Q&A with oDesk CEO Gary Swart

From Little Things caught up with oDesk CEO Gary Swart while he was in Sydney this week, to talk about the company’s plans for the Australian market, the future of work, and some of the lessons he’s learnt building the world’s largest online workplace. Here’s an edited version of the interview.

Zach Kitschke: It’s good to catch up with you. So tell me, what are you doing in Australia?

Gary Swart: We have 35,000 clients in Australia. So people who need work done. And so, we’re here meeting our clients. We’re here talking to press. You know; we’re the world’s largest online workplace and people have heard about us now and so we’re here talking about press. And we’ve done a lot of research and we’ve planned some pretty good statistics that I can share with you about what we’ve learned from our clients.

And then, we’re here meeting entrepreneurs and really assessing the market to see what does Australia have in store. But it’s the number one per-capita country for oDesk. So in total spend, more than $32 million last year was spent on oDesk from clients in Australia, and hours billed by Australian businesses on oDesk grew from just 337,000 in 2009 to 3.3 million last year.. And we’ve never been here. So we said, ‘Gee, per-capita it’s bigger than anywhere in the world.’ So we decided to come and spend some time here.

Zach Kitschke: Okay, so you’re spending a few days here. Is an Australian office on the cards?

Gary Swart: You know, right now we’re here to learn. I don’t want to rule it out, but I also don’t want to make any commitments. We really want to understand like what’s required. Would that make a difference? Is that something that the market requires or that the market needs? Do we need a local presence? And so we’re really here to learn this week to figure that out.

Zach Kitschke: You’ve spoken a lot about the future of work, and I think you’re doing a panel later this week on that topic. What is the future of work?

Gary Swart: Well, in the United States the percentage of goods bought online versus on-site is only 6%. So after 20 years of ecommerce, we’re at 6% penetration of online shopping versus offline, yet it really fundamentally changed the way that I personally shop. Not for everything. But for some things, I’d rather get them online than actually have to go to a store or go to five stores and comparison shop and go. Well, we’ve done the same thing for work and the internet has really enabled this. The internet has enabled us to work regardless of where we are; regardless of where the client and the contractor live.

So what we think the future of work is really leveraging the internet to bring the work to the worker, as opposed to the worker to the work. So trying to get the proper visas or to import talent into Sydney now is just really hard.

We were talking to our client last night and he said the iron ore industry up in Perth, they just got approval to import workers because there’s not enough cleaners and truck drivers and people to support the industry. So you know how hard it is to bring the worker to the work. You’ve got to move them, pay for it and then that person now has to move to Sydney. Well what if they can’t move to Sydney?

So we think that the future of work is transparent. It’s about people having a reputation and keeping that reputation online where people can see what skills you actually have and have them be verifiable. It’s transparent, and we think it’s on-demand. You should be able to hire the right resources at the right time based on what you as a business need; and workers should be able to choose based on what’s important to them. So we think it’s very much on-demand on both sides.

We think that it’s global. The best workers should be able to go to work and come to work from wherever they are in the world. So it’s transparent, it’s global, it’s on-demand; it’s all of these things.

Zach Kitschke: What’s your advice for managing virtual talent?

Gary Swart: Think about how you effectively manage in a face-to-face relationship, it’s around clarity. Where are we going? How are we going to get there? It’s around responsibility. What are you responsible for? What key metrics am I going to give you to be successful and what am I going to do?

So you’ve got to be clear about where you’re going, how you’re going to get there, what you’re responsible for. And you have to be really clear about the standards. How am I going to hold you accountable till the results? Doing that online you have to sort of amplify all of that. And it requires constant and consistent communication. So whether it be daily check-ins via Skype or every other day or a client last night said he does a twice-a-week standup meeting with everybody on the team. To say, ‘Where are we with the client? What are you going to get done?’ Another one of our clients says he screenshots everything. So he takes a picture of exactly how he wants it with arrows and buttons, and very very clear instructions.

Zach Kitschke: You haven’t always been involved with oDesk — you were actually talking to investors about a previous company when you took the job. How did you become CEO?

Gary Swart: Yeah. So my previous company was called Intellibank and it was genius: it was an intelligent bank of knowledge online, so you and I could share documents. I would simply drag and drop a document into a WebDAV interface and there you could have access to it. And you could write to it and I could see your version versus my version and compare the changes. It was really document management in the cloud — it sounds a lot like Dropbox — and we just didn’t execute.

So in the process of trying to raise money for Intellibank, one of investors that I was pitching to to raise capital said, ‘We really like you, but we don’t like Intellibank. So we want you in our company over here.’ And so they recruited me into oDesk which had already started.

