Tag: startups

The 4-Day Work Week

A few years ago we offered our employees the option to work 20% less in exchange for a 10% pay-cut. The results and reactions surprised us.

A few years ago Fresh Air Educators performed an HR experiment: We offered all our full time salaried employees the option to pick between 2 work schedules:

  • Status quo: 5 days @ 7.5hrs at current pay
  • 4-day work week: 4 days @ 7.5hrs – Every Friday off
    Work 20% less but take  a 10% pay cut

For me, this seemed like a no-brainer:

Very Little Change to Take-Home Pay

The 10% of salary that was being given up would have been taxed at highest tax rate if it was earned (in Canada). So the net “take-home” amount was probably closer to 95% of what the employee was making previously.

Better Hourly Pay

Employees would now be getting 90% of their salary for only 80% of the work, so the pre-tax hourly wage was higher.

Happier, more rested, more productive

The 4 day work week gives employees a long weekend every weekend. That’s 52 extra days off a year.

Obvious Employee Perk

Offering a 4 day work-week is an obvious perk which should make it easier to hire top talent, and should lead to less employee turnover.

Cost Savings for the Business

The 10% salary savings for the business goes directly towards profits.

Very Little Productivity Loss

Working 20% less DOES NOT mean 20% less productivity.  The 80/20 rule kicks in: The most important things still get done while the 20% dropped will be the least important things (which probably only account for 5% of weekly productivity). By only working 80% of the time, you will still reap 95% of value.

Negatives: No Work Gets Done on Friday

The only negatives seemed to be that no work would get done on Friday. This was an issue for departments such as Customer Service, but most of those employees were hourly and already working non-standard work hours.

Employee Reactions to the Proposal

I was extremely surprised that we had almost zero adoption of the 4-day work week. A few employees tried it for a few months during the summer, but everyone eventually switched back to the 5 day work week.

Ultimately it seemed that:

  • Many of our employees were living paycheck to paycheck, and the reduced income simply wasn’t feasible for them.
  • Some employees were suspicious that this was some long-term scheme to permanently reduce their salaries
  • Some employees thought that they would be forced to make up the 20% of missing time for free.

So in the end, I am sad to say that this experiment was a failure, and we cancelled the program 12 months after starting it due to non-adoption. (However, I still believe in it, and I think I will try to implement this from the get-go in my next startup)

Related Reading

Random Thoughts from 2012

Some random takeaways from the Business of Software conference in 2012: Product vs Customer Focus; Cognitive Resources and Willpower; A/B Testing; Profit Sharing; and the Question Sales Pitch

Don’t Focus on your Product;
Focus on your Customers Instead

Don’t focus on making your product awesome, instead focus on making your customers awesome. This may seem like a small semantic difference, but what triggers the word-of-mouth snowball is when your customers can impress their friends because of something you enabled. To encourage your customers to spread your product via word-of-mouth, your product should make your customers “badass”.

Try this: Write a fictional product review WITHOUT mentioning your product or company. Write it solely with a focus on what your product allowed your customer to accomplish

The Power of Simplicity

…and the Scarcity of Cognitive Resources

Cognitive resources are scarce and easily depleted. If you present multiple choices to your users early on, they eventually run out of cognitive resources at a later time. Simplify the things that are not important and save the complexity for critical tasks.

Example: A complex registration process can impact the ability of your user to successfully accomplish tasks later on in your workflow (such as payment).

Willpower

Your willpower resources share the same part of the brain as your cognitive resources. By depleting cognitive resources, you are also depleting willpower resources. This theoretically means that if you are selling vices or guilty pleasures, there may be an evil strategy where you purposely deplete your customer’s cognitive resources via complexity in order to weaken their willpower and sell them a guilty pleasure.

The Evils of Gamification

Gamification works only in very narrow verticals and in general will not produce sustainable or desired results. Gamification triggers similar brain functions to those experienced during slot machine use and is not something that promotes long-term loyalty in your customers.

A/B Testing

Start with a Theory and Test it

When running an A/B Test, ALWAYS start with a theory and then use the A/B test to prove or disprove the theory. Don’t run random A/B tests hoping to stumble upon a magical winning combination.

Statistical Significance

Don’t trust your A/B Testing Toll to determine statistical significance. Use this formula instead:

  1. Define N as the total # of conversions in A + B
  2. Define D as the difference in # conversions between A and B divided in half
  3. The test result is statistically significant if D squared is bigger than N.

Thanks to Jason Cohen at WP Engine for this formula

Profit Sharing

Here is the profit sharing strategy that is implemented at Balsamiq.com (circa 2012)

  • All employees have a base salary that is better than market value
  • 10% of all profits are shared with employees
  • 25% (of the 10%) is divided equally among all employees
  • 75% (of the 10%) is divided based on seniority (with the more senior employees receiving more)
  • Additionally, 2% of all profits are divided equally among employees for them to donate to the charity of their choice

If there are more interactions than this, then you are not spending enough time either understanding the problem or finding the perfect solution for the problem.

Sitting down is Killing You

Sitting down for more than 3 hrs a day decreases your lifespan on average by at least 2 years. Try to stand up and move around for a few minutes at least once every hour, or consider getting a standing desk.

The Question Sales Pitch

If there is a question you can your customers, and you know the answer they will come up with, and it’s a favorable answer, then asking this question is a much more compelling sales pitch than just leading with the answer.