Startup Diary: Why it's crucial to build trust and pay freelancers on time
I'm writing a weekly series of articles on my new startup - it's an exercise in radical openness.
I got this idea for radical openness from a Canadian guy called Shane Parrish, who writes at farnamstreetblog.com. In particular, the idea that you should maintain a 'decision journal' - write down your decisions and your reasoning before you know the consequences. That way you can't cheat. I decided to do this in public: that way I'm forced to follow the rules. The outcome is that one can critically analyse decision-making processes, avoid bias, and get better at making better decisions.
This week I want to talk about the culture of the company I'm building. I'll be returning to this topic many times, but today I want to talk about remote work. Metsitaba is designed to be a remote working company.
The company has seven employees. Six of these are remote (I have an office in the co-working space boxworks.ie - I'll discuss that decision in the coming weeks). Everybody works from home. There are two full-time and five part-time employees. There are three men and four women. (Supporting diversity is another fundamental culture decision.) I won't report these numbers every week, as they won't change often enough, but you'll get a monthly update.
How does remote working work? You'd think that a startup needs to hothouse. That is, get everybody in the same room, preferably living together and achieve a Vulcan mind-meld of creative output. Surely a startup is the last place you'd want to try remote working?
I'm lucky enough to have had the opportunity in my previous company, nearForm, to learn how to do remote working properly. As a large consulting company based in Waterford, we just had to accept remote working as the only way to find the top-level talent needed to deliver large-scale software for enterprise clients.
Here's the key insight: remote working requires trust. You build trust by paying people on time. Most remote working relationships start off as freelance engagements. It's the only way to know if somebody has the discipline to work from home. This means that you get invoices from your freelancers, who you must pay, regardless of the quality of the work. Now, if the work is not satisfactory, you end the relationship gracefully, but you still pay. That's perfect for everybody; freelancers expect to move on.
You do not start arguments with your freelancers. You do not hold back payment. You do not look for freebies. You do not allow scope to expand. You decide not to act like 95pc of businesses out there. Freelancers talk to each other. A lot. Put your emotions aside. If the freelancer failed to deliver, perhaps it was your fault. Perhaps you failed to set the terms explicitly. Perhaps you were too busy to write the spec properly. Perhaps you just screwed up. Whatever it was, you pay for every hour and then you close it down.
To make remote working possible, you need to invest in the right tools. You need to use online apps like slack.com, and WhatsApp, and trello.com and all of the wonderful plethora of tools that we have these days. That's the easy part. Building trust is the hard part and the simplest way to do that is to pay people properly for their time, on time.
This approach is driven by the consideration of what are know as second-order effects. Most people just consider first-order effects. Let's say a freelancer screws you over - they fail to deliver on time and you lose a client. The first order effect is your loss on that job for that client. You can blow your top, withhold payment, send a nasty email, and threaten lawsuits. You are pursuing the loss in front of your nose.
But consider the second-order effect: that freelancer will talk to others, and your reputation as a business that treats freelancers properly will suffer. You won't get word-of-mouth referrals. You'll end up paying recruiters far more than you ever lost on that one deal. The correct action is to absorb the loss, say a friendly goodbye to the freelancer, with honest feedback, and go on your merry way. You have to decide in advance that this is what your culture does. In the heat of the moment, you won't see clearly enough without having this guiding principle.
In previous columns (you can read back on them at metsitaba.com/diary), I also promised to share numbers. So let's get down to it.
I'm writing a weekly newsletter for technical conference speakers as my first product. Last week, I had 109 subscribers, of which 35pc read the newsletter when it arrived in their inbox. This week I have 119, and an open rate of 33pc. This growth rate is not going to get me to 500 subscribers by Christmas, which is my target. There have been five editions so far, which you can find on the archive page of metsitaba.com.
I did decide to refine the newsletter first, before doing any real promotion. All I've done so far is to email friends and family and send out a few tweets. It seems I've reached the limits of that approach. This is fine, because I've now got to the point where I know I can produce the newsletter reliably. I have a little production process in place and have external help with some of the content.
The decision to refine first, before promoting, is based on the general principle that scaling before you are ready is a waste of resources. It's better to get most of the product delivery details worked out with a small and forgiving customer base before pestering people with something that has too many rough edges. You should be embarrassed by a lack of features, not features that are lacking (in quality).
Here is my plan to promote the newsletter. First, LinkedIn allows you to send a small number of unsolicited mails. I'll use these to reach out to speakers that are influential. Second, the community discussion website reddit.com, which happens to be the eighth most visited site in the world, lets you advertise to targeted communities for very reasonable rates. Third, I'll send personal emails to speakers that I've met at conferences. Come back next week to get some numbers - we'll see how these decisions play out.
Richard Rodger is the founder of Metsitaba. He is a former co-founder of Nearform, a technology consultancy firm based in Waterford