Archive for category Virtuality

Green Acres

CEOs – what if you could double your productivity, cut costs, and save the planet at the same?

In “Coffee Klatch,” I reported the remarkable productivity gains of organizations like AT&T and the Arizona Health Care Cost Containment System found by simply sending their employees home. The practical advantages of virtual officing in productivity, hard cost and opportunity savings are compelling enough, but are there also benefits to the planet?

The answer is “yes.”

Exhibit A: there are approximately 56 million white collar workers in the US[1]. About 76% of these commute alone to work[2], each dumping about 5.2 metric tons of carbon[3] out their tailpipes along the way every year. That works out to 223 million metric tons of carbon annually. While it’s true these people don’t all use their commute cars exclusively for commuting, if 70% of total usage is spent on commuting, that’s still 156 million metric tons of carbon expended on commute.

Exhibit B: office buildings consume 1,134 trillion BTUs of energy each year[4]. At 215 pounds of carbon produced for every million BTUs of energy consumed[5], that yields 122 million tons of carbon every year. If you were ever curious about what all those office buildings in Silicon Valley produce, well, now you know.

Exhibit C: office buildings in the US occupy 282 thousand not-so-green acres[6]. If you planted pine trees where those office buildings are currently standing, you would sequester 282 thousand tons of carbon annually (1 metric ton per acre[7]).

The grand total: 278 million metric tons of carbon annually! That’s about 5% of the grand total Sasquatchian carbon footprint of the United States. Stated another way, it’s about 50 times the daily carbon equivalent output of BP’s Texas Tea Gulf gusher[8].

There are lots of other exhibits: if there were 56 million fewer commuters, our freeways could be a lot narrower. We wouldn’t need to expend carbon to construct or maintain as many roadways, bridges and tunnels. We wouldn’t need to manufacture as many cars, or the resources to maintain them.

Of course, there are some offsets – if we all worked at home, there would be a net increase in home energy consumption for homes that are currently dormant during business hours. There would be some increase in occasional home deliveries or trips to the store for things like office supplies and equipment. Still, there is little question that the net benefits to the environment vastly outweigh the offsets.

I have no illusions about businesses suddenly packing up their cubicles in Silicon Valley, where there exists a fascinating inverse relationship between the sophistication of tech company products and those companies’ administrative processes. I am simply pointing out yet another significant cost associated with maintaining a 19th century business model in the 21st century.

One of the very first things management does when setting up a business is to find an office. This ostensibly fundamental step in the process of forming a business is so deeply hard wired into the minds of business managers that they never question why they’re doing it – it’s simply one of those checkboxes that requires a mark before opening for business. It’s never a question of whether or not to get an office, it’s a question of “where” and “how much?” If the question of “why” were ever to bubble up, it would likely be dismissed or rationalized as being somehow essential to the business – employees need supervising, management needs their colleagues nearby just in case they need to talk about something – whatever.

This raises one of the fundamental paradoxes of offices – though management has an intrinsic faith that business cannot succeed or even function without them, the reality is that offices consume resources and productivity – they do not multiply them. It requires money to rent the office, furnish it, and enable the infrastructure. Offices consume productivity in a variety of ways, including time lost in commute and preparation for work, as well as that lost in unnecessary meetings and water cooler chat. Offices severely narrow the geography from which management can recruit talent, thereby driving up competition and cost of talent. And offices exact a substantial carbon premium from the planet.

Despite the powerful inertia of tradition, a growing number of companies are embracing the advantages of virtual officing or “homesourcing,” including JetBlue Airways, 1-800-Flowers, J. Crew, and Office Depot. When you call JetBlue to make a reservation, you’ll be speaking with a work-at-home agent, many of whom are stay-at-home moms. As Thomas Friedman wrote in “The World is Flat,” JetBlue CEO Jeffrey Neeleman started homesourcing reservation agents at his first venture in the airline business, Morris Air (acquired by Southwest Airlines). As Neeleman put it, “We had 250 people in their homes doing reservations at Morris Air. They were 30% more productive – they take 30% more bookings, by just being happier. They were more loyal and there was less attrition. So when I started JetBlue, I said ‘We are going to have 100% percent reservations at home.’”

