Discussion on Corporate Structuring
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Kris
Oct 8, 2009, 7:46:30 PM10/8/09
to Fireworks Project
We are having an open debate about our corporate structure, and what
it should be. Anyone is welcome to add their 2 cents and more.
Back in March when we were drafting the corporate operating agreement
with Peter Erly (who represented us in the legal formation of our
corporation), Peter and I decided to putt off a bunch of complex
issues I wanted to address in the operating agreement. There had been
a precedence set for a simple system of members mutually voting points
to one another with some studies done by David Johnson at New York Law
School, and several previous operating agreements that Peter had
drafted. Since there were many unknowns about how these new
corporations would work, Peter suggested that we try not to guess too
much about the future, and adopt a simple, but extendible solution.
Recently Mike has raised concerns that while simple in design, the
practice of mutually voting points to one another on a regular basis
can actually become very confusing when a member tries to
pragmatically reason about how many points to vote to whom and what to
expect from the results of voting.
While this problem my be solved over time as we reach a critical mass
of members voting points on a regular bases, there is a more crucial
concern. While the system is simple, it has an inherent lack of
structure which leaves many variables to be considered. To some people
this may not be a problem, as they have the ability to ignore most of
these variables and make decisions based on their own “black box
reasoning”. However, to the majority of people this actually leads to
“paralyzation by overwhelming choices”. In other words, so many
variables in the system do not represent freedom of choice, but
instead breed confusion.
A confusing system throws up a barrier to new members. And, without a
growing membership, we would never reach the critical mass necessary
to remove most of the variables that are making it confusing. In this
case, the egg cannot come before the chicken.
So, you can see and comment on the goals for our corporate structure
from this link:
http://docs.google.com/Doc?docid=0AfSqqtLFXRPoZHR2bWhzc18yMjJ2Y3RyMmhu&hl=en
You can see and take part in the debate by reading and editing this
online document (on your first visit to the link you need to ask
permission to see it, which will be made available within 24 hours)
https://docs.google.com/Doc?id=dhcb23f4_44s674kzfs
it should be. Anyone is welcome to add their 2 cents and more.
Back in March when we were drafting the corporate operating agreement
with Peter Erly (who represented us in the legal formation of our
corporation), Peter and I decided to putt off a bunch of complex
issues I wanted to address in the operating agreement. There had been
a precedence set for a simple system of members mutually voting points
to one another with some studies done by David Johnson at New York Law
School, and several previous operating agreements that Peter had
drafted. Since there were many unknowns about how these new
corporations would work, Peter suggested that we try not to guess too
much about the future, and adopt a simple, but extendible solution.
Recently Mike has raised concerns that while simple in design, the
practice of mutually voting points to one another on a regular basis
can actually become very confusing when a member tries to
pragmatically reason about how many points to vote to whom and what to
expect from the results of voting.
While this problem my be solved over time as we reach a critical mass
of members voting points on a regular bases, there is a more crucial
concern. While the system is simple, it has an inherent lack of
structure which leaves many variables to be considered. To some people
this may not be a problem, as they have the ability to ignore most of
these variables and make decisions based on their own “black box
reasoning”. However, to the majority of people this actually leads to
“paralyzation by overwhelming choices”. In other words, so many
variables in the system do not represent freedom of choice, but
instead breed confusion.
A confusing system throws up a barrier to new members. And, without a
growing membership, we would never reach the critical mass necessary
to remove most of the variables that are making it confusing. In this
case, the egg cannot come before the chicken.
So, you can see and comment on the goals for our corporate structure
from this link:
http://docs.google.com/Doc?docid=0AfSqqtLFXRPoZHR2bWhzc18yMjJ2Y3RyMmhu&hl=en
You can see and take part in the debate by reading and editing this
online document (on your first visit to the link you need to ask
permission to see it, which will be made available within 24 hours)
https://docs.google.com/Doc?id=dhcb23f4_44s674kzfs
Kristoffer Walker
Oct 8, 2009, 7:54:08 PM10/8/09
to Fireworks Project
Received by David Johnson:
Kris -- I'm inspired to hear of your efforts and would like to help in
any way I can.
I don't know of any formal studies.
(Yochai Benkler's work on peer production might provide some clues).
One alternative that might be easier for people to grasp is to give
everyone who is active (or has received points within some recent
period) the right to vote (perhaps weighted by points received) for a
single individual (or small group) that will allocate a stated number
of points in the next period.
