Alliance Perspectives

January 25, 2019

Case categories include: Culture   Operations   Organizational Design   Trends   

By Warren Lutz

For Everett Harper, CEO of Truss, a software infrastructure consulting firm that helps companies and government agencies scale by allowing them to ship products more efficiently, running a virtual company wasn’t really the original plan.

As Truss was getting off the ground, one of its co-founders couldn’t remain at the company’s San Francisco headquarters because her husband had accepted an overseas fellowship. No problem, the other co-founder said – we’ll just launch the company virtually. And it worked.

“We conducted virtual meetings and video calls when she was in Croatia, Hungary, Scotland and Germany, and it worked quite well,” Harper says. “As long as we had an Internet connection, it was quite remarkable.”

Whether he planned it or not, Harper became one of a growing number of leaders who employ a virtual workforce. By taking advantage of new communication and computing technologies, more organizations are ditching physical offices and leveraging a virtual or distributed company model, where most, if not all, people work from home or in remote offices.

The benefits are significant. Organizations save time and money on office space and overhead, and workers avoid commuting and uprooting their families. The technologies used to run virtual companies have also been found to drive efficiency and growth. But there are challenges, too—from the need to create and protect a company’s culture, to finding people with the right mindset to make it work.

“You have to hire people who are highly trustworthy, seek high levels of autonomy and support transparency, so everyone can align,” says Harper, adding that not all workers have these traits. He says organizations also need the right tools, infrastructure and communication systems that enable “friction free” access to other people. “For example, we have protocols around our Zoom meetings that we set up in advance with a link in everyone’s calendar, so when you hit the link, boom—you’re in the meeting.”

Ensuring everyone can participate and stay connected required a major investment in technology, he added. “We’ve had to make sure everybody in the company has sufficient speakers, headphones, screens and bandwidth, routers and cameras, so we created a budget to cover the basics, and subsidized the extras.”

Evan Bailyn, CEO of First Page Sage, an SEO and thought leadership content marketing company, said his decision to run a virtual workforce began with him. “One day, I woke up and felt motivated to work, but I didn’t feel like getting out of my pajamas, so I asked my team to just email me everything,” he remembers. He began staying home more often. Then one of his most valuable employees announced she was getting married and wanted to start a family, and wanted to work from home, too. “I didn’t want to lose her, so I said, ‘let’s try it.’”

Things snowballed from there. As he transitioned the business to a virtual company, Bailyn took the money he saved by not having to pay for office space, supplies, food and other perks, and reinvested it in providing a better service for his clients by hiring better writers and paying them more. For some employees, however, the switch was tough. “Running a virtual workforce requires “intentionality,” Bailyn says. “You cannot go into a meeting unprepared; there’s no showing up late because of traffic. You’re either organized or you're not, so you're going to fail pretty quickly if you cannot work independently in a virtual environment.”

Other employees, Bailyn found, didn’t want a job that lacked face-to-face socializing. So, he began advertising First Page Sage as a family-friendly company. “People couldn't believe there was an opportunity to work from home and make the same or more than they would in an office and not have to commute.”

Some leaders have found that a mix between a virtual and a traditional company works best, such as Ross Fernandes, CEO of Q Analysts, a provider of quality assurance and testing for Fortune 500 companies. Fernandes has designed what he calls a “distributed hub and spoke model,” in which he leverages a mix of offices, people working on-site with clients and others working from home. Q Analysts now has 400 employees spread out between its Santa Clara headquarters, offices in Washington and India, and client sites in twenty plus states, London and Zurich, with plans to double in size over the next two years.

Fernandes calculates that he has invested in 25 different systems to keep his team connected, including a state-of-the-art VOIP system, video conferencing, and a CRM system that works on all devices. He also uses Skype, GoToMeeting and desktop sharing, so he can collaborate with others online. "We made a huge investment in technology, so I can reach anyone, anywhere, and we manage it to the hilt.”

Yet like most leaders running distributed companies, Fernandes still believes in the value of face-to-face meetings. Once every quarter, he flies in 30 to 40 of his core team members to discuss strategy. For virtual team meetings, however, he minimizes big meetings in favor of more frequent smaller ones, usually involving the site leads for certain clients. “It would be impossible to do a companywide, all hands meeting, but smaller meetings are far more efficient,” he says. The meetings, he adds, “must be agenda-driven and can’t be meetings for the sake of meetings.”

