Philip Rosedale On Building A Business: Practice Extreme Transparency

April 2, 2009

Source: Linden Lab

Source: Linden Lab

At the Web 2.0 Expo in San Francisco, Philip Rosedale (Founder and Chairman of Linden Lab) gave a fascinating presentation titled “Extreme Transparency: Virtual Worlds, the Love Machine, and Other Practical Things That Actually Work in a 300 Person Company“.  Rosedale spoke of his methodology for growing Linden Lab (creators of the virtual world Second Life) from a small team working out of a warehouse on Linden Alley (in San Francisco) to a 320-person, profitable company with multiple locations across the globe.

Instead of a top-down approach to building the business – which starts with a grand vision and then trickles down to all the details that allow that vision to unfold – Rosedale decided to take a bottom-up approach.  An Engineer (and physicist) by trade, Rosedale was very hands-on during the early days – code that he wrote back then still resides in the Second Life software today.

Rosedale’s concept of extreme transparency means that each individual knows what every other individual is working on, accomplishing, doing, etc.  His analogy is one of a sports team (where transparency comes in the form of player statistics).  That’s not to say that Rosedale believes employees should be represented by numerical scores – rather, information should flow freely regarding each and everyone.  When that occurs, Rosedale belives that traditional management (of people) is simplified – and you end up spending much less time managing and more time doing.

Rosedale spoke of an interesting internal application called The Love Machine – an internally developed web site that allows employees to send a message of thanks to another employee.  The web site lists “Sender”, “Recipient”, “Description”, “Time Posted” and scrolls in real-time as new Love is posted.  A posting of Love autogenerates an email, such that if Rosedale entered a posting, the recipient would receive an email with a Subject heading of “Love from Philip”.

I think the point here is that “thanks” is such an easy thing to say, but how often is it really done in a business setting?  Not enough – that is, unless you have a tool (like Love Machine) to foster and facilitate it.  Rosedale noted that transparency needs to be granular – and these love posts are as granular as it gets.  Linden Lab has a data and metrics-driven culture – so of course, Rosedale presented a slide that plotted average love received per employee – to show that the trend line goes up (as more people use the tool to give thanks).

Rosedale next spoke about a Linden profit sharing plan – a certain amount of the company’s profits are divided equally among all employees – everyone from Rosedale down to individual contributors receives the same amount.  But then, employees are asked to distribute their shares to colleagues whom they feel deserving of it.  Rosedale found that profits were shared equally across functional roles (so as an example, Development did not receive an unfair share of the profits compared to another department).  This goes against conventional wisdom, which might say that certain groups would receive more favor than others.

A neat side effect of this plan is that executives get to uncover the hidden heroes of your business – those who did not have full exposure to senior management, but are highly appreciated by the masses.  The result is that their visibility in the organization is heightened – and those heroes become better appreciated.

With regard to data – Rosedale suggests that companies define the metrics that are important to the business.  Then, visualize them and keep them constantly updated.  Linden Lab leverages flat panel displays in many of their offices to display key metrics (via real-time charts).  Total simultaneous users is an important chart – if the count suddenly drops, everyone stops what they’re doing!  Linden Lab provides each employee with a personalized dashboard tool, where metrics can be dragged and dropped in – so, each employee watches (in real-time) data that’s important to them.

On measuring engagement within Second Life, metrics of importance to Linden Lab include average session length, number of Linden dollars spent and retention (since 85% of new sign-ups are gone within the first month).  Of course, a natural platform for transparency within Linden Lab is Second Life itself – and Rosedale spoke of its use for internal meetings.  Rosedale did a demo of the famed Virtual Isabel conference room, which is an in-world representation of a physical conference room at Linden’s headquarters.  A video stream of the physical conference is piped in-world and in the physical conference room, folks can go in-world from their laptops.

One audience member asked how Rosedale handles the media hype cycle – with media coverage today not as positive regarding Second Life compared to a year or two ago.  Rosedale pointed back to his key metrics – and noted that those metrics (e.g. total hours, total Linden dollars spent, etc.) continue to maintain a steady and healthy trend upward.  And that’s what matters most to him (and not what the media thinks).  Rosedale then made a casual reference to the open source movement, in which he’s become more involved of late.

For more info on the culture of Linden, their web site has a page focused on The Tao of Linden.

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