When asked why JetBlue prefers homesourcing over outsouring to India like other airlines, Neeleman went on to say “[Employers] are more willing to outsource to India than to their own homes, and I can’t understand that. Somehow they think that people need to be sitting in front of them or some boss they have designated. The productivity we get here more than makes up for the India [wage] factor.”

More productivity, happier employees, greener planet – what’s not to like? In our current challenging economic zone, traditional choices are increasingly becoming risky choices. A growing preponderance of data is compelling savvy businesspeople like Jeff Neeleman to set aside tradition in favor of facts when making decisions about their businesses, particularly those about their office monuments.


[1] The Henry J. Kaiser Family Foundation, “United States: Workers by Occupational Category, states (2007-2008), U.S.” The Henry J. Kaiser Family Foundation. Web. 2008 http://www.statehealthfacts.org/profileind.jsp?ind=748&cat=1&rgn=1

[2] U.S. Census Bureau, “American Community Survey, 2005-2007.” U.S. Census Bureau. Web. 2007. http://factfinder.census.gov/servlet/NPTable?_bm=y&-qr_name=ACS_2007_3YR_G00_NP01&-geo_id=01000US&-ds_name=ACS_2007_3YR_G00_&-_lang=en

[3] U.S. Environmental Protection Agency, “Emission Facts: Greenhouse Gas Emissions from a Typical Passenger Vehicle.” U.S. Environmental Protection Agency. Web. February 2005 http://www.epa.gov/oms/climate/420f05004.htm

[4] U.S. Department of Energy (DOE), Energy Information Administration, “U.S. Commercial Buildings Site Energy Consumption.” U.S. Department of Energy (DOE), Energy Information Administration. Web. December 2004 http://www.eia.doe.gov/emeu/cbecs/cbecs2003/introduction.html

[5] U.S. Department of Energy (DOE), Energy Information Administration (EIA), “Fuel and Energy Source Codes and Emission Coefficients. Voluntary Reporting of Greenhouse Gases Program.” U.S. Department of Energy (DOE), Energy Information Administration (EIA). Web. April 15, 2008 http://en.wikipedia.org/wiki/Carbon_tax#cite_note-eia-coefficients-27

[6] 824,000 office buildings, Source: U.S. Department of Energy (DOE), Energy Information Administration (EIA), “2003 Commercial Buildings Energy Consumption Survey.” U.S. Department of Energy (DOE), Energy Information Administration (EIA). Web. 2003; 14,900 average square feet per office building: Source: U.S. Department of Energy (DOE), Energy Information Administration (EIA), “The Commercial Buildings Energy Consumption Survey (CBECS) 1995.” U.S. Department of Energy (DOE), Energy Information Administration (EIA). Web. 1995 http://www.eia.doe.gov/emeu/cbecs/cbecs2003/introduction.html

[7] Birdsey, Richard A., “Carbon Storage for Major Forest Types and Regions in the

Coterminous United States.” Forests and Global Change, Vol. 2: Forest Management Opportunities for Mitigating Carbon Emissions, ed. Sampson, Neil, R. and Dwight Hair, American Forests, Washington DC 1996, Appendix 4, Table 26, p. 361.

[8] Average of 45,000 barrels per day x a minimum of 317kg of CO2 produced per barrel of crude oil when the combined liquid fuels from an average barrel of crude are consumed – Bliss, Jim. Web March 20th, 2008. http://numero57.net/2008/03/20/carbon-dioxide-emissions-per-barrel-of-crude/

, , , , , ,

No Comments

Coffee Klatch

coffee_cupDrive the length and breadth of Silicon Valley, and you’ll see lots of office buildings, homes to the biggest names in technology. Some are fantastic campuses, like the Googleplex. Some are garden variety leased office space. So what do they actually manufacture in these hi-tech HQs?

