In March, the billionaire founder of Austin, Texas’ ESW Capital, Joe Liemandt, fired off a directive to managers of his army of 2,500 remote workers. The email’s subject line read: “White Collar Specialization- Worksmart Work Unit.” With the world embracing remote work as the new normal, Liemandt ordered his managers to design work units, specialized tasks that workers—mostly software engineers— could perform efficiently over and over, as if they were assembly line workers in an old-fashioned auto factory.
“Most jobs are poorly thought out and poorly designed—a mishmash of skills and activities . . . poor job designs are also quickly exposed with a move to remote work,” Liemandt wrote.
The solution, Liemandt argued in his email, was for managers to observe remote workers and identify repeatable work patterns in order to create these work units. The idea was for managers to fragment white-collar work into small-scale tasks—the writing of specific code by a software engineer, a customer support agent solving a specific technical problem, or a targeted document analysis. Liemandt wanted his managers to create these units—lots of them.
“Acknowledge you aren’t good at it, please acknowledge you have to learn and practice. Then put the hard work in to do it,” said Liemandt, in his harsh email to managers whom he believed were slacking. “The business benefits of this are transformative. For a decade, we have been one of the most forward thinking companies on this topic. Take advantage of that fact to reskill for the next decade.”
Ten years or so before the pandemic, Liemandt’s ESW Capital had become one of the biggest corporate operations to fully embrace a remote staff. The private equity firm funded solely with Liemandt’s estimated $3 billion fortune, started buying some 80 mostly U.S.-based software companies and systematically replacing hundreds of workers with contractors from 131 countries ranging from India to Ukraine, typically paid hourly to work from home. In a 2018 investigative feature story, Forbes detailed how the tech billionaire was quietly building what amounts to a global technology sweatshop (See story). Most of Liemandt’s acquisitions have been small private companies, lesser-known providers of “backoffice” software, but some have been larger, like his $462 million cash purchase of collaborative software company Jive in 2017.
“Most jobs are poorly thought out and poorly designed—a mishmash of skills and activities . . . Poor job designs are also quickly exposed with a move to remote work.”
Unlike Google, Microsoft, Nvidia and Amazon, who compete fiercely for promising programmers from top universities, Liemandt’s hourly workforce was largely expendable, with his operation casting off and replacing workers on a routine basis. The average tenure is 370 days and only 35% of Liemandt’s workers leave voluntarily, internal text messages obtained by Forbes show. The rest of the remote workers have their contracts cancelled due to low performance, projects ending and “non-compliance.”
Given the new normal for office workers around the world, Liemandt has strong ideas about what is coming next. Remote staffing is now ubiquitous, so Liemandt has decided to take his operation to the next level. His workers have been told by their managers that the goal is to turn them into “algorithms” and “human CPUs.” At the same time, Liemandt has updated his acquisition process with a new playbook, obtained by Forbes, with an eye toward purchasing one company each week. Liemandt and ESW Capital did not respond to requests for comment.
The playbook lays out a series of steps, starting with “sales development representatives” and “inside sales representatives” who make $30 to $50 per hour devising lists of acquisition targets and conducting semi-scripted introductory calls with company owners. “Calls are not fully scripted because scripting can detract from authenticity,” the playbook says.
When a good acquisition target has been identified, Liemandt’s playbook prescribes making a phony two-day “exploding offer” to “urge CEOs to make quick decisions and prevent them from looking for competing offers.” In most cases, however, ESW “does not intend to actually let the deal expire and will allow decision-makers more than two days.”
Companies that are bought are folded into Liemandt’s virtual factory of remote workers and work units.
Joseph “Joe” Liemandt has been at the forefront of workplace innovation since the personal computer became a permanent feature of modern life. Back before it was fashionable, Liemandt defied his parents and dropped out of Stanford University to start a software company, Trilogy Development Group. By 1996 he was on the cover of Forbes at the age of 27, and on the Forbes 400 list of richest Americans with a $500 million net worth.
Liemandt based Trilogy in Austin and together with Michael Dell helped transform the Texas capital into a technology hub. Trilogy developed rule-based software, but it was Liemandt’s recruiting machine that was truly innovative. He attracted and galvanized young coders with a mix of long working hours, parties, and lavish signing bonuses. Some believed Liemandt also helped invent the bro culture that made tech hostile for women. Liemandt’s Trilogy empire ended when the internet bubble burst and he withdrew from public view. For a while, he became a software patent troll, suing dozens of companies including Sun Microsystems and Ford.
But a decade ago, Liemandt started pursuing a new business model around remote work. His ESW Capital, essentially Liemandt’s family office, started buying lesser known U.S. based enterprise software companies going by names like Aurea and Ignite. These firms ran legacy programs in areas like sales and marketing, IT and compliance resources, and customer relations for hundreds of companies that had valuable cash-generating maintenance contracts with business customers. The idea was to drive up margins by cutting reinvestment and marketing, giving up on new customer acquisition, and getting rid of employees as well as the costs associated with them, people familiar with the operation say.
“Calls are not fully scripted because scripting can detract from authenticity,” the playbook says.
After stripping his acquisitions to the bone, the staffing required to run them was turned over to Liemandt’s Crossover unit. Crossover recruited people from countries like India, Ukraine and Venezuela, who were paid hourly, worked remotely on their own computers, and spied on constantly with software that tracked their mouse clicks and keyboard strokes, and periodically took screenshots and photos from webcams. The hourly salaries—$15 an hour for entry level computer engineers—were rich for many developing countries, but limited to 40 hours per week and without any of the protections and benefits normally associated with full-time employment. Workers who didn’t measure up were unceremoniously cut.
