as evidenced by our open sourced operating agreement which details how we make financial and functional decisions at Outseta.
But to most of the world of SaaS self-management remains an abstract concept, most often known only as an organizational structure that Zappos has adopted with mixed results if not dismissed altogether. Even to me, self-management has always felt a bit ahead of its time.
On a personal level, I’ve been struggling as of late to find that “next thing” to write about that hasn’t already been beaten to death in the world of SaaS start-ups. As SaaS has matured, the industry’s playbook has become well understood and I’ve found myself relentlessly bombarded by the same messages:
Pricing should be based on value
Retention is a growth strategy
Transparency is great (but it’s now largely table stakes)
Meditation helps keep us balanced
Drift is scaling a reality TV show
This isn’t a dig at any of these topics—all good things—but it’s been a long time since I’ve heard many truly new, fresh perspectives in the world of tech.
I recently read Better Work Together, a collection of stories published by the Enspiral Foundation, and it presented self-management in an entirely new light for me. The book presents self-management as a method of organizational design that we’re rapidly hurtling towards, driven by a series of trends that we all agree are already making up the so-called future of work:
Remote work and digital nomadism
The open source and decentralization movements
Taken collectively, where are these trends leading us? That’s what this post is all about and I think I may have stumbled upon the “next big thing” that I was looking for—even if the tech world isn’t quite ready for it.
Tech world, meet Enspiral
Chances are you haven’t heard of Enspiral—despite the fact that I’m building a self-managed company I hadn’t until recently. In short, they’re an interesting organization because they’ve already traveled to the furthest reaches of the future of work—Better Work Together is their report back on what the future holds.
For the past decade Enspiral has been “a community of entrepreneurs experimenting at the edges of ownership, governance, decision making, resource sharing, and educational design.”
More tactically, Enspiral started as a loose collaboration of freelancers supporting one another and sharing resources in New Zealand back in 2008. The group was brought together largely by social entrepreneurship—their mantra is “More people working on stuff that matters. If your primary mission is to make the world a better place, your personal success is the reason Enspiral exists.”
In the early days Enspiral members kept 80% of their earnings, choosing to contribute 20% to Enspiral, a shared governing body for the collective. In the decade since this has evolved into an ecosystem of people and companies connected through a co-owned hub, now called Enspiral Foundation.
Enspiral itself is a self-managed organization without any hierarchy, but the lack of hierarchy itself is not what’s interesting to me about self-management. What I think is powerful and compelling about this book (and self-management in general) is the idea that entrepreneurs can take greater, bolder risks and be more successful when they choose to work on their own projects and companies but with the backing of a community rather than operating purely independently.
“That’s just the way the game works,” says Susan Basterfield, an Enspiral member. “Bosses have ‘their people’ and human resources decides who is worth how much. Most of us willingly go along with this. It’s a game that we know the rules of. I played along for another few years. Then I stopped. Being supported and challenged as an entrepreneur inside a community was a breakthrough for me.”
As the prevalence of remote work has grown, I’ve witnessed first hand many entrepreneurs choosing to turn to communities to fulfill their needs for comradeship, belonging, and support throughout their entrepreneurial journeys. We all need a tribe and we’re already actively seeking out and building our own. This is not a new concept, but I think you’ll see this trend evolve rapidly in the coming years.
What I see in Enspiral is a bunch of corporate astronauts, collectively 10 years ahead on a journey that many of us are just—often unknowingly—starting now.
Enspiral’s approach to self management
What struck me as I read Better Work Together was how reasonable the authors were in presenting their case for self-management—it was as far from “Bosses are bad! Let’s be counterculture!” as you could possibly imagine.
Kate Beecroft provides the definition of self-management that resonates most with me.
That sounds great to me—that’s a future of work that I want to help build. But while self-management emphasizes autonomy, community-based support systems play an important enabling role in the organizational design needed to make self-management work.
“Enspiral itself is not producing deliberate external outcomes,” says Chelsea Robinson, an Enspiral member. “The most direct units of impact are the projects that people organize themselves around. However, the community is a very important primordial soup for increasing everybody’s capacity for impact. This is the essence of becoming a platform for impact: combine passionate people, a trickle of money, high risk tolerance, and good intentions.”
Communities then are two main things—cultural echo chambers and accelerators. Here are some of the lessons that Enspiral has learned along the way with regards to how to leverage and build these communities, supported here by short excerpts from the book.
No one organizational structure fits all
“I believe that the right organizational structure is unique to its context, people, objectives, and history.” -Richard D. Bartlett, Co-founder of Loomio
All of which is to say self-management is not a fit for every organization, although most would benefit from the additional space for creativity and agility that self-management provides. SaaS companies—where work largely occurs in front of a laptop and often independently—are a particularly good fit for self-management. But even amongst self-managed organizations, the actual structures and processes used to operate a business may vary widely.
Management remains necessary
“We need management, not managers. Even though the role of the manager may be redundant, the function of management—of tasks, work, and people—is still needed. This function can take the form of coaching, guiding, and supporting, rather than coercion or direct power from a job title. It comes down to how people can be supported to manage themselves and develop the skills they need, rather than relying on someone to tell them what to do.” -Enspiral member
True equality will never be achieved
“Equality is a compass point to navigate towards, not a destination I’ve ever arrived at. Imbalance can be bad, e.g. inherited privilege, coercion, manipulation, the ‘old boys club.’ Some imbalance can be good: earned trust, reputation, eldership. Transparency reduces toxicity.” -Richard D. Bartlett, Co-founder of Loomio
“We want to exercise power with others, not over others. No one should lead all the time and everyone should lead some of the time.” -Enspiral member
Influence is earned, not assigned
“We’ve learned to distinguish between the coercive power that someone holds over another person, and the social power that someone has earned from their contributions to a group over time. In a ‘Do-ocracy’ power and responsibility accrues to those who execute.” -Francesca Pick, Co-founder of Greatherthan
Ultimately these ideas all boil down to power structures and how they can be applied more effectively to benefit a business. The key idea coming out of Enspiral is that decision making power and ownership should be shared among those doing the work.
These new power dynamics are not ideals that should be quickly discarded, easily cast off as belonging to some group of corporate radicals who are probably sewing hemp shoes in a far off forest in New Zealand. In fact, these same ideas are being discussed in business publications as well known and respected as Harvard Business Review.
Now let’s turn our attention to the ways in which many of us in SaaS are already starting to work this way, oftentimes without consciously realizing it.
Entrepreneurs are already seeking out community based support groups
As I was reading about Enspiral’s journey, it struck me that this whole “self-management thing” should be a lot less controversial than how it’s often perceived. In fact, as I thought about the world of start-up SaaS companies that I work in I realized that the ideals that Enspiral is advocating for are ones that most of us are starting to reach for already. A few examples:
IndieHackers is a community owned by Stripe, but at its core it’s a community of 45,000+ entrepreneurs supporting one another, sharing ideas, and celebrating milestones together.
Don’t get me wrong, Tinyseed is dressed up as an alternative form of start-up financing and there’s a financial end goal for all involved, but at its core this is a supportive community more than anything else. Founder Rob Walling also founded MicroConf, a conference for self-funded software entrepreneurs. He made friends within this community, was looking for a better way to support those entrepreneurs, and realized that collectively they were more powerful than they’d be individually.
Tinyseed also recruited a long list of big name mentors for the program to further this idea—collectively 1+1 = 5. While Tinyseed does prodive a small amount of funding to its portfolio companies, I would argue that the community will ultimately make a much larger impact on these companies than the actual financing that Tinyseed provides.
Justin Jackson’s MegaMaker club is a pay-to-play Slack community of entrepreneurs sharing ideas and supporting one another. Like Tinyseed, it’s also a built in amplification channel for its members—anytime Justin publishes a new blog post or podcast, he has a built in community that helps him get the word out. In my conversation with other group members several have expressed that they chose to join the group because they needed a sense of community and a support system that they didn’t have as remote entrepreneurs working independently.
Simply put, as the prevalence of remote work and entrepreneurship has grown more people have realized the need for a tribe—the communities mentioned above are all an example of those tribes being formed. While groups like these aren’t all sharing an organizational structure, ownership, and profits it’s undeniable that they’re communities of individuals with shared values who have recognized that by supporting one another they’re much more powerful than they’d be on their own. They can continue to work on their own projects and interests and leverage the community to increase their chances of success. That’s the very same concept that drove the formation of Enspiral.