Fernandes believes he can scale his business indefinitely using the distributed hub and spoke model, but doesn’t think the model is particularly unique. “We’re not much different than other firms," he says. "Facebook, for instance, is a giant company with different sites, satellite facilities and people who work remotely. Ours is really more of a mixed model, but it's the way the world works today.”

Paul Lipman, CEO of BullGuard, a leader in smart home cybersecurity, runs a distributed company that has customers in 200 countries. BullGuard has a large office with 120 people in Romania, 35 people in Israel and a variety of regional sales people who work from home throughout the U.S. and Europe. The structure, he says, is “more a function of our history than by choice, but we make it work to our advantage.”

For example, BullGuard’s Romanian team gives the company a unique advantage. “Romania recently came out of communism, and because technical skills were highly valued in communist countries, they have a much higher proportion of women in tech roles than you see in western Europe and the U.S., which has its own advantages,” he said. “Romanians also have an energetic, passionate sense of entrepreneurialism, where everything is possible, and the sky is the limit.”

BullGuard uses video conferencing between all its locations and has a daily meeting with the management team. “Every day of the week we have a very short five-minute call with our management team around the world, which we use to highlight and surface problems. We ask every member of the team, ‘What are your hot issues? Who do you need help from?’ It’s a fantastic way of ensuring we’re all on top of our day-to-day challenges, and that issues requiring attention and resolution are taken care of as they come up.”

Then there are companies that straddle the line between a traditional workforce and a virtual one. Bernie Tobin, President of Crescendo Bioscience, a molecular diagnostic company, has employees who work from home around the country and in offices in Salt Lake City and the Bay Area. But Tobin doesn’t consider the company a completely virtual one. “We’re not doing something no one has thought of before,” he says. “What we’re trying to do is to be very open to the reality of the world we fit in, and look for ways to do it better.”

Tobin says the company is still investing in physical office space in the Bay Area and Salt Lake City. “As a life sciences company, there is such an importance for collaboration in a face-to-face way. Right now, we haven’t found a way to do that effectively in a virtual environment.”

For others, a virtual workforce is almost a necessity. That was the case with MedData, a leading provider of patient-facing financial services for hospitals and health systems, according to former CEO Ann Barnes, now CEO of Intelligent Medical Objects (IMO). Barnes commented that MedData was operating a virtual workforce of 2,700 people around the country, with 1,000 employees at hospital sites or working out of their homes, and another 1,600 located in distributed offices. “Because we were based in Cleveland, we competed with the Cleveland Clinic,” Barnes says. “We would never have been able to go head-to-head in that market if we didn’t have the benefit of being a virtual company.”

Barnes says MedData’s leadership team was completely distributed, with each member located in a different state. “It wasn’t so much by design but, as we made acquisitions and gained talent, I didn’t want to be restricted by having all our leaders located in one place, because we would not have obtained such incredible talent that way.”

Communication was key — not just formal communication, but informal communication as well. “Because the leadership team was so distributed, we had to find a way to be incredibly connected and, if we could do that, it was highly likely the organization would follow,” she says. “The question was how to enable that in an organization that was growing so fast.”

In addition to organizing online meetings, everyone at MedData had to leave hours in the day open for having informal chats with each other. “We had to reconstruct our habits, pick up the phone and talk to people just to stay connected, because so much came out of those discussions,” she said. It was critical that her leadership team walked the talk. “If my team wasn’t doing it, they wouldn’t be able to coach other people to do it.”

Barnes said the primary tool everyone in the organization connected with was the company’s intranet. “When you have people working from home and in hospitals around the country, you have to find some way for them to feel connected to the company and part of our culture, and our intranet did that,” she said. “We also changed the communication style of our intranet to be less formal and more casual, as if you were chatting with people while in the same room.”

Barnes says how employees communicate is more important than the technology they use. “The real thing is culture,” she says. “If you can’t create it, and your leadership team can’t model it, it won’t work.”

As the above leaders will argue, indeed, leveraging a virtual workforce is definitely worth the effort—but it is no guarantee of success. Only by planning properly, focusing on culture and investing wisely in technology can leaders ensure their teams are all on the same page, when they aren’t in the same place.