I’m speaking at the Freemium Summit next week about the secrets of how we make money on WordPress.com. Looks like it’ll be a fun event.
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Toni Schneider
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Toni Schneider
Great to see the FCC focus on promoting broadband adoption.
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Toni Schneider
5 reasons why your company should be distributed
I’ve noticed a new trend in Silicon Valley. More and more startups are beginning life as distributed companies, and investors and partners are starting to accept it as normal. Our company Automattic is distributed, and I’m ready to sing the praises of running a business in this way. BTW, I think distributed (“evenly spread throughout an area”) is a better description than the more commonly used virtual (“nearly real or simulated to be real”) for a company that has people working from all over the place instead of a centralized office. In Automattic’s case, we currently have over 50 employees spread across 12 US states and 10 countries.Here are my top 5 reasons why you should consider the distributed model for your company:
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Joseph Dart
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Toni
AdminiStaff is US only. We’re looking for an international equivalent. In the meantime, we do international payroll ourselves (in local currencies to avoid random pay cuts or raises based on dollar value fluctuations).
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Mine Seckler
Hi Toni, did you know that ADP does international payroll??
http://www.adpstreamline.com/international-multinational-payroll?knc=streamline&gclid=CO6YtNHSw6ACFSFciAodWGQ-aQ
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Derrek Cooper
SPOT on post! I work for a company that is very distributed and I think we thrive in the environment. We have an HQ and about half of the folks in the US work there, but the rest of us in the US and international all are distributed (good word, I normally say virtual).
Keywords to being distributed – productive, inspired, happy, challenged, happy, creative happy..
you get the idea..
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Aleks
Great posting! Love this kind auf company philosophy
um, there is no one in germany? Maybe Automattic should hire me
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Gary
Brilliant post. Some forward-looking corporates here in Australia use a ’semi-distributed’ model where they have a few offices however the majority of staff work wherever they want. This certainly seems to result in far great staff ‘turnover’ (happier staff).
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Rebecca
Count me in as a happy employee of a distributed company
It is, hands down, the best form of employment possible. -
Jay Gilmore
I’ve been over a year at a distrubuted organization and think it is the ultimate in bootstrapping for startups. With communication tools such as Skype, IM, Collaboration tools and screenconferences there is little need to limit your organization to a physical location. Need great talent? It’s everywhere.
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Andrea_r
I’ve seen firsthand how well it works for you.
It’s very clear that your employees all love their jobs. -
rowjee
dsitributed works and scales well too, Tutorvista.com is one such example
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Eoin
Great post Toni. It is the future for many types of businesses as infrastructure grows and improves and business attitudes evolve.
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Zim
It makes me want to work this way now! Sounds really interesting.
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Jeremy Zawodny
Hey, Toni.
Good to hear how well this model works out for you guys. I’ve been working remotely ~4 days a week for the last year and a half. Having a good supportive culture at work and an active chartroom makes a big difference for us.
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David Coveney
I used to do a lot of work for multi-nationals on accounting and payroll systems – consequently I’m not quite so positive about the idea. Here’s why:
You’re dealing here with ten different legislatures, each with completely different employment rights, benefits, tax regimes and so on. If you hire your staff as self-employed or as contracting companies, then that’s not so bad, because the laws are a lot simpler… but if they’re actual employees then it gets tough.
Take one example – maternity/paternity leave. In some countries you can take a year as the father, in others just a couple of weeks, and others none at all. How do you reconcile that into your procedures?
What about the right to a sabbatical for French staff, or 401K contributions in the US… it goes on and on.
So, while I like the idea of running a distributed company the legal minefield is scary if you get things wrong.
However, I do agree that being able to hire the very best staff regardless of location is a Very Good Thing indeed. And distributed companies save an awful lot on relocation fees. I’d be interested to know more on the legal aspects of Automattic’s hiring process – but I suspect that’s not information that’ll be shared.
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Toni
Yes, the taxes and rules overhead is very real. It’s just overhead though, and we’re always working to get more efficient at it. Right now we use AdminiStaff for everyone in the US, and we deal with each country on a case by case basis (using self-employment in a lot of them). We also try to keep our policies and benefits as simple as possible so they can be more universally applicable. Overall I feel that the benefits of being distributed are well worth the extra HR and legal overhead.
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Steven
How do you balance this against a VC’s desire to have a company centralized?
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Toni
Most VCs I know are comfortable with a distributed team. What helps is if some or most of a company’s leadership team is nearby (near their customer, partners, and investors).