How this all ties back to Outseta—and the future of work
When I first read Reinventing Organizations, there were three aspects of the book that really spoke to me. Three years into building Outseta, here are my personal reflections on the importance of each.
As I said, I have no problem with hierarchy but I have seen it cause unhealthy power dynamics and I simply believe that there’s the potential to do better. Anthony Cabraal writes in Better Work Together, “In a company built through transactional relationships people move on when the money stops coming in or a better offer comes along. Any why shouldn’t they? In an industrial economic model we are just rational units of labour, framed by job descriptions, making self interested decisions.”
While that’s a bit harsh for my tastes, it’s at least worthy of contemplation. Personally, I see in self-management an organizational structure that I think will result in more engaged employees more than anything else.
Another of the essays states, “Organizations that best engage and grow talented, caring people will do the best over time.” I agree wholeheartedly and see self-management as a means towards this end.
Bringing your “whole self” to work
Popularly discussed as “vulnerability,” this is the idea that most of us only bring only a small portion of our true selves to work—most often the part of us that’s very masculine, confident, and rational. We check our vulnerabilities, emotions, and uncertainties at the door because we’re afraid that they’ll hurt us in the workplace.
Laloux’s book proposes that this is actually doing yourself and your company a disservice—a fact supported by the report What Makes A Team At Google Effective? In the report, researchers found that the single most important dynamic of successful teams at Google is psychological safety.
“Can I express my opinions and be heard? Can I share the challenges I am facing, both personally and professionally, and be supported? Is there space for vulnerability? Can we take risks in this team without feeling insecure of embarrassed?
To me this boils down largely to the benefits of transparency and telling the “full truth.” If you’re constantly putting up a facade that hides your vulnerabilities or concerns, you’re robbing others of the opportunity to help you address them. By doing so you’re simply not giving your organization the best chance to be successful.
Evolutionary purpose is the idea that the purpose and work that an organization does can evolve over time. You should follow the current to where the collective energy of the group wants to go, and members of self-managed companies will be brought together by shared purpose, values, and ideals.
Reading Better Work Together was a great opportunity for me to reflect on our purpose and why I’ve decided to spend the last three years building Outseta. Dave, Dimitris, and I were certainly brought together by purpose. We want to show that self-management is a viable method of building a business that has benefits in spades over the predominant means of building companies. Silvia Zuur, Director of PwC New Zealand, writes in Better Work Together, “We need to look forward and define the leadership of the future, instead of perpetrating patterns from the past.” I agree.
Additionally, our founding team wants to build software that helps other entrepreneurs succeed with their own start-ups. Both of these purposes still ring true and very much drive the work that we do today.
It’s worth noting that while a shared purpose and philosophical alignment brought our team together, as individuals we all have different purposes, needs, and motivations driving our work too—and that’s perfectly OK! When I think of individual purpose and what we’re each trying to get out of our work at Outseta I can’t help but think of Maslow’s Hierarchy of Needs. Only once you’ve fulfilled your lower level needs and purpose can you move on to the latter stages, and I think that’s true with our team. Said another way, evolutionary purpose occurs at the individual level too.
For example, Dimitris has had more financial success than me—he Co-founded Buildium and because of the company’s financial success his family is taken care of financially. This has allowed him to move up the hierarchy of purpose pyramid, and think more about how Outseta can be used as a vehicle to make the world a better place. He’s also more passionate about building great software than I am—he cares deeply about providing other entrepreneurs with fantastic software tools.
I care about both of these things too, but they don’t drive my individual purpose at this stage of my life to the extent that they do Dimitris’. Financially, I’ve yet to achieve the financial security that he has so it’s more important to me that Outseta helps provide financial security for my family. And building great software is not as powerful of a driver for me—but building a company that provides fantastic job opportunities to others is. My career and life have already benefited tremendously from working in forward thinking organizations, and I’m deeply motivated by the opportunity to provide similar opportunities to others.
“What if your company was designed from the ground up to challenge and support you to be the best possible version or yourself?” writes Anthony Cabraal. I want Outseta to be an enabler that allows other individuals and their families to live fantastic lives on their own terms—that’s a big part of my individual purpose.
My objective with this article was not to push any “woo-woo” organizational structure on you or sell you on the need to build a self-managed business. But Enspiral has been challenging the status quo for over a decade, and I think it’s undeniable that there are trends like remote work, the sharing economy, and social entrepreneurship that are driving us towards a place where we should be rethinking our organizational structures.
We’re already seeing entrepreneurs proactively seek out their own tribes—groups that share a common purpose and values where the community itself can be a major catalyst of both personal and professional growth. At the very least I hope that I’ve spurred your own thinking about the structure of your team or start-up, and that you’re open to the idea that self-management could represent a way of Better Work Together.
By Geoff Roberts 10 min read
When you say “Blockchain” or “Ethereum” to people who live their lives outside the spheres of tech or highly speculative investments, you often get confused or simply apathetic reactions, to which I say… understandable. But the applications of blockchain technology are in fact vast, highly useful, and go way beyond whether or not you’ve chosen to invest in Bitcoin.
We’ve been writing for more than a year now about our desire to build a self managed, non-hierarchical business. One that is absent of bosses, where work is both more rewarding and meritocratic. Allow me to introduce you to Jack du Rose, CEO and Co-founder of Colony.
Colony is building a platform on which to build open organizations. The rules of the organization are enforced by blockchain technology rather than paper based contracts, allowing anyone to contribute to the organization and earn payment or ownership commensurate with their contributions to the “colony.” Workers earn “reputation” and influence based on merit.
We caught up with Jack because we are interested in a future where work sucks less, where no one feels like nothing more than a cog working in a company where disproportionate rewards are reaped by few. It’s an ambitious undertaking, and Colony isn’t the only company focused on solving this problem - make no mistake about it, there will be an entire generation of SaaS start-ups embracing this model before you know it.
Geoff Roberts: Hi, Jack. Good to have you. Why don’t you start by giving us the elevator pitch regarding what you are working on at Colony?
Jack du Rose: Colony is a platform for open organizations. By open organizations I mean what some people might call decentralized organizations; essentially it means that we’re creating software that enables people all over the world to work together and complete projects or start companies together without needing to know or trust each other. So it's a platform and a protocol that provides a software based framework so that the organization runs based on a set of immutable smart contracts rather than on the basis of legal agreements and paperwork.
Geoff Roberts: So if you are talking to someone who doesn't understand what blockchain is... why should it matter to them that the rules of the organization don't live on paper contracts but instead live in blockchain? Why should people care?
Jack du Rose: People should care about this thing because it’s powered by software. Let's forget about Ethereum for now. If a company’s operates based on paperwork there has to be somebody who is managing that paperwork, somebody who is looking after the fact that that paperwork is being done. You're trusting that there are people who are competently adhering to the rules, but also that they are honestly adhering to the rules. You can't really trust that unless you've got the laws of a nation to back up and ensure that there will be consequences to anybody who is either negligent or malfeasant.
The nice thing about doing it on Ethereum is that you don't need a national legal system to enforce the rules of the organization. You can create smart contracts that lock up value or that have inherent consequences for misbehavior if you go against the rules.
Now if that's a centralized piece of software it's difficult to trust that you can predicate the existence of your company on that piece of software. For example, if Colony was a centralized piece of software we could get ourselves sold to Linkedin. Linkedin could then say "Oh we're going to shut this down actually," so for all the people who started your company, tough, it's gone. You probably just get that little email saying, "Hey, great news we've been acquired! We're joining this company and oh and at the end of the month we're going to stop providing our service.” So that's one important thing that need not happen.
Finally, smart contract based applications are sort of truly in the cloud. With decentralized applications, you'll always be able to use them. Once Colony is live on mainnet, even if the whole Colony team gets run over by a bus, you’ll still be able to use Colony. So that's really important if you're considering this kind of software as the infrastructure for an organization. You'd be incredibly foolish to predicate your business, your livelihood, all of your employees and stakeholders on some company that could run out of money or get acquired at any point.
Geoff Roberts: Talk to me about the product itself... is a Colony akin to a specific project or akin to a specific company? How do you think about the notion of a colony?
