SEASON 2 - EPISODE 0045 - DEC 28, 2022

Year in Review: Growing as a Company

With the year ending, it’s a good time to reflect on how far you’ve come in the past year as a company.

Today, the co-founders of 37signals, Jason Fried and David Heinemeier Hansson, discuss the growth of the company in 2022 and some of the significant changes they made this year.

They’ll walk us through some of the new positions they’ve added, the challenges they faced along the way, and how they work to preserve a culture at 37signals that aligns with who they are.

Show Notes

00:42 - Jason shares how their two hits, Basecamp and HEY, were the primary motivators to change the way they operate (and grow).
02:44 - How a bigger team is helping 37signals stay on track with their goals.
03:44 - David shares that after 20 years, the extra team members are helping to ensure everything gets done without over-scheduling and a little more downtime.
06:40 - The importance of expanding the team to be more available for their customers to help them better use the 37signals products.
08:13 - How they are creating educational tools to help their customers get more out of their products.
09:26 - Making the experience of buying Basecamp feel more luxurious.
11:13 - David discusses their painful experiences with not expanding their team to mitigate business risk.
13:04 - Jason shares what’s tricky about new roles from the book, REWORK.
14:01 - How to stop replaying your greatest hits and embrace the growth experience.
15:12 - How new blood and fresh perspectives help you test your old ideas to see if they’ve improved.
17:44 - The joys and challenges of letting go and leaning into growth.
19:01 - The frustrating and rewarding process of putting things on someone else’s plate—even if YOU are good at them.
21:49 - The challenge of seeing beyond HOW the work is done to focus on the outcome.
22:54 - Why the culture at an 80-person company cannot be the same as the culture of a 40-person company, and what David and Jason are doing to ensure it remains true to who they are and what they stand for.
26:16 - If you have a specific question for Jason and David about a better way to work and run your business, leave us a voicemail at 708-628-7850, and we might answer it on an upcoming show.

Links & Resources

Do you have a question for Jason and David? Send us an email or leave us a voicemail at 708-628-7850.

Transcript

Kimberly (00:00): Welcome to REWORK a podcast by 37signals about the better way to work and run your business. I’m your host Kimberly Rhodes. With a year coming to an end, it’s always a good time to reflect and take a moment to consider what went well and even celebrate how far you’ve come. I’m joined by co-founders of 37signals, Jason Fried and David Heinemeier Hansson. I know you two don’t wanna make a whole episode about all the great things that we’ve done, but I do want to talk a little bit about the growth that 37signals has had in 2022. We’ve nearly doubled our size, added some departments functions that we’ve never even had before. So let’s dive into it. Tell me about like this kind of big change of size and growth.

Jason (00:42): Yeah, so we decided to make sure that we could do at least two things at once. So historically, um, we’ve only worked on one product at a time. So even though we’ve built, uh, depending how you count, could be like up to eight products. We had Basecamp and Backpack and High Rise and Campfire and the job board and Sort Folio and some other things. Um, we would sort of work on one, put that aside, work on something else, put that aside, work on something else. We didn’t have enough capacity to do two things at once, and now that we have two hits, we have Basecamp and Hey, we didn’t want to continue that pattern of having to put something aside. For example, when we built Hey, it took us about two years to build Hey all in and we basically weren’t able to work on Basecamp during that time.

(01:33): That didn’t seem like moving forward that was the way we wanted to continue to run the business. So we decided to hire a bunch more people, staff up in a bunch of different ways, build some different departments up so we could sort of do Basecamp, do Hey maybe, well, we’re beginning to work on a third product right now, but to be able to do multiple things in parallel versus just having to put things aside, I think that way back when putting things aside was sort of okay, but the landscape has changed. Uh, demands are higher. There’s a lot more competition and having something sit for a while just doesn’t make any more sense. So that was the, the primary impetus to, uh, to build up the company, uh, to a level that we’ve, we’ve never been at. We’re about 80 some odd people now, which is, uh, the biggest we’ve ever been. And, and, uh, what’s great is it’s working and, and that we’re able to ship incredibly, uh, incredible updates, great features, really nice improvements to each product every six weeks. We’ve been doing this now for a number of months, number of cycles, and, um, the products are both getting better all the time and it’s a really satisfying thing compared to our, our history. So, um, that was, uh, one of the primary, uh, reasons we, uh, we grew.