Coffee.

Bold, medium roast, espresso, latte, caf, de-caf, you name it. Silicon Valley makes really good coffee. But do they make anything else?

Well sure, they make software and design hardware, but in the 21st century, do you really need office buildings to do that? What is truly gained by requiring employees to devote an average of 2 hours each day to commute to a central location? Is the cost in opportunity, rent, and the associated expenses of maintaining an office offset by a boost in productivity and revenue that makes it all worthwhile?

No. There is compelling data that suggests the opposite, that traditional offices are far more expensive and less productive than their alternative: virtual officing. Yet, in the 21st century, businesses nonetheless cling to 19th century office practices. That businesses are slow to adopt new technology is not in itself unusual. Over time, the adoption of advancements like the telephone, voice mail, fax, email, the internet, software-as-a-service, virtual meetings, voice-over-IP telephony, web 2.0, social networking, viral marketing, etc, have been impeded by the previous generation’s management best practices. In the particular case of virtual officing, there is a strong visceral force at work against it – managers are simply uncomfortable with it and are willing to pay a very steep price to keep their bricks & mortar.

Nevertheless, the sober realities of this economy are forcing many businesses to consider creative options to keep the lights on and the doors open – even if keeping the doors open requires closing the doors. Virtual office service Officebroker.com reported a 41% increase in virtual office inquires in June 2009 as compared with the previous year. These businesses are finding that gains in productivity and opportunity cost are as great as 200% over their traditional counterparts, enabling them to not only weather the downturn, but prosper as well.

In a 2006 pilot project, the Arizona Health Care Cost Containment System (AHCCCS) sent 4 employees home 4 days a week to gauge the potential benefits of virtual officing. The results were astonishing. The AHCCCS found that the number of claims processed by their virtual employees grew from an average of 2,101 claims medically reviewed per month to a seven month average of 4,700 claims medically reviewed per month! The authors of the report acknowledged how fantastic these gains might appear: “These numbers may seem incredible, but private sector firms like AT&T have reported increases in productivity of 75%!”

Additionally, the AHCCCS found that by offering telecommuting services to these four subjects, it saved each individual an average of $7,000 per year in vehicle costs. It also found substantial quantifiable benefit to the community as well – a total savings of $15,764.83 from commute-associated costs, such as traffic services, roadway land value, roadway costs, and crash damages. Finally, though not specifically addressed in the study, in can be reasonably assumed that the project yielded a compelling green dividend in the form of reduced CO2 emissions.

Given the potentially spectacular gains in productivity and cost savings, why aren’t captains of industry abandoning their corporate coffee clutches with greater, well, abandon?

Though virtual officing offers a relatively cheap and easy way to realize extraordinary efficiency and productivity gains, it is often dismissed due to management’s visceral discomfort with the notion of a company without walls and visible people. Managers don’t like it but, in my experience, they can rarely backup their feelings with rationale. At the top of the list of management excuses is that virtual employees can’t be supervised. This begs the question: “why would you want to hire employees that require supervision?”

Duh.

Though many companies are being driven to virtual officing by today’s tough economy, many believe the trend toward virtual officing will persist beyond the great recession.

One of these is j2 Global Communications’ CEO Hemi Zucker, who has presided over the company’s year over year growth in the outsourced fax, voice and email services categories, such as eFax.

Mr. Zucker summed it up this way: “businesses that have seized on technology advances have demonstrated a decisive advantage over their traditional competitors.”

Perhaps General George Patton said it best when he declared “Fixed fortifications are monuments to the stupidity of man.” Though his words were intended more for the Maginot Line than the Googleplex, they are still relevant over 65 years later, as there has never been a time when the when economic necessity and the tremendous capacity of virtual technology have had greater convergence. Those who choose to surrender their forts of industry today may well prove tomorrow’s corporate titans.


Note: this article is also available on San Francisco Chronicle’s “City Brights”

, , , , , , , , , , , ,

No Comments

I Haven’t Grown Accustomed to Your Face

myfairladyI rarely meet people before I hire them.

