SEASON 2 - EPISODE 123 - SEPTEMBER 18, 2024

Everybody Works

37signals’ co-founders Jason Fried and David Heinemeier Hansson discuss their unique approach of operating without full-time managers. They reflect on the company’s experience with full-time managers and share why they’ve moved to a flatter organization.

Watch the full video episode on YouTube

Key Takeaways

00:54 - The before and after of 37signals’ experience with full-time managers
08:34 - The founders thoughts on being directly involved in the business
10:36 - Why the company’s management hierarchy works best for the founders
17:17 - 37signals’ career ladder doesn’t necessarily mean people leadership
20:03 - What company size makes sense for having more management layers

Links & Resources

Transcript

Kimberly (00:00): Welcome to Rework a podcast by 37signals about the better way to work and run your business. I’m Kimberly Rhodes and joined as always by the co-founders of 37signals and the authors of Rework, Jason Fried and David Heinemeier Hansson. Well, in their book Rework, Jason and David write about the importance of everybody working. In fact, they have a short essay called “Everybody Works” and David recently wrote even more about this on his HEY World Post, talking about not having managers at 37signals. You guys, I am going to jump right into this because I know people who are listening are saying you don’t have managers? What does that mean? Jason, do you want to take it away? What does this company structure look like without full-time managers?

Jason (00:43): I think David should take it away because David,

Kimberly (00:44): David…

Jason (00:44): David just wrote this post so it’s top of mind. I mean I could go on for a while as well, but he’s really got it in his head.

Kimberly (00:52): David, you go.

David (00:54): Sure. So the reason I wrote this post was we had had a period of time at the company where we had actually experimented with some full-time managers, people who were going to help us grow in part and deal with that growth and take up some of those managerial tasks that we thought, you know what, maybe we missed something. When we wrote REWORK now 14 years ago, we were a substantially smaller company than we are today and certainly than we were for a while trying to be. And while that chapter rings amazingly true today, I hadn’t even had it as top of mind when I wrote the new post, I still think we were under a different set of circumstances than we were when we wrote it. And one thing I like to believe that we pride ourselves on is to test our assumptions, test our ideas whether they’re still valid, especially if they’re still valid in a new context.

(01:51): And that’s what we did for a few years, hiring a small handful of professional managers, especially on the engineering and the programming side to try to see if that would make things better. And I think after running that experiment for a couple of years, we came to the realization, no, do you know what? The context is actually not that different, whether you’re 20 people or 40 people, 60 people as we are now, it’s not that different. And the pitfalls we identified in that chapter, the idea that if you have managers who have 40 hours of available work every week to do management in, they’ll fill up with management and a fair chunk of that will be meetings, it’ll be coordination work, it’ll be intermediary work, it’ll be the kind of stuff that managers do, and I’m sure that there are organizations where that carry, where that load adds up to something that’s worth more than what it costs to have.

(02:49): But what we found was that it just didn’t at 37signals, and now we’ve ended up with essentially the original configuration we were describing in REWORK. There are no full-time managers, people who just have as their mission to delegate work, to check up work, to check in on others, to follow up, to do one-on-ones, to do that whole bucket of work we normally characterize as management. Every single manager at 37signals do it now as essentially a moonlighting gig, including Jason and me. We are not sitting down thinking, do you know what? I have 40 hours a week to delegate other people. Delegation is something that happens occasionally. It especially happens when we do our cycle planning once every six weeks. Then of course there’s following about in the work and there’s a bunch of other things where you’re supervising or overseeing the work, but it’s coming from a position of someone who’s in the work, that there’s not this separation of people who do the work and then others who look at the work or are removed from the work.

(03:54): Both Jason and I are in the work. We help develop the new products, coming up with the designs, influencing the programming, all these other tasks. And I think I’m not stepping out of turn here saying that both Jason and I, we enjoy that more. We enjoy more being in the work, being part of the production, being part of the making than we enjoy sitting up, bird’s eye view above it all as a manager just trying to move pieces around. That also, again, still it does need to happen. It’s not that you go from full-time managers to zero management. There’s just a huge amount of room in between those two extremes that we can go, some weeks it literally is zero management. Some weeks there’s no one-on-ones, no delegation, there’s no performance inquiries or whatever else have you. And other weeks there’s maybe half of it or maybe some weeks there’s a full week just of that, but it can scale and it can’t scale very well if you have people who do that work full time, it needs to be one fixed lump sump every week.