Jack du Rose: A Colony could be a company. I generally think there's some sort of quickening point when a project becomes a company. I'm not exactly sure what that looks like but I would say that almost every Colony starts out as a project.
Geoff Roberts: Got it. And with this notion of a Colony being open and fluid, where anyone can contribute to a Colony, is there still a notion that you're being hired to a specific Colony or is there a process to invite someone to your Colony?
Jack du Rose: Yes. We don't necessarily think that the only use of Colony will be this sort of really utopian vision of fluid organizations where it's completely leaderless. I think that there will be a bunch of different organizational types. Some will be more socially centralized, some will be completely socially decentralized. By that I mean that there's various trusted people within some organizations. I think that's likely to be the case.
I think some people want to be able to use Colony for, you know, they've got their centralized team, their core team if you like, and then they have a bunch of external contractors that they want to be able to work with. So I think it will be a broad spectrum of different organizational types. As it stands today everybody needs to be invited to join a Colony. I don't think it's going to be right for all if not most organizations to be just completely open. Many will want to be invite only.
Geoff Roberts: I know this is a very broad question but as you think about real life scenarios that Colony is going to have a hard time supporting what sort of things immediately come to mind?
Jack du Rose: I can't see Colony being used to run a veterinary surgery. Or a bakery. You know, there's all types of companies that run just fine as they are and they necessarily need to be collocated. It doesn't add a huge amount to be able to coordinate yourself, or have this kind of egalitarian way of working. I also have some doubts as to whether any very, very large organizations are likely to embrace sort of new organizational paradigms, just as we don't generally see those kind of organizations embracing things like holacracy. It's just very, very hard for them to do so. They're very interested in different organizational models, but it's not something that springs to mind as something which is going to be an easy change.
Geoff Roberts: Sure. So a key idea here is that people working on a colony are paid or earn ownership in a company in line with their contributions to the colony. In order to facilitate that there's a systematic peer review of work completed. Can you talk to me about that? How has this process worked with your beta testers or just how you envision that peer review process working?
Jack du Rose: A peer review would be understandable to mean that when you do piece of work it gets put out to a whole bunch of people and those people approve it in some way. That's not how it works at all in Colony, actually. There are three roles within a piece of work. We consider the smallest piece of work to be a task. But there are three roles within a task. There's the manager of the task - that's the person who defines it, who sets the budget for it. You've got the worker, the person who does the work for the task obviously. Then you have the evaluator, whose role is to make sure the task has been adequately completed and rates it.
Sometimes all three roles can be played by the same person - people are incentivized to check what everybody else has done because if they find something that they disagree with they are incentivised to raise a dispute over it. Someone raising a dispute can put down a stake to claim some action taken by another is inappropriate. The person against whom the dispute has been raised may then either back down, or match the stake deposited by the objector. Only then will a vote be called to arbitrate the dispute, and the winning side will receive a share of the losing side’s stake. So essentially the peer review is implicit by virtue of the fact that people are incentivized to police activity in their Colony.
Geoff Roberts: Talk me through the idea of the reputation system and how that is leveraged.
Jack du Rose: Within a colony we have tokens and reputation. Whenever you do a piece of work you earn tokens for doing that work and you also earn reputation as a function of the number of tokens that you earn for doing the task and how well the evaluator thinks you did it.
The reputation that you have is important because it informs the amount of influence you have when a vote is necessary or when you're requesting funding for a task. The more reputation you have, the more of the funding of the Colony you can direct. Also from the perspective of your earning ability within a Colony, the more reputation that you have and the more tokens that you have, the larger the proportion of the revenue of the Colony that's going to be yours to claim.
Geoff Roberts: OK. And what does that reputation score actually look like? Is it a number 1 through 10, or 3 out of 4 stars?
Jack du Rose: It's an unbounded number associated with two different values within a Colony. For every task that you do you simultaneously earn reputation in these two different attributes. One is the skill that you used, and the other is the context in which you used it. So that would be the departments or projects that you worked within.
Geoff Roberts: How do you see company direction or strategy created, maintained, and reinforced over time for companies built on Colony? When a project kicks off it has some sort of strategy and mission. And then you can work from that for months or years depending how broad that is but at some point that needs to be revisited. How have you envisioned that working?
Jack du Rose: I think that a common misconception about organizations that will be completely decentralized is that they will be leaderless, that there will be nobody who is providing vision, who is providing the direction. I think that that's not proved to be true at all. I think even in the most decentralized projects, Bitcoin for instance, there are leaders who emerge and people rally to a flag. I think this will be no different whatsoever.
I think with strategy - that's also a job, that's also something that needs some people to do that work. It's not just sort of an emergent consequence of an organization. It's usually the C-level people within an organization who are the people who create that strategy. In this case those C-level people, rather than being canonized as they currently are, will instead emerge as a consequence of the quality of their actions and the fact that people want to follow them.
Geoff Roberts: Fair enough. Sounds good.
Jack du Rose: Good stuff, it's been great to talk to you guys.
By Geoff Roberts 15 min read
Forecasts, budgets, and performance targets; these activities have long been seen by business people as critical activities in the operation of companies of almost any size. They provide a necessary compass for the business, an accepted and understood path towards a business achieving its goals. They are also critical activities in driving accountability within an organization - performance will ultimately be measured against the budgets, forecasts, and performance targets that were agreed upon by the CFO, the Board of Directors, the company’s investors.
We’ve all been there - this is simply how businesses are run.
But a growing number of businesses - particularly those who are embracing self management principles - are beginning to flip the script. Simply put, activities like budgeting and forecasting are not compatible with self management. You can’t have a top down budget created by an executive team and approved by the board, while also having self managed teams that are empowered to make decisions by sensing and responding to what the market and the business is telling them. The case for doing away with these activities becomes pretty straightforward - not only can these activities be a big waste of time, but they can actually be detrimental to a company’s performance.
My start-up, Outseta, has decided to pass on these activities. We’re a start-up without a forecast of where we’ll be in one year, let alone five. We don’t have any agreed upon budgets, or any sales reps with quotas. But before we start to build the case of why we think this makes sense for a lot of companies, let’s start with a couple of stories that will likely sound awfully familiar.
Sales quotas and forecasts can hurt your business… and we’ve all seen it
Let me start by saying that I live in the same world that you do, one where it’s nearly impossible to avoid being beaten over the head with messaging citing the importance of goal setting. If you write your goals down you have a better chance of achieving them. If you share them publicly, even better. I’ve heard countless talks on the importance of setting S.M.A.R.T. goals - those that are Specific, Measurable, Achievable, Relevant, and Time bound. I believe in all of the above - the point of this article is not to reject goal setting altogether. But as I’ve witnessed a growing number of businesses work through the process of setting budgets, forecasts, and performance targets I began to see these processes start to break down. And when I began to learn how self-managed organizations view these activities, I couldn’t help but find myself nodding my head in agreement.
Let’s start with probably the most familiar scenario - I was working at a tech company, with top tier venture capital investors. Each year the company’s revenue targets were set, rather arbitrarily, at the beginning of the year. Where do we want to end up come year’s end? What sort of revenue growth will our investors be happy with?
Come the end of each quarter, I would inevitably find myself sitting in a room full of sales reps. They’d work two or three 10-12 hour days in a row, trying to bring in as much business as possible before the quarter’s end. Stress levels were high. Huge discounts were offered. Some prospects that were in our sales pipeline would get 3-4 calls per day as we tried to get them across the finish line. This scenario is in no way unique - it happens four times per year at businesses all around the globe.
What happened next wasn’t unique either, though. I’d see my friends in sales get really burnt out. The pipeline that they would be relying on to hit their quota the next quarter would have all but disappeared. Perhaps worst of all, those last few accounts that they had so desperately tried to close would cancel, churning at a much higher rate than the business they closed earlier in the quarter. The buyers hadn’t truly been ready for our product - we had forced the issue.
The second scenario is equally as common. In this case I was consulting with an early stage tech start-up. I had a front row seat as the CEO, the CFO, and several other member of the executive team spent countless hours putting together a 5-year revenue plan that would take the company from $0 to $50mm+ in revenue. The plan included budgets for each department, each year. It had customer acquisition and revenue targets for existing products, and new lines of business that did not yet exist. It was a perfectly detailed path to the promised land.