Seriously.

The reason why I lead off this installment of Virtuality with this particular factoid is because, in some 12 years of virtual officing, this is the one that has consistently drawn the greatest surprise from others. Actually, I would never have given my blind recruiting a second thought if not for the shock and awe reaction I typically receive in response to this particular revelation.

Why do I pass on face interviews? I think the better question is: “why conduct face interviews?” My rationale is this: if the employee is not going to have a public face, what do I care what they look like? My primary interest is in results. If an unattractive person gets the job done, that’s terrific. In 12 years of virtual officing, I can say with confidence that there is no correlation between looks and job performance.

Of course, there’s much more to our virtual recruiting practices than what doesn’t meet the eye.

For example, we not only don’t care what our employees look like; we don’t care where they live either. When we recruit new employees, we don’t constrain our net to a particular area, we draw from the entire 50 states. This enables us to search for talent in less competitive places, which substantially drives down our payroll expense, while driving up our retention. For example, we have successfully recruited from small college towns with little local industry. Graduates may love the town, but may find the local pickings slim. They’re often willing to give up some premium in compensation in order to enjoy college town life rather than pick up and move to the big city and swim with the sharks.

Another factoid: I never look at a software developer’s resume until they’ve passed a test.

When we place a job ad for a software developer, it’s not unusual for us to receive hundreds of applications. Over time, I found that there tended to be an inverse relationship between a software developer’s job-hunting skills and their development skills. The slicker the resume and the smoother the interview, the worse the code. After getting burned a few times, I asked my developers to assemble a test to probe the skill sets we needed from our recruits. Our job ads informed prospective employees that their applications would be screened by test results. Overnight, our world changed for the better. From the hundreds of respondents that applied, only a dozen or so would bother to take the test. From that number, only 3 or 4 would deliver satisfactory results. Suddenly, instead of spending dozens of hours vetting resumes only to be disappointed with the eventual hires, I might spend 30 minutes reviewing resumes, another hour or so in interviews, and I was almost always happy with the new additions to our team.  It’s worth noting again that I have never met a software developer before hiring them.

Job jumpers need not apply

Early in my virtual management career, I was confounded at the number of resumes I received from job hunters who, although relatively young, had already had scores of jobs on their CV. It was rare for these people to last a year at a job, yet it did not seem to be a particular impediment to their career. People kept hiring these job jumpers despite the long odds against them being around to celebrate a single anniversary. Why invest in someone who is going to leave, either voluntarily or involuntarily?

Then it finally dawned on me: the people who are hiring them are job jumpers too!

These managers may rationalize their hiring behavior – perhaps they actually believe that those who exhibit loyalty and longevity are complacent or even lazy, when the reality can usually be filed under one of the following categories:

  • The employee left voluntarily for a better opportunity – i.e. a shortcut to better compensation and status
  •  The employee left voluntarily because he/she just didn’t like the job
  •  The employee left involuntarily because he/she did not perform well on the job

Which of these would you prefer as your dream employee?

Of course, there are situations where things just don’t work out – the company downsized, the job was a bad fit, etc. However, if I see a consistent pattern of short-lived job experiences, it instantly hoists a big red flag for me. It costs money to recruit and train. Moreover, there is enormous opportunity cost associated with the organization trusting an employee to be on the job and supporting their proportionate weight of the company workload. It is extremely disruptive to an organization (and, therefore, costly) to replace an employee in midstream.

No adult supervision required

As I’ve written previously, one of the principal objections to the virtual office is management’s inability to physically supervise employees. My response to this is: why would you want to hire an employee that requires supervision?

Duh.

Professionals will deliver professional results without the additional overhead of constant supervision. If you treat employees like children, you can expect childish behavior in return.