(05:01): Here’s 40 hours, fill it with management stuff. It’s Parkinson’s law. The management instincts are going to fill the allotted time, it’s going to fill the 40 hours. And the primary problem with management is when it’s full time and it’s only that it can’t do anything by itself. So the way 40 hours are manifested is through other people. It’s, hey, can you join this meeting? Hey, can we do a one-on-one? Hey, can we do some planning? Hey, can we do? Every bit of it is something that pulls someone who’s actually working on things away from that work and into the managerial orb. And I think we just finally came to the realization we did not need that. We do not need that at our scale, that we can supplement the work that we’re doing with a handful of managerial practices or protocols, things that don’t even require human to run.

(05:57): For example, at a lot of companies, the status meeting is one of the chief tasks of a manager every week, maybe even every day in some pathological cases with the standup meetings you go around, what is everyone working on? Where are they blocked? All that stuff. We don’t. We don’t do any of that. We’ve talked about it in the past. We delegate that work to Basecamp. Basecamp asks everyone every Monday morning, what are you going to work on this week? And at the end of the day they ask everyone, what did you work on? That’s a manager’s job put into a system such that no one has to do that as a regular task. It just happens. And I think we’ve managed to do that with quite a few things. To the degree that the management that is still left is mostly about exceptions, it’s mostly about what something is going wrong or off track. When there’s performance issues with employees or other things where the normal rhythm of things is off and we need to intervene and do you know what again, at a company of 60 people, that should not be a weekly occurrence, a daily occurrence, it should scarcely even be a monthly occurrence that you’re following up with that because then something is wrong and you should actually change

(07:18): as Jason often says, change the product. When you think of the company as a product, there’s a bug here in the configuration of a company, if it’s continuously producing performance issues with employees or otherwise, let’s fix that. And then the managerial stuff that is down a hill from that is just going to go away. So you end up with a situation or we’ve ended up with a situation where the management burden that is left is all about exceptions. It doesn’t have to happen that frequently and when it does happen, it’s actually better that Jason or I deal with it. If whoever is a team lead doesn’t want to deal with or isn’t capable of dealing with it, the kind of stuff where you’d normally say, ah, I need a manager to do that. If you reduce it to those exceptions, Jason and I can handle it. It’s not a full-time job.

Kimberly (08:09): Okay, so I think it’s interesting that the two of you like being so hands-on involved. I think there’s probably a lot of entrepreneurs who are like, I can’t wait to get to the level where I have other people doing these sorts of things for me. Talk me through that. Was there ever a point in your career in this 25 years of 37signals where you thought, yeah, maybe I’ll be a little less hands on and we will have other people do this stuff?

Jason (08:34): It’s not that fun, frankly. I actually tweeted something about this today, which is the business side of running the business is not that interesting to me. It’s like I consider it a very, very thin candy shell around the gooey center of all the good stuff, which is product, which is people, which is thinking about marketing and talking about their product and talking to our customers. All that stuff is like that’s the really exciting part. And so to launch yourself into orbit far away from that gooey center is not that interesting to me personally. There are other entrepreneurs I’m sure who don’t like the work and do want to sit in the corner office and tell everyone what to do all the time, and that’s fine too. That’s what they want to do. It’s their business. It’s not how I would want to run it. It’s not what I’d want to do.

(09:14): Again, the business part of it is not intellectually stimulating enough for me or creative enough for me or interesting enough for me to just do that. Of course there’s some of that here and there, but most of the time we’re doing the thing and that’s why we started doing this thing in the first place is to do the thing and to make the stuff and to build the tools and all that kind of stuff. So the closer we are to that, the better. At least that’s my take. There’s also I think an ounce of respect that’s lost when someone’s a manager and they don’t do the work, even if they used to do the work. I think it’s harder for managers who don’t do the work at all to actually gain the full respect of the people who they would be managing or who are around them or under them or whatever term you want to use for the hierarchy, that it’s important to still have your hands in the mud, so to speak, to have the respect.

