In my career, I once served as the Chief Information Officer of a struggling startup. We were burning through $50,000 to $75,000 monthly, barely matching that in gross sales. Our survival depended on increasingly scarce investor funding, and the future looked bleak.
After careful analysis, I proposed a radical solution: cut expenses by more than half by letting go of non-critical personnel and, crucially, closing the physical office to operate ‘virtually.’
The executive team initially resisted, but I presented a detailed plan demonstrating the potential monthly savings. After thorough consideration, they agreed, and our company transitioned to a virtual model.
Following the difficult news to our employees, we closed the office. Each executive team member took essential files and equipment home. Critical employees received company-provided computers, software, and equipment as needed.
Before leaving the office, we implemented a virtual PBX phone system. Many providers offer these services online; a simple search for ‘virtual PBX’ will reveal options. We currently use GotVMail.com, finding it reliable and cost-effective.
Most established businesses now use automated PBX systems, so this setup maintained a professional image. Upgrading to a live receptionist is also readily available. The PBX system forwards calls to designated numbers (sales, support, etc.). Unanswered calls are directed to voicemail. The primary advantage is the affordability of these systems. We pay between $35.00 and $75.00 monthly, including an 800 number. While employees have personal phones and cellphones, these are not business lines, avoiding significantly higher costs.
With the phone system addressed, we turned to the corporate information and file system.
As CIO, I relocated the computer servers and Internet connectivity equipment to my home. I established a robust (non-business) Internet connection and hosted our inter-computer network and website from there. We implemented a VPN (Virtual Private Network) to create a secure connection between our computers over the Internet, mimicking an in-office network. Secure directories remained protected. For a central file server, I established an FTP (File Transfer Protocol) site on our file server, fully protected against intrusion, allowing employees easy access to the central file system, just as if we were in a physical office.
For internal communication, we continued using phones and email extensively, as we did in the office. For meetings, we initially explored ‘virtual meeting’ software but discovered a preference for in-person meetings at restaurants, expensed by the company.
Our business was now entirely virtual. Everyone worked from home, and initially, morale was high. However, a significant problem soon emerged: employees, particularly critical ones, struggled with distractions at home, such as television and personal matters, leading to reduced productivity. Our phones went unanswered, client service suffered, and sales declined further. I began to doubt the viability of the virtual office model.
We held an executive meeting to address the crisis, facing a choice between solving the problem and closing the business. We committed to finding a solution.
First, we held a company-wide meeting (with a provided lunch) to explain the situation to our employees. We clearly stated that job security depended on improved performance.
Second, we restructured employee compensation. Base salaries were reduced but supplemented with performance-based pay, moving closer to a piecework model. The emphasis shifted from hours worked to output achieved.
Furthermore, we developed software to monitor employee work. Employees were required to log each task completed by checking a box or clicking a button. Failure to log work meant no payment. We periodically audited these logs for accuracy, and employees were generally honest. In some cases, more detailed information was required, such as client selection or specific services provided. In short, every aspect of their work had to be recorded in our database to receive compensation.
We created reports detailing each employee’s work, allowing close monitoring. Some reports were accessible to all employees, while others were restricted. For example, the service team could view each other’s accomplishments, and the sales team knew who was selling what (with customer names and other sensitive information redacted). We assigned senior employees to supervise subordinates, especially concerning voicemail responses, creating a ‘virtual supervisor’ system.
As a result, we knew, and our employees knew we knew, what they were doing at all times. Like any business, we had to terminate and rehire a few employees, but overall, the system worked exceptionally well. Sales and operations significantly improved compared to our time in the physical office. Everyone was accountable to the company for their actions. Good performance was rewarded (primarily with financial incentives and promotions), while poor performance was penalized (sometimes with job loss).
That startup is still operating, albeit still with its share of challenges. I question the fundamental business plan, but the virtual office structure works exceptionally well, exceeding my initial expectations.
Since then, I’ve observed many businesses embracing remote work. A friend who works for a large temporary personnel agency now works from home full-time.
With today’s technology, running a business virtually, without a central office, is not only feasible but, in many cases, the more practical solution.