Your Startup Team Should Have Unlimited Vacation

image001

A version of this article previously appeared in Forbes.

It sounds crazy to offer unlimited vacation time to your startup employees. Something to the left of socialism. Yet that is exactly what Richard Branson announced this past Fall. According to Branson, “We should focus on what people get done, not on how many hours or days worked. Just as we don’t have a nine-to-five policy, we don’t need a vacation policy.”

If you haven't already subscribed yet,
subscribe now for free weekly JohnGreathouse.com articles!

They Wouldn’t Do That At RCA

It’s one thing when a wild-eyed billionaire like Richard Branson sings the praises of unlimited time off. It’s quite another when a pragmatic industry veteran like Jim Zarley echoes similar sentiments.

Jim spent nearly two decades at RCA before embarking on a serially successful Internet career, culminating in his long-time role as CEO and Chairman of ValueClick. He surprised me during a recent Local Market Launch Board meeting by suggesting that the company stop accruing vacation and allow employees to take as much time off as they need.

I was a bit shocked to learn that ValueClick implemented this seemingly radical policy during 2014. Yet Jim’s wise and reasoned support of the policy opened my mind to its advantages. In Jim’s words, “Our approach with our employees was, ‘If you get your job done, everything else takes care of itself.’” This enhancement of ValueClick’s benefits seems to have been well received by its employees, as evidenced by several positive references to the change on Glassdoor.

Eager to learn more, I had a sidebar conversation with Jim, in which he shared with me several advantages of not capping employees’ vacations, along with some cautionary advice for companies rolling out a similar policy.

Better, Not Worse – Employees are naturally skeptical whenever a major change is made to their benefits. ValueClick was proactive in assuring its team that this change was not intended to reduce their vacation, but to provide them with more flexibility and less stress should they unexpectedly need to take time away from work.

Historical Status Quo – All vacation which had accrued prior to the policy change remained in place and was paid whenever an employee left the organization, just as it would have been before the policy shift. The treatment of legacy vacation was a challenge for ValueClick to communicate properly, which prompted Mr. Zarley to note that, “The most challenging aspect of the change was the implementation. Thus, the earlier in the company's growth cycle unlimited vacation is granted is, the better.”

Company Benefit – Organizations which allow employees to take “as needed” time off, are not required to accrue the associated payroll liability, which increases the health of both their balance sheet and income statement. In addition, no lump sum payments need be made to employees because they have no “banked” vacation time due them upon their departure. Although this is certainly not the primary reason to implement an unlimited vacation policy, it is a real corporate benefit to be considered when evaluating a more liberal vacation policy.

Heads Up Required – Unlike Netflix, which does not force employees to obtain approval prior to taking time off, ValueClick asks employees to obtain such authorization. However, Jim noted that this approval requirement is not used to limit time off, but rather to ensure proper communication between employees and their managers which reduces potential disruptions during an employee’s absence.

Universally Applicable?

Most startups offer unlimited vacation time by default, as they lack the infrastructure, time and personnel to properly track employees’ vacation. More importantly, it is a moot point, as six-day work weeks are seldom conducive to taking extended Holidays.

For instance, when I joined Expertcity (creator or GoToMeeting, sold to Citrix) as one of its first business executives, the European Founder granted me three weeks’ vacation, citing the deplorable few holidays that most Americans take. The extra week of vacation proved to be nothing more than a nice gesture, as our team consisted of less than 10-people and we worked 6-days a week, including most major holidays, for nearly 18-months.

The irony was that we touted the extra week of vacation when recruiting talent, but none of the core team members took time off for a major hiatus, let alone an extended vacation. When we grew to about 50-employees, we began to make an effort to track vacation time, but our “policy” (though unwritten) was essentially the same as ValueClick’s – “If you need time off, take time off. If there is a risk you won’t meet your goals, shout and we’ll find the resources to help you.”

As Mr. Zarley noted, “If you hire the right people with a results-oriented work ethic, the amount of vacation time they take is irrelevant.”

Will Virgin Go All The Way?

It’s interesting to note that despite the broad attention Richard Branson’s comments received on the subject of unlimited vacations, only applying the policy a relatively small number of its employees (about 150).

In September of 2014, the infinite vacation policy for Virgin’s “parent company” was announced on its blog, along with the following promise: “Assuming it goes as well as expected, we will encourage all our subsidiaries to follow suit, which will be incredibly exciting to watch.” It will be interesting to see if Virgin goes all the way and tells all of its 50,000 employees, “take as much leave as you need.”

Follow my startup-oriented Twitter feed here: @johngreathouse. I promise I will never tweet you about my lack of vacation time or tell you about that killer burrito I just ate.

Image: Jonathan Daniel/Getty Images

John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara's Faculty where he teaches several entrepreneurial courses.

Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.

Twitter LinkedIn  

Share and Enjoy

  • LinkedIn
  • Facebook
  • Twitter

Get real world advice from John Greathouse, Subscribe Today.