The executive team needed this plan to drive alignment. They needed this plan to share with investors, to show the awesome return their business would provide in just 5 years. But the problem in this scenario was maybe even more troubling. The activity took literally hundreds of hours of the company’s most valuable employees’ time. I found myself wondering, why would you spend that much time figuring out a path to $50mm+ in revenue when you haven’t yet figured out your path to $500,000?
Self management’s perspective on budgets, forecasts, and performance targets
It’s worth noting that as I started working on my own start-up, my Co-founders and I made a deliberate decision to embrace self management principles. We’ve derived significant inspiration for Fredric Laloux’s Reinventing Organizations, as well as companies like Zappos that have recently made the transition to self management. While that’s the case, we are by no means strictly adhering to self management principles - whenever we’re making an organizational decision, we carefully consider whether self management’s philosophies on any one topic resonate with us and are applicable to our business. In lieu of the stories that I shared above, much of what I read about self management’s take on forecasting, budgeting, and performance targets started to make sense to me.
Let’s start by acknowledging that self management does not advocate completely scrapping all budgeting, forecasting, and goal setting activities. What is does advocate for is making these quick and dirty, back-of-the-envelope type of activities as opposed to hunkering down with your executive team for an offsite session, followed by several weeks of revisions to your plan.
The basic premise self management shares is that these activities are most often a shot in the dark, can be confining, and can drive behavior that’s not in the best long term interest of the business. Let’s start by unpacking a few key themes.
Sense and respond rather than predict and control
I think few people would argue that most forecasting and budgeting processes are an attempt to predict and control aspects of your business. It makes sense that this is something that we try to do - for most of us, our livelihood depends on our performance at work. We take some degree of comfort in knowing that there’s a plan, that we have some sense of control in terms of what the future looks like.
But to what extent can we actually predict the future? In any company or market, how much control can we ever really have… or do these activities simply give us an illusion of control? Jason Fried and David Heinemeier Hansson, Co-founders of project management software company Basecamp, weighed in on this exact topic in their 2010 book Rework.
“Planning is guessing. Unless you’re a fortune-teller, long-term business planning is a fantasy. There are just too many factors that are out of your hands: market conditions, competitors, customers, the economy, etc. Writing a plan makes you feel in control of things you can’t actually control. Why don’t we just call plans what they really are: guesses. Start referring to your business plans as business guesses, your financial plans as financial guesses, and your strategic plans as strategic guesses. Now you can stop worrying about them as much. They just aren’t worth the stress.”
Frederic Laloux’s book gives a great example further illustrating this point. Imagine two companies tasked with having an employee ride a bike from Point A to Point B. The first company huddles up and puts together a detailed plan on the path that their rider is to take. They carefully calibrate the angle of the handlebars, measure the slope of the ground, and consider the speed of the rider. A team of product managers carefully roadmaps the rider’s course.
The second company asks their rider simply to be an active participant in the ride. They ask him to sense and respond to the terrain as he sees fit during the course of the ride.
When the riders take off, the rider from company one rigidly sticks to the plan - the “optimal” plan - that his team has put together for him. He doesn’t change course when an unexpected wind arises, and as he veers off course his team of product managers demands that he stick to the original, optimal plan. Later, when the rider has failed to reach point B, the product managers begin pointing fingers at one another. Someone must have made an error during the planning process.
Meanwhile, the rider from the second company simply senses the wind and makes adjustments on the fly, arriving at Point B safely.
Fried and Hansson take this point even a step further, noting that, “The timing of long-range plans is screwed up too. You have the most information when you’re doing something, not before you’ve done it. Yet when do you write a plan? Usually it’s before you’ve even begun. That’s the worst time to make a big decision.”
Ultimately, this comes down to improved agility. Self managed companies value workable solutions and fast iterations rather than focusing on finding the best possible solution. A “workable” solution in this case is simply one that no one thinks will make things worse - decisions can always be reviewed or changed if new data or a better idea are presented. The key here is that time is never wasted or decisions postponed because someone thinks more data or analysis could lead to a more optimal path.
It’s interesting that many companies, across industries, buy into the importance of agility in other areas of their business - but not when it comes to budgets, forecasts, or performance targets. For whatever reason, these items remain fairly rigid. The tech companies that I cited in my examples above all practiced agile software development, for example. The basic premise of agile software development is that fast iterations rather than a few larger leaps will help products progress faster. This same concept is also at the heart of lean manufacturing practices.
A final benefit of this approach is that by favoring agility as opposed to the “optimal” plan, we become less attached to the decisions that we make. We become more comfortable adjusting to reality and changing our plans as needed, rather than stubbornly sticking to the carefully plotted course we spent so much time and energy defining.
Arbitrary performance targets drive shortsighted behaviors
Agility aside, most performance targets are at least to some extent arbitrary numbers. Sure, in established businesses benchmarking and historical performance can set some precedence. But really, how useful and specific can that really be? You needn’t look any further than the stock markets to realize how little capacity we have to predict or control - and in a start-up company any performance targets are almost completely arbitrarily pulled out of thin air.
More often than not these targets will fairly quickly become seen as too easy, in which case their value is eroded, or too difficult, in which case shortcuts must be taken to reach them. We’ve all heard of sales reps that reach their quota and stop selling early, either to pad their pipeline for the next quarter or for fear that their quota will be seen as too easy and will be updated to be more aggressive in the following quarter. Similarly, it’s all too common for excess budget to be spent on non-critical items to avoid budget cuts in the future. So what’s the solution?
The first is simply accepting that there’s so much outside of your control, that the best thing you can do is focus on getting everyone to work hard and do the best job they possibly can, across the organization. If you truly focus on doing this, and on optimizing for the long term rather than to meet an arbitrarily set performance target, then the numbers will fall where they will and that’s OK. If you did your best, you did your best - isn’t that what we should all be trying to achieve?
To bring it back to the example of sales reps, simply because it’s an easy example, in the absence of quotas you’ll still have some reps do better than others. Some will need additional coaching. Some who consistently underperform will need to be exited - none of that changes. All that changes is that you’re measured on the reality of the best you can do, rather than against an arbitrarily set performance target.
Secondarily, goals and performance targets can still be incredibly useful as you strive to do your very best and optimize for the long term. For example, think of joggers who time their average pace per mile when they are exercising. Most of us are not Olympic athletes and are not out to break any specific records - instead, we do this simply to better ourselves and see if we can do a little bit better than we did previously. This is a self prescribed tool that we leverage to help us get better at an individual level.
Companies with new approaches to budgets, forecasts, and performance targets
It’s worth noting that there are already thousands of organizations that have begun putting the practices we’re advocating for in this article into practice - and no, these practices are not just applicable to start-ups.
Take for example Charles Towers-Clark, CEO of POD Group, a maker of mobile connectivity solutions with offices in England, the US, and Spain. Founded in 1999, POD Group only recently began embracing self management after Towers-Clark realized, “Everything was being held up by me.”
“What would happen is one of the development guys would come to me and say ‘We need more cloud hosting servers, I think we should use these, can we do it?’ and I’d ask, ‘Do we need to get more servers?’ to which they would say ‘yes’, so I said ‘yes’. They wasted their time asking me a question they knew the answer to before, I had to say yes, otherwise the business would stop and the responsibility was passed from them to me. If everybody in the company knew the financial situation of the company then the expert would make the decision - not a clueless CEO. Now anyone can make any budgetary decision they want, regardless of the amount, as long as they seek relevant advice. The only fireable offense is not seeking advice, and if it’s a budgetary situation they should check the company financials on the intranet."
At POD Group this included making all employees’ salary information available as well - a process that was not taken lightly and that included quite a bit of feedback from the company’s employees. “One thing we found is that people valued their salary more so than income from profit sharing or bonuses,” said Towers-Clark. “I came to the conclusion that the only way to motivate people properly is the let people choose their own salary. People now feel like they’re valued according to their worth, because they are setting their own worth - and if they don’t feel valued on their next salary review they can change it.” POD Group now has a salary review process that occurs every four months, and even had several of the company’s managers lower their salaries after embracing the change.
Ricardo Semler, CEO of Semco, offers an additional perspective on how his organization handles the budgeting process.