That gives those who are actively (and valuably) participating the
right to select someone they trust to do the hard work of evaluating
what others are contributing.
I suspect the barrier is not degrees of freedom but the amount of work
involved in spreading the decision across the whole community.
Fairsoftware.net goes the other way on this (though they don't create
a legal entity) -- they let founders allocate "shares" -- and, I
think, allow voting about issuance of new shares.
One aspect of your operating agreement, as I understand it, is that
points never disappear or degrade. I think that may be another source
of the problem. There is an inherent tension between early founders
and late arrivals. So maybe one problem with recruitment is that
people feel that a large portion of points is already allocated,
irretrievably, so they will get less credit for their contributions.
I'm only guessing. We really don't know what will work -- this is
unexplored territory. It is one thing to ask an open source project
contributor to work "for love" (or reputation) -- quite another to try
to create a system that actually compensates efforts in a way that
people will view as both fair and adequately incentivizing.
And one needs to incentivize continuous involvement. That can be done
by limiting the rights of founders and by causing points to disappear
over time. The major barrier to easy acceptance and understanding of
points systems, I think, is that giving everyone the right to award
points involves a lot of effort. That might be the best system once a
group is established. But it seems like a lot of work. My suggestion:
use the more familiar concept of "votes for the compensation
committee". This could even create a concentrated group of people that
both has the trust (for the moment) of the larger group and also an
incentive to recruit new, valuable, contributors that they are in a
position to compensate (until voted out of office if they don't do it
right).
I'll look for more materials that might help. But, as you can tell, I
think this is just unexplored territory. We're used to allowing the
money to talk! Please do feel free to pose other challenges and keep
in touch as your experiment develops. If you send me some more
information regarding what you are trying to accomplish, substantively
in the "business model", maybe I could come up with more ideas about
how to help.
p.s. you might also take a look at charles armstrong's work on
oneclickor.gs -- he is very thoughtful about this kind of thing. And
clay shirky's book (here comes everybody) might provide an
inspiration. I'm looking at a whole shelf of books that might help on
the theory --but realize that you are trying to figure out what would
work in practice to get people in the boat. One instinct: you have to
define the role that people will be playing that appeals to their own
self-selecting identity. Challenge: If you were recruiting me for your
group, and you knew that (like most people) I'm less motivated by mere
dollars than by self-fulfillment (but also want to be treated fairly
and need to pay the rent) what is your "elevator pitch"? Let's
continue that conversation.
drj
Kris -- I'm inspired to hear of your efforts and would like to help in
any way I can.
I don't know of any formal studies.
(Yochai Benkler's work on peer production might provide some clues).
One alternative that might be easier for people to grasp is to give
everyone who is active (or has received points within some recent
period) the right to vote (perhaps weighted by points received) for a
single individual (or small group) that will allocate a stated number
of points in the next period.
That gives those who are actively (and valuably) participating the
right to select someone they trust to do the hard work of evaluating
what others are contributing.
I suspect the barrier is not degrees of freedom but the amount of work
involved in spreading the decision across the whole community.
Fairsoftware.net goes the other way on this (though they don't create
a legal entity) -- they let founders allocate "shares" -- and, I
think, allow voting about issuance of new shares.
One aspect of your operating agreement, as I understand it, is that
points never disappear or degrade. I think that may be another source
of the problem. There is an inherent tension between early founders
and late arrivals. So maybe one problem with recruitment is that
people feel that a large portion of points is already allocated,
irretrievably, so they will get less credit for their contributions.
I'm only guessing. We really don't know what will work -- this is
unexplored territory. It is one thing to ask an open source project
contributor to work "for love" (or reputation) -- quite another to try
to create a system that actually compensates efforts in a way that
people will view as both fair and adequately incentivizing.
And one needs to incentivize continuous involvement. That can be done
by limiting the rights of founders and by causing points to disappear
over time. The major barrier to easy acceptance and understanding of
points systems, I think, is that giving everyone the right to award
points involves a lot of effort. That might be the best system once a
group is established. But it seems like a lot of work. My suggestion:
use the more familiar concept of "votes for the compensation
committee". This could even create a concentrated group of people that
both has the trust (for the moment) of the larger group and also an
incentive to recruit new, valuable, contributors that they are in a
position to compensate (until voted out of office if they don't do it
right).
