MCF Technology Solutions, a software company in Cleveland, will save around $4,500 a month when it closes its only office in the next few weeks.
Only a handful of employees used the space, anyway. Instead, most of them worked from home while staying in touch through Skype (MSFT), WebEx online conferencing, and collaboration software built in-house.
“Because of the kind of work we do, it’s not really necessary to have a physical office,” says Govind Davis, chief executive officer of MCF, which has 45 employees. “We’re confident that people will be able to do their work,” he says. “We have lots of tools.”
Indeed, companies that forgo offices in favor of employees working from home have an arsenal of technology at their disposal. Nothing entirely makes up for sitting shoulder to shoulder with colleagues. But the tools available let workers stay connected and share across thousands of miles. The question, ultimately, is whether employees bother to use the technology to pass along important details, or do they leave some co-workers in the dark?
The idea behind setting up a distributed, or virtual, company is that it helps with recruiting the best workers because it opens the door to candidates who live anywhere. Requiring new employees to move to a particular locale limits the number of available applicants and, potentially, their quality.
Saving money is a byproduct of a distributed business. Real estate costs are lower because companies need less office space. Additional savings can be found in salaries, as a company based in New York, for example, would likely pay an employee in Ohio less than it would in Manhattan, in line with the local cost of living.
To keep employees in touch, most companies depend on a similar list of technology. Skype instant messaging and video conferencing is an almost universal fixture, as are corporate chat rooms and blogs that look a lot like Facebook (FB) or Twitter. File-sharing services such as Dropbox are also important. E-mail, in contrast, is generally avoided because it tends to be a black hole for information that should be more broadly distributed.
GitHub, a business software company in San Francisco that adopted the distributed model, uses Campfire, a group chat service, to keep its 114 employees connected. Nearly all questions, comments, and discussions are posted in one of dozens of chat rooms, each devoted to a different topic, including design and operations. “One room is dedicated to nothing but goofing off, and it’s probably our most busy room,” says Brian Doll, an engineer and head of marketing for GitHub.
Employees are given the usual array of computers and tablets to do their jobs remotely. A stipend for phone service is included in everyone’s paycheck.
Like many distributed companies, GitHub maintains an office despite the work-at-home emphasis. Although employees are not required to show up, some do, at least sporadically. A little more than half of GitHub’s employees live near San Francisco, with the rest working anywhere from Indiana to Australia to Greece. On an average day, 20 to 30 employees work out of the headquarters.
The downside of a distributed workforce is the lack of personal touch with colleagues that comes easily in traditional workplaces. There’s none of those impromptu discussions around the water cooler or whispering across cubicles. GitHub, therefore, plows a pile of money into travel. Employees attend all-hands summits twice a year in San Francisco to help everyone get to know each other beyond their chat room posts.
Still, a handful of GitHub workers in Boulder, Colo., prefer more of an office atmosphere. At their behest, the company established a small office there where they can work if they feel like it.
It’s relatively common for distributed companies to have at least one satellite office or rent a few desks at a co-working space for remote workers. Some of them get lonely at home or are distracted by children running around the house. It’s details like these that inevitably come up for companies that adopt a distributed model. Although the wrinkles are not necessarily costly, they highlight the forethought required before making such a radical change.
Something as simple as arranging technical support for employees who work at home can get complicated, points out T.J. Keitt, an analyst with Forrester Research (FORR). Should workers mail their buggy laptop back to the headquarters, or get a contract with a troubleshooter that can handle the problem locally?
How the headquarters is laid out also becomes an issue, Keitt says. The setup should emphasize more meeting areas and open seating where employees can just plug in their laptops. Private offices are, of course, mostly unnecessary because most people come in part-time. Calculating GitHub’s overall cost savings, if any, as a distributed company is difficult. Although it undoubtedly saves money on real estate expenses and some on salaries, it pays more for travel than it would otherwise.
Doll says cost had nothing to do with GitHub’s decision to embrace a distributed model—recruiting and the incremental improvement to the company’s products is the only rationale.
“If it cost three times as much, we’d still do this,” Doll says.