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Matt
Gotcha. That’s sensible. Thanks for the article.
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Mark Atwood
Find a smarter VC.
VCs that insist that they need to be able to manage a company by physically visiting are making the same mistake that old school managers make when they say that they have to watch their staff work to make sure they are working.
If your company doesnt perform or you staff wont work if you are not watching over people’s shoulders, then it won’t excell even if you are doing so.
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Chris
Great write-up Toni! Very cool model! I could imagine there are some additional benefits…for example, having folks in various locales may allow for a chance to be closer to the customer. Silicon Valley is sometimes accused of having a bit for a bubble mentality and having folks out and all over the globe may give you better access and a better understanding of your customers and should allow you to better tap into interesting regional/int’l trends and understand local markets better.
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Mark Atwood
I started working at a distributed company when I was hired at MySQL. It was a great draw, and a great reason for great people to work there. In the transition to Sun, the distributed work environment continued. Now I work for Gear6, and I still work this way. I cannot imagine wanting to work in a cubicle or even a corporate office, ever again.
Some things to note about distributed work. You have to hire good self-motivated people. You have to anyway, but the reasons become stark here. Also, do not think that being distributed means you can just save money by not having office space. The money you don’t spend on office, you have to spent on travel, because every team needs to meet face to face at least once a year, and everyone in the company should meet at least once a year.
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Dan Kligerman
Very interesting read. I think a lot of these benefits and techniques can be applied to distributed teams within larger organizations. Of course, not everything applies, and there is not as much flexibility as in an entirely distributed startup. That said, as someone working in a large corporation which is slowly moving towards a more distributed model, I can see things like better communication tools and in-person week-long events having a very positive impact.
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Yogesh
We are a group of 10 working distributed on HR, IT, and Power sectors in India. We all work from our homes or where ever we are. This is really excellent working like this and reduces your lot of infrstructure cost. Nice to see that people have achieved altitude of success through this.
we are more detemined now.
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Numpty
I’ve worked this way for ten years, and it’s certainly not a bed of roses. For example, those “hallway discussions” that “nobody misses” don’t tend to happen at all, or at least not in nearly as productive a fashion, and that’s a very bad thing.
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Jon Stephens
At MySQL, we’ve always used IRC chat as our ‘virtual office/hallway’ and this seems to have worked well for us. It’s a tried-and-true technology that provides excellent real-time group and 1-on-1 interaction. And unlike the case with some other collaborative apps, I can’t think of any operating platform that doesn’t have (at least) several IRC clients to choose from.
Most teams have their own channels on our dedicated IRC server; we also have a number of ad-hoc channels for specific topics/projects. And since it’s exclusive to employees, you don’t have to worry much about administrative overhead, ‘Can I have ops?’, etc. For MySQL Support staff, presence on our IRC is required during core working hours; for others, it’s optional but expected. Many of us stay connected even when not working; this makes it easy to catch up on what your team-mates were discussing while you were away.
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Tim Dysinger
+1 We went 100% @ home engineeing from the beginning in 2007 @ Sonian and haven’t looked back. It’s awesome. We have adapted our workflow for work-at-home and it’s working great.
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TropicalGringo
Great write up. I am just ecstatic that all the tools are coming together so companies can work with talent wherever it is. I for one am building a technical team in Latin America and am sure the opportunity will arise where our team will become part of a multi-country startup.
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Glyn Normington
I worked in distributed teams for many years. Not bad if you don’t mind lots of phone calls. But recently, I’ve been a part of a small local team and it’s so much more efficient. Decisions take minutes rather than hours or days and productivity is to much higher. In summary, you can survive in a distributed team if you have to, but you wouldn’t design an organisation that way if you care about programmer productivity.
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Toni
I agree that phone calls are inefficient for distributed teams. Using something more immediate and scalable like IRC or chat is crucial.
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Numpty
IRC and chat programs are very inefficient compared to face-to-face (or voice-to-voice) chat, though, and they really *aren’t* scaleable– as soon as more than two or three people try to talk together, you spend half your time typing over each other and subsequently trying to figure out who’s talking to whom about what, and the other half in long periods of unproductive Bergmanesque silence. Been there, done that (and still do, most days).
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Dan Kligerman
This is an interesting debate. I am thinking the efficiency of working remotely or in the same office differs depending on role (programmer versus other), but also that the best situation may be to have people work remotely some of the time and together some of the time. Of course, this negates some of the benefits of being completely distributed, such as hiring people from anywhere in the world.