David (02:44): The other reason was to have a little bit more slack, have a little bit more flex in the system, not run as lean as we’ve historically been. I mean, we’ve taken an absolute pride in running as lean as basically any software company you could compare us to in terms of customers and revenue and so forth. We were tiny. And that gives you a lot of advantages, huge advantage early on that you can run on a smaller budget. You can run within your means quicker. You can do a lot of things more easily, you can move more nimbly, but it also has the consequence that if someone is out sick or if someone leaves or whatever, suddenly uh, this finely tuned machine is missing a part and there’s just no immediate spare to, to plug into this such that everyone else can continue to do the great work that they they want to do.

(03:44): And I think we came to the realization that, do you know what, after 20 years in business, we don’t actually need to prove that we can still run a triple triathlon every year. We could also just go like, do you know what, it’s okay to have a little bit of body fat like having 1% body fat. It’s not actually healthy. Having a bit of margin in terms of people and responsibilities and flexibility for those people to sometimes not be scheduled the whole way through. I mean, in our peak sort of fitness ideal where we had the 1% body fat, everyone on the product team were scheduled all the way through, we would go like, okay, six weeks, what fits in for every single individual such that it adds up to six weeks? And you do that cycle after cycle after cycle and you go like, do you know what, that is a little exhausting to constantly be scheduled all the way out, even if we still have cool down and all the other, uh, factors into it.

(04:47): Now we have enough capacity and we don’t have to do that for everyone all the time. Sometimes you’ll be on a, what we call big batch project and you’ll work for six weeks on a single major feature and you’ll ship that, and other times you’ll have three weeks of work assigned or four weeks of work assigned, and then the rest of it is just sort of slack. And that filters into a lot of aspects of the business on the product team with programmers for example, we have this notion of on-call that someone has to be there to help the customer support team respond to customers when they’re having issues with the software. They have to dig into what’s possibly a bug or, or help something out. When we had a much smaller team, people had to do that a lot more because, hey, you’d be on call for, for a week and then it quite quickly would be your time again.

(05:32): Now we’ve arrived to a schedule where you’re really just oncall once a cycle, which is just a lot easier to deal with. And again, having that buffer allows us to do pretty much the same things in the same ways, just with that little bit more flex. I think if you stretch things out than enough, you just become a little brittle. And again, I think we are huge proponents of doing that when you don’t have a choice. But part of the luxury of running a business profitably for all the years that we’ve been doing is that eventually you can arrive at a place where you don’t have to run everything on that shoestring approach. You should always, in my opinion, be capable of doing it, and you should flex those muscles and those boundaries and boxes frequently enough. And, but you know, what, if, if we’re looking into this and, and for the people who work at 37signals looking into, what would it be like if I were to work here for another five years, 10 years, 15 years? Is that pace that we are running in now? Is that something I can see myself in for 10 years? Eh, I don’t know.

Kimberly (06:40): Well also in 2022, you guys added departments that had never existed. I mean, I’m part of the Customer Success team that didn’t exist before. That’s a new 2022. I know there’s some other on the commercial side of things that are new. Kind of tell me about that and why you guys decided to expand in those non programmer areas of the business.

Jason (07:01): Yeah, it’s, it’s one of these things where it just felt like, okay, well, so customer service is very, is very reactive, for example. So customers have an issue they write in, we, we help them with that. It could be a pre-sales thing, it could be an existing customer, but it’s always in response to typically a question or an issue of some sort. And they’re full with that.

