Being distributed is a popular topic in the tech industry - though not without detractors. It's a strategically interesting approach to organising a company because it materially impacts the talent, growth and culture of the organisation.
Canonical is highly distributed with people based in over thirty countries - with over 600 people about 80% of employees work from their homes or personal offices. It's been part of our DNA from the start and has really benefited our day-to-day experiences and growth - but there have also been hard learnt lessons along the way!
When I say a distributed company I mean that whole teams do not work in offices. This is a different situation from either a co-located team with one or two members who are remote workers, or a multinational business that operates co-located teams in multiple locations (think off-shoring or shared services). In a distributed environment everyone is teleworking.
Being distributed has a profound impact on hiring and retaining people. The best people aren't in a single town, region or country: with a distributed set-up you're no longer limited by geography. It frees the organisation to focus on finding the very best people: those critical set of skills and experiences can come from anyone based anywhere.
To build great teams you need great people, but getting the mix right is key: a contrasting set of skills, attitudes and experiences is the 'secret' ingredient. In a distributed company the wider talent pool makes for a richer cultural and capabilities mix. A distributed company also has more freedom to hire the right person no matter how unusual their circumstances - the fact that someone is based in the jungles of Brazil isn't a problem! Ultimately, that makes for a better and more fun company.
I think a distributed set-up lets you work in markets and reach customers much more efficiently. For traditional businesses geographic expansion means setting up in a region and creating a physical presence, hiring people and then learning about the region. With a distributed company the first step is to hire people, and as the only limit is by time-zone1 you often find that expansion into new geographies happens naturally. This means that when you're ready to start acting commercially in a new region you already have team members who can help you understand the local market. The ability to start in a light-weight fashion and to build up your experience progressively is really key.
Many businesses naturally expand by region but it's not the only way. If your prospective customer base is highly distributed, even if you are focused on a particular sector, then this model lets you reach them a lot earlier than would normally be possible. Afterall, every employee can represent your business.
Of course, there is often a meaningful difference between employing people in a specific country and then being in a position to operate locally from a business perspective. At a business administration level the former often only involves registering for local employee taxes, whereas the latter is a much more complicated set-up with company formation, corporate taxes and a more significant understanding of the business environment required. So adding regions is still worth careful consideration and planning.
An important benefit is that a distributed organisation has many important impacts on the culture of the organisation: the experience and values. Working remotely changes the way we communicate and the way that the company needs to keep everyone informed. The loss of the informal links and the water-cooler effect is real and is often the biggest criticism of being distributed. This necessarily means that culturally a distributed company has to pay more attention to communication and being explicit in it's goals. There's a whole range of ways you can do that (ie monthly newsletters, regular conference calls, efforts to document) and different methods will suit each organisation. The key point is that by communicating the explicit goals you make it much easier for each team member to make their own decisions within a framework that benefits the organisation. It's probably true that distributed organisations are by nature high-trust and that management is by outcomes.
For many businesses an important driver for off-shoring has been the financial benefit from using less expensive labour. At least for high-tech companies this isn't as much of a consideration since we're commonly trying to drive the speed of innovation. Consequently, while the cost of labour may be less, there are other costs such as travel and co-ordination to consider.
Distributed companies aren't without their challenges, there are definitely limits and I've learnt lots of lessons along the way. More important than whether there are constraints is whether there any scenarios where they are not suitable or just won't work?
I can think of some sectors where it's not going to make sense, manufacturing springs to mind. But, I think most knowledge working businesses can be done in a distributed set-up. As a company gets larger there are an increasing range of functions, and some of those may find it more difficult to operate in a distributed set-up so you do have to adapt. For example, in Canonical we mostly operate design as a co-located team because that way of working is more effective and more suited to the team. I've also seen some situations where as the teams grow they seem to naturally move towards regional clusters as some cultures aren't as comfortable working remotely.
Overall, I think it's possible to operate a lot of organisations in a far more distributed fashion than many people realise - tech may have made the concept popular but I really believe it's more widely applicable.
While we haven't maintained a 'pure' distributed set-up we have been able to operate successfully through multiple iterations as the company has grown. This type of structure offers real strategic and commercial benefits to a business that wants to work internationally. It's not an easy option and you have to think about your tools, your communications and your culture - but it is possible!
It's very hard for teams to work together effectively if they have less than half a day overlap for most situations. So there tends to be a natural overlap within teams. ↩