“We do budgets on a small scale at Semco. Each group of six to ten people, once every six months, puts together the numbers for their unit. If they need help, they easily get it from the financial office. We believe that any company, even a Boeing, GM, or the U.S. Postal Service, should allow their workers to organize themselves, even when tens of thousands of employees are involved. It could be done the same way we do it at Semco. It’s not a question of size. Rather, it’s a question of relinquishing control, trusting workers to pursue their own best interests, sitting back and letting nature take its course. This isn’t an academic exercise for us.”
It’s worth noting that Semler’s company is doing this at scale - the business has thousands of employees, and has grown revenues from $4mm in 1984 to $212mm in 2003 - all the while pioneering self management practices like their approach to budgeting.
Dimitris Georgakopoulos, Co-founder of software companies Outseta and Buildium, offered this perspective on the forecasting process used at Buildium. “I think it is important as a company to have a streamlined mechanism to know how recent results affect the outlook for the business over the long term,” says Georgakopoulos. “What we’ve done at Buildium is build an automated model that projects out the future performance of the company based on the last few quarters’ performance. As a board member I rely on this to see if we’ve directionally changed the trajectory of the company - this is a lot more useful to me than assessing the businesses performance against a top down forecast based on biased predictions and individual assessments.”
This article and the concepts shared within it will be unpopular with many, no doubt. But rather than discrediting self management’s approaches to budgeting, forecasting, and performance targets as the latest management fad or academic theory, it’s worth reflecting on why self managed organizations are embracing these practices in the first place.
“Management is a lot easier if you make people responsible for managing themselves,” said Towers-Clark. “I decided to embrace self management for three reasons. First, it was simply easier for me. Second, I realized we needed to use everyone’s brain and not just mine - that’s how you create value. Last but not least, this has helped us with attracting and retaining employees - we’ve never lost anybody.”
For those struggling to give up “control,” I leave you to contemplate a few questions - how much control do you really have? And what’s your concern with simply asking everybody to work hard and do their very best?
Perhaps the most fundamental tenet of self management is that people are fundamentally good and can be trusted to do the right thing. If you believe that, then the answers to these questions will reveal themselves pretty readily.
By Dimitris Georgakopoulos 8 min read
With this post I want to share some highlights from my recent trip to the Giffre Valley of the French alps in a small village called Samoens. The week was organized by The Happy Startup School whose mission is to build a community of purpose-driven entrepreneurs and changemakers. Alptitude is the group's flagship event and brings together 25 purpose-driven entrepreneurs and changemakers from around the world for a unique, meaningful experience in stunning natural surroundings. Their next event is in Mt. Hood, Oregon in October.
The event was nothing like I’ve ever experienced. With a loose agenda the organizers left space for the group that attended to explore the areas that they were most interested in. People were asked to let the group know what they need help with and what they could offer the group. Part of the time was spent on topics that the group brainstormed and wanted to talk about; part of the time was spent 1-on-1 with other attendees getting to know each other; and the most significant portion of the time was spent on outdoor activities that exposed us to the beauty of the valley.
The day typically started with a mindful activity like yoga, meditation or pilates followed by breakfast. Then we spent 2-3 hours on topics that attendees had experience with and wanted to share with the group. Some were more scripted presentations and others were facilitated discussions. After lunch we would head out to experience the area by hiking, biking or a nature walk. The outdoor activities gave a lot of space for folks to get to know each other well. My favorite activity was hiking up to a refuge at 1,763 meters and spending the night there. The refuge is taken care off by a family and provides food and shelter to hikers. There are hundreds of these refuges in the Alps and one can plan hiking trips and visit a number of them in a trip.
I signed up to attend this event without a specific goal in mind. I was attracted to the unstructured agenda and the opportunity to meet other like-minded entrepreneurs. The setting and the outdoor activities was the icing on the cake. The event delivered everything promised and then some. The conversations and discussions validated and reinforced what I’ve come to appreciate about life in the last few years. The best way to live, in my opinion, is by focusing on the process instead of the outcome. The journey not the destination. Optimizing for the long term over the short term. Couple that with leading a creative life, focusing on intrinsic motivation, and spending time using your talents to build something that gives you joy and pleasure at each moment. Finally, do all the above in the presence of friends that share your values and you have the best opportunity to live a truly fulfilling life. I left the week reinvigorated and with a number of new friends.
Below is a collection of resources organized by topic that sparked my interest during the week.
Gini is a German company whose purpose is to free mankind from paperwork. The company has enjoyed success by partnering with a number of banks and building a solution that enables customers of a bank to pay any invoice that they receive electronically. The company has primarily had success in one market segment and has grown its team to close to 30 people. They recently began to consider other market segments and also began questioning how they should organize the company to best be able to fulfill its vision and build the best possible working environment. The company decided to organize around a structure that is as flat as possible and decentralizes decision making. The Gini handbook is an inspirational resource that covers how the company organizes and conducts day to day business.
Maptio is a startup that is focusing on helping self managed organizations visualize their organization. It’s for leaders who want to find ways to work and organize without traditional management hierarchy or the overbearing rules of Holacracy. The product lets you see who has taken responsibility for what; who's helping who; and how the big vision breaks down into its component parts. The company is in private beta and is looking for prospects.
Agile manifesto is widely known but I wanted to include it in this blog post as a reminder. It came up in a number of discussions and I had forgotten how inspiring the main 4 principles are:
Individuals and interactions over processes and tools
Working software over comprehensive documentation
Customer collaboration over contract negotiation
Responding to change over following a plan
While items on the right are valuable it’s the items on the left that should be focused on more.
The Entrepreneurial Operating System (EOS) is a complete set of simple concepts and practical tools that helps entrepreneurs get what they want from their businesses. The system helps get everyone in an organization on the same page, instills focus and accountability throughout the company, and helps create a cohesive, functional, healthy leadership team.
The entrepreneurial lifecycle
Jeroen Meens was kind enough to share his thoughts on the entrepreneurial journey. He discussed what to expect from each stage and what you should be doing.
StrengthsFinder is a tool that helps you find and develop your talents into strengths. It's based on decades of research and documented success in multiple case studies. Talent is your natural way of thinking, feeling or behaving. When talent is combined and developed with knowledge and skills, it becomes a strength. Strength is performing with near-perfect results on a consistent basis. To take the assessment allocate about 30 minutes of uninterrupted time. For better results work with an experienced coach like Jo Self. I am particularly intrigued to use this tool for parenting and to help raise my kids to discover and strengthen their talents.
I had the chance to experience a short version of the workshop that Tom Nixon runs on the topic of money. The workshop was very insightful and reinforced my beliefs about money. I came out with new tools that help me identify and keep at bay undesirable ways of thinking and projecting myself when it comes to money.
Once Upon a Doug
I had the pleasure to meet the founder behind this non-profit project. At the moment this project provides regular monthly income for 15 women. The goal is to grow that to 200 by 2020 and he needs your help. Check out the inspiring story via the link above.
Since 1979, Jadav Payeng has been planting hundreds of trees on an Indian island threatened by erosion. In this film, photographer Jitu Kalita traverses Payeng’s home—the largest river island in the world—and reveals the touching story of how this modern-day Johnny Appleseed turned an eroding desert into a wondrous oasis. A truly inspiring story about the impact one person can have.
The Incredible Edible project is an urban gardening project which was started in 2008 by Pamela Warhurst, Mary Clear and a group of like-minded people in Todmorden, West Yorkshire, England. The project aims to bring people together through actions around local food, helping to change behavior towards the environment and to build a kinder and more resilient world. In some cases, it also envisions to have the groups become self-sufficient in (local) food production.
Cycling Without Age
Cycling Without Age is a movement started in 2012 by Ole Kassow. Ole wanted to help the elderly get back on their bicycles, but he had to find a solution to their limited mobility. The answer was a tri-shaw and he started offering free bike rides to local nursing home residents. He then got in touch with a civil society consultant from the City of Copenhagen, Dorthe Pedersen (now Cycling Without Age), who was intrigued by the idea and together they bought the first 5 tri-shaws and launched Cycling Without Age. The company has now spread to all corners of Denmark, and since 2015 to another 28 countries around the world.
Your one stop shop for adventure planning in the Giffre Valley - this week would not have been successful without the help of Alp Adventures. Most of the outdoor activities consisted of exploring the trails of the Grand Massif either hiking or on bikes, and were organized by our guide Arno de Jong.
