Beyond Hawaiian-Shirt Friday: Groupon, Hulu Inspire Employee Innovation With Radical Trust

CEOs of two breakthrough, webby businesses show Fast Company how office policies built on frankness, trust, and occasionally awkward closeness engender a culture of success.

Inside the multi-million dollar video streaming giant, Hulu, CEO Jason Kilar has gone to extraordinary lengths to subvert his own power: he has no office, has a makeshift desk partly built from empty boxes, and personally takes each new hire out to lunch to learn what he or she thinks the company can do better. "You will not attract and retain the world's best builders in a command-and-control environment," Kilar tells Fast Company.

Last weekend, Hulu and fellow Internet prodigy, Groupon, were honored at the WorldBlu Live conference for their unusually strong commitment to worker empowerment. We sat down with these web successes to understand the driving philosophy, small-team orientation, and straight-up weird employee morale boosters that lie at the foundation of their innovative products.

Part Philosophy, Part Intuition

"We assume that people are fundamentally good and people are responsible adults," says Groupon CEO Andrew Mason. "The policies we have reflect those beliefs."

While most organizations craft exhaustive rules for bad apples, Mason says "The cost of creating bureaucracy and red tape that assumes the other 90% of people are also bad is creating rules that encourage people to live up to the edge of those rules."

So instead of bottom-line sales goals and minimal call number requirements with no underlying rationale, agents get access to their departments' real financial progress so they can craft their own sales strategies for improving it.

It's the kind of thing that makes team members want to do better, Mason says. Otherwise, the focus becomes gaming the goals rather than increasing profits. "Because the company is not showing them the respect and autonomy to get the work done in the way that they know it will actually get done, they're treating the company with the same lack of respect."

This treat-the-employee-like-the-CEO logic also extends to Groupon's open vacation policy, where workers can take as much time as they choose, so long as their work is completed.

Groupon's (and Hulu's) orientation is more knee-jerk intuition than a deeply reflective comparison of management strategies. Political psychologists have long known that individuals have general personality traits that either are deeply distrustful of human nature and democracy, or the reverse.

"When I was told we were being considered for this [WorldBlu] honor, my response was, 'Really, we're a democratic workplace?'" jokes Mason. "I haven't worked anywhere else. This is my first full-time job. One of the blessings of a lack of experience, you don't have preconceived notions about how things work. And, you end up building things from the ground up in a way that seems logical to you."

Serious About Silliness

You don't BS friends. And they don't blow smoke and rainbows when you share with them your crazy ideas. Hulu and Groupon try to be like that.

At Hulu, each incoming cohort of hirees produces a semiprofessional-quality video skit.

"Familiarity breads innovation," says John Foster, Head of Talent and Organization. "You have to be able to share half-baked, provocative, sometimes completely wrong ideas in order to get to a breakthrough." (Check out one cohort's Glee spoof below)

The elaborate video production isn't an accident. Hulu fancies itself a premium video-content company. Why would its employees produce anything less?

At Groupon, writers, ad producers, and PR folks are expected to entertain the public at large with whimsical writing, whether in product descriptions or commercials (see below @ 0:42):

Groupon's morale booster was even more elaborate. A Nicolas Cage-style scavenger hunt involved a lifelike mock bedroom housed at Groupon HQ. The story, employees were told, was of a disturbed tenant named Michael, and they were charged with following a sophisticated clue trail to learn more about him. "Don't be boring," is a company mantra, says Deputing Manager Editor Jamison Webb.

The intense business casual vibe butters up employees for the moments when the boss wants raw honesty—both at Hulu and Groupon. Each company's CEO dedicates regular time to town halls, office hours, and email exchanges.

At Hulu, Kilar takes each new cohort out to lunch to learn how they can all make Hulu better. One particularly bold new college graduate emailed him after one such chat 'n' chew to say that the meeting hadn't provided ample time for Q&A. "When someone who is within weeks of joining the company," says Kilar "can basically lay it right on the line with the CEO and say 'With all due respect, that meeting could have been a lot better,' then I know our culture is working."

To reinforce the culture of debate, Kilar stuck to his word, re-did the lunch, politely apologized for not giving enough time for Q&A, and praised the employee for his honesty...then promptly fired him. (Kidding!)

Tight-Knit, Experimental Teams

To ensure that employees can function without constant managerial oversight, Hulu functions in small, tight-knit teams of three or four. And by tight-knit, we're talking connected desks with no partitions and chairs that sit no more than three feet apart.

"The great thing about being really close together, particularly with small teams," says Richard Tom, VP of Platform Technologies, "is that we can have just really great debates, and really great conversations about what we're building, just right there standing next to each other." Sardine-like huddles are Hulu's solution to potentially expanding from a friendly startup into a sea of unknown faces supervised by managers with exclusive bird's-eye views.

Even colleagues in foreign offices feel close, thanks, in part, to one entrepreneurial engineer who got sick of waiting on a conference room and constructed a makeshift mobile Skype station with a TV, microphone, and speakers strapped to a cart. "He didn't wait for getting approval to purchase these pieces," Tom says. "He put this cart together; demoed it one day, and we're all like 'This is awesome!'" Many more polished versions of the cart roam Hulu HQ.

Old Concept, New Face

The web has refreshed the concept of workplace democracy that Ricardo Semler popularized in Brazil nearly 30 years ago with his famous experiments of self-set salaries and employee voting on new managers (or long before then, in the early 20th-century union movement and Kibbutzim in Israel that gave worker empowerment a global presence). This time, it's working toward an unfamiliar end: efficiency. Rather than manifestos of social justice and picket signs, worker empowerment has resurfaced to deal with the unpredictability of technology: Innovation opportunities exist everywhere. And the most likely source of it is an unsuspecting employee who stumbles upon a new solution. At places such as Groupon and Hulu, he's empowered to exploit it.

Follow Greg Ferenstein on Twitter. Also, follow Fast Company on Twitter.

[Homepage image: Flickr user greggoconnell]

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