A Practical Guide to Transparency for Startups
Join the movement that’s changing how companies are grown and run
By law, a public company can’t be transparent about how it operates, but a startup can. The ability to be transparent is an advantage unique to startups and, done right, it can drive company culture, employee happiness & retention, marketing, community building, and all other aspects of your business.
Moreover, transparency is an essential movement that’s changing the way that companies are built because it has the potential to make work more human and fulfilling.
In this guide, we cover why transparency is so valuable and important, and we give you concrete advice on how to make transparency real in your company using examples from how the best startups are doing it today. After you get a chance to read our guide, we’d love to hear what you think on Twitter at @idonethis.
Nowadays, You’re Hiring People to Think
Case Study: How Silicon Valley Companies Scale their Teams with Transparency
Case Study: How Transparency Helps Buffer Works Smarter, Not Harder
The Transparency Paradox
When Transparency Makes People Hide
How to Use Trust and Autonomy to Channel Change
Are You an Unwitting Audience to Productivity Theater?
The Backbone for Effective Transparency: Autonomy, Mastery and Purpose
Autonomy: Help people direct themselves
Mastery: Invest in your people
Purpose: Connect work to a greater cause
Case Study: Cells, Pods, and Squads: The Future of Organizations is Small
Case Study: How to Get Stuff Done without Bossing Around
The Inherent Fairness of Salary and Performance Transparency
The Inevitability of Salary Transparency
How to Make a Salary Formula
Case Study: A Googler’s Critique of Google Performance Reviews
Case Study: Stop Repeating the Same Mistakes
Work In Public
Case Study: Why Getting Personal Matters for Getting Professional
Case Study: Write your Own Story
1. Nowadays, You’re Hiring People to Think
In many companies, your manager will know the team’s and company’s objectives, but you won’t. He may keep crucial information from you so that he can consolidate decision-making power.
Not so at Qualtrics, the extraordinary Provo, Utah-based company that did $50M in revenue, raised $70M from elite venture capital firms Sequoia and Accel, turned down a $500M acquisition offer, and grew its headcount to nearly 300 employees in 2012.
At Qualtrics, transparency is perhaps the company’s most important value for one simple and obvious reason—”Nowadays, you’re hiring individuals to think.”
For employees to think for themselves, they need information—and that comes from transparency. At Qualtrics, not only can every employee see the company’s objectives and every employee’s objectives, every employee can also see what every employee has gotten done recently, performance reviews and ratings for all employees, meeting notes from all meetings that have taken place, and even the office’s security camera footage.
We took our best product guy and some of our best engineers and built a system internally to help scale our organization by knowing everyone’s objectives in the company. We have five objectives annually for our company, and everyone goes into the system each quarter to put in their objectives that play into those broader goals.
…
We have another system that sends everyone an e-mail on Monday that says: “What are you going to get done this week? And what did you get done last week that you said you were going to do?” Then that rolls up into one e-mail that the entire organization gets. So if someone’s got a question, they can look at that for an explanation. We share other information, too — every time we have a meeting, we release meeting notes to the organization. When we have a board meeting, we write a letter about it afterward and send it to the organization.
When everyone’s rowing together toward the same objective, it’s extremely powerful. We’re trying to execute at a very high level, and we need to make sure everyone knows where we’re going.
Qualtrics is taking to an extreme what many tech companies have done to eliminate the manager-as-a-single-point-of-failure antipattern of corporate organization. Transparency gives the power of self-determination to every employee in the organization.
1.1. Case Study: How Silicon Valley Companies Scale their Teams with Transparency
The wonder of Silicon Valley has been its rich history of producing incredibly capital efficient companies operating at massive scale. No doubt part of that achievement lies in the capital efficiency of software engineering itself where technology gives incredible leverage to create and disrupt established industries. Nevertheless, as a company scales, individual engineers need to work together in concert which results in the industry-agnostic problem of people management.
Unique from other industries, Silicon Valley’s natural inclination is not simply to find a solution to people management, it’s to create a scalable management model. Of course, technology is the natural place to turn.
During Google’s growth stage, Larry Schwimmer, an early software engineer, stumbled upon a solution deceptively simple, but one that persists to this day at Google and has spread throughout the Valley. In his system called Snippets, employees receive a weekly email asking them to write down what they did last week and what they plan to do in the upcoming week. Replies get compiled in a public space and distributed automatically the following day by email.
A number of the top Silicon Valley startups have similar processes. At Facebook, they have a system called Colbert where weekly check-ins are logged. Square employees, for example, send weekly reports directly to the COO Keith Rabois. The elite engineering shop Palantir requires a weekly email to managers detailing what got done last week and what’s planned for the upcoming week.