(10:04): Your fingernails should still be dirty if you’re talking to a landscaper or a mechanic. If you can’t do that, it’s harder I think to ultimately manage. So when we do need to manage, hopefully there’s a modicum of respect there because we’re still doing the stuff too, and I think that’s just the best combination probably of actual leadership. You’re able to lead yourself too if you can’t lead yourself through the work. Not all the work. Sometimes you can’t do as much as you used to be able to do or there’s different things that have come up, but fundamentally you need to understand what you’re doing so other people I think will listen to you and believe what you have to say.

David (10:36): And I think that’s a key part of how we ended up with our structure. When we say we don’t have full-time managers, we actually have a quite high number of part-time managers. We have team leads and principals who are responsible for one person. On the programming side in particular, we have this mentorship set up where a lead or principal programmer will be assigned usually just one mentee that they’re responsible for a junior or even senior programmer whose work it is their responsibility to oversee and it’s their ass on the line, if you will, when it goes out the door. And that sets up a relationship where for junior and even senior programmers, their management relationship if you will, is to someone who is more experienced than them, more competent in many cases, not in all cases. There are cases where junior or senior programmers know more about a certain topic than the lead programmer does, but on the overall sense of it, you’re being driven by and learning from someone who knows more.

(11:45): That’s not exactly a novel concept. That is literally how most crafts have been for thousands of years, that you would apprentice under someone who knew more than you. You would be led by someone who knew more than you. And I think that is a really powerful way of both keeping the part-time managers in the work because they only have to deal with perhaps one, maybe two reports. Usually where things fall over and you get the sense that you need to be a full-time manager is when you start having 5, 6, 7, 8, 9 reports. Now suddenly your entire week is filled just with overseeing other people, just with overseeing their work. And yeah, I can easily see how someone goes, I simply don’t have time to be in the work. I don’t understand how you have time to be in the work. I’m not in the work at all.

(12:34): I’m just managing these nine people. Well, at 37signals, we broke that up. Most of the lead and principal programs just responsible for one person. You could be responsible for one person and think, do you know what, that’s maybe five hours a week at most. So the bulk of the week is for myself and my own work and I will oversee that work. And then for Jason and I, we oversee or interact with or have reports that are all leads or principles and most of the time we don’t need to do the kind of very hands-on management stuff that you need to do with more junior programmers where you’re really guiding their career and so forth. Most of the value that Jason I can add as managers of leads and principles is engaging on the work. Here’s a problem, let’s figure it out. Let’s work together on it.

(13:25): And I think that’s a more satisfying relationship for both ends. I certainly know it’s a more satisfying relationship for me. I far, far prefer collaborating with someone on a piece of work. We’re trying to solve a problem, we’re creating new framework, we’re making a new feature, that sort of stuff. Then the overall, how do we tinker with the protocols or the structures at the managerial level? How do we have just these standing meetings and so forth? I think a great example of how the traditional conceptions of that managerial hierarchies being hammered from multiple sites right now is Huang, Jensen, the Nvidia, CEO, he has 50 direct reports and the way he manages that is not by the traditional, we have weekly one-on-ones. He has a group, a very large group, a surprising large group. It’s even hard for me to fathom. It’s like, wait, literally almost everyone in this company would reporting to just Jason or just to me.

(14:24): That sounds wild, but he’s doing that by not having anything be a 1-on-1. He does it in team forums when they’re discussing things and they’re discussing problem and that’s a way to scale things out, which kind of gave me sort of an echo of what we’re trying to do with these check-ins. When you write what you’re working on, what you’re going to work on, the whole company gets to hear it. Everyone gets to be part of that conversation. And then you have other things as Brian Chesky apparently gave a inspiring talk at a recent startup conference and Paul Graham wrote it up and it was this big thing this week on Twitter “founder mode.” This idea that the CEO refuses even at the scale of something like Airbnb, which I don’t know how many employees they have, but they must have thousands at this point, even at that scale, refuses to be a recluse that sits up in the ivory tower and only delegates by assigning resources and broad visionary multi-year priorities.