I'll look for more materials that might help. But, as you can tell, I
think this is just unexplored territory. We're used to allowing the
money to talk! Please do feel free to pose other challenges and keep
in touch as your experiment develops. If you send me some more
information regarding what you are trying to accomplish, substantively
in the "business model", maybe I could come up with more ideas about
how to help.
p.s. you might also take a look at charles armstrong's work on
oneclickor.gs -- he is very thoughtful about this kind of thing. And
clay shirky's book (here comes everybody) might provide an
inspiration. I'm looking at a whole shelf of books that might help on
the theory --but realize that you are trying to figure out what would
work in practice to get people in the boat. One instinct: you have to
define the role that people will be playing that appeals to their own
self-selecting identity. Challenge: If you were recruiting me for your
group, and you knew that (like most people) I'm less motivated by mere
dollars than by self-fulfillment (but also want to be treated fairly
and need to pay the rent) what is your "elevator pitch"? Let's
continue that conversation.
drj
Kris Walker
Oct 12, 2009, 10:08:35 PM10/12/09
to Fireworks Project
I'm in agreement with all the goals outlined in Mike's last document:
http://docs.google.com/Doc?docid=0AW5e4ajruBoCZGhjYjIzZjRfNTFmdGt3ZnJneA&hl=en
I'm also in agreement that the mechanism outlined in that document is
the best compromise between efficiency and balance of power.
I'd also like to point out that the most successful peer produced
project in history (so far) is a software project called Linux. It
was started by a computer programmer named Linus Torvalds during his
graduate work in computer science. Linux is the fastest, most secure,
and most stable computer operating system available. It is often said
that everyone works on Linux because of their passion for it, but at
last count, the majority of the code being written for the Linux
operating system has been written by people being paid by the
companies they work for, like Red Hat, IBM, Intel, Oracle, and Google,
because those companies depend on it so much.
It is also worth noting that this "peer produced" project has evolved
into a textbook example of top down management efficiency using an
innovative method that not even the biggest corporations have thought
of yet. I call it "pull" management, opposing the typical "push"
management used by most companies. It works like this:
Linus maintains the only branch of the Linux code that really
matters. He is also the only person able to commit any changes to
that code. However, he rarely writes any of the code. Instead, there
are a handful of "lieutenants" whom Linus knows well and who's
opinions he trusts. If they have a patch for Linux that they think
Linus would want to include in the next release, they simply tell him
about it, and then Linus decides whether or not to "pull" the patch
into his branch.
If you work at Google, and want to write a new Linux module that
controlled a certain disk drive in a certain new way, you would find
the Linux "lieutenant" who specialized in handing disk drive modules,
and send him your new patch. The lieutenant would then review it and
decide if it was worth recommending it to Linus to pull into his main
Linux code branch.
Now, if I want a new, fresh, stable copy of the Linux operating
system, I would simply "pull" it from Linus, because I know about his
commitment to maintaining a fast and stable operating system.
During each stage of development and distribution of the Linux kernel
there is only "pulling", and no "pushing". I think this is good
because it inspires innovation, and perfection at the same time.
Instead of a manager telling me what to make, I get to make whatever I
want, and then everyone else decides if it should make it all the way
to the top and actually get distributed.
Google tried "pull" management with some success. They have a
database with all the projects that the company is working on. Some
projects come from the top down, but Google also asks that everyone in
the company spend 20% of their time working on something they find
interesting just because they want to. Employees can post projects
into the project database that were not sponsored by management, and
when employees work on those projects, they are using their 20% time.
Google Maps and Google Wave both came from that 20%.
I think the Fireworks Project is really close to nailing down the next
improvement to "pull" management, and I also think it will give us
huge competitive advantages as we grow larger.
We've been discussing the strong possibility of a planning committee,
made up of a dictator and lieutenants, that would decide what projects
needed to be done and what our priorities will be. Their only tool
will be assigning a point value to each project, or some similar
mechanism, so members will have incentive to pick those projects that
really need doing.
However, I'm beginning to think that we need to leave the actual
mechanisms of management out of the legal structure of the company.
For instance, the legal language should read in such a way that it is
clear that the planning committee members are the ONLY people allowed
to award points, and then leave the management style up to them. This
will enable "pull" management because, not only could the committee
declare which projects are important, it could also reward members who
start innovative fringe projects that should be included into the
"main branch" of production.