I had the pleasure to meet the founder of this company that has transformed her home into a place that folks can use to experience the wonder of the area. Sally-Anne organizes customized retreats to serve your needs. Check out her cool site for more info.
Dan lives in the area and came over and gave us a slideshow and a funny narrative from his experiences travelling the globe to capture awesome moments (he’s a photographer). He represents the epitome of living a full creative life. I encourage you to check out his adventures.
Other fun activities included….
Yogic laughter - A fun group activity
Coupe des Alpes - An automotive event
Naturally seven - The art of becoming an instrument using the human voice
While it may sound a bit (and I admit, it felt a bit this way) like I just spent a week gallivanting around the French Alps, the more I reflect on my experience the more I realize how valuable it was. I have spent my career in an industry obsessed with “innovation,” yet when I reflect on the industry conferences and meet-ups I’ve attended over the years I see anything but innovation.
What is there to the “standard” conference format of cheap hotel rooms, quickly erected corporate booths, and regimented presentations that is so effective? The inspiration that I derived from a week spent in nature with a small group of 25 reinvigorated me in a way no other event has. The relationships and friendships that I formed, both from a personal and business perspective, will benefit me for months and years into the future. When was the last time you could say that about any event that you attended?
As I continue to build Outseta I plan to look for opportunities to borrow heavily from Alptitude’s format. Whether it’s putting on customer events or organizing a company retreat, I believe that this format can be both more enjoyable and more productive than what’s today so often considered “the norm.” My hat is off to the team at The Happy Start-up School for so fully embracing their purpose driven mission with this event. It was my pleasure to attend!
By Geoff Roberts 11 min read
This is not the first blog on the web highlighting admirable or inspiring companies. That said, we’ve spent quite a bit of time lately thinking about and discussing how we’d like to build Outseta. Many of the companies that have come up in our discussions are included on our list below. Some of them we simply appreciate because of the decisions they’ve made while growing their businesses. Others have inspired us to the extent that we’re planning to directly steal their ideas and concepts as core elements of our own operational strategy. The common theme running through this list is that the majority of these businesses are challenging assumptions of how people should work together while creating organizations that bring out the best in people. These companies work hard to foster environments where people feel fulfilled, trusted, and empowered to take initiative every day. If that tickles your fancy, read on!
Semco is a Brazilian company that’s known for its controversial business management practices and corporate reengineering. CEO Ricardo Semler grew the organization from $4mm in revenue in 1982 to $212mm in 2003, all the while pioneering principles and operating procedures based on trusting your employees and not having a lot of rules within the organization. The company has been described as “insanity that works” and their CEO has been described as a “corporate rebel.” What we like most about this company is that they’ve shown that self management principles can work at scale - the company has more than 3,000 employees today, and has experienced less than 1% churn in their workforce over the last six years. Unlimited vacation time policies that are so prevalent today (particularly in tech) originated at Semco. This is a really interesting podcast with their CEO - one of my favorite stories is Semco was having problems with their employees stealing some of their products, which were kept under lock and key because they were very expensive. Unsure of what to do, Ricardo decided to no longer lock up their inventory - a statement that said loudly and clearly, “we trust you” to the people in the organization. Amazingly, once he made this change the issues with product theft all but disappeared.
Tower Paddle Boards
Tower Paddle Boards is a San Diego based company that sells manufacturer direct stand up paddle boards, in addition to the Southern California beach lifestyle. The company recently embraced a 5 hour work day in order to support their employees’ desire to live that SoCal lifestyle, and it hasn’t slowed them down one bit - Mark Cuban famously invested in this business via Shark Tank and the company has landed on the INC 5000 list of America’s fastest growing companies each of the last two years. Also of interest - they emphasize hiring great people over hiring for specific roles, and ask all job applicants to send them a 2-minute video application.
Wistia is a Boston based SaaS business offering “your friendly neighborhood video hosting platform.” Dimitris and Geoff were early customers of the company at Buildium, with both companies sort of growing up together. There’s a lot that we admire about this company…
They’ve resisted the temptations and trends to grow at all costs; they took a small angel investment early on and have been very deliberate throughout their growth.
They’ve almost never raised prices.
One of the biggest early investments they made was in office space, because they cared deeply about creating a great working environment.
They’ve always been willing to lend an ear or a hand (thanks Chris and Brendan)!
The product is awesome. Nuff said.
ConvertKit is an email marketing platform for professional bloggers. One of the company’s values is “Teach everything you know,” so they’ve always made their revenue performance public and written about their path to (currently) $600,000+ in monthly recurring revenue (MRR). They are a completely distributed team of 25 and have always made a concerted effort to stay small. The company is currently operating with a 25%-30% profit margin and participates in profit sharing with their employees. Metrics like revenue per employee and customers per employee have been tracked since early on; something we’ll look to replicate at Outseta.
Patagonia is a California based outdoor apparel company that constantly lands on lists just like this one. The company has always celebrated the outdoor lifestyle its products are built to support, and has used environmentally friendly materials long before it was en vogue to do so. Flexible hours, on-site childcare, and 16 weeks of paid maternity leave as well as 12 weeks of paid paternity leave are examples of the company’s focus on their employees' experience.
FogCreek is a software company that started in New York - they are well known for founding Trello (which we use at Outseta), which they later spun off into its own company and sold to Atlassian. They’ve taken an interesting approach to compensation, as they’ve long wanted to foster a workplace where software developers don’t feel pressured into personnel management if they want to be promoted. They have a compensation ladder with all employees at the same level making equal pay, and a limited number of job titles. Again, financial rewards are gained via profit sharing. Six weeks of paid vacation is the norm, as is three weeks each year dedicated to training. New employees receive a 10% signing bonus that must be paid back if you leave the company within 12 months.
Zappos is another company that lands on lists like this one all the time. The Zappos Culture Book has long been a staple in Buildium’s offices. Most of what we like about Zappos is directly attributable to their CEO, Tony Hsieh. He’s completely sold on the concepts of self management and employee empowerment, and despite the fact that Zappos did not start out as a non-hierarchical organization, he didn’t shy away from making that change (7% of Zappos’ Managers left the company after the change). Tony uses a metaphor when talking about his company - Zappos is a village, and he’s the mayor - meaning he’s just there to serve the people of the village. The company also takes an interesting approach with new hires - they pay new hires to quit within their first 90 days, taking a proactive approach to exiting new employees who don’t feel that they’ve found a good fit for themselves at Zappos.
Basecamp is probably the company that’s been our most consistent source of inspiration. They spent a lot of time and effort thinking about how to structure their organization so that they can keep it at a size that’s easy to manage, and have focused on creating a place that you’d want to work - even if that means sacrificing some growth. They don’t have a sales team and have done very little in the way of paid advertising to acquire customers - they’ve instead focused on content marketing and “building a tribe” of passionate users. They spend a lot of time and effort sharing details of how they work and operate - while these philosophies may not directly correlate to new business or users of their product, they believe enough in their approach that they take the time to share it with the world. To date they’ve written a few books about how they operate, and they also host live sessions at their headquarters walking people through how they work. The company’s Signal V. Noise blog is a favorite of ours.
Toms shoes has quickly become synonymous with social entrepreneurship - for each pair of shoes that they sell they donate a pair to someone in need. They offer a good product, and their customers are OK with paying a higher price point because they are a mission driven company. What we like most about Toms is that their CEO and early employees actually took the trek to the underprivileged communities they were donating shoes to, and distributed the shoes themselves, in person. It would have been easy and less expensive to simply ship the shoes overseas, but that was never the point and the power of those experiences created an extremely loyal workforce.
HolacracyOne is a consulting company that has gone the furthest with experimenting with self management principles. They’ve consistently published content on emerging best practices within self-managed organizations, and are very much at the forefront of thought leadership in this area.
Valve is a Seattle based gaming company founded by a team from Microsoft. They were among the first companies out there to embrace self management in the late 90’s and early 2000’s, although they’ve never talked a lot about it. When you show up on your first day you’re given their employee handbook, which is inspiring and outlines their unique approach to performance and compensation management. When you start at Valve you aren’t hired to a specific team or department, but instead you simply start working on a few different projects and gravitate towards those that interest you most. The company focuses on hiring experts in different fields - artists, developers, etc. - but they don’t plan out how things are going to happen and instead let work happen as organically as possible.
