One of the really cool things about being a startup is that you can make your own rules.  There is no HR department to try to make you act all “corporate” and instill strict rules and guidelines or even have an “employee manual.”  There is no doubt that this added freedom creates much of the innovative culture that drives a startup and attracts great employees.

One common area to experiment in for a startup is with the vacation policy. Talking to founders, I’ve heard startups use the entire spectrum from no vacation to unlimited vacation.  Today, I’d like to examine the unlimited vacation policy and why I think it may not be the best idea for startups.

There are really just 2 sides to this issue I see: how your best and worst employees handle it.

Unlimited Vacation takes advantage of your best employees.

I’m a workaholic. So are many other startupers. Especially for an employee punching above their weight class, there can be a lot of pressure to constantly move the ball forward and make progress. That can mean taking very few breaks, and risking burn out.

When you have unlimited vacation, there is no finite number. That number feels very foreign and it’s hard to understand when you are allowed to take time off and how much is appropriate.  When you become a veteran entrepreneur, the concept may make sense and be easy as you’ll know when you should take time off; you fully appreciate the concept that a recharged version of yourself is much more productive than the borderline exhausted version of you slogging along for months.  However, when you’re new, knowing the actual amount of time you’re allowed to take off can really help you not feel guilty taking time off when you need it.

Unlimited Vacation is a dangerous option for bad employees.

What do you do when one of your employees wants to take time off repeatedly in a short amount of time or a time that is far from ideal for your startup? How do you rein that in without conflict? When you talk about issues around “wrongful termination,” it’s a hard argument to say you’re firing someone for taking too much “unlimited vacation.”  This can cause all kinds of conflict in your company as you can have resentment between employees and frustration for both parties; those taking the vacation think they’re merely exercising the rule as written and those working hard and not taking breaks see it as abuse.

So what’s the solution?

Have an open vacation policy with a finite number of vacation days. 

What does this really mean? It means you shouldn’t have to apply for vacation days, but there should be a specific number you get each year. That finite number means employees can’t abuse their freedom to take time when you need it, but you can also tell your workaholic employees, “Hey, you have 90% of your time still unused…take it!”

Obviously vacation and sick policies are a complicated issue at startups. This is just one piece of a larger question about how to get the most out of your employees while keeping them happy, healthy and motivated.

Have you worked at a startup with Unlimited Vacation or another creative vacation policy? What were the pros and cons?

Last night, I watched the documentary, The Pixar Story, which is exactly what it sounds like: the story of Pixar becoming the powerhouse computer animation film company it is today.  You can view the documentary by clicking here.

It’s a fascinating story hearing how they built a team of people sharing a common and seemingly impossible dream when they started: making a full-length, feature-film made entirely with computer animation.

There’s a lot of awesome anecdotes in the film and the documentary’s creators did an excellent job of capturing the emotions of creating these movies many of us know so well: Toy Story, the Incredibles, Monsters Inc and Finding Nemo.

I’m a bit of a leadership geek, so I wanted to share leadership lessons I saw in the film that stood out.  (Note: some of these are also inspired by the book I just finished reading: Little Bets, which uses Pixar as one of the key companies it draws stories from.)

1) Collaboration and spontaneity matters

This is why cubicles are the enemy of any great company. Those random connections that happen in an open environment vastly outweigh the costs of interrupting others.

2) Openness to criticism and feedback is essential

Without a collaborative environment where feedback is welcomed, you will never be able to move quickly enough.

3) Celebrate real success

Many have talked about the distorted reality of celebrating funding for a startup.  It’s important to remember that especially after a major struggle for your team to celebrate key successes and recognize those making extreme efforts.

4) Take bold chances

Recognizing talent within your company and giving them the opportunity to grow beyond their current role can yield great results as demonstrated here.  The director of Monsters, inc, was employee #2 at Pixar.  He was ready.

5) Push the Limits

The greatest inventions of man have always come from those willing to try to make the impossible possible. It is a worthy exercise to ask your team “what if” and make things happen.

6) Never Settle

When you get comfortable and rest on your laurels, that provides a window of opportunity for your competition. If you continue to push the limits and innovate, you will never be caught.

7) Be your own best customer

Every startup knows the best customer in the early days is full of ideas and constructive criticism. Make your people a great customer of their work.

8) Your competition doesn’t understand your value prop

Know what your company is all about at its core and focus on delivering your best possible product. Don’t worry about competition, because they are likely to look at your success and be unable to understand what the real reasons for your success are.

9)  Empower your people to have control of their work

Give your employees the opportunity to surprise you. Give them ownership and the opportunity to see their work to the end.  This empowerment will give them new vigor in their work.

10) Overnight successes are far from overnight

No success is overnight. It’s a collection of small victories that eventually add up and one day reach the tipping point of success.

Maslow’s Hierarchy of Needs