Red Rocket recently acquired Restaurant Furniture Plus, a B2B e-commerce 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 Disadvantages 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.
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!