Mailchimp is another company that’s constantly landing on lists like this one. They have stayed private, and have crushed companies that were much better funded than they were. We admire the brand that they’ve built, and are big fans of their content style guide.
Squarespace is a website building platform, and a company who knows who they are - they are not trying to be all things to all people. Their product is reasonably priced, and they’ve emphasized ease of use and user experience over all else. We chose to build the first version of our website using Squarespace, and their help content is second to none. Whenever we’ve had any sort of question we’ve been able to find appropriate documentation and resolve our question or issue ourselves - very few tech companies truly deliver on this level of self service. It would be amazing to know how much their knowledge base saves them in customer support costs.
Groove is another small, distributed team that builds help desk software. We like just about everything they say on their “About Us” page - they advocate for a sane work schedule, they’re in it for the long haul, and they emphasize that the journey of building the company is more important than the destination. The result? The company has only been in business for about 3 years and supports 6,000+ customers with just 12 employees. Last but not least, the blog they’ve written detailing their start-up journey is second to none. Cheers to you, Alex and team!
InvisionApp is growing like a weed - it seems like in just a few years InvisonApp came from nowhere to being used by seemingly every product design team in the SaaS industry. And all of that growth has been accomplished with a 100% remote workforce - there is not a single corporate office. They feel the benefits of opening up your hiring pool to the world far outweigh the benefits of being co-located - we tend to agree.
Baremetrics combines the majority of the characteristics that we’ve called out throughout this list - they are mission driven, have passed on growth at all costs, support a remote workforce, and have shared fantastic content throughout the course of their start-up journey.
It may seem strange to see a venture capital firm on this list, given how much we’ve spoken about focusing on profitability and not chasing growth at all costs. Well, the team at IndieVC says it better than we can in the introductory paragraph on their website. “Real businesses make products and sell them for a profit. They focus on customers, revenue and profitability not investors, valuations and the next fundable milestone. Real businesses prioritize their customer’s needs over their customer’s eyeballs. They have a functioning business model, not a believable financial model. Real businesses want to stay in business, not run for the exit. They create their own source of funding and don’t have to ask anyone for permission to exist. We believe real businesses make really great investments.”
Dimitris can’t say it, given that he co-founded Buildium and that could be construed as self-serving… but I can (Geoff here). I was insanely fortunate to start my career at Buildium and work with a team that always put ethics, the employee experience, and my interests as an individual above all else. The company’s mission to “help small businesses succeed, while setting the highest standard for how business should be done” is very real. The number of remarkable and admirable things that I witnessed at this company, behind closed doors when no one was watching, is something that will always stay with me. My experience at Buildium will forever shape my professional priorities and philosophies on work.
Not a bad list, eh? It’s companies like the ones above that keep us motivated, hungry, and inspired as we work to build Outseta into the company we know it can be. We are convinced that there’s a better way to build a sustainable organization, rejecting leaders that employ a rigid form of command and use fear, status, power, or money as carrots to bring out the best in people.
Without question we feel that there’s a strengthening tide of businesses that truly care about the journey over the outcome, about the potential of self management practices, and about the well-being of employees both inside and outside of work. That’s what will keep us going, and we could not be more excited put these principles first to help further that strengthening tide. We want to lead by example in changing how work is done and perceived, as it has the potential to benefit us all.
By Geoff Roberts 15 min read
As I’ve been speaking to more and more people about Outseta, I’ve found that the conversation tends to linger much longer on how we want to build the company as opposed to focusing on what the software we’re building actually does. That’s OK by me; the “how” and the “why” are what I’m most interested in. I very quickly find myself talking about creating the best possible employee experience and how we’re planning to embrace self management principles.
“Self management, huh…” I can almost hear it, judging from the half-perplexed look on the face of the person I’m talking to.
“Self management” sounds accessible enough; most people get that it concerns some aspect of self responsibility, rather than relying on an outside person or force for “management.” But what does that actually mean; how does self management manifest itself within a self managing organization? This post serves to give specific examples of self management processes in action - our goal here is to make self management come alive and be that much more real for you. These are also processes that we’d like to use or borrow from at Outseta.
What is self management?
We wrote on our About Us page long ago that we’re planning to embrace the principles shared in Frederic Laloux’s Reinventing Organizations as we build Outseta. Self management is one of three principles that Laloux’s book emphasizes; our definition of self management is derived from his book.
In short, self management simply means “no bosses.” That’s it.
What Laloux argues is that you can run an organization without the need for hierarchy. There’s absolutely no real reason or need for a boss; but in order to operate without hierarchy, there must be well defined structures or processes to help with the things that bosses usually do.
It’s around this time that I usually get one of two responses. The first is “that’s a recipe for chaos.” The second is, “what type of socialist/communist company are you trying to run?” To be honest, I very much understand both reactions (I felt both). Before I even reply to these quips, the person I’ve been chatting with has already turned these thoughts over in their head a few times and has a new take.
“I like the idea conceptually in some ways, I do. But it’s too aspirational. How would that ever work in the real world?”
Why we care about self management
Let me start by saying my reaction to the “too aspirational” comment is “that’s exactly the point!” If you’re going to spend 40 hours per week doing something…. Heck if you’re going to spend your life doing something, shouldn’t it be something aspirational? If it wasn’t aspirational, could you possibly be doing your very best work?
Think about that for a minute…
When you chase something aspirational and find the practical means of making it happen, I’d argue that’s when great things happen. That’s when people effectively bring their full passion, energy, and abilities to the workplace. And that’s just starting to scratch the surface of why we (and a growing number of other organizations) care about self management.
So what is the promise of self management? Why would you try it when building a business is already difficult enough? It starts with a belief that top down control within an organization can never produce the best possible outcomes. As additional layers of hierarchy are added to a business, the more disconnected the limited number of people making the key decisions become from how to best deploy the resources at their disposal. Self management puts the onus on everyone to understand the needs of the organization, and how their own unique skill sets and passions can best be leveraged to meet the organization’s needs. People more often find themselves on projects and in roles that they think are the best fit them, and as such are more likely to feel fulfilled and empowered.
While Laloux’s book provides evidence that self management can produce superior business outcomes to a traditional, top down management approach it’s also worth noting that that’s not the primary driver for us embracing self management at Outseta. We have a strong instinctual, intuitive sense that this is how work should be done. It’s certainly how we’d prefer to work if we were joining a new company.
Necessary assumptions and prerequisites for self management
While that may sound all well and rosy, there are some conditions that need to exist, some assumptions that need to be fully believed and adopted within an organization for self management to be successfully practiced.
The company has figured out the principles which will guide it. In different contexts this is often referred to as a mission, a set of core values, the why, or the brand promise. Regardless of what you call it, the company must have a clearly defined sense of it’s reason for being and the values on which it won’t compromise.
A belief in trust over control. The organization intrinsically believes that employees are reasonable people who can be trusted to do the right thing, and as such are able to relinquish control that’s typically provided by some form of hierarchy in a traditional organization.
A belief in personal ownership and responsibility. Without a boss to “manage” people, people are expected to bring their unique skill sets to the table, as well as a sense of personal ownership and responsibility for their work. A lack of hierarchy is not intended to make everybody “equal” - it’s fully expected that everyone has different skills, and different levels of skill, which they bring and contribute to the organization’s work.
A belief in earned authority over positional authority. People actively seek the advice of others because of their experience and expertise - not because of their position or title - with a full understanding that doing so is in their best interest.
A long term view. If you’re interested “flipping” a business or looking to build a company for a few years, self management is probably not for you. Self managed companies believe the best decisions tend to be made when acting in the best interests of the company over the long haul.
The company shares all information, including financial information, with full transparency.
How self managed organizations handle operational decisions
With the aforementioned conditions met, almost any business regardless of size or industry can practice self management successfully. Here are real world examples from Laloux’s book highlighting how self managed businesses tackle operational decisions that traditional organizations typically rely on hierarchy or bosses to handle.
Self managing companies typically consist of self organized and self governing teams. Each team is responsible for figuring out things like how large it needs to be, which geographies or territories it will cover, which customers it will serve. Tasks typically assigned to bosses like performance evaluations, planning, and even finding office space are distributed amongst and owned within each specific team. Teams collectively are responsible for their own performance, operating procedures, and contributions to the company at large.