Kimberly (07:23): That’s, it’s a full-time job

Jason (07:24): As we’ve talked about on previous podcasts. It’s a full-time job and there’s a lot to do there. And to, to David’s point about slack in the system, we should also have slack in the system to be proactive and to uh, be able to, to give demos if a customer wants to walk through something more than just an answer. Some people might just want an answer, others are like, can you show me something? Can you take me through this? Um, and we didn’t really have any capacity for that. Um, we could occasionally do it, but we didn’t have any, we couldn’t just say yes, we had to say, Hmm, maybe and who’s gonna do it? And whole thing. So we felt like that was another area where we should, we should just, we should be available to a customer, prospective customer or an existing customer who just really wants more time with us and really wants to understand how to use the product better and not just to solve a problem that they might be having with it.

(08:13): So that’s something that’s, I think, a very important thing to do. I think we all appreciate when someone, a company does that for us or when someone shows you something in a way where it’s not just about solving problems, but helping you learn how to use something better and make it fit in or work, you know, fit in with your flow, that sort of thing. Um, and then there’s also, you know, uh, some stuff that you’re doing Kimberly, which is like creating videos and, and creating educational resources for people. So it’s one thing to make a marketing site and get people to sort of sign up for something and give them the gist of what something is, but I think historically we’ve sort of left people, uh, hanging after that point. Like, here’s, we have a help site, here’s pictures of a thing. But we haven’t been, you know, helpful and educational beyond that.

(08:57): And I think the customer, customer success role, the stuff you’re doing with videos, stuff Chad’s doing this is all in, in the spirit of, of helping someone get more out of what they’ve already purchased or what they’re about to purchase, which is quite a bit different. So anyway, I think we were sort of looking at it previously as a sliver of a job and now it’s a full-time job and there’s a, as a department working on it and um, it, it feels like it, it feels good to support customers in that way and not have to say no because we don’t have the people or the time to, to, to help,

David (09:26): Which I think is, um, illustration of this larger point of growing some capacity that we did not have before. Some capacity to have the capability of doing some of these things that we just think like, you know what, that’d be really nice if we did that for customers. And when you see the effects of that, when you see the effects of, for example, someone who’s on a customer success demo and like the light bulbs that go on above their head when they’re showing something, you’re like, do you know what? This feels good. And again, some of this is, I think a previous version of me would say luxury as in, do you know what, it’s not the first thing you necessarily add to a team. Um, but again, we can have some luxury. The experience of buying Basecamp should feel luxurious at this point.

(10:14): Um, we have room to have more of that luxury feeling to it. The other aspect of this I think is risk. So some areas of the business for a surprisingly long time has run in a, um, let’s gently call it naive way. Uh, accounting is one of those ways. So until quite recently we ran as our new head of finance would say, we ran the business like you would, uh, an ice cream stall, almost like a cash register, you discounting thing to come up and do you know what, um, maybe that’s not appropriate for a company that’s been around for 20 years of processed, tens of millions of dollars in revenue a year, um, have 80 employees and so on. Having a little bit of rigor around those things is a risk mitigation. And this is one of the things again, would I do that as the first thing out the gate until you’re secure and, and founded?

(11:13): No, I would not. But also, should we waited 20 years to get a proper head of finance into run things, eh, okay, maybe that was a little too far, right? In fact, that’s one of those examples where there’s a almost a sticker price you can put on that. Um, several years back, maybe this is five years back or something, we realized that we hadn’t been doing the right things around, um, sales tax and that there were actually all sorts of obligations we had in the individual states because we’re a remote company and you end up creating this thing called Nexus if you have employees in different states, nexus being that the state has a a right to essentially tax you. Now there’s even more rules around just doing enough business in a given state means that you are liable for sales tax. We hadn’t really followed up on that because we didn’t have anyone to follow up on that.