The Snippets process at any scale is a compelling productivity solution, and companies of all sizes have adopted it — some, like SV Angel, rich in Google DNA, do daily snippets. The process forces employees to reflect and to jot out a forward-looking plan for getting stuff done, all while requiring a minimal disruption in the employee’s actual work.
Setting aside time on a daily or weekly basis to reflect on the day is a powerful productivity hack. In The Progress Principle, Harvard Business School professor Teresa Amabile and Steven Kramer showed the counterintuitive conclusion that progress toward a meaningful goal is the #1 motivator for employees at work, not financial motivation or downward pressure. Professor Amabile prescribes 5 minutes per day of reflection, religiously protected by bosses, centered around the progress and the setbacks of the day. Simply put, employees connected to their work and its progress are happier and more productive.
On the flip side, Snippets works because it has a minimal disruption in employee flow because it works asynchronously and without facetime. It allows for a maker schedule — large blocks of time dedicated to concentrated progress on work — rather than breaking up an engineer’s day into a manager’s schedule to suit a manager’s need to manage. At Palantir, they do email snippets because they have a very strong culture against meetings. In addition, email as an interface avoids the issues with, for instance, CRMs, where employees spend valuable time logging into a system and entering highly structured information or they don’t use it at all.
Google turned periodic email updates as a process into a scalable management solution, leveraging technology, through automation, data storage and data retrieval. An individual’s Snippets are transparent across the organization and are linked to an individual’s internal resume in its MOMA system which connects individual employees to the work of team members and others within the company. It can kill political squabbles, the core problem of people management, by providing a record of what’s been done.
Put differently, Snippets is a management process that scales because transparency means that individual engineers can manage themselves and individual engineers can manage each other without having to go through a middleman. It’s the disruptive power of peer-to-peer for management centered around atomic units of work.
Silicon Valley’s focus of work around the work itself is still an ongoing competitive advantage. Compare it to the East Coast and you’ll see a stark contrast in the importance of dress and facetime at the office. Being work-centric means focusing manically on how to formulate process to eliminate all the cruft. Most engineers at Google, Zynga, Palantir, Square, etc. do often end up finding the process of Snippets and OKRs to be annoying and unnecessary — at the same time, many of them admit that they were their most productive when they closely tracked their Snippets and OKRs (objectives and key results) and that much of the autonomy and freedom that’s characteristic of top software engineering shops in the Valley could be attributed to Snippets doing its work of people management secretly, in silence.
1.2. Case Study: How Transparency Helps Buffer Works Smarter, Not Harder
Buffer stands out among startups not just for its success in building a great social media sharing tool but in fashioning a company culture focused on making work fulfilling, impactful, and enjoyable. What’s fascinating is that they do this as a completely distributed team, spread across multiple countries and time-zones.
Treat People in the Best Way
Co-founders Joel Gasciogne and Leo Widrich set the foundation for Buffer’s culture according to the tenets of Dale Carnegie’s How to Win Friends and Influence People. Carolyn Kopprasch, Buffer’s Chief Happiness Officer translates what that means for Buffer’s modus operandi: “We want to treat people in the absolute best way we can, and that includes co-workers, vendors, and customers.”
It also includes how the Buffer employees treat themselves. With a unique self-improvement program, they share their progress on anything from time management to healthy eating with their teammates, spurring conversations about different lifehacks and routines. Michelle Sun, Buffer’s growth and analytics expert, tracks fitness routines and getting up early while Leo has been making strides with learning how to code.
Co-workers become a collective accountability partner for future plans like blogging or exercising, and more importantly, they become an incredible support system. Instead of looking askance when you’re doing work to do something to take care of yourself, you receive encouragement. “If you’re trying to work on your health or your fitness or your happiness level, that affects work a lot too,” Carolyn explains.
Work Smarter, Not Harder at Buffer
It’s not surprising then, that one of the company’s mantras is to work smarter, not harder — taking time to review what’s working and how to improve operations. As a remote team, Buffer needed a better way to stay on the same page. Previously, everyone would get on a daily group Skype call in which each person would take three minutes to talk about what they did, how their co-workers could help, and their improvements. With the team growing larger and the standup process proving unwieldy over email, Buffer turned to iDoneThis.
Leo remarks, “It allows us to track performance, which easily gets lost in a chat room or an in-person standup. If new people come on board, they can look through and see what has been worked on. And of course, it’s amazing to keep in sync with everyone, working as a remote team. iDoneThis is invaluable to us and has changed our productivity for the better.”
