The Foundr Podcast with Nathan Chan

Ditching Growth and Setting Up Camp

How Jason Fried and David Heinemeier Hansson turned their backs on lofty goals and created a profitable tech company quite unlike any other.

Growth is exciting. Sales boosts, climbing revenue, and eager investors are all signs of a happy, healthy company. Right?

Basecamp founders Jason Fried and David Heinemeier Hansson beg to differ. While they rejoice in revenue and profit as much as the next set of tech company founders, they define success a little differently.

Instead of chasing arbitrary growth goals and deadlines, they simply aspire to do their very best work day in and day out.

Instead of always expanding their line of software products, they double down to perfect the one they already have.

Instead of scrambling to hire more people when revenue is climbing, they enact a hiring freeze so as to not lose sight of their mission.

Critics might call their approach too timid. Others call them brilliant. Fried and Hansson don’t care much either way. They’ve followed the startup road less traveled and have pitched sturdy camp at the end of it—all while remaining profitable and highly respected.

Today, Basecamp is one of the leading project management and team communications tools on the market, while boasting remarkable employee satisfaction. The duo also have a new book out explaining their unique take on startups and how they’ve found success.

Setting Up Camp

The origins of Basecamp date back to 1999, when Fried started 37Signals as a web design company. It’s since transitioned to a web development company, specializing in project management and team communication software, and became Basecamp in 2014.

The transition to web development happened in the early 2000s, when young Danish developer Hansson responded to Fried’s blog query about PHP. Hansson had been a fan of 37Signals for years and jumped at the chance to help out. After a handful of emails, Fried decided it was easier to hire Hansson as a programmer than learn to code himself.

The firm created Basecamp’s flagship software product in 2004 and drummed up 45 customers in its first year. The idea was simple, but met an important need in the modern workplace: It allowed for real-time, remote communication to help teams identify what needs to be done (and when) and work together smoothly and efficiently. In the following years, the pair saw their product achieve steady growth, which also caught the eye of venture capital and private equity firms.

Even so, working with investors never made sense to Fried and Hansson. They didn't want to sell any control of Basecamp or be forced to exit their business on someone else’s timeline. But they did need money to continue developing Basecamp and its products.

In 2006, the pair was approached by Jeff Bezos himself. In exchange for a yearly dividend payout (but without making any other demands or staking any other claims to the company), Bezos purchased a piece of ownership and became a member of Basecamp, LLC. This arrangement worked well for Fried and Hansson as they didn’t have to sell control of their business to raise money, and the purchase was a lucrative investment for Bezos.

“[After Bezos’s investment], the appeal of selling the company subsided and allowed us to pursue our mission to build a wonderful company to work in for the long term,” Hansson said.

Fried and Hansson maintain a fiscal relationship with Bezos, but that’s about it in terms of what they’ve taken from the richest man in the world. As for perspectives on growth, productivity, and culture, Basecamp has blazed a trail of its own.

It Doesn’t Have to Be Crazy at Work

Or does it? Fried and Hansson’s latest book introduces a new perspective on the modern-day entrepreneurial hustle. They published this book to “[send] out an alternative beacon,” Hansson says.

The cover of It Doesn’t Have to Be Crazy at Work features a big red “X” crossing out words like "packed schedules,” "80-hour weeks," and "overflowing inboxes."

Sadly, a lot of today’s business literature and role models celebrate crazy schedules, packed days, and little sleep. “[This has] been a predominant narrative for quite a long time,” Hansson says.

Pushing back on the norm, It Doesn’t Have to Be Crazy at Work argues that this kind of lifestyle isn’t healthy, sustainable, or necessary. “You can do great work in a normal eight-hour day and 40-hour week,” Fried says.

Basecamp’s culture and success is a testament to this ideal. The 20-year-old business has been profitable every single year since it started, and the company’s 50-plus employees work a totally normal schedule. “At Basecamp, it isn't crazy at work,” Hansson says. “Crazy at work should be an exception; it shouldn't be the norm, and certainly not be an aspiration.”

The (Mis)Guiding Principles of Goals and Growth

As of 2018, Basecamp has more than 100,000 companies utilizing its software. But unlike most tech companies, that number goal doesn’t dictate their work.

“We have no interest in building [our] company to a certain amount of dollars or size,” Fried says.

In Silicon Valley, businesses often feel the need to dominate industries and destroy the competition. Basecamp isn’t driven by those criteria, and they’re definitely not driven by constant growth or lofty goals. “We've always felt that we don't need to chase anything but profit and quality...and quality of life, for both our employees and customers,” Fried says.

To Fried and Hansson, it’s much more about running a sound, sustainable, profitable business. Instead of prioritizing OKRs or various other acronyms, they simply focus on doing the very best work they can every day.

“The idea that a goal should be driving you harder. ... I don't understand why that'd be,” Hansson says. “People forget that goals are figments of their imagination.”

He explained that as a primary indicator of what success should look like, goals are not helpful. They’re arbitrary measures of success or failure…and falling short of one can make you feel bad when you shouldn’t.

Moreover, goals are often determined by looking at others. “They become this death of enjoyment by comparison,” Hansson says.

Basecamp does set a few loose, top-level goals, such as “build a good product,” “create a great place to work,” and “treat customers with dignity, honesty and kindness.”

But what about specific metrics, like sales, retention rate, or customer success? “We can look at [those] numbers, like retention rate, renewal rate, etc., to see how well [Basecamp is] working,” Fried says. “But we don't have goals around those numbers.”

To measure the success of their product, the team simply uses it themselves. They actually use it more than any other company. By employing their own product and improving it every day, they’re able to better understand their customer experience. And when it works better for them, it works better for their customers.