(12:02): We had no one minding that risk and we ended up spending several million dollars out of pocket to settle, um, back taxes when we realized by ourselves before getting audited or anything, you know what, we haven’t been running this, right? So sometimes you, you can get to, to this state where you’re, you’re well past the point where you can afford and it fits into your trajectory to have some of this risk mitigation, but you just didn’t do it. And then you look at like, why, why are we not doing it? Are we doing it just solely out of pride or is it because it’s affording us something? Um, there are other times where I think bigger businesses we’re like, oh, to be a proper business we have to do all sorts of stuff for pomp and circumstance and we hire a bunch of people to do that and the work is busy work or whatever. That’s not what I’m talking about. I’m talking about actual business risks where uh, the tax services of a state might show up and say, hey, we’re auditing you and you’re not in compliance. That’s not gonna be a good time.

Kimberly (13:04): And then there’s also been some marketing functions that we’ve added in 2022, I don’t know if they existed before and they’re just new hires or they’re completely new roles. I’m thinking of people like the Rolando’s and Kelly’s and those all happened in 2022, right?

Jason (13:18): Yeah, yeah. These are new roles and um, you know, one of the things that’s tricky about new roles is that you’ve gotta figure out how to integrate them, how to sort of figure out what the actual job is. So something that David and I have talked about for years, I think it’s in, it’s in REWORK. I think, um, it might have been in getting real, but I think it’s in REWORK, which is do the job yourself first. Typically before you hire someone in a role, try to do that job yourself because then you really can understand what it is that needs to be done. And so for example, with, with writing, David and I have been writing for years, but we’ve been writing from like our perspective and our point of view more personal writing. So to hire someone who’s dedicated to writing, um, company material is a new kind of role.

(14:01): We know how to write, but it’s a new role. And so figuring out how that fits in has been interesting in sort of where the articles go. And we didn’t have a place before for like articles about Basecamp, so we had to figure all this stuff out. So it’s, it’s really interesting to to, to expand. Cause I think in, in some, in some ways it’s easy to just sort of go, well, we’re just gonna keep doing things the way we’ve been doing them. Um, but I think also, you know, one of the, the other sort of, um, I conclusions maybe is the wrong word, but things we came to over the past year was like, what’s worked for the past 20 years may not work for the next 20 years. And if we’re just stuck with looking back in our past and pulling out the greatest hits and saying only do more of that, that may just not land the same way it used to land.

(14:43): And so this is also in the spirit of trying new things and and expanding our exposure and you know, what it is that we’re putting out there in the world world, that’s a big part of this too. And so all these things are, are ultimate experiments like the pricing experiment. We’re, we’re running, um, figuring out how to make all this stuff work is new for us. And so that’s part of, part of growth too, is not, not just like organizational size, but organizational capacity and the, the ability to use resources that we didn’t have before and how to use them is all part of the growth, you know, experience.

David (15:12): And I think that’s the magic sometimes of new people and functions you haven’t had before, that they can inject some fresh perspectives on things we might have grown a little stale on. As Jason says, one of the pleasures of being around for 20 years is obviously you’re still in business and we’re still serving customers and so forth, but your thinking can also ossify. And you think like, oh, do you know what we did that thing in 2008 and either it worked or it didn’t work and therefore that is now the truth. Either that that was a success or that was a failure. Do you know what the half-life of facts sets in quite quickly in tech in particular and in business in general that the things we think we know to be true often are no longer so. And it’s difficult at times to reconsider that just out of your own drive, if you are the person responsible for how, how things are.

(16:08): So injecting new people to test new things out or retest things that we’ve done before on marketing in particular, the strategies that work or don’t work, they change quite frequently. And we might have tried something five years ago on a, on a certain thing sponsoring podcast for example. How does that actually work now? Um, so having someone come in and drive that in in a, in a way is a, is a way for us to re-question the things we think we know and that may no longer be so, so that in itself is, is valuable. But so two though is embracing data as experiments. You’re not because we hire someone in is not a declaration that that approach to a given experiment. That’s just what we’re gonna do from now on out. That is one of those I think really beautiful moments in early startup life is you get to try a lot of different things.

