As the head of Sonatype’s product development engine, I’ve spent the last six-plus years scaling and hacking on the design and evolution of our fully remote organization. Over this period, we’ve learned a lot about what works, why it works, how to keep things running smoothly and what should be avoided. But none of that would matter at all if it were not for the fact that the fully remote organizational model gives us significant competitive benefits.

Results

As a small and growing company, we’ve had—and continue to have—an impact globally on software development, where roughly $2 trillion is spent each year. Our products and services are used by millions of developers every day with users of our open source Nexus Repository Manager, now in the millions, growing 68 percent last year.

It is rare to have the ability to blaze trails that end up materially helping the world do something better. That’s the epitome of meaningful work, and it’s awesome to be part of it. Sonatype has significantly influenced the way software is developed not just once, via contributions to Maven and its numerous progeny including npm and NuGet, but twice, with the Nexus Repository Manager. And a third big innovation is well underway, with competitors working furiously to try and catch up. Nexus Lifecycle lets development teams automate the effective use of open source.

These innovations with their consistent themes of “Better software, faster” were the work products of our fully remote product team.

What Does the Team Think?

There has been a steady stream of innovations and the business is growing, but how do the members of the Sonatype team feel about the company and the environment within which they are working? Can we accelerate progress and continue scaling the organization?

We are currently rated an A+ (4.9/5.0) and have been trending up over the last year. The high scores here are indicative solid engagement by team members and positive trends are effectively leading indicators of future engagement levels. Additionally, our overall annualized employee retention rates have been >95 percent for the past three years in an industry where the norm is 77.6 percent retention. The remote model certainly doesn’t seem to be hurting us here.

Side note:  The dip in the ratings graph was us breaking through a scale point that required some notable changes in organizational design.  It seems change is still challenging regardless of the remote model.

The Remote Model

It is still early days for the remote model. The remote organization design is not a common pattern for venture capitalists to match against. For VCs, unfamiliar patterns equate to unknown risk and I’ve been asked about this during board meetings. “Are we riding a tiger here? When are you going to open a local R&D center?” I will readily admit, I had some healthy skepticism very early on; however, my experiences as we have continued to scale have reinforced my position that this is a material competitive advantage for us.

While this is by no means a scientific assessment—Sonatype is invariably a single data point—what follows is at least based on a small mountain of empirical data collected as our product team has scaled beyond the 100-person mark. And I can see an appealing path to 500 and beyond.

Fallacies

“People just work better when they can interact face to face.”

Right … There is so much wrong with that statement that I just smile when I hear it, and I hear it often. While this judgment might seem intuitively correct on the surface, it is not based on anything but gut sense and is always made by people that have no significant experience with a fully remote model. These folks usually have experience or have heard about experiences with the (fatally flawed) mix of co-located and remote models. These are destined to fail for reasons covered a bit later.

What does “work better” mean, anyway? (Yes, those are often the exact words used.) This statement is extremely narrow in scope when you consider broader workday activities. In a typical office environment, how often do you absolutely need to interact face to face to be effective in achieving organizational goals?

Don’t get me wrong. The high-bandwidth exchange of information possible via face-to-face interaction can be extremely beneficial in the more limited cases it is needed and cannot effectively be compensated for through other means. But there is no reason that people cannot get together this way with the remote model. In fact, we do this multiple times per year.

What is conspicuously ignored here is the material “tax” tied to persistent, often ad hoc, face-to face-interactions, which are often (poorly) compensated for by headphones, closed doors and other distraction-reduction techniques.

“You have no idea if people are just off screwing around.”

While I don’t hear this one as much as I used to (is Taylorism finally dying?), do your visual senses really answer this when everyone is on site together? Ever hear of the “boss” key? Regardless of organizational model, you have to be able to trust and verify. There are certainly mechanisms for accountability that don’t require standing over someone’s shoulder. Expectations must be clear and people must have what they need to achieve what is expected. This is standard stuff that has nothing to do with co-located or remote scenarios.

Upsides

There are a number of key benefits that collectively lead to significant gains in organizational effectiveness. The communications are balanced and self-optimizing, distractions are reduced, quality of life is higher and the number of amazing people you can recruit is enormous.