Of course, without building our desired management style into the
legal structure, we are taking the chance that the new planning
committee may not reward innovation at all. However, I believe that
if the early leaders of the company set a deep rooted company culture
to do this, it will take hold for a long, long time.
http://docs.google.com/Doc?docid=0AW5e4ajruBoCZGhjYjIzZjRfNTFmdGt3ZnJneA&hl=en
I'm also in agreement that the mechanism outlined in that document is
the best compromise between efficiency and balance of power.
I'd also like to point out that the most successful peer produced
project in history (so far) is a software project called Linux. It
was started by a computer programmer named Linus Torvalds during his
graduate work in computer science. Linux is the fastest, most secure,
and most stable computer operating system available. It is often said
that everyone works on Linux because of their passion for it, but at
last count, the majority of the code being written for the Linux
operating system has been written by people being paid by the
companies they work for, like Red Hat, IBM, Intel, Oracle, and Google,
because those companies depend on it so much.
It is also worth noting that this "peer produced" project has evolved
into a textbook example of top down management efficiency using an
innovative method that not even the biggest corporations have thought
of yet. I call it "pull" management, opposing the typical "push"
management used by most companies. It works like this:
Linus maintains the only branch of the Linux code that really
matters. He is also the only person able to commit any changes to
that code. However, he rarely writes any of the code. Instead, there
are a handful of "lieutenants" whom Linus knows well and who's
opinions he trusts. If they have a patch for Linux that they think
Linus would want to include in the next release, they simply tell him
about it, and then Linus decides whether or not to "pull" the patch
into his branch.
If you work at Google, and want to write a new Linux module that
controlled a certain disk drive in a certain new way, you would find
the Linux "lieutenant" who specialized in handing disk drive modules,
and send him your new patch. The lieutenant would then review it and
decide if it was worth recommending it to Linus to pull into his main
Linux code branch.
Now, if I want a new, fresh, stable copy of the Linux operating
system, I would simply "pull" it from Linus, because I know about his
commitment to maintaining a fast and stable operating system.
During each stage of development and distribution of the Linux kernel
there is only "pulling", and no "pushing". I think this is good
because it inspires innovation, and perfection at the same time.
Instead of a manager telling me what to make, I get to make whatever I
want, and then everyone else decides if it should make it all the way
to the top and actually get distributed.
Google tried "pull" management with some success. They have a
database with all the projects that the company is working on. Some
projects come from the top down, but Google also asks that everyone in
the company spend 20% of their time working on something they find
interesting just because they want to. Employees can post projects
into the project database that were not sponsored by management, and
when employees work on those projects, they are using their 20% time.
Google Maps and Google Wave both came from that 20%.
I think the Fireworks Project is really close to nailing down the next
improvement to "pull" management, and I also think it will give us
huge competitive advantages as we grow larger.
We've been discussing the strong possibility of a planning committee,
made up of a dictator and lieutenants, that would decide what projects
needed to be done and what our priorities will be. Their only tool
will be assigning a point value to each project, or some similar
mechanism, so members will have incentive to pick those projects that
really need doing.
However, I'm beginning to think that we need to leave the actual
mechanisms of management out of the legal structure of the company.
For instance, the legal language should read in such a way that it is
clear that the planning committee members are the ONLY people allowed
to award points, and then leave the management style up to them. This
will enable "pull" management because, not only could the committee
declare which projects are important, it could also reward members who
start innovative fringe projects that should be included into the
"main branch" of production.
Of course, without building our desired management style into the
legal structure, we are taking the chance that the new planning
committee may not reward innovation at all. However, I believe that
if the early leaders of the company set a deep rooted company culture
to do this, it will take hold for a long, long time.
Kris
Nov 1, 2009, 4:28:18 PM11/1/09
to Fireworks Project
This post came from Mike O'Hara on our Basecamp project management
site, and for the sake of transparency, has been copied to here:
Mike O'Hara Wed, 21 Oct at 8:17pm
So there has been a slight change of plans. After consultation with
lawyers, Kris and I have decided to slightly alter the tact on this
milestone. We came aways with a couple of legal lessons.
The lessons:
1. Simple and vague is good. Our charter, right now, is pretty easy to
grasp. If we were to add a more ridged structure, we start limiting
our ability to change. And that is not what we want.