Zach Kitschke: I think it was Josh Berlinger from Sigma Capital, who had previously worked for oDesk, who described the concept of liquidity hacking; how you kickstart a marketplace. Looking back, what would you have done differently?

Gary Swart: When you’re building a marketplace business, people come to us and they said, “Why don’t you do local hiring? You’ve got the platform. Like what if I had just wanted to hire somebody locally?” Sort of like a test rabbit, or I don’t know who was doing something similar here. “But why not do local? But why not just have this vertical? Hey, you know lawyers are good. People need lawyers. Why not just have lawyers?”

And if imagine if eBay started with Beanie Babies, Pez dispensers, Rolexes and cars; what would they be known for? So I think the lesson for us was focus. Like don’t try and be all things to all people. Pick a niche or a domain where the pain is really acute and solve that need. And then earn the right and respect to go to a second need that’s an adjacency and then a third and then expand from there.

And I think that we got distracted by bigger clients; higher value work; maybe a certain geography. And if you try and pursue all of those things, you’re not known for anything for being really good at anything. And so for us I think focusing on development; focusing on a one-to-one relationship – not outsourcing, not throwing it over the wall to an agency, but hiring an individual to work with you in your startup to be a member of your team for the next year just happened to do that from Romania or Ukraine or Pakistan or wherever they may be located. And I think that was the differentiator for oDesk. We recognized that we had to create trust. And if we didn’t create the world’s most trusted online workplace, we weren’t going to earn the right and respect to continue to do that. So focus and trust for both sides I think enabled us to get significantly bigger than everybody else.

Zach Kitschke: There’s a great story about your Director of Engineering, who after joining the company was asked to prioritise the product roadmap, and perhaps surprised the company with what he said. How did you know you’d made the right hire?

Gary Swart: So we hired a Director of Engineering out of Netflix, and he’s a really good guy. And I used to work for Reed at Netflix. And Reed sent me an email saying, ‘Congratulations. You got a good one.’ And we handed him a list of 50 features that we thought needed to be built. But we hired him to actually make those decisions. Why? Because he’s a great product guy.

So we handed him a list of all the features that we thought and he said, ‘Give me a month. And I’m going to sort through all of these and I’ll come back to you and let you know what I think the priorities should be.’

Sean came in and he told us about Netflix wanting to increase their lifetime revenue of a customer and they came up with a metric that they could move to do that. And the metric was called ‘movies in queue’. If you have more movies in queue, you’re likely to have a longer subscription. And so, Sean said they came up with a feature at Netflix called the movie trailer viewer and they had three different choices of how to build it. And they debated for a couple of months which one to build. They ended up building all three. They ended up presenting all three to customers. And it turns out that movies in queue didn’t actually increase – movie trailer viewer did not increase movies in queue at all. As a matter of fact, it went down, the number of movies in queue.

And so Sean told us that story and as a result saying the only reason they knew that movies in queue didn’t increase is because they had really good A/B testing infrastructure. And so the first thing he had to build was A/B testing infrastructure which oDesk didn’t have at the time. And it was just brilliant prioritization. None of these features mattered if you couldn’t measure the impact of the feature. And we didn’t have a way to measure the impact of features. So that became the most important thing to build first. And he convinced us of it by telling us the Netflix analogy and the entire company trusted that he was the right guy and he had the right priorities.

Zach Kitschke: What’s your approach to hiring? Do you have any insights or advice?

Gary Swart: I do. Let me tell you about how we’re structured and then I’ll tell you about the insights on hiring. For oDesk, for every employee we have about two contractors. So we really are fans of what I would call leverage. We invest in and hire employees locally, give them an office and all of the benefits and things they’re entitled to and then give them leverage by enabling them to leverage on-demand workers via oDesk in order to get more work done. And that way you end up with more motivated employees and they end up with a skillset that I think is going to be valuable moving forward, which is how to manage a blended team between on-site and online workers.

Now, as far as hiring, I kind of look at it as four things; we look at personal characteristics, we look at motivation, we look at skills, and we look at knowledge. And we typically look at them in that order. So first and foremost personal characteristics; these are things that you can’t change about somebody. It’s really hard to teach smart, it’s really hard to teach creative, it’s really hard to teach integrity.

And anytime I’ve tried, I’ve failed. I had a manager once who used to say, “You can teach a chicken to climb a tree but you’re better off getting a squirrel in the first place.” And so, we kind of look for squirrels. We look for people who already know how to run. They’re smart. They’re high integrity. They’re creative. They’re innovative. They’re entrepreneurial. They’re hard working. These are personal characteristics that I try and get out in an interview because if you don’t have them, we can’t teach them.