Michelle agrees, “It’s a way to understand what teammates are working on, and every time I read people’s iDoneThis, I feel connected with the team.” Where iDoneThis shines, for Carolyn, is the ability to comment and have chronicled conversations about her teammates’ work and improvement practices. “I think that’s one of the biggest things. It’s not just reporting what we’ve done. It’s asking, ‘oh tell me more about that.’”
iDoneThis is a natural fit for Buffer’s culture, but Carolyn points out that iDoneThis has helped them to work even smarter. Holding more traditional standups over video chat meant that “if you jump in and talk about something that somebody just said, you’re basically interrupting their three minutes. So what we would actually do is not ask that many questions.” Now the team can communicate asynchronously — asking, commenting, interacting — without feeling like they’re butting in.
Transparency Fosters Tight-Knit Teams
The extreme transparency that Buffer practices in terms of sharing information from sleep habits to how much salary and equity everyone gets is not without feelings of vulnerability. But what they gain is an incredible feeling of connection. In the Buffer universe, where the personal flows right into work and vice versa, it’s their collective care, attention, and support that binds and strengthens the company.
“When somebody will say to me, ‘you didn’t really get very much deep sleep yesterday. Maybe you can try taking a bath before dinner,’ and you’re like, ‘where am I? Am I at work?’” Carolyn laughs. “It’s unique. It takes a certain type of person to really like that, but having a team that’s really interested in keeping you accountable to your own self-improvement is kind of a wild thing. It’s awesome and a little bit crazy sometimes.”
2. The Transparency Paradox
The rule is one operator per station. But when nobody’s watching, there might 17 people for 13 stations on the assembly line at one mobile phone manufacturing plant in Southern China.
When managers comes around, though, they’ll see 13 operators, one for each station, exactly as prescribed by the leaders. Even with company values like learning and continuous improvement, this plant’s employees scrambles to hide exactly the kinds of refinements and creativity that management seeks.
Transparency is often touted as a vital ingredient for the best teams. And it’s true. For people to move fast and think for themselves, they need ready access to the information they need to do their job. Failing to provide a foundation of common knowledge and creating an uneven distribution of information opens the door for inefficiency and unhealthy power imbalances.
But the transparency paradox arises when there’s no trust and autonomy. Actually, it’s more like counterproductive monitoring — one-sided visibility to benefit the manager’s curiosity rather than equip the employees to do their best work.
2.1. When Transparency Makes People Hide
As Ethan S. Bernstein, Harvard Business School professor, discovered in his study of that Southern Chinese plant, organizational transparency may be counterproductive, incentivizing people to hide. When you’re watching your employees like a fox, you can drive them underground.
For his study, Bernstein embedded Chinese-born Harvard undergraduates at the manufacturing plant. Their new peers took them aside and discreetly showed them methods and tricks that improved on the by-the-book training to accomplish tasks, keep production going, and make the work faster, easier, and safer.
Meanwhile, the whole reason managers at this plant supposedly cultivated workplace transparency was to foster learning and continuous improvement. Everything about the set-up and environment — from the display of output and quality numbers to different-colored caps and clothes indicating roles — were carefully designed to, first, help figure out the best way to do something, and second, be able to spread that information quickly to other lines.
Yet what happened was that the employees hid their best, most innovative ways of doing things. They also instructed the embedded Harvard newbies to alter their methods when observed or when things weren’t too busy.
Otherwise, they explained, the managers will “get mad” and yell at them. So when employees saw supervisors hovering — they resorted back to doing things according to code, and predictably slowed down. This combination of top-down observation and transparency then caused productivity to fall, and the “suggestion boxes on every line remained empty.”
2.2. How to Use Trust and Autonomy to Channel Change
Employees hid even though they knew the best way of doing things and productivity would decrease, because experience had taught them the cost of deviating from managements’ expectations.
The plant employees explained, either they would have to stop to justify why the new methods were better in ways that the managers understood, or get in trouble from diverging from the standard — both of which stood in the way of actually getting stuff done on busy, demanding assembly lines.
How employees perceive their autonomy is crucial to eliminating the transparency paradox. It’s pretty clear that autonomy doesn’t mean anything if you get penalized for trying new things. As additional research from the University of Illinois’s Gopesh Anand and Dilip Chhajed corroborates, trust has to flow in both directions. Otherwise, as they write:
any latitude that employees have as a result of autonomous job design will be used to make ad hoc changes to work processes rather than to channel such changes through systematic continuous improvement.
Basically you have to create a safe environment for experimentation and failure. As an operator who’d contributed many of the new improvements on the line explained to Bernstein: ‘We have all of these ideas . . . but how do we feel safe to try them? We’ll experiment as long as the consequences aren’t so great. As long as the price we pay isn’t so great.’’
Employees can recognize in a second when higher-ups don’t have the same depth of knowledge of the work on the ground. That means managers have to be careful of becoming their own obstacle — setting rules and requirements because they think they’re the smartest person in the room — without completely understanding what’s going on.