(17:03): You get to try a bunch of stuff at the bottom and that’s totally normal. What happens with successful companies who’ve been around for a long time is that that becomes harder and harder to do that you have to forcefully inject that impulse to try weird things or different things or things you’d already tried before versus when you’re starting out first, that’s totally blank canvas. You can show, throw whatever you want at it and it’s gonna leave a, a novel mark. When you’re dealing with an organization like ours that’s been around for so long, you, you kind of have to force it in. And one of the ways to force it in has been to hire someone in these, um, in these domains and then run new experiments as though it was as, uh, as your basis would say day one.

Kimberly (17:44): Okay. So I’m curious because you guys started, I mean it was two of you and now, now there’s 80 something as founders, have you struggled with, you used to do these roles and now you’re having to let go and let someone else do them and run with them. Have y’all had any challenges with that letting go or is it just like, no, it’s no big deal? I say that as someone who has a hard time letting go

David (18:08): . Uh, how about all the challenges? I think that is actually perhaps the, the bigger, the harder test is that over 20 years, particularly if you are the kind of opinionated operators that Jason and I are, that it is quite difficult sometimes and you have to actively combat the impulse to refer back to your perfect memory of 20 years of experiment. I know I have this all the time with the marketing thing, oh we tried that in 2017 and here’s almost the stats on how that played out and yep, those are historical facts perhaps even, um, or maybe they’re just anecdotes, but uh, pulling back in that and allowing some degree of, you know, what retesting of these facts are, these things still true is surprisingly difficult even when you recognize going into it that, you know what, I’m probably gonna have a a bit of a hard time with this.

(19:01): It’s, it’s harder still to live through it, but that’s um, that’s part of the, part of the joy of this, right? Um, and some of that too in terms of the growing capacity is also to realize that there are aspects of the business operations that Jason or I might have been doing just because that was on our plate. Like for example, I’ve been involved with a bunch of the legal stuff we’ve done over the years and now we have both Elaine and we’ve had um, Abigail in over to deal with some of those questions. You know what, I don’t necessarily need to be involved with what happens with a law enforcement request that comes in. We have some capable people who actually specialize in this or have seen this before. So letting go of that is not just good for the business, it’s healthy for you as an individual, but holy shit, it’s difficult.

Jason (19:49): . Yeah, cuz look, doing something doesn’t mean you’re any good at it. You know, we did a lot of things cuz you have to and, and part of part of letting go is realizing maybe there’s someone who’s better at this than you are. And then also there’s other times when you’re like, well no, I think I’m still better at it, but also I just can’t do it all anymore. I’ve gotta do other things. This is an organization. Um, so it’s hard. It can be frustrating at times, but I think it can also be incredibly rewarding when you see people really step up and do things and take something off your plate. Um, and then you can free yourself up for the things that you are, are actually still really good at or still really find joy in. Um, so I think it it’s a mixed bag. It’s a mixed bag. Some people are better better at it than others and there might be individual things that you’re easy, that are easier to give up than others, but in the end, like you kind of have no choice. I mean, unless you want to micromanage everyone everything all the time, that’s gonna be a pretty miserable situation too. So you, you kind of do have to get used to, to letting go of it bit if you’re gonna grow a business.

David (20:48): And transform your review of the work from sometimes the mechanics to the outputs because that’s the other thing. Just because you hire a new function does not mean that you’re not ultimately responsible for what the company does. Jason or I are responsible. Jason a little more than me, thankfully. Um, it’s says CEO on his card, right? So ultimately the buck stops with Jason and I mean as owners of the business and operators of business stop with us more broadly. So we do still have to be part of it. And that sometime is the difficult dance. You have to be in the loop, you have to be able to assess how we do things. When someone new comes in, they don’t have your whole repertoire of, of ethics and principles and values. That stuff has to be passed on. And one of the ways it gets passed on is that something is done that isn’t quite to our liking and then we have a conversation about how we can perhaps finesse it or redirect it, uh, more to be in line with what we wanna stand for as a business, but then also evaluating the outcomes, right?

