How Radical Transparency Sparks Excellence

By David Hassell, CEO of 15Five

Recently, I was lucky enough to have a quick chat with Philip Rosedale, the founder of Second Life, Linden Lab, Coffee & Power and co-founder of High Fidelity. A technologist and inventor, I admire Philip for constantly challenging the status quo, both in the virtual world and in reality.

At 15Five, our focus is on fostering great teams and work environments and I wanted to pick Philip’s brain on how he establishes culture in a highly technologized and virtual world and some strategies he uses to strengthen and empower his team.

Technology vs. Geography

To Philip, the power of technology is how it’s changed the way we can exchange information making it fast, easy and at very low costs. He found, especially with software engineering, that finding the talent he needed to help build things did not have to follow the beaten path.

When he built Coffee & Power, instead of assembling a small, full-time start up team, he opted to break the project up into tiny parts and have about 60 part-time and contract employees, near and abroad. Using real-time, shared chat system technology, he was able to co-ordinate the efforts of his team, without having to harness them under one roof.

A Culture of Radical Transparency

So how did he achieve a sense of team, culture and camaraderie?

Philip believed that the best way to keep this non-conventional team structure strong was to ensure everyone felt heard and part of the decision making process even if they were considered part-time or contract on paper. He even gave stock options to reinforce the idea that even though the team wasn’t physically together, they were all working towards the same goals and should be invested in its success or failure.

For Philip, the most important aspect of work culture is radical transparency.

To achieve this transparency, everything was radically open for everyone to see. What you were working on, what you had to deliver, what you had delivered what you were charging for deliverables — it was all visible and available information. By having this transparent system in place, the team almost naturally kept everything in check and fair without management having to step in to interfere.

When everyone is on the same page and feel seen and heard, culture doesn’t have to be created (or forced) -it just manifests itself through the attitudes and actions of the team.

Stock Option Roulette

After hearing about Philip’s approach to transparency and culture, we shouldn’t be that shocked that he also advocates for democratizing ownership.

Democratizing ownership sounds like a renegade idea that might involve occupying the streets with picket signs, but when Philip explains it, the merit of this approach makes perfect sense.

“In the last decade or so, we have all seen crazy ideas like crowdsourcing,” he says adding, “a big group of people can assess things and do so remarkably effectively.”

In respect to the startup world, he takes crowdsourcing to the next level by letting each and every employee allocate stock options based on performance. In a truly transparent work culture, Philip believes everyone has a peripheral awareness of what everyone else is doing and therefore they can make an informed judgement call when it comes to compensation. Usually, the distribution of stock options are managed at an executive level and are role-based not performance-based which does nothing to foster unilateral team growth.

So, how does this work?

Simple. Everyone, including the founder himself, gets an equal amount of shares. You are allowed to allocate them to anyone but yourself in a completely anonymous process. The stock options are then tallied up for each employee by a third party and that becomes your stock allocation.

And we’re not talking symbolically.

Similar to how feedback can help weed out issues or celebrate wins, his democratic approach to stock distribution rewards hard work and sheds light on weak spots. If you find yourself on the lower end of the curve, decided collectively by your peers, this is what Philip calls “advice” and “truth” — a powerful wake up call to encourage people to reflect and grow.

Using Peer Recognition for Employee Assessments

Philip does not stop there with transparency and decentralizing power. He has also implemented systems to allow people to send recognition to their colleagues. Something as simple as “Great job on the video” can be sent at anytime. Now, that’s not exceptionally groundbreaking, however, that these one-line, virtual, high fives are not only open for public viewing but also apart of employee records for assessments and reviews.

Trust, the other T word

Philip’s theory is that this small practice of sending recognition statements is actually an act of trust and spreading the important judgment calls across the team, not just in the hands of a few senior people. You get an honest expression of what people are thinking, what people are achieving and how it’s inspiring and pushing others.

In fact, this is exactly why we developed “Viewers” into the new 15Five 2.0 –so that all members of the team could potentially have access to the reports of everyone, including the CEO, and while not directly reviewing the reports, any “Viewer” could leave comments, high fives, advice or a simple non-verbal “Likes”.

Philip trusts and believes in transparency and decentralized authority so much, he isn’t scared of asking the tough questions. How many leaders do you know who have the guts to ask, “In a forced choice, would you keep me as CEO?”

Yes, Philip has gone there. And although he acknowledges the approach might have come across as slightly aggressive, he believes the company was better for it. A little discomfort, in his mind, does not derail the pursuit to building empowered teams and transparent work environments.

Image Credit: Bhaskar Peddhapati

What do you think of Philip’s approach to peer-to-peer stock option allocation? Is there a leadership approach out there that you admire most? Let us know in the comments below.

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