Those extra operators on the line? They provided much-needed help whenever the line fell behind and enabled employees to meet increased targets that were determined by managers and kaizen engineers who’d pitched in with production to come up with the new numbers.
If you want transparency to be a truly beneficial practice, back it up by supporting your employees’ progress rather than delivering edicts and only watching for mistakes. When you impose the transparency paradox’s costs on experimentation, innovation, and even making mere suggestions, everyone loses out on crucial information and better ways to work.
2.3. Are You an Unwitting Audience to Productivity Theater?
A productive office is supposed to be a buzzing hive of activity, right?
But as a manager, a workplace that’s always humming with constant activity is not what you want to see — because it’s a sign that something has gone awry. It means that people are putting on a show to look busy all the time.
You know the trick: when someone walks by, you quickly switch tabs to bring up the spreadsheet or report you’re supposed to be working on, or engage in theatrics like looking very annoyed or walking briskly like you’re a very important person who can’t be bothered.
Welcome to Productivity Theater. It’s what you see when there’s transparency but no trust and autonomy.
Even though it’s impossible for human beings to be working nonstop, that’s what’s expected at the workplace. Looking busy becomes how you get recognized for doing a good job. The result is a show put on for the managers — and proceeds largely according to their expectations, scripts, and direction.
The Fruitless Posing of Productivity Theater
One of the biggest challenges of being the boss is that you always want to know what’s going on. Your job relies on information in order to be able to deal with problems, strategize, and make decisions, and it’s why leaders like Andy Grove spent the larger part of his day information-gathering.
Yet, as Harvard Business School professor Ethan Bernstein discovered, this information-gathering quest can be exactly what drives people to put on a productivity theater show.
When Bernstein studied a Chinese mobile phone factory, he was surprised to find that employees devised better, easier, safer ways to perform tasks, but when managers came around, they returned to doing things by the book. Even though the company was trying to build an open culture of learning and continuous improvement, it left out the crucial factors of trust and autonomy. Employees ran into obstacles and discouragement when bringing things up, since the only “acceptable” changes came from the top.
The intended openness turned into an obstacle because it didn’t serve employees and slowed them down. “We assume that when we can see something, we understand it better,” Bernstein explained to the Harvard Business Review. “In this particular environment, and perhaps many others, what managers were seeing wasn’t real. It was a show being put on for an audience. When the audience was gone, the real show went on, and that show was more productive.”
Overcome Managerial Confirmation Bias
The problem is that people already see what they want to see. If everyone seems busy all the time, it tends to reflect well on you as a manager for running a tight ship.
But as one of the plant operators in Bernstein’s study explains, this is just a coping mechanism to keep things running smoothly — rather than make improvements, innovating, and trying new things. “Everyone is happy: Management sees what they want to see, and we meet our production quantity and quality targets.”
When asked about what motivated them to hide their improved techniques and experiments, the plant workers pointed to the lack of knowledge that many middle managers have of what jobs actually entail:
People from above don’t really know what they are doing. They set all these rules, but they have no idea how it actually operates down here. Sure, process engineers time these things and set all of these requirements, but they have no idea how people operate.
Catering to the confirmation bias of managers is counterproductive. Inherent to the job of managing others is that you’re going to be somewhat removed from the work being done. Your productivity relies on helping your team make progress, not driving that knowledge further underground.
The appearance of continuous activity means that there’s either a show going on due to a lack of support and trust or people are struggling to manage their time effectively — both exactly the kind of issues that make up a manager’s job.
Don’t Short-Circuit Transparency
The point of transparency isn’t one-way observation but openness, increasing ownership and empowering the very people doing the work. Here’s three things to consider to protect against productivity theater:
Define productivity in terms of results rather than facetime. Stop measuring things in terms of hours and mere presence, and look instead at results. Relying on face time as a way to measure performance incentivizes presenteeism over efficient, effective work.
Create zones of privacy. In his study, Bernstein found that creating smaller zones of privacy — blocking off certain assembly lines with curtains, for example — actually allowed transparency to do it work. Since the workers felt safe to experiment and not put on a show, they became more productive and were more comfortable sharing their improvements. In open offices and transparent work cultures, make sure there are physical and mental spaces where managers aren’t hovering.
Find out what people need to manage their energy. Willpower, productivity, and motivation wax and wane during the day, so doing your best work means having the autonomy to recharge when you need to, without having to put on a show of looking busy.Incentivize people to take breaks, get away from the desk, and exercise.
Buffer CEO Joel Gascoigne with bunkbed in background
That could mean furnishing coffee and healthy snacks, having team lunches away from people’s desks, or offering a stipend for a gym membership. You could even provide dedicated napping spaces like Hubspot, which has an entire nap room that can be booked like a conference room, or Buffer, which has bunk-beds in their SF headquarters.
