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How to manage a business without a headquarters

by Ace Damon
How to manage a business without a headquarters

March 25, 2020

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"Strangely, things haven't changed much," says Kyle Mathews as he sprays disinfectant on his hands. At least at work. His startup, Gatsby, helps websites manage content in the cloud. It has no headquarters and its 50 employees are spread across the world, from Mathews' home in Berkeley, California, to Siberia.

These "fully distributed" companies were on the rise before covid-19. As national blockades spread, conventional ones are forced into similar agreements. Those who grew up that way offer lessons.

Distributed organizations are as old as the Internet. Its first users, 50 years ago, realized how much can be done by exchanging e-mails and digital files. These exchanges led to the development of "open source" software, written together by groups of strangers often geographically distant.

Today, most distributed startups have open source roots. Gatsby is one of them. Almost all 1,200 employees of another, Automattic, better known for WordPress, software for creating websites, work from home. GitHub, which hosts millions of open source projects (and was acquired by Microsoft in 2018), may be the largest distributed company in the world. Two-thirds of its 2,000 employees work remotely. Most companies that build blockchains, a type of distributed database, are by nature dispersed.

Many startups start out distributed to avoid high rents and wages so high in Silicon Valley and other technology centers. Many choose to stay that way. Joel Gascoigne, head of Buffer, who helps clients manage social media accounts, works remotely in Boulder, Colorado. Stripe, an online payments company, is headquartered in San Francisco, but its new engineering center is a collection of remote workers.

Distributed startups exist thanks to a variety of digital tools – obviously corporate messaging services, like Slack (chat) and Zoom (video conferencing), as well as lesser-known companies like Miro (virtual whiteboards for brainstorming) or Donut (which pairs employees forge personal ties). Others, such as Process Street, Confluence or Trello, help manage workflow and keep track of what happens in virtual corridors – crucial when people don't share the same physical space. Companies that offer organizational scaffolding to distributed companies include Rippling, which manages payroll and employee benefits, grants workers access to corporate services and configures their devices. Much of what is now done in spreadsheets can be turned into a virtual service, predicts Rich Wong of Accel Partners, a venture capital firm (VC) (and an initial investor in Slack).

In addition to new tools, distributed companies need new management practices. A rule of thumb is not to mix physical and virtual teams. Online participants in mixed meetings often feel left out. GitHub boss Nat Friedman makes sure all employees – including himself – log into meetings virtually, even if they are in the office. Looking over someone's shoulder to see if it's working (or worse, using software to do that) is another no-no. Remote workers do not relax, as some managers fear. Trust your team, set clear and, where possible, measurable goals and let people do their thing, advises Mr. Mathews. To promote camaraderie, Buffer organizes an annual in-person retreat (the covid will send it online this year).

Trust also requires transparency and clarity – another reason why documentation is critical, says Michael Pryor, co-founder of Trello (whose workforce is 80% remote). Discussions that lead to a decision must be captured in writing, he explains, so that everyone understands the tradeoffs being considered. As a result, distributed companies favor wordsmiths, not good speakers like traditional companies. Good writing requires clear thinking and discipline, says Friedman, who has been running teams for 20 years. VCs duly report that distributed startups tend to be better at preparing board meetings.

The pandemic may lead some companies that have outsourced many operations to the cloud to go a step further and get rid of at least some offices. "I don't think we're going to go back to business as usual," says Frank Slootman, head of Snowflake, a database company. I even digested how Twitter plans to become more virtual.

Still, some companies suddenly forced to work remotely will regret the experience, predicts Gascoigne. Without a learning period, they will have all the disadvantages and some of the benefits. Brainstorming and other creative activities are possible online, but you need to practice – and still feel like an imperfect immersion in a real room. Recruiting and hiring new employees is virtually difficult. According to a recent survey of 3,500 remote workers, one in five struggles with loneliness. That's why GitHub and Trello operate optional offices.

Most companies always need to be located somewhere and they need people to work side by side. But as technology improves, part of the knowledge economy gradually moves more functions online, thinks Venkatesh Rao of Ribbonfarm, a consultancy. New companies will build a new virtual floor, on which other people live. The coronavirus exodus to cyberspace is unlikely to be the last.

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