At his first all-hands meeting as CEO of Los Angeles-based DreamHost, Simon Anderson addressed his new workforce: "All those of you who didn’t vote for me, stand up. You’re fired." 

It was a joke, of course, but one emblematic of the kind of high-handed management style that this $41 million Web-hosting and cloud-service company has avoided since launching in 1997. DreamHost is in many ways a typical work-hard-play-hard tech culture, with game tables, parties, and offices that resemble an installation at MOMA. But the serious foundation of that culture includes a dedication to democracy: not surprising given that its four founders originally envisioned starting a co-op for Web developers (an idea that didn’t pan out). 

So when the founders decided to recruit an outsider as the company’s first CEO in 2011, they wanted to give employees a voice in who would take them forward. They charged Art Elizarov, DreamHost’s vice president of people strategy and administration, with devising a plan. "I had this epiphany," says Elizarov. "In the true spirit of democracy, what if we had an election?" 

Democracy in action

After reviewing a large pool of candidates and conducting extensive interviews with eight, the executive team winnowed the list to three whom they liked and who agreed to stand for election. The candidates were scheduled to answer questions before the staff on different days (one withdrew on the day he was meant to appear). When Anderson’s moment of truth arrived, he perched on a stool in the company’s Brea, California, office, surrounded by close to 100 people, most of them strangers. A video camera recorded the proceedings so employees not present (the company operates 24/7) could view it later. "It turned up the heat because I wasn’t just connecting with the founders and the senior leadership," says Anderson, who at the time was CMO at a large Internet company. "I had to try to connect with every person in the company."  

And every person in the company was invited to connect with him. Sixty of the then-90-plus employees had submitted questions, and the entire staff voted on 10 to be asked. Anderson says the questions gave him insight into employees’ priorities, such as the First Amendment. That’s a passion-evoking subject at DreamHost, which hosts some sites banned by other providers. (A site for Draw Mohammed Day provoked a denial of service attack that rendered the company unreachable for six hours.) "I said I really believed in freedom of speech on the Internet, and it went over well," says Anderson. Another question asked whether DreamHost might someday go public. "My belief at the time was yes, and I believe it even more now," says Anderson. But he’s not sure everyone in the audience liked that answer. 

Winner takes the corner cubicle

After the grilling, employees had a chance to meet candidates and ask questions one-on-one. Voting, which took place over 48 hours, was online and anonymous. Anderson won, 53 percent to 47 percent. That narrow victory set the tone for how he would lead. "I knew that there were people who had voted the other way," says Anderson. "That meant I would have to be very open and a very good listener."

It also meant doubling down on the democratic principles that had won him the position. Since the election, Anderson has begun sharing detailed financial information and engaging employees in discussions of critical issues, such as how the company could continue to pay 100 percent of health premiums in light of rising costs. It recently formed a committee of managers and rank-and-file employees to create a kind of constitution that will guide how Dreamhost makes decisions. "Open-source communities use a consensus-building model [to build software] and we’re trying to adopt that approach to running a company," says Elizarov. 

Anderson says he’s a naturally collaborative guy, but the nature of his ascension "makes me work even harder to persuade people and to be more persuadable," he says. "I suspect people think because I was voted in I could also be voted out. In some ways I am here at the pleasure of the employees."