Second is motivation. What is it that a candidate wants out of a job; out of a career, out of life? And if they want a nine-to-five job where they can be home every night maybe we’re not the best fit. And again, we’re not about nine-to-five but we are about hard working. And so we try and align the motivation to be consistent with what those people want. So if they want a more stable environment. They don’t care about growth and development. They don’t care about impact. It’s probably not a good fit.

And then we look at skills and knowledge. And skills are sort of less important than personal characteristics and the motivation. I’ve never had to fire somebody over knowledge. I fired them because they weren’t smart enough to get the knowledge.

Zach Kitschke: What sort of roles do your contractors take on?

Gary Swart: Everything. So we hire senior architects in Silicon Valley, very experienced seasoned engineers who are pricey. But then those architects in turn can manage 10 to 12 online developers. And so we get a lot more code written because we have zero developers in Redwood City. We have senior architects, who stuck a feature, decide how to build it and then manage the distributed team to actually build it. So it’s development; it’s QA; it’s some tech writing; it’s marketing. So we have a copywriter in Toronto who edits our blog. We have support people. A stay-at-home mom in Tennessee; in Texas; managed people in the Philippines and in the U.S. We have researchers. We have an analyst who creates really great dashboards and reports for us from a lot of our data, and happens to be in Florida.

So it’s really any job. The first thing we ask ourselves is, ‘Do we need to hire an employee or is this something that we can get from the network?’ And then we typically get it from the network and if it works out really well, a lot of those people, we make them permanent employees. If they want to be. The first thing we do is we figure out, can it be done remotely.

Zach Kitschke: How much bigger could this market be?

Gary Swart: Well, I presented to a group of top CIOs in the world and told them about oDesk. And by the time I was done I said, ‘So could you imagine a world where out of every 100 employees, two out of 100 worked online instead of in your office. Is that believable?’ And every head turned in the room was saying, ‘Oh, two is a no brainer.’

So what does 2% of all work look like? That’s huge. And so it’s $1 billion today, but I’d say even if it’s 2%, that is a massive massive market, and we want to be the leaders in that market. We want to help companies to find the right workers to work online; to contract with them; to manage them as if they were in the same office; and let us handle all of the payroll and money transfer across borders and boundaries and everything that goes along with that. And if that’s 2%, it’s a massive massive shift in the way the world works.

Zach Kitschke: Do you see that there’s any inequality there, in terms of pay, when you compare oDesk staff with contractors?

Gary Swart: I think there’s two ways to look at this. It’s like, everybody makes their own deal. And I believe everybody should make their own deal. And I believe that people should vote with their wallets or their feet. You know what I mean?

So for our contractors, specifically, our contractors decide to work with us because they have these things more than they could get somewhere else. They’re making more money at oDesk than they could make somewhere else, and they love the work. So we pay them very fairly. We have a system for increasing the top performers every year. And for those that don’t perform, it’s on-demand. We’re going to give them feedback and we’re going to help them to go be successful somewhere else whether they’re an employee or a contractor.

The average worker on oDesk, the average increases their wages 190% in the first three years. And so the good people are being able to increase their wages, and our clients are happy to pay up because they’ve told us consistently that they care about quality over price. They want good value. They’re not saying, ‘Oh, I’ll pay $1 million.’ But they want to pay for quality, and they would rather pay for quality up front as opposed to get it wrong, only to find that somebody was a cheap price, but took twice as long to do it. That’s a waste of their time. So they would rather take the quality.

Zach Kitschke: I want to ask about employee stock options, because in Australia there are regulatory restrictions in the way that ESOPs are taxed. In fact, a lot of startup choose not to offer them because it’s just not financially viable. How important are employee stock options for your company and I guess, more broadly in the Valley?

Gary Swart: Everybody at oDesk is a stockholder. And if the company’s successful, they’re all going to be successful. And so we give people incentive to help make the company successfully. And then of course we pay them for coming to work every day and that’s back to table stakes. That’s sort of, it’s not birth right but people who do go work deserve to get paid for it. And if you do exceptional work, you deserve to get paid more. And then balance is number four. So impact, growth and development, financial reward and balance. That’s what we owe our employees.

I think options are really important. And it goes back to the personal characteristics. You kind of want people who are risk takers, who want to share in the rewards, who want to have skin in the game, and so we look for people like that. For the people that don’t want that they might go to a larger company with no stock options but a much bigger salary.

There’s this idea that, “Hey, if I’m going to take a risk, I want to share in the rewards.” And you don’t hear enough about all of the opportunities where that didn’t work out. There tends to be a spotlight on the ones where it did; the Facebooks and Instagrams. And you know for people who made far more money – there’s far more wealth creation from their options than there ever could have been from compensation.