By now you've probably heard Richard Branson has adopted a "non-policy" for paid time off at the Virgin Group. What that means, in plain English, is that Virgin employees can take unlimited vacation. You've also probably heard why this is such a nifty (but hardly novel) idea. As entrepreneur Aaron Skonnard points out, policies like this have proven successful for Netflix, Zynga, Groupon, Evernote, VMware, Eventbrite, and HubSpot. Skonnard adds that unlimited vacations have worked well at his own company, Pluralsight. Margaret Heffernon, another entrepreneur who is an Inc columnist, has also been a longtime advocate of not tracking vacation time. 

I'm not foolish enough to take up verbal arms against these entrepreneurs or their employees. If your company can pull it off, thanks to depth of talent and strength of culture, then an unlimited vacation policy is hard to argue against. But what's indisputable is that few companies actually pull it off. In fact, fewer than 1 percent of companies offer unlimited vacation time, according to the 2014 survey from the Society of Human Resource Management. Is this almost unanimous mob of employers living an unenlightened existence, blind to the benefits of work-life balance and the perils of workaholism?

Hardly. Here are two reasons bona fide vacation policies--with their limits and defined terms--are often a smarter idea:

1. Employees will be more likely to take vacations if there are limits in place. Here's how Lotte Bailyn, emeritus professor at the MIT Sloan School of Management, explains this concept in Quartz

Unlimited vacation time may sound wonderful in theory, but in reality, less is more. Too much choice is restrictive and confusing. Sheena Iyengar, a professor at Columbia Business School, calls this phenomenon "choice overload." Some of her past research shows that when employees are deluged with too many mutual fund choices it overwhelms them to the point of paralysis. They become risk-averse or unable to make a decision, which leads them to either make a low yielding investment choice--or, worse, not sign up at all.

Applied to vacations, something similar happens. "When vacation time is offered as an unlimited resource many people decide not to take advantage because it's too hard to figure out the right amount to take," concludes Bailyn. 

Indeed. In fact, it's why many companies with unlimited vacation plans need to enforce them through incentives and other policies. As Sue Shellenbarger notes in the Wall Street Journal, Evernote pays employees $1,000 to vacation for at least one week. HubSpot allows salespeople to reduce their quotas twice a year, which makes them feel more comfortable about taking the time off. They no longer fear that doing so will make them fall behind on their workload or cut into commission-based compensation. 

2. Employers need employees to be present at work. For example, if you run a retail or hospitality business, you'll be in a jam if your employees take vacations as the winter holidays approach. You need all of your employees on site, speaking and selling to customers.

Not long ago I spoke about this with Luis Salazar, CEO of Jobaline, a mobile-friendly, bilingual online job marketplace that matches employers with hourly workers. 

"Talk to any retailer about how they are getting ready for the holidays," Salazar said. "They are terrified. They cannot find workers." 

The situation is worse this year than it was last year, he adds.

"Last year the average time to fill a position in retail and hospitality was 20 days. Now it's up to 35 days," he said. The concept here is simple: At many businesses, the need for on-site workers--bodies in the building, as it were--is urgent, especially at this time of year.

In all-hands-on-deck situations like this, unlimited vacation is not an option. To be employed is to be essential, whether you're a full-time exec or a seasonal addition.

The seasonal urgencies of retail and hospitality businesses are one thing. But in high-tech startups, too, there are exigencies where to be employed is to be essential. For example, at Enplug, 12 of the startup's 37 employees (including the CEO), actually live full-time in the six-bedroom Bel Air house the company uses as an office, reports Rachel Emma Silverman in the Wall Street Journal. She writes: 

The idea is to live and breathe work--24 hours a day, seven days a week--without the commute and few outside distractions.

Employees and managers meet, work, eat, clean, exercise and sleep in the same space. And while there are occasional uncomfortable moments, such as nudging your boss to do the dishes, companies like Enplug say it is good for professional relationships, saves on rent and travel costs and is often just plain fun. Employees who choose to live in such arrangements are generally single 20-somethings who have recently left dorm life.

Enplug is hardly the only startup working this way. You can venerate the startup cultures in which employees live at their jobs. Or you can criticize those cultures. But you can't ignore that those cultures exist. They exist for many reasons, one of which is to accommodate the nonstop zealotry that--right or wrong--is the lifeblood of founding teams who believe that their product can change the world.

Published on: Oct 9, 2014