What Happens When Companies Give Workers Unlimited Vacation Time?

vacation timeAs the 15 employees of the SmallBox Web marketing agency gathered for their Christmas party last year, CEO Jeb Banner stood up and read a proclamation.

"We now declare all SmallBox employees to be free," Banner intoned. "Free to come to work when you want for however long you want. Free to take as much vacation time as you need for whatever reason. Free to work and live the way you want to."

Cool. That was the general response of Banner's employees, who already enjoyed a fairly loose work environment. But the change at SmallBox could represent the future of work, as companies adapt their environments to mobile technology and knowledge-based work that no longer require the traditional place- and time-based organizational habits.

Adopting an unlimited-time-off policy moved SmallBox into a small coterie of companies that have jettisoned the age-old traditions of employers defining work as a specific amount of time spent on task and defining vacation as a predetermined amount of paid breaks from that requirement.

Instead, SmallBox and a few other companies are trying to define work as completing tasks successfully -- regardless of how much time it takes, let alone when or where that time is logged.

Unlimited time off is a core part of what employers call results-only work environments, or ROWE -- where workers are not measured on the time they put in but on the product they turn out. Only 2 percent of employers have such policies, according to a 2011 survey by the Society for Human Resource Professionals. They include such prominent companies as Best Buy, Gap and Netflix.

Proponents of such policies say they are the future of work -- even as they acknowledge that it may take a generation for them to be widely accepted. Today, unlimited time off gets a lot of attention -- but a lot of skepticism, too.

Study: Americans Waste $34 Billion in Unused Vacations

Employees initially take less time off than they used to because they fear that "unlimited vacation" is really a ploy to end guaranteed vacation, so that workers will work more, said Pete Morse, a labor and employment attorney at Barnes & Thornburg LLP in Indianapolis who has helped several employers start unlimited-time-off policies. Barnes itself has an unlimited vacation policy.

"There is skepticism on what's really at play here," Morse said of employees at companies that adopt such policies. "There is concern, either imagined or real, that your manager does not embrace this. That your manager wants to see butts in the seats. They don't want you to use this."

A law firm where Morse worked before joining Barnes had an unlimited-vacation policy, but employees didn't trust their managers. So when they would take a day off, they would first drive to the law firm office at 6 a.m., turn on their office light and hang a sport coat over their chair -- just to give the impression that they were, indeed, working.

In fact, if unlimited-time-off policies are dropped on a company culture not prepared for them, the results can be disastrous, Morse and other human resources experts said.

Rampant Abuse And Attrition
"If you have a culture that is not high-performing and you start to put in some of these benefits that are not well-managed, you will quickly make the culture even more toxic because rampant abuse will cause great friction," said Karl Ahlrichs, a consultant at Indianapolis-based Gregory & Appel Insurance. "And the high-performers know that they can get another job. And they will do just that."

Topher Overstreet has no regrets about launching his digital marketing firm Xiik LLC four years ago with an unlimited-vacation policy.

"Basically, I just didn't want to keep track of it," said Overstreet from Xiik's new office at the top of the old Business Furniture building immediately north of Bankers Life Fieldhouse. But now he's finding that not tracking vacation creates some problems, such as whether women can take more than the federally mandated three months off after having a baby.

Another issue is how to help workers qualify for short-term disability, given that most disability insurance plans require workers to exhaust their allotted vacation time before benefits kick in. Overstreet hired a human resources consultant in mid-April to help figure it out.

Overstreet is confident that he can find solutions to those challenges. And he wants to keep the unlimited-time-off policy to promote a culture of trust and self-policing among his 15 employees.

"We only hire adults here, so we trust you to manage your work flow," Overstreet said. "If you're getting your stuff done, I'm not going to ask you how many vacation days you're taking."

Freedom And Responsibility
To date, Overstreet said, no Xiik employee has abused the policy. Banner at SmallBox Web hasn't had problems, either, although from the very moment he read his proclamation of freedom, he also gave them Eleanor Roosevelt's warning that "with freedom comes responsibility."

"The responsibility to do our best work. To hit billable goals. To go above and beyond when needed. To thoughtfully communicate. To plan ahead. To think of others. To hold each other accountable when we stop growing or lose focus," Banner said at the Christmas party. "If you need help knowing where the lines are, ask. If you want personal structure, create it."

SmallBox Design Director Lydia Whitehead has certainly enjoyed the culture Banner is trying to create. Despite her leadership role with the company, she works only about 32 hours per week so she can also work on a master's degree in human-computer interaction at IUPUI.

And three years ago, Whitehead took a six-month cross-country road trip, working roughly 10 hours a week as she did so.

The key with all of it, she said, is communicating with your team about your schedule coming up, the projects that need to get done, then taking responsibility for making sure they're done on time. How the work gets done is not a big deal.

"Jeb is an incredibly trusting person. I think we all have a healthy amount of trust. We all take a lot of responsibility for our own jobs. I think that's why it works for us," Whitehead said.

"There's definitely more vacation happening, but not an outlandish number, like six months off or even three months off. About three weeks, on average," she added. "We're all pretty good about just taking the time that we need."

From Jody Thompson's perspective, Xiik, SmallBox and even Barnes & Thornburg -- even with their unlimited-time-off and flexible-work practices -- are still stuck in obsolete work environments.

Thompson and her co-worker, Cali Ressler, created the results-only work environment concept in 2003 while working in Minnesota-based Best Buy's human resources department.

Companies won't truly have the cultures that support unlimited-time-off practices until they start managing in a completely different way, Thompson and Ressler argue in a book they wrote called, "Why Work Sucks and How to Fix It."

That style never dictates job duties or hours to employees. Instead, a company first identifies its one, overarching purpose, then managers conduct a Socratic dialogue with employees to help them identify how they, in their given roles, can best help the company fulfill that purpose.

Hours of work are just one thing that each employee will, in essence, define for themselves. They also will identify key metrics by which their performance can be measured.

"You're not building a workplace anymore, you're building a workforce. People feel that their dignity's back and they feel more respect and they start to care, instead of just putting in their time," said Thompson, who also runs a consulting firm with Ressler called Culture Rx.

"We're on the verge of a big idea that's really about completely changing the culture of how we think about work. Work isn't a place you go, it's something you do," Thompson added. "That doesn't mean that people don't go to a place sometime. But they're not at a place because they're not going to look good if they're not at a place at 8 o'clock in the morning."

Pushing Productivity
Michael Reynolds, CEO of Indianapolis-based Web design firm SpinWeb, has fully embraced Thompson's ideas. Reached by phone on a Monday afternoon at his office at Keystone at the Crossing, Reynolds said only two of his 11 employees were in the office.

Since working with Thompson to adopt ROWE policies, Reynolds said, the productivity of SpinWeb's workers has nearly doubled. They also stopped billing clients based on hours logged, and instead started quoting a flat price -- which clients have appreciated. SpinWeb's revenue has been growing steadily.

Only once did Reynolds have an employee abuse the policy -- a copy writer who didn't end up writing much copy. When Reynolds discovered it, the employee was soon dismissed.

Otherwise, Reynolds said, having workers define their roles and determine how they will work has been a boon to SpinWeb.

"With the technology that we have today, there is very little need to be in an office, unless you're doing some heavy collaboration," Reynolds said. "I go weeks at a time where I have no idea where my employees are, and I don't care, because they're getting the work done."


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