Unlimited vacation perks and game theory

There have been a few news articles going after perks like “unlimited vacation.” The trouble with these articles is that they typically go after these perks quoting folks who run workplaces without these policies and thus tell you that these perks are dangerous. There’s an inherent skin-in-the-game problem there.

A better approach might be to examine such perks from the lens of game theory. The challenge with unlimited vacations is that one’s natural behavior is to want to take a little less vacation than their neighbor – i.e., not enough to be the slacker on the team. This means the natural equilibrium point is to reduce the number of vacation days to zero.

This problem can be easily solved by shifting the equilibrium. For example, companies like Hubspot and LinkedIn (where I work) either mandate 2 weeks of vacation or shut down entirely for 2 weeks in the year. Another way to do this would be to have negative incentives below a certain threshold – e.g. maybe you get some benefit deducted if you don’t take 3 weeks off.

Company culture goes a long way in creating equilibrium points as well. Smart employers understand that breaks result in more productivity. And, cultures can create norms that make it unacceptable to not take these breaks.

Perks aren’t culture – their use is dictated by culture. They are rarely good or bad by themselves. Ping Pong tables, for example, can actually be pretty great if you use them every once in a while to blow off some steam with a teammate.

So, if perks aren’t being used as intended, it is better to evaluate the equilibrium created by the culture and incentives in place. And, game theory is our friend.

(Inspired by the game theory chapter on “Algorithms to Live By” – a very good book :-))

Open plan offices – counter to the counter point

Cal Newport and David Heinemeier Hansson had strong critiques of open office plans this week (Cal, David). They’re both thought provoking thinkers/writers and I understand where they’re coming from. That said, their arguments are built on the incorrect assumption that the primary purpose of open offices is to foster collaboration.

While that may be the party line, I think the two primary reasons for open offices are cost and culture. Office space is expensive and open offices are much cheaper on a per-employee basis. Cost is a powerful organizational incentive.

Culture is an often overlooked part of the discussions of open offices and is why richer technology firms have embraced open offices. Having executives work at their desks a few meters away from entry level analysts makes leadership feel more approachable and less hierarchical. It signals certain cultural values and changes the dynamic from workplaces where the goal is all about getting to that coveted corner office.

The absence of the culture variable is also the weakness in most studies on open plan offices. The effect of signaling these cultural values is hard to measure in the short term. But, just because something is hard to measure doesn’t mean it is less important.

I still think the commonly cited issues with open offices should be addressed – this critique of open offices based on their propensity to foster predatory behavior against women, for example, is important and needs to be fixed. We need more spaces and cultural norms that make it easy for people to focus. It may also be that companies with strong hierarchical cultures are just not suited for open plan offices.

The issue just isn’t as simple as is often outlined. And, it is hard to move these discussions forward if we don’t understand the trade-offs involved.