Managing "Virtual" People
By John Jordan
Many new businesses are "virtual companies," in which entrepreneurs and their staffs work from home offices. Frequently, these offices are scattered around the country or even around the world, tied together by increasingly sophisticated and inexpensive technology.
Although the absence of a "normal" office environment changes the job of managing people, it doesn't eliminate the need for doing so effectively. In fact, it introduces new challenges the founder must be aware of. As in every realm of business -- and life -- these challenges are the flip side of a set of advantages that prompted the model to take hold in the first place.
In 2002, after eight years with three public relations agencies, I opened my own firm, Principor Communications, as a virtual organization. My major reason was to eliminate the cost of office space and everything connected to it. In addition, there are tax advantages to working from a home office. However, the major cost savings have been in the area of labor. The skilled, experienced professionals who staff my agency are all independent contractors. They're women who are home raising young children.
Like many new parents, they enjoy the challenges of working and don't want to fully sever their relationship with the work place and their colleagues. Their ability to obtain health insurance through their spouses gives them the freedom to work part-time to keep up skills and networks. Virtual companies provide parents of both sexes with opportunities that did not previously exist.
The challenge in this low-cost model is to keep in mind that eliminating an office doesn't entirely eliminate all the social needs fulfilled through working in a common physical space. Discussions over meals or coffee, celebrations of important milestones -- these and other social activities are still important to staff satisfaction in a virtual company. They must be consciously factored into both an entrepreneur's schedule and, as important, the cost structure. It's easy in a virtual environment for team-building activities to be "out of sight, out of mind." Don't let that happen in yours.
Effectively managing staff is critical to any entrepreneurial success story. However, it can consume a huge amount of time -- time that could be spent building the business. Running a virtual company eliminates a great deal of the more time-intensive elements of management. The office conflicts, tensions, and politics are minimized and nearly eliminated in a virtual company. Because people are physically separated, many of the negative and time-consuming aspects of the "office dynamic" simply cannot take root, thus freeing the entrepreneur to focus on building the business.
It's easy to become a "lone ranger" in identifying and cultivating new business prospects. Success in this area is connected to the previous point, spending time and money to inculcate contractor attachment to the company and its goals. It's important for contractors to know they'll profit more both financially and socially by working with a new client through your business than by servicing that client on their own.
A virtual-company entrepreneur should implement methods to reward contractors for landing new business, such as offering a fixed cut of the billings. Generosity in this area pays huge long-term dividends. It's much less expensive to reward contractors now than to see a client walk out the door with the contractor -- and your revenue -- in the future.
I've staffed my virtual company with senior people, professionals with the skill and experience to drive projects and appropriately tap into the skills of their co-workers and external resources. These are autonomous, flexible, and results-oriented people. Making this kind of team function requires drawing contractors from a pool of trusted people who have experience working with one another in some capacity. My staff and I have worked together in various ways for years. Some were even my clients.
We consider each other colleagues who enjoy our work and enjoy working with one another. While the physical distance means we don't always get to share ideas as often as we'd like, there's no doubt we all contribute our best to one another and to our clients. Spending a good amount of time away from co-workers, as one does in a virtual company, makes the time spent together that much more valuable. There's a hunger to come up with creative ideas that translate into business results.
Of course, there's the very real risk that clients will come to view your contractors as the face of your company -- and that your staff will be tempted to take the client for their own. As noted above, it's absolutely essential that your staff understands and regularly experiences the satisfaction that comes from working with fellow professionals at your company and is rewarded for bringing in new business. This goes beyond straightforward loyalty. An entrepreneur has to deliberately create an environment in which a contractor owes it to himself or herself, in terms of work satisfaction and professional development, to work through your company.
A virtual company allows maximum flexibility and autonomy for everyone concerned. Contractors set their own hours with little oversight. The entire business exists in something of a netherworld in which time and space don't apply. All of this can be extremely liberating.
It's also immensely challenging. While it's easier to relinquish control working with trusted, competent people, it's still not a simple thing to do. It can be especially taxing when the unexpected occurs with or to contractors. A sick child, a spouse's business trip, a family visit -- all these can take a contractor off the clock and out of client contact at a moment's notice. Of course, this means the entrepreneur must step in and handle client assignments. This tends to occur more frequently in virtual businesses than in "normal" ones.
An entrepreneur has to recognize that the freedom of running a virtual company is punctuated by regular -- and random -- episodes of unanticipated obligation. Entrepreneurs need to be fully versed in all aspects of contractors' work to succeed in this environment. A high degree of flexibility and autonomy works only in an atmosphere that encourages regular and open communication.
It's important in a virtual company that the work experience is seamless for the client. That means investing in the technology to recreate, as much as possible, a "normal" company experience. Thankfully, costs have come down enough to put technology within reach of just about any entrepreneur and contractor. Almost every professional today possesses the ingredients of a home office: a computer, high-speed Internet connection, and a phone. The founder of a virtual company needn't worry about providing those devices to contractors.
You must make sure that your workers understand and utilize tools that go beyond the basics to allow for the seamless client experience. These include file-sharing systems, computer back-up devices, speakerphones, voicemail, and Web hosting. While the monetary investment in these technologies isn't very great, the time investment in setting them up and mastering them can be.
As a former executive with global public relations agencies, I never thought about such things. Happily, tech companies are increasingly targeting the so-called small office, home office (SOHO) market. Both suppliers and independent Web sites provide quick tutorials on what's necessary to set up a virtual office. Learn about these systems and set them up right away, so clients and prospective clients immediately sense you're running a "real" business.
I'm not certain I'll run a virtual company indefinitely. This model is an effective way to get a full-service company off the ground quickly and in a way that minimizes costs and maximizes earnings, which, in turn, can be reinvested in the business at the appropriate time. It also allows a great deal of freedom for the entrepreneur and staff.
With freedom come challenges, yet each can be met through conscious, deliberate, and planned activities. It would be helpful for a founder to list all of the challenges noted above and develop a timetable and budget for addressing each. Undertaking this thinking prior to launching a virtual company will help ensure a smooth, enjoyable, and profitable experience for all.
Jordan, 40, founded Principor Communications, a public relations agency based in Washington, D.C., in 2002, and serves as president. His staff includes five public relations professionals who work on contract from virtual locations. The firm has annual revenue approaching $500,000.
Entrepreneur's Byline comes to BusinessWeek Online readers courtesy of EntreWorld.org, a resource for entrepreneurs that is sponsored by the nonprofit Ewing Marion Kauffman Foundation
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.