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If you don’t trust your employees, then you can’t trust what you see.
And the more you try to gain visibility in a trust-less environment, the more your employees will resent efforts to monitor and observe, especially when cloaked in the friendly language of openness and transparency. They’ll hold themselves back and end up distrusting you in return.
Photo: Jason Brush
3. The Backbone for Effective Transparency: Autonomy, Mastery and Purpose
Given a choice between solving puzzles for free or for pay — which would you pick?
If you want to stay motivated and solve more puzzles, the surprising thing is that you should do them for free.
In the early 1970s, psychologist Edward Deci wanted to study how money affects motivation. In one experiment, he paid one group $1 (that’s about $6 today) for each puzzle solved within three sessions, while the control group received no payment. In the middle of each session was an eight-minute free period in which people could continue puzzling, read magazines, or otherwise spend the time how they wished.
It was the paid group who chose to spend less time working on puzzles in the free periods. The extrinsic monetary reward made them lose intrinsic motivation, where the reward is the activity itself.
Over forty years later, managers still rely on the old model of dangling external rewards like money and prestige to motivate their people — but in today’s era of knowledge work, this model is increasingly misguided. If you think your people are going to continue to put in their best efforts with monetary rewards, you’re sabotaging the most powerful sources of motivation.
Instead, as Daniel Pink explains in his book, Drive, the three basic sources of motivation — autonomy, mastery, and purpose — come from within.
While this assumes fair compensation as a baseline — the fact is that in harnessing intrinsic motivation, you feed deep-seated human psychological needs. That’s incredibly compelling and it’s an essential backdrop to having a transparent organization. Here’s a basic refresher on these three limbs of intrinsic motivation and what managers can do to drive transparency and help people become more motivated, productive, and happy.
3.1. Autonomy: Help people direct themselves
People want to feel like they have a choice in what they’re doing, that they’re in some way determining their own fate rather than having to follow scripts set out by others.
As a manager, you hold the keys to increase this sense of choice by providing what Deci and psychologist Richard Ryan call “autonomy support.” A major departure of the command-and-control style of management, this involves acknowledging people’s perspectives, encouraging choice and self-initiation, providing relevant information, and being responsive rather than dictatorial.
The effects are great. In a 2004 study, Deci and Ryan discovered that employees that receive autonomy support are better performers, and happier to boot. Provide some choice over how to do work and support people with the frequent feedback and resources they need to get the job done. At companies like Reddit, Buzzfeed, and Foursquare, they use a system that originated at Google called Google Snippets to distribute information across the whole company on what people are working on — helping people stay on the same page. This kind of transparency gives autonomy to people to do their best work instead of having to stop and hunt down the information they need or wait to receive it from gatekeepers.
3.2. Mastery: Invest in your people
Getting better at something is inherently satisfying and motivating. Making progress at learning a language or an instrument, for example, fuels the fire to keep getting better. If you feel like you’re getting stuck and running in place, failing to grow in some meaningful way, it’s natural for interest to fade and effort to flag.
Failing to capitalize on the motivational benefits of improvement and mastery is a major mistake. More and more, however, employers aren’t making the effort to train, grow, and broaden their employees’ skills. Such investment has a mutual benefit: investing in your people is a way to build for an organization’s long-term future.
Companies like Spotify and Wistia invest in their people with deliberate programs to teach new skills and build on existing ones. Wistia runs a code school to teach employees how to code using real-world problems. At Spotify, they believe in three-dimensional development, that you can develop in more ways than moving up the corporate ladder. They provide structured opportunities to learn at trainings, workshops, and teach their co-workers. You don’t have to start a whole new training scheme to help people gain mastery at work. Provide coaching and frequent feedback to encourage learning and continuous improvement.
3.3. Purpose: Connect work to a greater cause
Having a larger purpose to work towards sounds almost like a luxury in the world of work — but it’s the deepest well of motivation. Purpose gives you a reason to stretch, explore, and keep at it. Contrast that with the disconnection many people feel about their job — at best, you’re in it for the paycheck — but if you don’t know why you’re doing something, what will drive you onwards and upwards?
As a manager, you want to help your team get up in the morning and feel like going to work because they have a purpose to work towards. It can be easy to forget about purpose as you get stuck in project details and analyzing metrics. Consider how often you communicate and connect work to purpose, values, and people. Help employees figure out the high-level “why” question. What’s the point of doing this task? Who does it affect? Why does it matter?