For software engineers whose skills Crossover considered a commodity, the model presented a bleak future. For owners of mature software companies, Liemandt’s ESW provided a lucrative and quick cash-out exit strategy.
With the pandemic, Liemandt figured it was time to supercharge his model. He drew up an updated playbook with a series of if/then steps that vice presidents, sales development representatives and general managers of his organization must follow to find acquisition targets and get owners to sign letters of intent to sell their companies. The whole scheme is eerily reminiscent of the calculated approach taken by cold-calling stock brokers once employed by Wall Street’s infamous bucket shops.
Liemandt likes to give each acquisition target company a score out of 100 based on their industry (25 points for software; 10 points for IT services); LinkedIn headcount growth (10 points for a greater than 15% quarterly decline; -20 points for greater than 30% annual growth); location (25 points for U.S.; 10 points for Canada and the U.K.), debt (five points if there is leverage) founding date (five points for seven-year-old companies; two points for four-year-old companies); and last fundraise (five points for two years). The scoring incorporates Liemandt’s assessment that companies that recently raised money or are debt-free are unlikely to sell cheaply.
“Newer companies are also less likely to sell . . . founders and CEOs with consistently mediocre performance become fatigued over time,” the playbook says.
Liemandt’s acquisition team then emails “thought leadership” content on a set schedule to the CEOs of target companies to create brand awareness before requesting introductory calls. Designated team members attempt to contact the CEOs every two to three days for two weeks to stay top-of-mind. If they don’t hear back, they stop reaching out for six months. Semi-scripted introductory calls that do take place are graded and anyone with low levels of success must attend a “coaches corner,” session to learn how they can improve.
If a CEO is responsive to the idea of selling their company to ESW, a second call is often conducted to set up non-disclosure agreements to get a sense of corporate financial health. Liemandt wants to determine whether a majority of a company’s revenue is contractually recurring and if operations are required onsite.
“Call(s) should be primarily focused on reinforcing the ongoing theme that selling to Trilogy is the right business decision,” instructs the playbook. In another step, the playbook seeks to zero in on cash flow. “The purpose of this data request is to understand exactly how much recurring revenue Trilogy is buying . . . the team wants to weed out companies that may have insurmountable issues.”
Joseph Czapovics was blunt in the text message he sent on a system used by Crossover managers. A high-level executive vice president for Crossover based in Hungary, Czapovics had learned over five years at Crossover that he hated talking to the workers he oversaw and looked for worker candidates he could manage easily. “That’s why you hire ppl from eastern countries, the money will override feelings,” Czapvoics texted. “The next two SVPs are from India, and they are humble ppl.” Czapovics did not respond to request for comment.
The more senior and highly paid managers at Crossover are increasingly trying to find workers who will not object to the idea of work units. There are teams at Crossover trying to understand how Crossover’s workers are spending their time, identifying work patterns, and boiling down jobs to repeatable tasks. These teams are also constantly creating assessments, evaluating the quality of work that is being done and flagging work that is inadequate.
To train workers to fix software bugs or handle customer help requests, new Crossover workers complete four weeks of “remote university” after they are hired, people familiar with the process say. The training, sometimes referred to as a camp, “teaches leading-edge programming practices based on the software factory theory.” The workers are taught to perform work units that are constantly assessed. If the workers do not perform adequately at remote university, their contracts are terminated, even if they just left a job to become Crossover workers.
During remote university, new employees must pass an additional proctored cognitive test. Workers must get 35 of 50 math and word problems right; some jobs require 40 correct answers. Most people who start remote university are either dismissed or quit after the four weeks. Once they start working, the tasks Crossover workers perform are constantly assessed. They can be demoted and are dismissed at any time, people familiar with Crossover say. The attrition rate is about 69% annually.
“That’s why you hire ppl from eastern countries, the money will override feelings,” the text message said.
Crossover’s worker unit approach and regionally high wage, can seem like a good deal to many foreign software engineers, but according to former employees, they may soon find that it is a career dead-end. Outside of pioneering efficient and cheap labor models, there is little innovation. “Our goal with our product rebuilds is not to beat the product we are cloning,” Liemandt commanded in a text obtained by Forbes.
“Crossover is like a drug. It is senseless work. It’s like the book 1984. You are just creating nonsense,” says a person who has worked for Crossover. “People are not doing real work. It’s not relevant to most standard workplaces. People can get stuck.”
It also appears that increasingly Liemandt has been relying more on contract workers in the U.S.—who look a lot like employees even though they are hired as contractors. There were recently about 420 U.S.-based contractors working for Crossover, about 17% of Liemandt’s workforce.
“It operates just like an employment arrangement,” says a former U.S.-based worker of Crossover. U.S.-based Crossover workers have bosses to whom they report and who set the direction of a workday, and must sometimes be available during specific hours. They don’t receive a statement of work. Some are even given the title of vice president.
“It is not easy on me – honestly I have worked in Crossover for 3 years without any sick or PTO time,” a U.S.-based worker who was released from Crossover wrote in a Crossover message chat obtained by Forbes.
Still, Liemandt is proud of the organization he has built and the high margins it churns out. He is convinced combining remote work and “taskified” work makes logical sense.
“Many managers design their jobs as if they are a small startup which requires everyone to be a jack of all trades. Many managers have a view that it is ‘natural’ for an organization to get slower and less efficient as it gets bigger,” Liemandt recently told his managers. “If instead of designing your org around highly skilled and broadly unfocused people, you design your organization around specialized work units, the opposite happens. Quality goes up, velocity increases and costs plummet.”
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Inside A Remote Work Billionaire’s New Plan To Turn His White Collar Workers Into Algorithms - Forbes
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