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LenZ
Great post! I agree to all of your points. I’ve been working in this environment for almost 8 years now (I joined MySQL in 2002). The regular face-to-face meetings are key, especially for new employees. Back when I joined the company, I was invited to attend a staff meeting in St. Petersburg in my first week, to meet all of the ~40 employees back then. These personal contacts really helped me a lot to find my way around and get started and they are still valuable nowadays.
The distributed work model also works best if you grow with it from the very beginning and everybody is in the same situation. It’s much harder to move to this model when a company already has an office and established procedures and practices. It’s easy for the few remote workers to fall off the radar screen and be out of the loop – discussions and decisions that have not been documented or communicated, etc.
Having IRC logs and mailing list archives is nice, but they are no replacement for proper documentation (e.g. meeting summaries). A Wiki turned out to be an excellent tool for that, but it needs to be properly maintained, structured and kept up to date.
Work/life balance is another interesting topic. It’s easy to fall into one of the extremes of not working at all (goofing off) and working too much. Having a social background (e.g. a family or partner, hoobies) is a very important aspect for every employee. It’s easy to burn out or fall into a black hole when you’re on your own for too long.
I’ve been giving talk about this topic at some events last year – here are the slides and videos:
http://www.slideshare.net/LenzGr/working-for-a-virtual-company
http://ftp.stw-bonn.de/mirror/froscon/2009/prerelease_please_do_not_redistribute/sa/hs12/2009_08_22_-_HS12_-_EN_-_Working_for_a_Virtual_Company.ogg
http://de.sevenload.com/sendungen/next-conference/folgen/loQ5kJB-next09-Working-for-virtual-Company-
LenZ
Somehow the trackback from my blog to this article did not work. I wrote a followup with additional comments on my blog about this topic:
Thoughts about working in a distributed organization
http://lenzg.net/archives/294-Thoughts-about-working-in-a-distributed-organization.htmlLet me know what you think!
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Jeremy
So how does this work for people who have family commitments and can’t commit to a week away? That’s a lot of great people who you’re immediately discounting.
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Toni
We make exceptions for family commitments, and we pick the dates for our meetups well ahead of time so people can plan for them. In general, I think it’s OK to ask for 2 weeks of company travel when the other 50 weeks are totally open.
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Tashacres
Great post. We’re just in the process of implementing a distributed model for our design company, wow creative. We also set odbody.com up like that. There is a word of warning and that is it’s a lot easier to start a company and develop the culture from the beginning than it is to change into this model. Existing staff can feel they are missing out on the team feel and they have to be prepared to embrace new technologies. All that being said I think the benefits far out way the negatives and it’s such a progressive way to work – I’m much more creative not stuck in the same 4walls.
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dannyman
And you can overlap on-call coverage across continents, reducing the need to page anyone out of bed.
-d
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John
Is there anywhere that lists distributed companies that are hiring? This type job would really fit my current situation.
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Michael Hsu
very write article. I first learned about Automattic’s distributed office when I visited Pier 38 and fell in love with the idea. I am implementing this idea for my accounting business right now so we’ll see how this work out (so far, 2 people in LA, 2 in Detroit and 1 in Davis). I’m very excited.
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John Sostak
Toni, great post and compelling. You are inspiring me to give it a try. I have had problems with home based partners. Communication, missed deadlines, stuff that happens in an office, but you are less inclined to think the “partner” was job hunting or laying on North Avenue Beach.
I see you have a huge thread, so if you can’t reply, I get it. What is the key to keeping the employee motivated each and every day? It is obvious with open source and wordpress, your community is the best. Passionate. Can this translate to online marketers, that have a different job description and skill set?
No one likes to talk money, but it is significant. How do you pay? I have been a victim of employees doing freelance, on Arcade time.
What are the benefits that you offer, or would offer that keep employees loyal?
Thanks a ton, John
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Toni
Hi John. Having a lot of control over your personal work environment is they key difference in this model. So it’s important to find people who are turned on by that. We look for people who are very self-directed. They might have done consulting before and liked it a lot. They can take a small amount of information and run with it. They communicate online easily and concisely. By using tools like P2 and IRC you can tell pretty quickly if someone is not participating (and might be freelancing or goofing off). Depending on the job there are other measurable indicators of how engaged someone is, like code check ins for software developers, or answered tickets for customer support people. Those are some of the patterns we look for. Having a way to work together on a trial or pilot project first is very useful to see if the distributed setup is working for someone and if their passion for the job comes through. As far as salary and benefits, I think they are the same in a distributed model as in a traditional one. Personally, I think top of market salaries, stock options (or some form of company ownership), and health insurance (US only because of the weird health insurance setup) are motivators. The rest (bonuses, 401ks, company gyms, etc) are only marginally useful (I’d rather pay someone extra and let them make their own benefits decisions).
