In May this year, Stephan Aarstol effectively doubled the per-hour earnings of every employee at his business, Tower Paddle Boards. Yet payroll didn't budge. Aarsol did this by exploiting the insight that, for startups, time is a more malleable resource than money. So instead of giving his employees salary raises, he reduced the company workday to five hours.
Aarstol, you may recall, is the guy who froze during his 2012 pitch on ABC's Shark Tank, but still walked off with $150,000 from Mark Cuban. Today, he and his team of nine operate the San Diego, California-based online paddle-board business in a city where the unemployment rate is well below national average.
"Part of our brand identity to do things differently," says Aarstol. He wanted people to quit their other jobs and come work for Tower Paddle Boards.
In 1914, Henry Ford cut autoworkers' weeks to 40 hours, taking advantage of newfangled assembly lines that made people more productive. The internet and related technologies have goosed productivity even more -- and yet, Aarstol argues, wages have not gone up, and hours have stayed the same.
"At the same time that people have the ability to be massively more productive, they also now have the ability to massively waste time," he says. With all the available distractions, Aarstol believes that most people, on average, are likely getting in just two or three hours of good work each day. (Research by Duke professor Dan Ariely bears that out, suggesting that people are much more productive in the first few hours of the day. After noon, you get into diminishing returns.)
Here are some ways the five-hour workday has helped Aarstol's team thrive:
Employees get to manage their own "five-hour" work days.
Tower's official hours are from 8 a.m. to 1 p.m. Aarstol estimates people stick to that 70 percent of the time, although when things get busy they work longer.
Hours also vary somewhat by role. "A customer service person, one of the most mentally taxing jobs in the company, may cut out right at 1 p.m. with great regularity," says Aarstol. "Our filmmaker, due to the nature of his work and his love of his craft, sleeps in the office on occasion."
The company nurtures a team of ambitious and disciplined employees.
Workloads haven't changed, so the policy is, in effect, a challenge to work smarter. "This is all about learning and forcing oneself to be productive by creating a very real restraint," says Aarstol. "Nothing like a deadline to focus your efforts."
Eager to join the exodus at 1, employees check email less, eschew social media, and minimize chitchat. "It's not about trying to make everything efficient," says Allison Dundovich, director of digital strategy. "It's about trying to remove inefficiencies, which in turn makes what you are doing more efficient."
Everyone learns to effectively set and follow their own deadlines.
In preparation for the shift, Aarstol instructed his staff to read The 4-Hour Workweek, by Tim Ferriss. He preaches the 80:20 rule (80 percent of productivity comes from 20 percent of effort) and urges workers to analyze everything they do to identify what creates value and where waste creeps in.
Eventually, Tower will develop training specific to productivity under constraint.
Everyone is a stakeholder.
At the same time Tower shaved its workday, it introduced 5 percent profit-sharing. Together, those policies nearly doubled everyone's earnings.
For example, an employee with a salary of $40,000 who worked 2,000 hours (50 40-hour weeks) earned $20 an hour. Reduce the number of hours to 1,250, add $8,000 in profit-sharing, and he's making $38 an hour. Tower's vacation policy--take as much as you like but don't abuse the privilege--remains.
Employees use the extra hours to stay healthy.
"It has worked amazing," says Aarstol. "Everyone is really happy to get off at 1 o'clock--especially people who have kids. It really opens up their lives." So far no one's used the extra time to take a second job, which would tend to counteract the policy's work-life balance objectives. "I told some people, if you really want to bump your wage you can use the free hours to drive Uber," says Aarstol. "But they are just enjoying the lifestyle."
Dundovich, for example, typically spends her afternoons lunching with friends, playing intermural softball, reading, or pursuing her hobby of interior design. "It's a good time for me to unleash my creative side," she says. "It has really has made me a lot happier."
The unique approach to work management gives the company's image some edge.
Aarstol worried slightly that he'd lose business when customers saw the abbreviated hours on his web site. But Tower gets as many calls as before--just in more concentrated periods. And Aarstol says it's good for the brand. "We want customers to see this and think, 'Wow, that sounds awesome,'" he says. "'Maybe they are onto something. I like these guys and I like what this company is doing. I'll buy from them.'"
A boss who practices what he preaches.
Aarstol himself works more than 25 hours a week but tries to model the moderation he wants others to enjoy. If things are running smooth, he might take off for three weeks to Africa, or Colombia, or Southeast Asia--something he's done each of the past four year.
"I'm certainly not shy about rolling out at 1 p.m. for weeks at a time," he says. "Part of the five-hour workday was that I wanted everyone in the company to have the lifestyle that I'd created for myself."