Nearly ten years ago, Tony Hsieh, CEO of Zappos sent out an email to employees, investors, and partners in which he explained that the purpose of a company like Zappos wasn’t to maximize short-term profits. It’s to “build a company culture and consumer brand that is centered around service, not the shoes or the handbags.” In continuing to reinforce and develop its inspiring purpose, Zappos motivates its people not just to get up in the morning and come to work with fewer grumbles — but to build something great.
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What drives our best work is intrinsic motivation, which sustains more deeply than any external reward can. As Pink writes:
Human beings have an innate inner drive to be autonomous, self-determined, and connected to one another. And when that drive is liberated, people achieve more and live richer lives.
People often fantasize about dream jobs, but often there are intrinsically motivating things we can do as individuals and managers to bring out and nourish autonomy, mastery, and purpose to turn a bunch of tasks and to-do lists into something more meaningful.
3.4. Case Study: Cells, Pods, and Squads—The Future of Organizations is Small
Think small and you will achieve big things. That’s the Yoda-esque, counterintuitive philosophy that nets Finnish game company Supercell revenues of millions of dollars a day.
So really, how do you build a billion-dollar business by thinking small?
One key is the company’s supercell organizational model. Autonomous small teams, or “cells,” of four to six people position the company to be nimble and innovative. Similar modules — call them squads, pods, cells, startups within startups — are the basic components in many other nimble, growing companies, including Spotify and Automattic. The future, as Dave Gray argues in The Connected Company, is podular.
Still, small groups of people do not necessarily make a thriving business, as the fate of many a fledgling startup warns. What is it about the cells and pods model that presents not just a viable alternative but the future of designing how we work together?
It preserves some of the spark. Let’s go back to Supercell’s terminology. Reflecting both its Latin roots (meaning “small room”) and what we learn about in biology (the smallest structural and functional unit of an organism), cells provide the dynamism and flow of building something together with a few people in the same room. It’s not just that these teams are small, they’re often cross-functional and self-managing, with members totaling in the single digits and probably eating two pizzas.
Achieving big in this podular future requires thinking about what makes that small team magic yield more than a sum of its parts and how to make that synchronize that throughout an entire organization and scalable for sustainable growth.
The Autonomy/Alignment Matrix
Autonomy is such a key factor in these small teams that they’re often referred to as startups within a startup. It’s no surprise; autonomy helps you move fast because you don’t get mired in decision-making by committee and inefficient coordination. Autonomy is also incredibly motivating. People crave some degree of control and self-determination to make, build, create awesome things rather than being told what to do.
Yet letting loose a bunch of people and proclaiming “Go forth and be autonomous!” will likely result in chaos, just like mashing a bunch of small startups together to create a larger company wouldn’t work. You have to think about what brings the cells together and how to scale that organizational glue.
The counterpart to autonomy is alignment, as Henrik Kniberg, an agile & lean coach who works very closely with the rapidly growing Spotify, explains.
At Spotify, engineers and product people work within a kind of matrix organization that evolved out of a need to scale agile small teams. Their basic unit or “cell” is called a “squad,” a cross-functional, self-organizing, co-located team of less than eight people that has autonomy on what to build and how. While each squad has a mission to work towards, they still have to harmonize across many levels — on product, company priorities, strategies, and other squads.
The trick, Kniberg explains, is not to frame autonomy and alignment as poles on a spectrum but as dimensions. The goal is high autonomy/high alignment within this framework.
Alignment is what enables autonomy. The stronger the alignment, the more autonomy you can grant because you don’t have to worry that people are going in a million different directions. What does that mean in practice? “The leader’s job is to communicate what problem needs to be solved and why, and the squads collaborate with each other to find the best solution.”
Kniberg sums it up this way: “the key principle is be autonomous but don’t suboptimize.” The company’s overall mission simultaneously takes precedence over individual squad’s and individual’s missions while granting people the ability to direct themselves. It boils down to this: “be a good citizen in the Spotify ecosystem.”
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Companies adopt these principles in different ways, according to their needs and cultures. But in studying similarly structured companies, I noticed three ways they create their ecosystem to encourage high alignment/high autonomy and good organizational citizenship.
How to Encourage High Alignment/High Autonomy in Small Teams
1. Don’t Hire Jerks.
If you’re building a high autonomy/high alignment work culture, hiring is a priority concern. You want people in place who will thrive within and contribute to both dimensions. For Supercell CEO Ilkka Paanenen, this is the first and foremost priority: “When you set up a company, the only thing — the only thing — you should care about is getting the best people.”
The “best people” often gets boiled down to what’s the most talented and has the most skill. But that ignores the fact that people must work together. The actual “best people” then have a balance of autonomy and alignment in themselves too. They’re both self-directed and collaborative.