Effective Communications

The most significant benefits I’ve seen in the remote model stem from the level communications playing field that emerges. Everyone is equally “disadvantaged” in not having ready access to high-bandwidth face-to-face interaction. The people we have hired have been quite adept at compensating for this, and we have not had to specifically select for this ability in our hiring.

Another subtle but material advantage is that all communications endpoints are equidistant. It is just as easy to communicate with someone on your team as it is someone on another team or someone in a different department or even the CEO. Everyone is a phone call, email, chat message or video chat away.

It is also largely unappreciated (until you’ve experienced it) how many advantages offset the “limitation” of infrequent face-to-face interaction. First, the communications pathways that form are very often driven by business necessity versus seating location, political motivations, after-work interest or other factors. Second, at least in a product development context with a bunch of technical people that just want to get stuff done, there is more focus on the work and the corresponding results than the political or social aspects of the workplace. Finally, as noted earlier, you can still get together—and should. These engagements are targeted, focused and effective rather than the more ad hoc engagements in the co-located setting. We hold these get-togethers when kicking off significant initiatives and we also get the entire organization together for our annual (open spaces format) meetup.

We also (judiciously) allow people to shift between teams as resource needs ebb and flow, which strengthens the overall fabric of relationships organizationally. It is hard to quantify the benefits here—and they likely span all organizational models—but this reinforces optimal communications and has been very beneficial as we have scaled. We have a far more ambulatory group of people with an extensive network of personal and professional relationships and diversity of expertise across our technology portfolio.

Life is Good

Not having to contend with a soul-sucking, energy-consuming commute on a daily basis is a major quality of life benefit for people. This also comes paired with plenty of options for a more reasonable cost of living for members of the team.

There is something that you do need to watch out for, though. There can be a tendency for people to burn the midnight oil. While this might sound like a big benefit to members of the C-suite, product development is ultimately an ultra-marathon. You have to watch for signs of burnout and ensure people that are falling victim sufficiently dial things back to their maximum sustainable pace. The cost to replace a talented member of the team is far greater than the short-lived incremental productivity of someone working too much.

Near Infinite Expertise

Hiring the right people is a perennial challenge in any discerning organization, especially when you are just starting out. In a co-located model, you are competing in specific geographies, often with better-capitalized companies that have a lot of brand recognition. In the remote model, the number of amazing people you can connect with is effectively infinitely larger. We are able to open a really big door. When you are also able to eliminate the commute and offer challenging work that matters, a lot of exceptional people can be convinced to walk through it.

One Note of Caution

Time zone overlap is a key consideration. There must be adequate overlap and we have this around the U.S. Eastern time zone.  We span 10 time zones overall, from Central European Time to U.S. Alaska Time, and that is a stretch in some respects. Team members at the edge compensate by shifting earlier or later into the work day when needed, and this has worked well. Regardless, sufficient overlap is critically important. Spreading out any further than we are today is likely untenable, as the time shifting would likely lead to unsustainable quality-of-life challenges for people that are geographically distant.

Avoid a Mixed Model at All Costs

While scorned by many when she abolished remote working at Yahoo, Marissa Mayer was ultimately right to unify the model … she just chose the wrong model! (Actually, she probably didn’t, given the existing scale.) You can’t effectively mix co-located and remote models across an organization. This is because it is impossible to create a level communications playing field, or maybe you could but the effort required to level the field would drive effectiveness to zero. It’s simply human nature at work.

Co-located members end up forging stronger communications channels and the channels with remote members weaken. Remote members become more isolated as seemingly innocuous interactions among the co-located people occur without them.

This isn’t to say that people can’t work from home occasionally in the co-located model. This certainly works. However, you cannot achieve optimal organizational communications at scale with a primarily remote group of team members mixed with a co-located group.

Perhaps you can mix modes, as long as you have a consistent mode across individual autonomously operating teams. We have not tried this, but I also sense this is not without material challenges and I have heard of some failures. I’d argue that many of the challenges tied to offshore development share similar root causes, leading to debilitating communications imbalances.

At scale, there is still the equivalent of a team (or teams) that ultimately support these autonomous teams, often with some members of these supporting teams being part of the autonomous teams as well. This forces you to contend with a mixed co-located and remote model one level up and likely leading to (again) imbalanced communications. While this perhaps can be made to work, the real question is whether it can work with a sustained, high degree of effectiveness at increasing levels of scale. I remain skeptical.