“We judge our success by how we feel about our work, and the customer reaction and reviews,” Fried says. They ask themselves, “Are we proud of what we did today? Are we proud of the way we did it? And ultimately, do customers like the product?”

How Basecamp Approaches Success

Such a nebulous approach to growth and goals is sure to make employees feel adrift, right? One might think so, but the opposite is actually true for Basecamp employees, they say.
“[We believe] work should be a pleasurable experience,” Hansson says. “Success to us means we set our own agenda, control our own destiny, and have a sense of independence,”

There are very few meetings at Basecamp, and that’s not just because they are a mostly remote workforce. The company does have an office in Chicago, but even those who live nearby only come in a few days a week.

“We’re a writing-heavy company,” Fried says. Instead of insisting on weekly stand-ups or organizing project check-ins, the pair encourages their employees to chronicle all updates, ideas, and thoughts. This gives employees a chance to ponder what they’ve read and formulate thoughtful responses—instead of presenting an immediate reply the way you’d expect in meetings and boardrooms.

This notion of slow, delayed communication inherently pushes back on live chat, an up-and-coming trend in today’s tech companies.

“The idea of chat as a primary means of communication inside of a company, I believe it to be a very toxic idea,” Fried says. He argues that outside of social communication and quick check-ins, keeping in touch with chat can cause a massive distraction for employees.

“I think that, right now, chat is why work is more hectic for more people,” Fried says.

Like they contend in It Doesn’t Have to Be Crazy at Work, Fried and Hansson don't expect, require, or support a culture that's “always on." They routinely monitor for “overwork,” and occasionally have to gently remind employees that late-night emails or mid-weekend product updates aren’t necessary. In fact, they’re frowned upon.

We don't reward late, hard overwork,” Fried says. “We’d rather reward someone who works normal hours and gets a lot done…someone who protects and manages their time. There’s no celebration of long hours here”

Basecamp hasn’t always been like this, though. Some of the values have been around since the beginning, but the company has spent the last 20 years constantly tweaking the way they work.

One major change Fried and Hansson have made is the way Basecamp gets projects done. The company used to work with absolutely no deadlines, then started implementing three-month work periods. Today, they work within six-week cycles.

The team doesn’t do anything they can’t complete in six weeks. When asked if that sort of deadline adds pressure, Hansson is quick to respond: “It could if you don't approach the idea of the budget as a tool. It’s there to shape your decisions and guide you. Budgets make it easier to say ‘no’ or ‘not right now.’”

Fried and Hansson are less interested and impressed by the results of work done with unlimited resources or timeframes. In the past, working with no deadlines left each project open-ended. It was harder for developers to say “no” or know when to stop working.

Each six-week time budget forces employees to make decisions and weigh tradeoffs. “That's what's enjoyable about product development,” Hansson says.

By implementing changes such as these, Fried and Hansson have noticed that Basecamp has become a calmer company. While the pair conducts employee audits twice a year, they mostly take the pulse of employee success and satisfaction by staying close to each team, which isn’t hard given the company only has 53 employees.

“We're constantly seeing [our employees’] work and talking to people,” Fried says. “We have a really good sense of how things are going. It’s pretty obvious when someone’s not doing well.”

How does their remote culture affect this? It doesn’t. The team has a few in-person outings each year—when they gather everyone in their Chicago office—but even those are spent “reconnecting and recharging social batteries,” as Hansson explains.

Basecamp’s culture is simply based on trust and harmony between words and actions.

When asked about the challenge of building a culture with a remote workforce, Hansson says, “[That is] based on a misconception of what culture actually is. Our definition is that culture is repeatable actions, what you actually do.”

Fried and Hansson do instill specific values and principles throughout the company, but Basecamp’s culture arises when they live up to those words. “Nothing transmits culture more than seeing actions, especially during hard times.”

He also believes that a remote workforce is better situated to building a strong culture because such culture is derived even more explicitly from the actions you actually take and the shared writings you commit, given there’s no office or in-person meetings to do the work for you.

The numbers behind Basecamp’s culture and employee satisfaction are off the charts. The industry average for employee turnover is about 18 months. Of the 53 employees currently at Basecamp, the average length of employment at Basecamp is 5.8 years. Eight employees have been there over 10 years, and almost half have been there over seven.

“Basecamp employees stick around a long time, even in traditionally high-churn positions,” Hansson says.
The company has recently enacted a hiring freeze, announced by Hansson in a post on their blog, Signal V. Noise, aptly titled, “Things are going so well we’re doing a hiring freeze.”

In the spirit of constraints, they’ve capped their headcount and are doubling down on good, effective work.

“We have no love for size,” Hansson says. “Big companies can’t solve small problems. The bigger they are, the more divorced and less able they are to relate [to customers]. More layers of management and indirection only harm empathy and kindness.”

Key Takeaways

  • How his latest book, It Doesn’t Have to Be Crazy at Work, is pushing back on Silicon Valley’s excessive work culture
  • Why chasing growth in your business can blind you
  • Why Basecamp doesn’t set OKRs, KPIs, or any goals of the sort
  • How to know if you have the right people on your team
  • How to ensure your remote team is doing their best work
  • The evolution of Basecamp’s culture and work processes over time
  • The difference between deadlines and “dreadlines”
  • When Slack can be toxic to your company
  • Why in-person communication isn’t as important as you think (and might even be detrimental)
  • How to eliminate meetings once and for all
  • The story behind selling a piece of ownership to Jeff Bezos
Direct download: FP231_Jason_Fried.mp3
Category:general -- posted at: 9:41pm AEST