Tim O'Reilly explains the mistakes he made and the lessons he learned


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While most of the people we laid off were great employees who went on to find good jobs elsewhere, we were appalled to discover there were some people who had built themselves a nice, cozy position but weren’t working very hard. While most of us were pulling the wagon, they were simply riding on it. We even discovered several cases of fraud! That goes back to my point above about the importance of a crack financial team — one of their key jobs is to have strong controls in place. I would never have believed that one of my employees would do that. It can happen to any company. The longer you are in business, the more outrageous things you will have employees do on your watch!

So very true. I had a partner in a business that thought it was a great idea to hire sales people, give them brand new iBooks and pay them salary plus commission. The salary was high enough that they could screw around and not complete any sales and still make a living.

Soon the iBooks started getting “stolen” (yeah, right) and we were getting very lackluster sales. I ended up having someone trail the more suspicious sales people and found out they were simply going to music festivals, etc. instead of actually going out to do sales and they were even fabricating leads they’d claimed they’d found. There was mass firings, but the damage had already been done.

I jettisoned from the partner shortly thereafter. Lesson learned on my part to be vastly more careful with who I partner with. I later heard the same jackass tried so save some money on distribution by hiring teenagers and paying them cheap to distribute expensive publications around town. It was later discovered the kids simply threw the pubs in dumpsters and goofed off instead. If you’re gonna pay people to screw you at least make them give you a reach-around.

Blind trust in new employees, etc. is a recipe for disaster. Some will act like crazed monkeys on acid and rob you blind.

Good on Tim O’Reilly for writing this. The learning to treat the business like a business is probably why O’Reilly is still around unlke so many of their contemporaries both in publishing and in tech.

I strongly agree with almost all of this. I have failed for similar reasons, but I would put choosing good partners VERY high on that list. My view now is that I’d never enter into a partnership with anyone again other than my wife.

Tim’s views on HR and legal are spot on. These two fields combine to destroy companies, large and small. Once legal has a foot in the door the logical outcome is mind numbing drudgery. This serves only to keep HR busy as staff turn over at a rate that will kill your company and your own soul.

I assume you are referring to start-ups.

I worked for a 3 billion dollar bank that had a small bored staff, and an tiny 2 person legal department. We got bonuses every year, and extra bonuses when the profits were high. Our staff was about 50 % the size of a regular bank that size. It was a nice place to work, with awesome healthcare benefits, good coworkers, and nice facilities (think marble lobbies, first of it’s kind energy efficient branch office, etc. When the owner sold the bank he gave millions of dollars from his sale to the staff (even the janitors). Yes, it was an exception, and not the rule.

Once the owner left, the place pretty much fell apart, however.

I don’t like how some people seem to regard Valve’s way of doing business as a good model. Valve has a giant button on the wall that they can smack every now and then to bring in heaps of cash. Otherwise, I don’t see how they’re necessarily that much different from 3D Realms: products quietly stewing in development year after year without ever actually getting released.

Mr O’Reilly - please put the original version of your handbook online. I would LOVE to read it, it sounds inspiring.

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