2. There is a difference between what our charter says and the
generally observed practices of the company. That means, we as a
company can do what we want, so long as what we do falls under the
operating agreement.
So…we can create project groups, a project leader, etc. That can be
what is known as generally accepted operating procedure. But we don
not have to have it written in our operating agreement.
3. When working with your operating agreement, do not change or alter
anything in it unless you really really really have to. Sounds good to
me. But this leads us to….....
We still need to add one stipulation.
We have to cap points that members can distribute to other members.
This is the first draft of that addition.
Member Point Cap No active member can vote more points than their
total amount of points to any other member unless otherwise granted by
the Board of Directors.
comments on this addition to the operation agreement?
site, and for the sake of transparency, has been copied to here:
Mike O'Hara Wed, 21 Oct at 8:17pm
So there has been a slight change of plans. After consultation with
lawyers, Kris and I have decided to slightly alter the tact on this
milestone. We came aways with a couple of legal lessons.
The lessons:
1. Simple and vague is good. Our charter, right now, is pretty easy to
grasp. If we were to add a more ridged structure, we start limiting
our ability to change. And that is not what we want.
2. There is a difference between what our charter says and the
generally observed practices of the company. That means, we as a
company can do what we want, so long as what we do falls under the
operating agreement.
So…we can create project groups, a project leader, etc. That can be
what is known as generally accepted operating procedure. But we don
not have to have it written in our operating agreement.
3. When working with your operating agreement, do not change or alter
anything in it unless you really really really have to. Sounds good to
me. But this leads us to….....
We still need to add one stipulation.
We have to cap points that members can distribute to other members.
This is the first draft of that addition.
Member Point Cap No active member can vote more points than their
total amount of points to any other member unless otherwise granted by
the Board of Directors.
comments on this addition to the operation agreement?
Kris
Nov 1, 2009, 4:33:32 PM11/1/09
to Fireworks Project
Continued thread from Bascamp:
===================
Kris Walker Wed, 21 Oct at 10:33pm
----------------------------------------------
Point Allocation Cap No active member can vote more points than their
at any time by a decision of the Board of Directors.
I think we need to explicitly reference a decision of the Board of
Directors as it is already defined in the operating agreement (a
decision is controlled by 2 members of the 3 member board)
Also, do we need to make sure that we explicitly allow for the board
to revoke extended point allocation privileges? (I added it as a
second sentence)
Mike O'Hara Thu, 22 Oct at 9:49pm
----------------------------------------------
I have no problem with this.
Should we have David take a look at this?
Kris Walker Fri, 23 Oct at 8:54pm
-----------------------------------------
I’ll forward this to David, and then Peter Erly if we need to.
I’ll also copy Mike on the email, and include any responses to this
thread and the Board of Advisors Google Group.
===================
Kris Walker Wed, 21 Oct at 10:33pm
----------------------------------------------
Point Allocation Cap No active member can vote more points than their
total amount of points to any other member unless otherwise granted by
a decision of the Board of Directors. Such a decision may be reversed
at any time by a decision of the Board of Directors.
I think we need to explicitly reference a decision of the Board of
Directors as it is already defined in the operating agreement (a
decision is controlled by 2 members of the 3 member board)
Also, do we need to make sure that we explicitly allow for the board
to revoke extended point allocation privileges? (I added it as a
second sentence)
Mike O'Hara Thu, 22 Oct at 9:49pm
----------------------------------------------
I have no problem with this.
Should we have David take a look at this?
Kris Walker Fri, 23 Oct at 8:54pm
-----------------------------------------
I’ll forward this to David, and then Peter Erly if we need to.
I’ll also copy Mike on the email, and include any responses to this
thread and the Board of Advisors Google Group.
Kris
Nov 1, 2009, 4:55:34 PM11/1/09
to Fireworks Project
My Email discussion with David Johnson:
from Kristoffer Walker <kristo...@gmail.com>
to "davidr.johnson" <davidr....@verizon.net>
cc Michael O'Hara <mroha...@gmail.com>
date Tue, Oct 27, 2009 at 10:04 AM
subject Re: Implementing a virtual company
----------------------------------------------------------------------------------------------
Hi David,
Regarding providing a more understandable environment for our members,
you suggested that we could possibly implement a "management
committee" that could prioritize projects and allocate points
according to priority. We definitely agree that it would be a good
solution. So, we set about trying to draft some amendments to our
operating agreement that would implement this.