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Mine Seckler, 
Toni Schneider
The 2% rule
The more time I spend around web services, the more I see 2% conversion rates show up all over the place. About 2% of people who visit a WordPress.com blog leave a comment. 2% click on “related articles” below a blog post. 2% of Evernote users buy their premium service. Same with 2% of Box.net users. We see similar numbers with WordPress.com premium upgrades. Is this a coincidence, or is there an underlying law that drives this? If you put something for free on the Internet and ask people to engage and take some sort of action, 2% of them will do so on average? I say on average, because I’ve seen 1-5% ranges on various services, but the 2% number seems to be the most common.
Brad and 4 others are discussing. -
Donncha
I think the same is true of anything. Those willing to help out with plugin development, or donate, or help at a club will be a tiny minority of the total users. Is it human nature? Are we all selfish at heart?
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Mark Jaquith
It will be interesting how this changes as the Internet continues to expand its audience. What happens to that number as Internet users become, on the average, less technical?
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Steve Krause
Hi Tony — For decades, 2% has been the rule of thumb for expected response rates to direct-mail campaigns. More randomly (or maybe not), when the Washington Post had the concert violinist Joshua Bell play as an anonymous street musician in a commuter plaza, the donations he received amounted to a 2.5% response rate from those who passed by: http://www.stevekrause.org/steve_krause_blog/2007/04/stubborn_respon.html
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Steve Krause
Sorry about the name spelling above, Toni!
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Brad
You’re getting 2%? Tell me your secret. 
Jim McNees
As contacts multiply and grow exponentially, will the 80/20 rule expire and now new on-line business will expect business from 2% of their on-line business contacts? 98/2 now?
Leslie
And as longas I am not being spamy it always works out about 2% click on ads. So where can we go on this one?
Toni Schneider
Automattic anniversary
Last Saturday marked my fourth anniversary as CEO of Automattic. It’s been an amazing time so far. I think 4 years is the longest I’ve ever been with one company. It’s also the length of an undergraduate college education (!) which gave me the idea to make a list of things I’ve learned during the last few years. The list is getting pretty long and is looking like a good set of suggestions for a series of blog posts about “Lessons learned at Automattic (so far)”. I’m hoping to do a post every week or two, starting with some of the topics I often get asked about:
- Open source business models: How did we structure Automattic as a commercial entity that both benefits from and supports the open source WordPress project?
- Distributed companies: We are a team of 50 people spread across 12 US states and 10 countries. How do we make that work?
- Internet scale services: We run multiple web services that see hundreds of millions of visitors a month. How do you reach an audience the size of Amazon’s and AOL’s with a small startup team?
There’s a lot more. Feel free to suggest what you think would be interesting to hear about (and to nag me if I don’t follow-up!).
Chris, 
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Sean McCue
Congratulations Toni!
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pinaldave
Many Happy Anniversaries. You guys my blog rock!
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Yuval Levy
Congratulations! Wishing you many more years of success.
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Matt
You started on my birthday — a fantastic present.
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Brian Oberkirch
Huzzah! Maybe you could write about acquisitions. You guys seem good at identifying opportunities and actually making it work for the larger mission. You guys are swell & are good for the Web. More, please.
Matt Thomas
Is it bad that I’m terrible with anniversaries, birthdays and even names, but always remember my Automattic anniversary every year? Here’s to many more!
Chris
Nice – congrats Toni! 4 years is a good chunk of time Would love to hear more about the distributed company model…
Luis Rull
Congratulations, Toni.
Thanks, Toni, for your work that makes possible this project, a project that give us so much joy, much more that expected. You have the resposability of keep making sustainable a bussiness which is making history. Do not forget you have the help of many people (like us)
Toni Schneider
And at this prompt, you could type in an entire program, and then type RUN, and it would motherfucking run.
dive into mark (via a different Mark)
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Lloyd Budd
Unfortunately Toni, because your quote includes the F word, we are not going to be able to accept your iPad app, because it might be used to view this site.
Toni Schneider
BCWax launches, with a fantastic blog post.
Toni Schneider
The WordPress Foundation has an official site now.
So do Administaff handle the international payroll issues too, or just the US ones?