For Spotify, that means filtering out people who don’t really care to align with anything outside of themselves — “the talented jerks,” as Jonas Aman, part of the People Operations team, puts it. “We don’t want to hire people who are very good at what they do but can’t work together with other people.” To do this, they scrutinize how candidates communicate about work they’ve done previously. Do they only talk about themselves? How do they talk about other people? “The best way to predict future behavior is to look at past behavior,” reasons Jonas.
2. Manage Progress and People Rather Than Power
Mini-startups can sound very flat, but alignment, especially as you scale, requires some management, whether they have that title or not.
Take Automattic, which is best known for making WordPress, for example. It currently has over 200 employees, but when it got to about 50 people, the company transitioned from a completely flat structure to the mini-startup collective model. Designated managers, or “team leads” help allocate work and provide direction. As a team lead at Automattic, Beau Lebens describes his job as “keeping the trains running — making sure that as a team we’re focusing, helping schedule priorities, or redirecting things to another team if they don’t make sense for us.”
Beau elaborated further via email — decision-making is:
a mix all the way from ‘the top’ (general strategic direction) down through other team leads (coordination where there’s team cross-over) through me (mainly prioritization and just helping people focus and not get tangled up in other things) to the team, which often decides who will specifically work on what, how to tackle specific projects, how to break it up, etc.
So top-down communication helps provide direction and purpose — the “why” — and small teams decide how to go about finding the best solution — and it’s the team leads who largely make sure everyone’s in alignment.
This more fluid, emergent style of management also applies the progress principle, the fact that making progress is the most powerful motivator. In high autonomy/high alignment cultures, the job of managers and leaders is to help people make progress and make sure everyone’s on the same page about what progress entails. They do this by providing guidance, support, and making sure people have what they need, rather than a low-autonomy GPS-style management of giving turn-by-turn directions.
3. Enable Self-Service Transparency
Enabling progress on all levels also requires transparency and distributing information. At Supercell, Paananen sends a daily company-wide email with key performance indicators to all employees so that nobody is left in the dark. He explains, “It isn’t restricted to executives, it is the same information released at the same time so we can all figure out on our own what is needed.”
Transparency is one of Automattic’s most prominent values. Beau’s team uses iDoneThis to keep on the same page on what everyone’s working on and to gauge progress all in one place, which helps align his team who’s distributed across multiple time zones. In addition, roughly 80% of all internal communication at Automattic takes place on its P2 blogs, which are organized variously by function, teams, and projects and run on WordPress’s own real-time theme. Rather than information getting hoarded away, decisions and discussions are documented, shared, searchable and viewable to everyone in the company.
When everyone has the knowledge they need at their fingertips, they don’t have to wait around to get to work or make decisions, they can just do it. Distributing information also means distributing power, and sharing knowledge helps align small teams together.
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People need autonomy, mastery, and purpose to be sustainably motivated and engaged at work, as Dan Pink describes in his book, Drive. Companies like Supercell, Spotify, and Automattic show how Pink’s insights can apply to create not just intrinsic motivation for individuals but people management and collective focus at an organizational level.
People in cellular, agile small teams thrive on autonomy and mastery — which are self-centered elements — but they are also guided, connected, and even elevated through purpose, which Pink describes as “our yearning to be part of something larger than ourselves.” By definition, as organization, there should be a collective purpose, but it’s often unclear or diluted through things like unhealthy politics, mismanagement, or even being at odds with the people you hire.
In building and scaling organizations, communicating, refining, and helping people carry out that purpose is vital to creating good citizens in your work ecosystem. Like pods and squads and cells, it’s about the yin and yang of holding the individual and the collective in your mind at once and thinking about how you can grow together. Supercell’s philosophy is actually a reminder that we’re all made of smaller stuff, that small seeds can grow into giant trees, that small cells and pods can grow, in the right conditions, to achieve greater things.
Credits: Check out Kniberg explaining Spotify’s engineering culture in this video. You can find the alignment/autonomy matrix in his slides here.
3.5. Case Study: How to Get Stuff Done without Bossing Around
The availability of seed-stage funding today means that there are a ton of first-time entrepreneurs out there assembling teams and building companies without any experience running a team or managing people. Building a team in this environment is especially difficult because funded companies typically grow teams prior to sustainability or product-market fit. It’s hard to steer the team in the right direction when you yourself don’t quite know what to build.
Naval Ravikant at AngelList has blogged about “Building a team that ships”, describing his assembled team as “self-managing people who ship code.” Naval calls this peer management: one person per project (with help from others as needed), no middle managers, and individual choice on what to work on using accountability is the rudder. In his words: “Promise what you’ll do in the coming week on internal Yammer. Deliver – or publicly break your promise – next week.”
