Case 20Jason Fried and HR Practices at Basecamp Intentional Selection and Managing for Results

It takes excellent people to build a great company.

Since launching the Chicago-based applications company in 1999 that today is known as Basecamp, Jason Fried, its co-founder and president, has developed a careful and deliberate approach to finding and managing people for his company. Why is he so intentional in his hiring? Hiring people is like making friends, asserts Fried. Pick good ones, and theyll enrich your life. Make bad choices, and theyll bring you down. This view makes sense. As Fried argues, the people you work with are actually more important in some ways than your friends, since you will spend much more time with your workmates.

The company has a deliberately small staff of 34, and it works hard to keep them happy. After 23 years in business, the rate of employee turnover has been very lowespecially considering the dynamic industry in which Basecamp must operate. Competition for the limited pool of technical staff is fierce, which makes job-hoping the norm.

To be sure, the company has hit a few bumps on the road to figuring out how best to manage its human talent. Perhaps the most public of these was in 2021 when Fried and his partner in the business announced a new policy that banned political discussions at the office. They found such talk to be a workplace distraction that cut into employee productivity. Some of Basecamps staff strongly disapproved of the decision, so Fried allowed any employees who disagreed with the new policy to leave with six months of severance pay. Some one-third of Basecamps staff did exactly thator at least declared that they would. But despite this notable HR hiccup, the company continues to be a very popular employer.

Frieds hiring method has served Basecamp well, but some of his methods clearly lean toward the unorthodox. For example, he hires late (only after it hurts) and never before a new employee is needed. He wont even hire the perfect catch if he doesnt have the perfect job open for that person. Invent a position to keep a talented person from getting away? Never! And Fried wont hire for a job he has never performed himself. In his mind, there is no way to find the right person for a job if you dont understand the position on a deep level.

Frieds approach to evaluating job candidates is also a little out of the ordinary. Rsums are ignored most of the time. Theyre full of exaggerations, half-truths, embellishmentseven outright lies. Cover letters are given extra weight, because they reveal who wants the specific job being offered, and not just any job, and they also show who can write well. When in doubt, always hire the better writer, Fried suggests. He bases this on experience: Every time weve been hesitant about someone, their skills have been great but they werent good writers, it turned out that we probably shouldnt have hired them. And during interviews, Fried listens carefully for signs of self-initiative. He reasons that candidates who ask, How do I do that? or How can I find out this or that? often are not used to figuring things out for themselves and thus would be a drain on others. On the other hand, Fried likes it when a candidate asks, Why? He interprets this as a sign of deep interest in a subject and a healthy dose of curiosity. Details can make a huge difference.

Even if all indications are positive, Fried still chooses to go slow. We . . . try to test-drive people before hiring them full time. We give designers a one- to two-week design project to see how they approach the problem, paying them a competitive stipend for their time. Fried sometimes extends the project into a month-long contract to see how we feel about the person and how the person feels about us. The point is to avoid hiring mistakes that would be bad for the company and unfair to the candidate.

Looking forward, many small businesses are realizing that it is becoming increasingly difficult to find the workers they needespecially if they prefer to hire very carefully, like Fried. Many are figuring out how to get by with fewer workers, perhaps because they have no choice. Some are turning to flexible management practices, like cross-training employees, hiring temporary workers on an as-needed basis, or forming outsourcing partnerships to adjust to fluctuations in market demand. And because of modern economic realities, these challenges continue to escalate. As one sign of the times, Fried explains that working with remote staff is here to stay: At some point, if you want to find great talent, youre going to have to look outside the walls of your city [because] there are great people everywhere, all over the world. Amazing people.

What business doesnt want to hire amazing people? So, one way or another, the small business show must go on, and that means having the right people on board when you need them. In the future, that may be far easier said than done.

QUESTIONS

1.Do you think Frieds hiring methods are reasonable? Will they lead to good hires for his growing company? What are the best features of his approach (if you believe there are any)?

2.Do you think it is a good idea for Fried to take a pass on perfect candidates because he doesnt have an attractive job open for them at the moment? Is it smart for Fried to let talented candidates get away by refusing to create more suitable positions to keep them?

3.If Fried were to use the behavioral interview format described in Chapter 20, what kinds of questions might be especially helpful, given what you know of the types of people he prefers to hire?

4.Do you agree with the view that working with remote staff will be necessary for small businesses that want to hire highly capable employees? On what do you base your view?

5.What recommendations would you have for Fried regarding his human resource management practices in general?