(15:23): Brian had tried that model and decided, you know what, that wasn’t taking the company in a good direction and switched to a more natural for him mode of simply being involved with the work, checking up on projects, being directly in it, skip levels when you have a big hierarchy and diving right down to individual projects and refusing to just be bird’s eye. Also wanting the frog perspective, also wanting to be on the ground in it. I can’t fully relate to that. We don’t have even the opportunity of sitting up in some ivory tower being bird’s eye. I mean the amount of resource delegation we do is 20 minutes every six weeks, so that’s not exactly a heavy burden as I can imagine it being thousands of companies, but it’s the same instinct. It’s the same idea that actually no, it’s good for senior executives, for founders to be in it, to be part of the product.

(16:17): They are very often the individuals who’s going to take the risk required when risk is required, who’s not going to tolerate a slacking or sliding quality bar, who’s going to be unreasonable in all the ways that promote a better product, better customer service, better overall company, and that’s not that easy to replace with a layer of professional management. Now all that being said, there are counter examples. Satya at Microsoft is not a founder at Microsoft. He was absolutely a professional manager. He’s done wonders for that business, so multiple things can work, but where I think Jason and I have arrived is just an honesty with what we like. I don’t like managing through other managers. I don’t like being one step removed from what we’re actually working on or getting the direct feedback. I like being directly in it. We’re small enough that we can be, so why not just stick with that?

Kimberly (17:17): I also think what’s interesting about 37signals organization being relatively flat without all these layers is I don’t think anyone thinks in order to move forward or progress in my career, the only next step is to supervise people. People can still work here without having to be a manager as the next step. You can continue programming if that’s what you want to do.

David (17:40): Yes, and I think that is something we’ve put a fair amount of work into, clarifying what the professional career ladder looks like when you are primarily an individual contributor. Although I will say that the way our progression ladder looks is that if you’re solely responsible for your own work, you peek out at senior, which is great. We have a bunch of people who are senior at the company, they’re primarily responsible for their own work. That is wonderful. By the time you set into a lead or principle role here, you are also expected to have a broader influence on the whole company, on your team, on a whole product where you are helping to work through others. And that’s where we end up with these obligations. Like by the time you hit lead or principal, you’re not just be willing, you are expected to, and it’s a part of your job responsibilities to be able to take on a mentee, not to become a full-time manager.

(18:36): We don’t want to do the Peter principle, which I’ve seen time and again where you take someone who’s a really good individual contributor and then you go like, oh, awesome, let’s promote them to be a manager and here’s three reports, here’s five reports, and at the end of it, all they’re doing is managerial work that they often don’t enjoy, frequently aren’t necessarily that good at, and very commonly are miserable in because they’re no longer in the work. In fact, we just hired a new programmer on the team who used to have a very senior role at a different, at a string of other companies solely as a manager who decided at this point in their career, that’s not what they want to do. They want to get back to the individual contributorship of actually being able to write code themselves directly have an impact on products being released through their own work, not through others.

(19:27): And I think there’s a huge class of very highly qualified senior folks who would love to stay in that if it did not mean anchoring their career at some junior level. And that’s what we’ve tried to facilitate here with the step ladder that we have. I mean, the other thing now is we literally removed the chairs, right? Like before there were a small handful of chairs that said manager on them. We ripped them out. They’re no longer available. Literally the only role that is available here is that you will become as good of an individual contributor as you possibly can and you might be responsible for one or two other people.

Kimberly (20:03): Okay, last question before we wrap up, and I’m going to ask you guys to speculate. So you had mentioned when REWORK was written, when there was this no managers, everybody works, the company was much smaller. At where we are now at about 60, we’re good with this, no managers. There was a portion of time where you thought we needed some. What size do you think that is? What size does the company need to grow to for that level, extra level of managerial oversight to be necessary? Again, I know this is not your company, so I’m asking you to speculate a little bit.

Jason (20:33): I would say, I don’t know. I think we hired in anticipation of needing that structure because we were planning for a while, there was a moment where we’re like, let’s try to double the size of the company as sort of like this, let’s try to do that. Why? Well, we had some other big ambitions and ideas that we couldn’t get to unless we did that we thought. And then as we got into that, we realized we actually didn’t want to do this is the second or third time we’ve tried to do that or thought maybe we should do that. And then realized, you know what, that wasn’t really honest. We weren’t really being ourselves there. Let’s not do that. But when we were about low eighties, we had a handful of other managers, we didn’t really need them at that size. We thought that we would need them if we got to 120 or something like that, but we didn’t want to hire them at 120.