At iDoneThis, we’ve seen peer management as an effective approach to take for the young startup CEO. We’ve worked closely with many first-time entrepreneurs like Danny Wen at Harvest and Tobi Lutke at Shopify who have succeeded in building unique, quirky, and profitable companies by empowering individuals at their companies to manage themselves and each other to build out great products exceeding a high standard of excellence. Here are some keys to effective peer management that we’re seeing.
Systemized Accountability
Skillshare uses a system called Objectives and Key Results (OKRs) to systemize accountability. Every individual is responsible for company objectives, which are broken into measurable bites in the form of key results, resulting in alignment within and accountability throughout the team. At the end of every week, month, and quarter, individuals measure themselves against their OKRs to evaluate performance.
OKRs have a rich history in building great tech companies, going back to Andy Grove at Intel in the 1980s and what he called “Management by Objective.” Drawing a fundamental distinction between output and activity, Grove’s use of the word “objective” involves dual meanings. Output is both the objective and something that’s objectively measurable, while activity is a black box. An engineer at heart, management by objective was Grove’s way of bringing scientific and engineering principles to management. OKRs have since been embraced by tech giants like Google and Zynga and spread throughout the Valley and to the broader tech world. At Salesforce, they do V2MOMs (vision, values, methods, obstacles, and measurement); at Yammer, they do MORPHs (mission, objectives, results, people, and how did you do); others use KPIs (key performance indicators). While the acronyms may vary, the general principles hold true.
To Mark Pincus, OKRs are the solution to the basic problem that’s at the heart of many a founder’s anxious and sleepless night: how “to keep everybody going in productive directions when you’re not in the room.” Every individual has one objective, and they are the CEO of that objective, entrusted with authority and accountability for their objective and the key results necessary to get there.
Individual Data Tracking
“Do things, tell people. These are the only things you need to do to be successful.” When individuals are CEOs of objectives, goals, and projects, they need a way of measuring the intermediate progress and activity of themselves and their peers. As with the quantified self movement, tracking progress — writing it down — leads to reflection, knowledge, and betterment.
In old school, hierarchical companies, information that passed down to employees or up to executives had to travel through middle managers and that created a single-point of failure anti-pattern. You had to rely on your manager to get information and also to market your accomplishments upward to upper management and the executive team.
Where individuals manage themselves and each other in a peer management environment, it’s vitally important that everyone gets the requisite information flow they need to do their jobs and that they have channels to market their own accomplishments and results.
The system of snippets adopted at Google is an example not of big brother monitoring, but of empowering individuals to see everything that’s happening in the company so that they can find their niche in the company and contribute. You get a weekly email that asks what they did last week and what they plan to do in the upcoming week. Replies get compiled in a public space and distributed automatically the following day by email.
The power of snippets is in gathering data to demystify the black box of the notoriously fuzzy production process — in which raw material turns into output with the application of labor — and makes progress possible to measure, analyze, and recognize. It makes sense then that peer management environments tend towards transparency, meritocracy, and individual professional fulfillment. Companies on the rise like Shopify and Harvest track and celebrate their daily accomplishments with a daily email from us here at iDoneThis.
Fit as a Deal Breaker
In company cultures of extremely high personal autonomy, fit is paramount because it reduces friction in every interaction. Companies like Valve and Github tout bossless cultures. Stripe is building a world-class team and every employee can veto a potential hire.
While fit can be tested by hiring a candidate first as a contractor, fit often amounts to guesswork based on intuition and impression during interviews. Peter Thiel said PayPal once rejected a top-notch engineering candidate because he said during an interview that he liked to play “hoops,” and a PayPal engineer does not play basketball, much less “hoops.” The wisdom of that decision is unclear, but that decision process no doubt solidified a sense of self in the team.
Fit is about an ever-solidifying sense of self as much as it is about bringing on like-minded people, and that sense spawns canonical stories and processes. Carwoo is a company that’s a little weird, so they ask every interviewee how weird she thinks she is on a scale of 1 to 5. There is a right answer. 3-4 is the sweet spot a weird person who is self-aware.
Wistia is a company that highly values its culture and the unique identity it has built. Co-founder and CEO Chris Savage finds that combination of autonomy, culture, and fit becomes “a competitive advantage”, as Wistia hires more people, “the culture of the company should get stronger because we’re hiring for values that the company believes in, and people with those values should make it stronger.”
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As work gets automated and outsourced, self-directed, creative work is required in ever-increasing degree. Peer management not only makes us more efficient, but it builds a workplace that enables — as Dan Pink describes — autonomy, mastery, and purpose that makes work fulfilling and joyful.
4. The Inherent Fairness of Salary and Performance Transparency
It’s been the system of getting a new job since time immemorial. You go through the application rigamarole. You’re interviewed multiple times, and every time, you pass muster. Finally, they’re ready to make you a job offer. They send it your way, and you take a look — it’s another lowba