Compensating Mechanisms

While there are significant benefits, the remote model has some challenges. These are the kinds of things you might expect, but thankfully, there are effective ways to respond.

Product development is a team sport and the remote model affords a lot of opportunity to go off on your own. The lone wolf might flourish for a bit, but to scale, you need people who will reach out to others and solve problems with them, proactively. While this is true in any organization, I’ve found that it requires more vigilance to keep this in check in the remote model. Do not let bad habits develop.

Similarly, it’s more difficult to stay mad at someone when you see them on a daily basis. I think most humans are probably about 99 percent irrational and 1 percent rational. Unicorns might have a 90/10 split. Regardless, many of us are absolutely amazing at seeing negative things that just are not there. The remote model can exacerbate this, and it can “take a village” to keep everyone grounded in reality (rational thought) rather than assuming the worst and starting a downward spiral. Just being aware of this goes a long way, making it easier to keep the irrational majority in check. Having a “no a-holes policy” is certainly useful, but pretty much anyone can still appear to be acting like an a-hole at times. Don’t console those griping about someone else. Push them toward reconciliation.

The Lounge

We created a chat room many years ago called “The Lounge,” a sort of virtual water cooler. Many other remote organizations have done similar things, and for us, this has been enormously beneficial in bringing “humanity” into the remote workday. It also helps connect people in otherwise distant parts of the organization. While it is not the same as getting together with people in person, it goes a long way in giving people a social outlet during work. Abuse has not been a problem, either.

We’ve more recently started a number of special interest groups and guilds, all of which have their own chat rooms along with more topical banter. And most recently, we created a Google Hangout version of “The Lounge,” which has been a surprisingly effective social exchange. It seems hearing and seeing real laughter goes a lot further than reading “LOL” or observing some emoticon or emoji.

Get Together, Live

As noted a few times already, it’s important to get people together, in the same location, at key points. This is common advice in most of the other literature I’ve seen on remote models. These face-to-face meetings strengthen individual relationships that tend to slowly erode over time given exclusively remote interaction. We’ve found that a year is just too long and I’ve picked up on subtle cues from the organization as we have approached the nine-month mark. While there are numerous factors in play, my experience tells me that six months is likely the sweet spot for this. The timing might vary from organization to organization depending on the nature of the work, but reasonably strong social bonds are an important factor in holding everything together.

Online Interaction

In addition to getting together, the effective use of video goes a long way for multi-party exchanges. Body language is often useful, especially in the cases where vigorous discourse is needed. For 1:1 interaction where you don’t need to exchange visual information, voice is a personal preference, primarily because with my wireless headset I can walk around, keep my blood flowing and concentrate far better, really listening and picking up on subtle cues voiced by the person on the other end. Random factoid: My FitBit reports that I’ve walked a few half-marathons during some days without ever setting foot outside.

Wrapping Up

When contemplating a fully remote model, be prepared to go all-in at the point you do. Do not, under any circumstances, attempt a mixed co-located/remote model. That is a certain path to failure. Beyond a certain organization scale, the fully remote model is likely impractical if not impossible to migrate to effectively. I have no empirical data to support this, but if your organization is fewer than 20 people, the challenges of adapting to the remote model are going to be simpler. Beyond this scale, there is inevitably a lot more organizational complexity, not to mention business risk tied to the short-term productivity drop as everyone adapts and learns how to work in the materially different operating context. I’m not stating outright that you won’t be able to make the move beyond 20, but you should expect the challenges to be far greater and the time to stabilize longer.

With the experiences I have had and the advantages we’ve realized with Sonatype’s remote organization, I cannot imagine choosing the co-located model if faced with the challenge of scaling an enduring product development organization from early days. I still have fond memories of sitting in a bullpen environment on University Boulevard in Palo Alto years ago. Without a doubt, the bullpen is a great model at the outset, when things are fluid and the requirement for high-bandwidth exchanges is nearly constant. However, the moment you are ready to scale beyond that initial bullpen, remote should be a serious consideration.  If you are growing, the option won’t be available for long.

— Mike Hansen