However, I got a chance to meet with some of the folks up at the
Berkley School at Harvard, and realized that perhaps one simple change
may make all the difference without being so explicit that we shoehorn
ourselves into a spot that we might need to get out of later. This
is, after all, experimental for us and we really do not know what to
expect, so we feel that the best strategy is to leave our operating
agreement in as ambiguous a state as possible while still remaining
useful. We're hoping that ambiguity coupled with only the necessary
restrictions and structure will provide the extendable and scalable
architecture that we need to make it work.
Our proposed amendment simple restricts the number of points that any
member can vote to another member during an allocation period to the
same number of points that the voting member presently has. So if I
have 60,000 points I cannot vote more than 60,000 points to any other
member at once. In addition we are giving the board the ability to
lift this limit for members that it chooses. These members with
extended privileges can vote as many points as they want to anyone.
Our intention is to create a culture/tradition where the members vote
on a planning committee and the board simply honors that decision be
giving the limitless point voting power to the elected planning
committee members even though they are not required to do so by the
operating agreement. If the board does not honor these decisions we
would expect that the members will not allow them to continue to have
seats on the board.
In addition we have not taken away the ability of the members to
reward each other. I would expect that this will allow us to create a
company culture of true peer production, where innovation gets pulled
into the mainstream from the fringes of the corporation. Google, for
example, has done this with some success with their 10% time, a case
where they allow their employees to spend 10% of their time on
whatever project they want to, just because they find it fun or
interesting. In our case I see the possibility where members could
form teams around fringe projects and reward each other for their work
on those projects, even though the planning committee has not made
them a priority. This leads to a scenario which I call "pull
innovation" as opposed to the "push innovation" that we see most
commonly.
We're hoping that this amendment will provide the structure we need to
be more understandable to new comers, but still allow management,
tradition, culture, and member expectations to be extended, scaled,
and managed on the fly with minimal disruption to the operating
agreement.
Our current operating agreement as Peter Erly drafted it is here:
http://groups.google.com/group/fireworks-project/web/limited-liability-company-operating-agreement
And our proposed amendment is:
"Point Allocation Cap
No active member can vote more points than the total points they have
themselves to any other member unless otherwise granted by a decision
for all the insight you've provided. When I first started thinking
about a member managed corporation I thought it was just a pipe dream,
so I'm really excited to have the opportunity to make it a reality.
from davidr.johnson <davidr....@verizon.net>
to Kristoffer Walker <kristo...@gmail.com>
cc Michael O'Hara <mroha...@gmail.com>
date Tue, Oct 27, 2009 at 11:01 AM
subject Re: Implementing a virtual company
-------------------------------------------------------------------------------------------
I've always thought that a member's ability to give points should be
limited by how many points the member has received from others (with
the obvious, necessary exception of the initial periods when the
founders have to get the ball rolling).
Indeed, my instinct would be that one should set the limit with
reference to points received within some stated recent period (e.g.,
last 3 quarters, or something like that) -- as a way of keeping the
decision-making on compensation in the hands of those who are both
active and valued by the other members.
I'm not sure, myself, whether it is workable to mix membership
prerogatives and a board of directors that has plenary powers (if
acting with 2 out of 3 votes). In general, there needs to be clarity
(in communications to the members) re who is in charge of determining
whose contributions will be valued. I personally think making this
completely horizontal, among the members (or recently active and
valued members) is idea. It is one thing for those members to elect an
"agent" who is then empowered to carry out their expressed will. It is
quite a different thing to give a board top down management powers --
especially powers to impose their own decisions about compensation
matters. Even if the board is elected by members, there will be a
great risk of perceptions of unfairness and disputes. (But I'm not
sure why you decided on a board for decision-making in the first
place. And, as you note, actual experience with the experiment is what
will matter.)
I hope you are also asking Peter Erly for his views on this. He will
be a better source of advice on specific wording for a revision like
this. Give him my regards.
David Johnson
from Kristoffer Walker <kristo...@gmail.com>
to "davidr.johnson" <davidr....@verizon.net>
cc Michael O'Hara <mroha...@gmail.com>
date Wed, Oct 28, 2009 at 7:14 PM
subject Re: Implementing a virtual company
-------------------------------------------------------------------------------------------------------
Hi David,
Thanks so much for your thoughts on this.