, , , , , ,

No Comments

Virtuality — Part 2: Strategy and Technics

Virtuality part 2: Strategy and Technics

gettysburg “Muzzle-loading weapons sound awful primitive. They didn’t seem primitive to them. They were a new kind of infantry rifle that is deadly at 200 yards. That was a tremendous step forward. And the tactics were based on the old musket, which was accurate at about 60 feet. And they lined up shoulder to shoulder and moved against a position, and got blown down because they were using tactics with these very modern weapons. They were using the old-style tactics with very modern weapons. A few of the men realized that, Bedford Forrest for instance. He would never make a frontal attack on anything with this new weapon in their hands. But too many of them, including Robert E. Lee and U.S. Grant, followed the old tactics against these modern weapons. That’s why the casualties. There were 1,095,000 casualties in the Civil War. If today you had that same ratio, you’d have something like 10 million casualties, to give you some idea of what happened.”

- Shelby Foote, Civil War Historian

“They were using the old-style tactics with very modern weapons.” History has demonstrated again and again that military strategy and tactics lag the available technology. This is also true in business, where the adoption of advancements like the telephone, fax, email, the internet, software-as-a-service, virtual meetings, voice-over-IP telephony, web 2.0, social networking, viral marketing, etc, have been impeded by the previous generation’s management best practices.

As was the case with previous generations, today’s managers encumbered by yesterday’s vision face an insurmountable competitive disadvantage from those embracing the current technologies and practices available to them. At WebFeat, we were able to defeat companies as much as 100 times our size, simply because we were much more efficient and more productive than our bigger, slower, traditional adversaries. How was this possible?

Two words: opportunity cost.

When I attempt to recount the benefits of the virtual office to a stranger, I invariably am (preemptively) told that office rental is the #1 advantage. While office rent might make my top 100 list of reasons to go virtual, it is far from #1. Number 1 is the cost-effectiveness of my work force. Our virtual office easily yielded double the productivity of our traditional competitors. How?

strategytechnicstable1

This may not seem like a lot, but it adds up:

strategytechnicstable2

27.5 years lost in a 100 person organization. That’s the equivalent of 27.5 extra people!

In addition, in my own experience, I found that my virtual employees tended to work longer hours than those in traditional offices. Typically, this ranged from 20% to 30% more than traditional employee office hours. Apparently this was attributable to two factors:

1. Virtual employees tend to make less of a distinction between work time and personal time than traditional employees, and…

2. It appears I am a hard task master

Whatever the reason, in our 100 - employee hypothetical company, this would add an additional 20 - 30 years annually, bringing the total to 47.5 - 57.5 years of additional productivity — a virtual company is 47.5% - 57.5% more productive than traditional companies.

But wait, there’s more!

While at work, my virtual employees tended to accomplish more than their traditional counterparts. This was due to a number of factors, including:

We held only a fraction of the number of meetings held by traditional companies

When we did hold meetings, they tended to be more productive — why?

Because most of our meetings were held via teleconference, the attendees tended to find silence or “dead air” to be uncomfortable. Consequently, our meetings tended to be short, and they followed classic successful meeting techniques, namely:

  • An agenda was published prior to the meeting, informing attendees what to be prepared to discuss
  • Brief minutes were taken, with action items captured, as well as persons responsible and deadlines
  • If follow-up meetings were required, these action items fed into the subsequent meeting

The bottom line is that we didn’t hold very many meetings, and we got a lot done in the meetings we did hold. Additionally, because our meetings produced cogent sets of action items, the work resulting from our meetings tended to yield better results

Finally, no one “dropped in” to our virtual offices to chat. Granted, some of our more gossipy employees made effective use of online chat, but they had little time to waste at the virtual water cooler. The moral of the story is that the success of the virtual office, as well as the traditional kind, is determined largely by the effectiveness of the management team. However, an effective team in a traditional office will be no match for an effective management team in a virtual office.

While it is difficult to gauge the amount of time consumed in useless meetings and water cooler gossip, consider that if it averages only 1 hour per day per employee, our virtual productivity edge over traditional offices grows to 60% - 70%! How many employees do you know that give up a mere hour each day in meetings and gossip?

