Meet the New Boss

Second Life’s creator wants to rewire how businesses run.

A few years after Philip Rosedale graduated from college with a degree in physics, he joined RealNetworks, then an audio-streaming company. It was a top-down, command-and-control kind of place, where difficult software projects were outlined in advance and executed according to carefully conceived plans.

Rosedale hated it. As a teenager more interested in programming than partying, he had experimented with simulations of flocking birds and other leaderless systems. He marveled at how order could emerge in the absence of hierarchy. “You think that they have a leader and a command architecture, and of course they don’t,” he tells me, going on to describe his “almost spiritual belief” in group self-organization.

So when Rosedale left RealNetworks in 1999 to found Linden Lab, the company that created Second Life, a freewheeling virtual world frequented by hundreds of thousands, he vowed it would be different. The immediate result was LoveMachine, a messaging system for Linden Lab that turned performance reviews into a peer-to-peer exercise. He subsequently designed Worklist, software that helps managers embrace uncertainty. Now, as part of his mission to infuse corporate America with the ethos of self-organization, he is marketing both as business tools.

LoveMachine is simple but powerful. When an employee does something great, colleagues can send electronic thank-yous, known as “Loves.” “It feels great when you get a Love,” says Michael Stoppelman, the vice president of engineering at Yelp, whose team uses the system. At LivingSocial, a consumer-deals Web site based in Washington, D.C., Loves sent by the 1,350 employees are displayed on screens throughout the firm’s offices. Linden employees earn $3 for each Love they receive, so the system complements the traditional top-down bonus allocation. And the messages are archived, so managers can gauge long-term contributions. It’s performance review, except no one is in charge.

Rosedale’s next offering, Worklist, is a project-management tool for tasks that are hard, if not all but impossible, to plan in advance. As Rosedale sees it, such tasks include most complex processes, particularly software development. Managers of such projects, he tells me, should find inspiration in The Flight of the Phoenix, a 1965 film in which a plane crash’s survivors use ad hoc methods to rebuild their aircraft. “All successful companies are built on jalopies at the beginning,” Rosedale says. “If you pre-plan, you’re probably wrong.”

Worklist is a Middle Eastern souk for software tasks—part chat room, part jobs board, part auction house. Employers post small programming jobs, which are bid on by the software developers who gather on the site. Workers and employers deal on the basis of feedback from previous jobs, just as buyers and sellers do on eBay. By making it easy to acquire (and discard) workers, Worklist lets managers tackle complex projects incrementally, exploring tangents or backtracking as necessary. The built-in communication system, as well as the transparency of the job postings, allows development to be bottom-up as well as top-down.

Rosedale’s timing is good, says Bradley Staats, an assistant professor of operations management at the University of North Carolina at Chapel Hill. Worklist taps into the trend toward fragmenting tasks and outsourcing. And LoveMachine could be transformative, he thinks, provided business leaders promote the tool.

Still, hierarchy persists in the workplace for a reason. Ever since Frederick Taylor, a mechanical engineer turned management consultant, set forth the principles of rigid, top-down management in the early 1900s, management theorists have attacked them. But no alternative has prospered. Small teams can self-organize, yet no one has pulled off the feat at a large corporation.

Could Rosedale’s tools be the catalyst for change? Possibly. The boom in distributed work has challenged the notion that hierarchy—like democracy—is the least worst way to do things. Managers have noted the success of Web sites like Amazon Mechanical Turk, through which in-house jobs can be quickly outsourced. Contributors to Wikipedia have self-organized to create the world’s largest encyclopedia. Volunteers have used Twitter, rather than top-down management, to coordinate the translation of emergency messages in the aftermath of recent disasters, including the Haiti earthquake. None of this proves that large organizations can be run on Rosedale’s principles. But at the very least, these projects may encourage reformist managers to give his ideas a go.