> Indeed, my instinct would be that one should set the limit with reference to
> points received within some stated recent period (e.g., last 3 quarters, or
> something like that) -- as a way of keeping the decision-making on
> compensation in the hands of those who are both active and valued by the
> other members.
This is a good point. In this iteration of the operating agreement we
are assuming a limit equal to the total number of points a member has
earned over their lifetime. I can see a time in the future where we
would want to limit it further to a stated period of time as you
suggest.
> It is quite a different thing to give a board top down
> management powers -- especially powers to impose their own decisions about
> compensation matters. Even if the board is elected by members, there will be
> a great risk of perceptions of unfairness and disputes. (But I'm not sure
> why you decided on a board for decision-making in the first place. And, as
> you note, actual experience with the experiment is what will matter.)
When first looking into this option of forming a planning committee
with extra points to allocate, we were making the same assumptions as
you, namely the perceived (or real) unfairness of an "o'l boys club"
running the corporation. However, we also began to think of the
possible political quagmire the members could find themselves in with
a "hyper" democratic system, hampering operational efficiency.
It is interesting to note the direction of the Debian software project
(the open source operating system based on the Linux kernel) to
provide a highly structured political system to set the direction of
the project. It has produced some high quality software, albeit at a
slower pace than other projects and generally annoying many developers
with the constant solicitations to vote on just about everything. The
correct balance will likely change over time, and I suppose we need to
be vigilant about maintaining an malleable operating agreement that
never allows one party to have too much power.
http://www.us.debian.org/intro/organization
http://seehuhn.de/pages/vote
http://www.debian.org/vote/
(you may find the Debian process an interesting case study)
Anyway, I think it deserves some more thought, but like you say, the
only way to find out for us at this point is through persistent
experimentation.
And, yes, I'll be in touch with Peter to help us draft the amendment
soon.
Thanks again David,
Kris
from Kristoffer Walker <kristo...@gmail.com>
to "davidr.johnson" <davidr....@verizon.net>
cc Michael O'Hara <mroha...@gmail.com>
date Tue, Oct 27, 2009 at 10:04 AM
subject Re: Implementing a virtual company
----------------------------------------------------------------------------------------------
Hi David,
Regarding providing a more understandable environment for our members,
you suggested that we could possibly implement a "management
committee" that could prioritize projects and allocate points
according to priority. We definitely agree that it would be a good
solution. So, we set about trying to draft some amendments to our
operating agreement that would implement this.
However, I got a chance to meet with some of the folks up at the
Berkley School at Harvard, and realized that perhaps one simple change
may make all the difference without being so explicit that we shoehorn
ourselves into a spot that we might need to get out of later. This
is, after all, experimental for us and we really do not know what to
expect, so we feel that the best strategy is to leave our operating
agreement in as ambiguous a state as possible while still remaining
useful. We're hoping that ambiguity coupled with only the necessary
restrictions and structure will provide the extendable and scalable
architecture that we need to make it work.
Our proposed amendment simple restricts the number of points that any
member can vote to another member during an allocation period to the
same number of points that the voting member presently has. So if I
have 60,000 points I cannot vote more than 60,000 points to any other
member at once. In addition we are giving the board the ability to
lift this limit for members that it chooses. These members with
extended privileges can vote as many points as they want to anyone.
Our intention is to create a culture/tradition where the members vote
on a planning committee and the board simply honors that decision be
giving the limitless point voting power to the elected planning
committee members even though they are not required to do so by the
operating agreement. If the board does not honor these decisions we
would expect that the members will not allow them to continue to have
seats on the board.
In addition we have not taken away the ability of the members to
reward each other. I would expect that this will allow us to create a
company culture of true peer production, where innovation gets pulled
into the mainstream from the fringes of the corporation. Google, for
example, has done this with some success with their 10% time, a case
where they allow their employees to spend 10% of their time on
whatever project they want to, just because they find it fun or
interesting. In our case I see the possibility where members could
form teams around fringe projects and reward each other for their work
on those projects, even though the planning committee has not made
them a priority. This leads to a scenario which I call "pull
innovation" as opposed to the "push innovation" that we see most
commonly.
We're hoping that this amendment will provide the structure we need to
be more understandable to new comers, but still allow management,
tradition, culture, and member expectations to be extended, scaled,
and managed on the fly with minimal disruption to the operating
agreement.
