Xconomist of the Week: Rich Sheridan and the Business Value of Joy

2/23/12Follow @XconomyDET

[Corrected 2/24/12, 10:00 am. See below.] The first thing you notice upon walking into Menlo Innovations, a small open-plan office in Ann Arbor, MI, is how hard everyone is working. There is a hive-like focus and intensity, so much so that the 40-member staff seems oblivious to the presence of a stranger with a notebook and camera. The second thing you notice is that everyone is working in teams—two to a computer. The third thing you notice is a portable crib in the corner piled with brightly colored baby toys.

“We’ve raised six Menlo babies here,” president and CEO Richard Sheridan (an Xconomist) says with obvious pride about his policy allowing new parents to bring their kids to work. “We’ve probably raised some of the best-socialized children on the planet.”

If you didn’t know before, you’re certain now: This isn’t the typical software development operation.

“At Menlo, we’re focused on the business value of joy,” Sheridan explains about the company named and modeled after Thomas Edison’s New Jersey lab. “Failed IT strategies have put companies out of business—it’s a huge issue to do software better. Here, we’re myopically focused on that as our goal. We’ve changed everything, because the industry is broken and we’re tired of it.”

Joy sounds fun to this veteran of more than one joyless workplace, but is it profitable?

One of Michigan’s greatest venture capital success stories is Accuri Cytometers. Menlo created all of the software for the company’s flow cytometers, and continues to hold the account today. Sheridan says his joy-based focus extends beyond his management style to his business model. To that end, he bet big on his client and what he saw as Accuri’s revolutionary life sciences technology: He traded half his cash pay from Accuri for shares in the company and royalties on Accuri’s products. When Accuri sold last year to Becton Dickinson & Co. for upwards of $200 million, Sheridan says Menlo got its biggest paycheck yet.

Sheridan was 13 when he first started tinkering with computers, and he rose through the software-development management ranks during the tech boom of the 1990s, when companies “turned a death march into a business model” by fostering work environments where people slept at the office and abandoned even their closest relationships trying to meet insanely ambitious project deadlines.

“The old me would get you productive and then demoralize you,” Sheridan says of his past management style. (He didn’t specify where he used to rule with an iron fist, but his LinkedIn profile lists past employers as Tumbleweed Communications and Interface Systems.) “There were moments of joy, but the majority of the time it was fear, uncertainty, and doubt.”

Then the bubble burst, and Sheridan was left wondering if his industry would have survived had it paid more attention to sustaining the people churning out the brilliant ideas. “I was tortured. I desperately wanted to do this kind of work, but I was continually failing. I thought I’d get out of the business, but instead I decided to change it,” he says.

He started Menlo eleven years ago, and he says the foundation of his management style is that he “sucks fear out and pumps safety in.” Once you have a safe environment, he says, creativity and imagination flourish. He does this by interviewing prospective employees first for a culture match (“must play well with others” is the top qualification); eliminating ambiguity by creating a board that tells employees exactly which task they’re to be working on and how much time they’ve been given to complete each task; and he pairs employees in teams that rotate weekly, which means they’re constantly learning, mentoring, and cross-training while they’re working.

“I went into this thinking I’d solve a handful of issues as a manager, but this has exceeded my expectations,” Sheridan adds. “It’s so fascinating to watch old problems melt away. We don’t have emergencies with software and fire-fighting. I don’t even need a human resources department.”

There are a few more rules at Menlo that aren’t found at most (or any) other software development companies. Menlo employees work a 40-hour week, and never on weekends. Earbuds and headphones are banned (you might miss “the serendipity of … Next Page »

Sarah Schmid is the editor of Xconomy Detroit. You can reach her at 313-570-9823 or sschmid@xconomy.com. Follow @XconomyDET

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  • http://http//www.menloinnovations.com Lisamarie Babik

    I am Menlo’s Evangelist, so I wanted to make one small correction regarding tours.

    In 2010, we conducted 208 tours for 1,108 visitors.
    In 2011, we conducted 168 tours for 1,381 visitors.

    We do not have a total count of the number of visitors since our founding, but I would guess the number could easily be 8,000-10,000 in our 11 years. These visitors come from around the country and around the world. Some tour as groups from the same company, some as individuals, some simply walk in off the street and ask, “So what do you do here?”

    The majority of these tours are conducted for free, but we encourage visitors to make a $250 donation to one of the non-profits we support (including American Foundation for Suicide Prevention, Ann Arbor Civic Theatre, Ann Arbor Hands on Museum, Dawn Farm, Food Gatherers, Washtenaw United Way, Washtenaw Literacy Council, and more). It is simply a suggestion. If they say no, they still get a tour.

    If anyone reading this is interested in arranging a tour, they can contact me at lbabik@menloinnovations.com and I’ll see what we can do to help you experience some of our joy first hand.

  • http://www.xconomy.com/author/ekutz/ Erin Kutz

    Thanks for the information Lisamarie. That paragraph has since been updated to reflect an accurate tours number. See above.

  • http://www.macomb.edu Martin Kohl

    This is a fantastic write-up on Menlo Innovations! But, you truly have to visit Menlo to really understand, feel, and witness the “JOY” (note all uppercase) in this software development firm. This is a real one-of-kind, tangible, no smoke-and-mirrors, no hyperbole, place that every future, and current, software developer should ‘at least’ visit! You will leave with a new perspective on ‘how’ to work and at the same time enjoying the work you do. And for the naysayers, “yes”, it CAN be done! There is hope for our industry!

    When I first read about Menlo Innovations several years back I said “this couldn’t be true.” This must be programmers Eden! Well, it is…very true and very real! You owe it to yourself to see “the other side of software development”.

    I have taken my many of my programming students to Menlo for the past two and a half years and all leave there saying “I want to work there”! For weeks later they walk the halls talking to other students about this place in Ann Arbor, MI, they call “Menlo Innovations”. Menlo’s ideals reverberate the hallways at school for months after the site visit. I even have non-students approach me in the hallway asking “When are you going again? Can I go?”

    I explain to students the days of the old (long hours, cubicles, disruptions, lack of communication, selfish-programmers, never seeing your family, etc.) and the new “Menlo way” and you should see their eyes open wide! At first there is skepticism and doubt from the students. “Is this true?” they asked. “Yes, very true”, I say.

    I’m very impressed with what Richard is accomplishing in this industry – I just wish he was around 25 years ago when I was on those constant project-by-project “sleeping-bag-in-the-office death marches”.
    Keep up the great work “Menlonians!” I’ll be seeing you soon!

    And to Richard, a heartfelt “thank you!” for putting the “JOY” back into software development. You are a true leader.

  • http://www.menloinnovations.com Rich Sheridan

    Martin – I am honored and humbled by your comments. We have sought for our entire existence to “end human suffering in the world as it relates to technology.” There can be joy in our work. I’m so glad your visits have brought joy and hope to both you and your students!

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