Clearly, I’m not talking about moving the corporate performance needle a couple of percentage points. I am talking about a great big game-changing, Earth-moving, paradigm-shifting fundamental makeover that can enable your business to not only weather the current storm, but enable it to prosper and handily crush its competition.

More to come in part 3…

, , , , , , , , , , , ,

1 Comment

Virtuality — Part 1: News for the Hard of Hearing

snl-news-hard-hearingIn “My New Old-Fashioned Company,” I’ve discussed what’s old about my company. Is there anything new?

Oh yes!

My company, gwabbit, is a 100% virtual office (as was my previous company). No bricks & mortar office whatsoever. Seriously!

I went virtual with my previous company, WebFeat, in 1998. If we were not the first successful100% global virtual company, we were certainly among the first. I must admit that, at the time, my motivation for going virtual was driven more by finance than vision. My little bootstrap start-up was short on cash and we simply could no longer afford our cool New York City office flat. Now, 11 years later, I can’t imagine running a business any other way.

When I would tell Silicon Valley colleagues about my virtual company, I found that most simply could not bend their heads around the notion of a 100% virtual office. The conversations usually went something like this:

Silicon Valley Colleague: “Where is your office?” (note: I had already explained to colleague that we were a virtual office)

Todd: “We don’t have an office”

Invariably, my colleague would ask the question again, slowly, as though either my hearing or cognition was impaired:

Silicon Valley Colleague: “where - is - your - office?” He asked, slowly

Todd: “We - don’t - have - an - office.” I repeated, slowly

One colleague actually asked the question a third time, making arm motions as though he were drawing a real office (ironically, in virtual space) as though I did not understand the question the first two times it was posited. It reminded me of when Garrett Morris did the News for the Hard of Hearing on Saturday Night Live by simply yelling at the camera.

Once my colleague reluctantly accepted the fact that I was serious about my virtual office, he would proceed to inform me why it could never succeed. The reasons included:

  • Virtual businesses can’t scale
  • You can’t supervise virtual office employees
  • You can’t have too many direct reports

I’ll knock these down one-by-one:

Virtual businesses can’t scale — invariably, my critics could never explain why they didn’t think a virtual business couldn’t scale. It just couldn’t scale. Like many reactions to the virtual company, this was an attempt to assign a rational sounding argument to an uncomfortable visceral feeling — we’ll talk more about feelings in later installments.

Despite the very worst prognostications of doom, our business somehow managed to scale anyway. At the time I sold my company, we had 40 employees. Still a small business, but I see no reason why it wouldn’t scale to 100 or 100,000

You can’t supervise virtual office employees — this is probably the most absurd argument against the virtual company — the notion that management can’t keep a close eye on their employees. My response to this is a simple one: why would you want to hire people that require supervision? Whether your business is virtual or not, don’t you want employees that can work and produce without supervision?

Too many direct reports – another one of the sillier arguments against the virtual office. More than one of my otherwise brilliant colleagues assumed that virtual officing somehow translated into every employee reporting directly to the virtual corner office. My experience has been that virtual offices utilize similar hierarchies and numbers of direct reports as their traditional counterparts.

So I’ve discussed some of the arguments against the virtual office – what are the arguments in favor?

There are many, which I’ll discuss in future installments, but the most compelling is this: in my 11 year experience with virtual officing, I found that a well-managed virtual office is 200% - 300% more efficient and productive than its traditional counterpart.

That’s right – not 20% or 30% more productive – 200% - 300% more productive!

In my decade long experience with WebFeat, our virtual David went up against not one, not two, but three traditional Goliaths. These companies had up to 100 times the number of employees as WebFeat, with relatively vast cash reserves. WebFeat, with no venture capital, funded entirely from operations, and fielding a comparatively puny cast of dozens, smacked down each of its Gigantor opponents, gaining top market share.

How – you might ask?

For the answer, stay tuned for the next installment of Virtuality!

, , , , , , , ,

No Comments