Our current operating agreement as Peter Erly drafted it is here:
http://groups.google.com/group/fireworks-project/web/limited-liability-company-operating-agreement
And our proposed amendment is:
"Point Allocation Cap
No active member can vote more points than the total points they have
themselves to any other member unless otherwise granted by a decision
of the Board of Directors. Such a decision may be reversed at any time
by a decision of the Board of Directors."
I'd be interesting in any suggestions you might have, and thanks again
by a decision of the Board of Directors."
for all the insight you've provided. When I first started thinking
about a member managed corporation I thought it was just a pipe dream,
so I'm really excited to have the opportunity to make it a reality.
from davidr.johnson <davidr....@verizon.net>
to Kristoffer Walker <kristo...@gmail.com>
cc Michael O'Hara <mroha...@gmail.com>
date Tue, Oct 27, 2009 at 11:01 AM
subject Re: Implementing a virtual company
-------------------------------------------------------------------------------------------
I've always thought that a member's ability to give points should be
limited by how many points the member has received from others (with
the obvious, necessary exception of the initial periods when the
founders have to get the ball rolling).
Indeed, my instinct would be that one should set the limit with
reference to points received within some stated recent period (e.g.,
last 3 quarters, or something like that) -- as a way of keeping the
decision-making on compensation in the hands of those who are both
active and valued by the other members.
I'm not sure, myself, whether it is workable to mix membership
prerogatives and a board of directors that has plenary powers (if
acting with 2 out of 3 votes). In general, there needs to be clarity
(in communications to the members) re who is in charge of determining
whose contributions will be valued. I personally think making this
completely horizontal, among the members (or recently active and
valued members) is idea. It is one thing for those members to elect an
"agent" who is then empowered to carry out their expressed will. It is
quite a different thing to give a board top down management powers --
especially powers to impose their own decisions about compensation
matters. Even if the board is elected by members, there will be a
great risk of perceptions of unfairness and disputes. (But I'm not
sure why you decided on a board for decision-making in the first
place. And, as you note, actual experience with the experiment is what
will matter.)
I hope you are also asking Peter Erly for his views on this. He will
be a better source of advice on specific wording for a revision like
this. Give him my regards.
David Johnson
from Kristoffer Walker <kristo...@gmail.com>
to "davidr.johnson" <davidr....@verizon.net>
cc Michael O'Hara <mroha...@gmail.com>
date Wed, Oct 28, 2009 at 7:14 PM
subject Re: Implementing a virtual company
-------------------------------------------------------------------------------------------------------
Hi David,
Thanks so much for your thoughts on this.
> Indeed, my instinct would be that one should set the limit with reference to
> points received within some stated recent period (e.g., last 3 quarters, or
> something like that) -- as a way of keeping the decision-making on
> compensation in the hands of those who are both active and valued by the
> other members.
This is a good point. In this iteration of the operating agreement we
are assuming a limit equal to the total number of points a member has
earned over their lifetime. I can see a time in the future where we
would want to limit it further to a stated period of time as you
suggest.
> It is quite a different thing to give a board top down
> management powers -- especially powers to impose their own decisions about
> compensation matters. Even if the board is elected by members, there will be
> a great risk of perceptions of unfairness and disputes. (But I'm not sure
> why you decided on a board for decision-making in the first place. And, as
> you note, actual experience with the experiment is what will matter.)
When first looking into this option of forming a planning committee
with extra points to allocate, we were making the same assumptions as
you, namely the perceived (or real) unfairness of an "o'l boys club"
running the corporation. However, we also began to think of the
possible political quagmire the members could find themselves in with
a "hyper" democratic system, hampering operational efficiency.
It is interesting to note the direction of the Debian software project
(the open source operating system based on the Linux kernel) to
provide a highly structured political system to set the direction of
the project. It has produced some high quality software, albeit at a
slower pace than other projects and generally annoying many developers
with the constant solicitations to vote on just about everything. The
correct balance will likely change over time, and I suppose we need to
be vigilant about maintaining an malleable operating agreement that
never allows one party to have too much power.
http://www.us.debian.org/intro/organization
http://seehuhn.de/pages/vote
http://www.debian.org/vote/
(you may find the Debian process an interesting case study)
Anyway, I think it deserves some more thought, but like you say, the
only way to find out for us at this point is through persistent
experimentation.
And, yes, I'll be in touch with Peter to help us draft the amendment
soon.
Thanks again David,
Kris
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