(21:18): We wanted to grow into that system. So we had some structure to grow into essentially. So I don’t know where that would be, and I think it’s quite a bit higher than most people would think is sort of the thing to lead people with, which is that you can probably get away with not having managers for far longer than you think. And I’m not against managers either. I don’t think David and I are against that role in certain situations in certain organizations and certain structures, but I would say I’d push that off as long as you can because there are some significant trade-offs that you may not realize. And the other thing I think it’s important to recognize is that companies typically hire management because someone else has too many responsibilities and they want someone else to do those things. It’s very hard to actually truly remove yourself from those responsibilities.

(22:02): So you might bring on a manager, but you’re still going to find yourself doing many of the same things you were doing before. And that I think is a big revelation. A lot of people don’t realize until they realize it and they go, oh, okay, I can’t actually remove myself from this part of the business truly, fully if you really care about the business. So then you’re stuck with a situation where someone else is trying to do a job and you still kind of are involved, which is actually harder for both of you to do the job. And then it’s harder for everybody below that because now who do we listen to? Do we listen to this person or that person? Now, someone listening to this might go, well, your management structure is crap. You’re doing it wrong. If it was this, that and the other, it’d be perfect and you guys don’t know what you’re missing. And then maybe they’re right, I don’t know. But for us, all I know is what we’ve tried, what we’ve done for ourselves. And I think that around 80, we didn’t need full-time managers either, but we gave it a shot and that’s fine. And we met some great people who are really talented and wonderful. It just didn’t pan out here ultimately.

David (22:54): And I think what’s interesting about, I think our hard watermark in terms of head count at 37signals was 83 or 84 people, and now we’re more around 60. The reason we originally wanted to have a larger company and thought we needed full-time professional managers involved in running that was that we wanted a more capable company. We wanted a company that could solve more of the problems that we saw in a better way and push things more or push more out. And what’s fascinating about the journey we’ve gone on is that the company we were at 83 was in many ways a less capable company than the one we have at 60, that some of these layers and intermediaries and whatever, even with the best of intentions, even with the best of skills, were not actually transforming the organization to be a more capable one.

(23:47): As Jason said, maybe it clicks. I can totally imagine it would at 150, that’s just, there’s something that clicks and it falls over and suddenly all this structure is warranted and it’s good and it’s helpful and so forth. Maybe. But what was interesting for us was to go through that valley of, do you know what? We’re actually, it’s actually less. We have less than the sum of the parts we currently have. And again, maybe it’s because we didn’t know how to use ’em enough. Maybe it’s because we should just push through. Revelation would’ve been possible on these such maybe, maybe, maybe, maybe. But at the end of the day, it was enough of a taste of what a company of that size would feel like to realize that doesn’t suit our taste buds. It does not actually suit our taste buds to work through other people to have to have that layer of management to be effective.

(24:42): It’s much more in tune with the way we’ve run the company for a long time and the way that we like to have things run for Jason and I to not have that at all, to just have the direct relationship to just be directly in contact with all aspects of the business. And we thought, again, there’s no one here telling us what to do. There’s not a VC going, what are you talking about? You raised your series C round like two months ago. You have 16 months left to spend a hundred million dollars. You damn well better double and then double again and then double again for us to see a return on this investment that we’re imagining. We’re accountable to ourselves and what we like and what we think is right for the business and right for the products and right for our customers. And therefore, we can say things like, no. We can say things like, do you know what? Nevermind. Do you know what? Let’s just go in a different direction here and maybe it caps us in some way and maybe there’s some upside and golden bucket of money at the end of some rainbow that we’re foregoing. Fine, whatever.

Kimberly (25:50): Well, Everybody Works as a chapter in REWORK, and you can also read David’s post on HEY World. I’ll link to all of that in our show notes. Rework is a production of 37signals. You can find show notes and transcripts on our website at 37signals.com/podcast. Full video episodes are on YouTube and Twitter. And if you have a question for Jason or David about a better way to work and run your business, leave us a voicemail at 7 0 8 6 2 8 7 8 5 0. You can also text that number. We just might answer your question on an upcoming show.