Rather than having predefined times and agendas for meetings, self managed organizations emphasize calling ad hoc meetings as needs arise. Every meeting is assigned a facilitator, whose sole job is to solicit feedback on items that the group would like to discuss in that present moment. From there items are prioritized and discussed in the context of the group.
Meetings are typically broken down into either tactical or governance meetings. Tactical meetings focus on the “what” - what’s our strategy? What’s our timeline? What progress are we making against our objectives? Governance meeting instead focus the “how” and the “why” - why does this team exist? How will we work together? How will we staff and operate this team effectively?
Say for example a particular team felt that their objective and team structure was no longer appropriate and was interested in disbanding the team into two separate teams with newly defined objectives. With no boss in the room this proposal could be discussed, refined, and put to a group decision (more on decision making shortly). In a traditional organization such a decision could often takes months to make happen.
Budgeting & Forecasting
Self managed organizations also advocate for keeping budgeting and forecasting activities to a minimum. Sure, budgets are a reality and must be operated within - but with everyone in the organization operating with a full understanding of the company’s financial standing, self managed organizations appreciate the agility that they have to operate within those financial constraints without adhering to or spending a lot of time putting together rigid budgets.
Likewise, forecasting and even to some extent goal setting aren’t stressed and are seen to an extent as an attempt to control the future. For example, a company that’s short of its quarterly revenue target might feel compelled to do something that’s not in its best long term interest in the vain of hitting that artificially set target - maybe it’s selling to a customer that’s not yet truly ready for your product, or maybe it’s making a short term investment in lieu of a long term one. Self managed organizations emphasize that if you always act in the best long term interest of the company, you’re ultimately putting yourself in the best position to hit your performance goals.
If you were managing yourself, how much vacation time would you give yourself? Unlimited vacation, of course! Take-what-you-need vacation policies have become popular in recent years, particularly in tech companies - this is simply one of the first self management principles that’s become mainstream or at least popularized in recent years.
The basic concept here is simple - people need time off. To recharge the batteries. Because of illness. Because of accidents. Whatever it may be. Who are you to say each person needs the same 10 days of vacation schedule per year? Every person’s needs are different, and every person’s needs may vary from year to year. As an employer it’s in your best interest to support your employees’ needs, which will in turn result in them doing a better job in their professional life. Employees are expected to act like adults and take what they need, but also get their jobs done and done well in cooperation with their co-workers.
While these policies are great, it's a frustration of ours that these policies are often either A) adopted for the wrong reasons, or B) are the only aspect of self management that an organization adopts. It's perhaps the least important item on this list; self management has so much more to offer than unlimited PTO.
OK, OK… vacation time is pretty easy to figure out. But without a boss, how do you figure out who gets paid what? There are few topics more sensitive or difficult to get right than compensation.
There is not one “right” way to handle compensation in a self managed organization, but there are a bunch of different approaches that have been practiced successfully. One that seems to be among the most promising is, unsurprisingly “Everyone sets their own compensation rate.” Here’s a recommended process for rolling out this sort of policy.
Once per year, every employee writes a letter to all of the other employees in the company highlighting the contributions they’ve made to the business over the course of the last year. They also specifically reference how much they think they should be paid the upcoming year based on their contributions relative to those of others. Prior to doing so, they receive anonymous performance reviews from at least 5 other people that they work with so that they have that feedback in hand when they set their compensation rate. All of the compensation letters and the anonymous reviews are made public.
From there, there is a “compensation committee” whose members rotate every year. The committee is supposed to provide a recommendation, some advice on how appropriate your salary ask was. “Hey, you did some great things last year - you should ask for a slightly larger raise” is just as appropriate as “Hey, you asked for a 25% raise when the rest of the company asked for closer to 10%. You should probably dial it back a bit.”
Every employee then has the ability to change their salary as they see fit - they can choose to follow or ignore the advice of compensation committee. Want a raise? Take it. Organizations who have adopted this approach speak to it being liberating; office politics, posturing, and raises going to the loudest voices are trends that tend to melt away when you’re granted the ability to set your own compensation rate.
Of course, to make this actually work in practice there needs to be some structure. It’s particularly important here that all information, financial and otherwise, is shared with full transparency. As a result, every employee goes into the process of setting their salary with full information. They know how much the company can afford to spend on employee compensation and how their ask will impact the business.
Second of all, because all of the employee salary letters and performance reviews are public there’s no place to hide for employees who consistently ask for more than their peers, yet under-deliver compared to others and ignore the advice of the compensation committee. These people are consistently abusing the process and are clearly not acting in the best interests of the business; there are formalized ways for exiting employees that abuse the liberties these policies provide.
Last but not least, self managed organizations emphasize profit sharing programs as a way to deliver financial rewards to employees. Profit sharing programs provide enormous benefits in terms of alignment, as employees can expect that working together in the best interest of the business will ultimately deliver the best financial return for all parties.
“90% of business is making decisions” - someone must has said that at some point. But in an organization with no bosses, no hierarchy, how do decisions get made? What are we going to spend money on? What strategy will we employee? Who are we going to hire?
The key pillars of decision making in a self managed organizations are that you do not rely on hierarchy to make decisions, nor do you need consensus (everyone in agreement) on which decision to make. Both processes have very familiar flaws - when hierarchy is tasked with making decisions, people often feel like they have little ability to impact or influence the decision - it’s outside of their control. When you strive for consensus, it’s all too common that opposing sides talk the issue to death, with both sides ultimately feeling frustrated and exasperated to the extent that they simply care that a decision, any decision, is made. Instead, Laloux advocates for the use of what he calls the “Advice Process” to make decisions in a self managed organization.
Simply put, advice process means that any employee can make any decision (including spending company money) as long as two conditions are met.
They seek the advice of experts
They seek the advice of the people that will be most directly impacted by their decision
That’s pretty much it - do your diligence, be informed, act with empathy, and good things will happen. Generally speaking the bigger the impact of the decision, the larger the group that should be consulted prior to making the decision. Again, those who serially abuse or disregard the advice process have nowhere to hide so people take the advice process seriously. And when everyone’s interests are aligned, and everyone is operating with all of the relevant info, this becomes much more practical and not just aspirational to put into practice.
Within every organization regardless of management styles or structures, conflict will happen. Decisions need to be made, and we’ve all experienced scenarios in the workplace where opposing sides just can’t agree on the path forward. Self managed organizations take a very deliberate approach to conflict resolution. To start, all employees are trained on both group decision making processes and conflict resolution - this is done proactively, rather than waiting until there’s a specific problem at hand.
With decision making conflicts, nobody is allowed to veto a decision simply because they prefer a different path or decision. As long as nobody has a principled objection - an objection on the basis that the suggested decision flies in the face of the company’s mission, values, or leading principles - then a team can make a decision collectively and move forward with it without the need for consensus.
Whether the conflict at hand is a technical decision, an interpersonal problem, or a breach of company values a recommended process for conflict resolution goes like this…
Employees are first asked to bring the conflict to light and sort it out privately, striving to reach an agreement that’s acceptable to both parties.
If the conflict can’t be resolved in private, a colleague that both parties trusts will be asked to step in as a mediator. Again, this colleague can’t impose a resolution but helps both sides work towards an accepted agreement.
If both sides are still stuck, a panel of relevant people is assembled to help the parties shape an agreement.
When group decision making and conflict resolution training is proactively done and this process is followed, it typically is able to resolve the vast majority of conflicts. All parties involved in the conflict are expected to respect confidentiality before, during, and after the conflict to discourage water cooler talk and either side making any attempt to bring others onto their side of the conflict.
Hopefully sharing some specifics on the processes self managed organizations use to handle operational decisions helped make self management a little bit more tangible. I know that the above examples probably left you with just as many questions as answers, and there are many more processes that need to be employed to make self management work in any organization.
Being part of a self managed organization is probably not for everyone - and there will be plenty challenges associated with running a self managed organization just in the sense that so few people have ever worked in one. From a business perspective there’s a growing mountain of evidence that embracing self management can drive better business outcomes, as measured by metrics from employee churn to revenue. From a personal perspective, there’s a spark that comes from following your intuition and embracing a way of doing things that just feels right.
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