(21:49): So part of this, um, on marketing and trying different tactics is to find a reasonable compromise in like how much time are we gonna give this initiative before we start looking into the details, because I’m very prone to wanting to look into the details early on and we’ve had a lot of discussions about that. Where do you know what, it isn’t actually helpful to this initiative if a week after it’s launched, we’re already trying to do the conclusion on it, but at some point we should be right. Like we otherwise we’ll just accumulate all such initiatives that aren’t moving the ball forward and the way we want it move forward. But you know what, maybe the rendezvous point is three months from now, six months from maybe even a year from now, particularly on marketing where some of these things have quite long cycles before you really know know, but coming to terms with like, when are we gonna look at this? When are we gonna look at the outcomes and being okay with a fair shift away from evaluating how the work is done to what the work results in.

Kimberly (22:54): So my question for you guys before we wrap up, the company’s grown almost twofolds in 2022. Have you had concerns and or what have you done about it to make sure that the company, even though it’s grown still has the same culture and the same vibe as it had when it was five people, 10 people, now it’s 80 something people. How have you tried to make that happen?

Jason (23:20): Well, it can’t, so I think it’s not the same company as five or 10 or 20 or 30 or 40, it’s a different company. And um, my sense on, on on culture is that culture is is just, it’s a moving average. It’s like a 50 day moving average. Like how are we to each other over the past 50 days? Um, are we helpful? Are we kind, are we fair? All those things. Like that’s really what your culture is. You don’t preserve one, you don’t really create you, you create one through your actions, but you don’t like write it down. It’s just how you are. And any slice of time is, is gonna be a little bit different than the, than the the previous. So for example, we might have 80 people this year, we might have 80 people next year. Next year’s gonna be different than this year because this year is more about learning and maybe next year is more about executing or I don’t know, I’m just making things up here.

(24:07): But like you have different slices of time with different outputs and different outcomes and different priorities and that all plays into to culture as well. But I think what’s unhealthy is to think that your company of 80 can be the same feel as a company of 20 or five or whatever and you can get stuck in this nostalgia bubble or you’re just like, ah, it was so much better when it’s like, I don’t know, maybe back then it wasn’t so good for these other reasons, things we can do now, we couldn’t do back then. Like, it’s just really easy to look back and and romanticize about how things were. But how things are is what you’ve got in front of you and, um, making the best of it is, is all you can do. And, uh, and don’t try to, I think hang on to the way things were. I I just don’t really feel like that’s ultimately very productive. There’s things you can take with you and principles that you can carry with you and, and important bits of all that that you don’t wanna lose, but you have different people, different times, different priorities, things are gonna be different.

David (25:06): I think you also have to realize that you cannot indoctrinate everyone personally as a company owner in a company of 80. It has to be an infectious game where Jason or I have very high bandwidth interactions with a number of people and they, they in turn have very high bandwidth interactions with other people and then that’s the way that these things disseminate and they, they spread that you set a certain standard. One of the things that I’ve been doing on the, on the programming side is to get involved with the code reviews and, and set a certain bar for the kind of quality of code we want to put out. And I’ll work very intensely with the people on that and then take pleasure in seeing them apply the same standards to people they’re reviewing, they’re interacting with. Because that is the only way to scale, if you will, a culture is that it, it spreads. You can’t personally, um, direct inject into 80 individuals. You can, you can direct inject into a handful of individuals and then that has to work through the system one at a time.

Kimberly (26:16): Well, with that, that is a wrap for us in 2022. We will see you back in the podcast in 2023. REWORK is a production of 37signals. You can find show notes and transcripts on our website at 37signals.com/podcast. And as always, if you have a specific question for Jason and David about a better way to work and run your business, leave us a voicemail at 708-628-7850. I am determined to have a Ask Me Anything episode with you guys in 2023. So you guys send those questions in.