Red Rocket
recently acquired Restaurant Furniture Plus,
a B2B ecommerce website selling furniture to restaurants. What made this business different from most
of the other businesses I have managed was the fact it was 100% a virtual company. The founders worked from their homes in
California and the fulfillment team worked from their homes in Ohio. So, we decided to try to continue to operate
the business as a virtual workplace, with the owners working from their homes
in the Chicago and Raleigh areas and the rest of the team working out of their
homes in the Cleveland area. It has been
an interesting learning opportunity that I wanted to share with you, as you consider
the pluses and minuses of virtual teams for your business.
THE ADVANTAGES OF VIRTUAL TEAMS
Lower
Costs: Since you don’t have to pay
expensive and growing rent for a home office facility, you can save material expenses
and reinvest those savings into other more important areas of your business,
like talent or marketing. And, you can
just as easily hire talent in a lower cost market like Des Moines, as you can
in a higher cost market like San Francisco.
And, virtual workers often come with their own home offices set up, so
no material costs for computers, internet or phones. So, hopefully, your virtual company has the
potential to be materially more profitable than your non-virtual, traditional
competitors.
Happy
Employees: One of the appeals of a
virtual workplace is that many employees are looking for the flexibility that
comes with that. They can work from
their homes, and not deal with long commute times each day. They can more easily set flexible work hours,
and squeeze in personal time, as needed.
They can come to work in their pajamas if they like!! Just make sure the staff member really has
the desire and discipline to truly work from their homes, as many people can’t
clearly separate their work life from their personal life when doing both in
the same location, or would have a tough time working by themselves every day.
Higher
Productivity: Without an office,
there tends to be fewer unnecessary meetings.
So, more work gets done and employee morale is better when they are more
quickly crossing work tasks off their list.
And, you can more easily hire local experts or benefit from local
relationships that improve productivity as compared to outsiders learning a new
market. This also replaces the need for
travel time, where they can put those costs and hours back into the company in
more productive ways.
Flexibility: With virtual companies, you can more easily
scale them up . . . or down, in case your business ever gets into a slump, not
saddled with expensive long-term real estate leases, as an example. And, if ever needed, you can have staff
geographically located across the globe, to allow for a 24/7 customer service
experience. When not “handcuffed” by a
physical office, the world of options are literally available to you.
THE DISADVANTAGE OF VIRTUAL TEAMS
Harder to
Manage: There are clear advantages
of having all your employees in one location.
You can more clearly see the work getting done . . . or more
practically, not getting done. You can more
easily walk down the hall to have a face-to-face conversation with someone or
see whether their inbox is overflowing with uncompleted work. So, you have to be really good at leveraging
online video and collaboration tools as best as you can to recreate the in-office
experience. But, you’ll never get the
same physical cues you get from people when being in the same place.
Harder to
Team Build: It is much harder to
create a culture that you aspire your team to work towards, when they are all
working out of their homes and not really getting team exposure on a daily
basis. And, you can’t easily get the
team together to celebrate employee birthdays or Friday happy hours, as
examples. You will have to be creative
in how you get your staff to build loyalty to the team vs. loyalty to
themselves, with incentives or team contests or whatever.
Harder
Legally: Instead of having to know
employment laws, hiring practices and payroll tax rules for one location, you
may need to learn how to live by the rules of all cities in all states (or the
whole world). But, at least there are
centralized HR tools you can leverage to help you deal with these types of
issues. And, don’t forget about the
potential security risks of having all your important customer or business data
stored in the cloud, instead of under lock and key in your home office.
YOUR FIRST DECISION--WHERE TO LOCATE NEW
EMPLOYEES?
When we
acquired Restaurant Furniture Plus we inherited the team in Cleveland. But, we
quickly needed to expand the team to support our sales growth. But, in what market do we hire these
people? Do we hire them closer to the
owners in Chicago or Raleigh? Do we hire
them closer to the Cleveland team? Do we
hire nationwide? The immediate instinct
was we can hire the best talent wherever they reside, nationwide. But, when we thought about the payroll tax
implications of managing employees in 50 states and that became a daunting
endeavor. Then, we thought, we will hire
the new team members near the owners, and ultimately build our “headquarters”
near one of us, so we can more easily manage them in person, if needed.
But, we ultimately decided, that we will need to be training the new staff on their new jobs, similar to the roles of the Cleveland team, so it will ultimately be easiest to hire all new staff in the Cleveland area. First, for simplicity in training and tax reporting. Second for ease of getting the team together for any in-person meetings over time. And third, all centrally located in one market, in case we ever wanted to open a physical office someday, if the virtual workplace experiment ever was a bust. The only downsides of that decision was, we have now set up the team in a market that is far away from the owners in Chicago and Raleigh (potentially making it tougher to manage), and we have capped our talent pool to the Cleveland area (instead of pulling from talent nationwide). But, we’ll see how it goes over time. There is no single right strategy here. You need to consider what is best for you and your business.
But, we ultimately decided, that we will need to be training the new staff on their new jobs, similar to the roles of the Cleveland team, so it will ultimately be easiest to hire all new staff in the Cleveland area. First, for simplicity in training and tax reporting. Second for ease of getting the team together for any in-person meetings over time. And third, all centrally located in one market, in case we ever wanted to open a physical office someday, if the virtual workplace experiment ever was a bust. The only downsides of that decision was, we have now set up the team in a market that is far away from the owners in Chicago and Raleigh (potentially making it tougher to manage), and we have capped our talent pool to the Cleveland area (instead of pulling from talent nationwide). But, we’ll see how it goes over time. There is no single right strategy here. You need to consider what is best for you and your business.
CONCLUDING THOUGHTS
So, as you
can see, running a virtual company can be very different than running a
traditional company. There are many advantages
and disadvantages to consider. But, if
you hire the right team members that are truly desiring and disciplined to work
well from home, and put the proper group communications tools and online processes
in place, there is no reason it cannot be successful. Or, better yet, materially more profitable
than operating in traditional ways. I’ll
let you know how our adventure into the world of virtual workplaces evolves
over time. But, so far, so good!!
For future posts, please follow me on Twitter at: @georgedeeb.
For future posts, please follow me on Twitter at: @georgedeeb.
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