Democracy in Action at Linden Lab

In Linden Lab's virtual online game, Second Life, players create alter egos in a virtual world where there are few rules and a lot of experiments that sometimes work out and sometimes don't. Life at the San Francisco company's headquarters is much the same. Back in 2000 "we started with the feeling that this company would be a system where people would be largely self-directed," CEO Philip Rosedale says.

Because Second Life itself is so multifaceted and amorphous, Rosedale figured that Linden Lab's managers could not control or understand every aspect of it. So executives created a structure in which engineers and the rest of the company's 250 workers have a lot of say over their projects and how they work.

Transparency is the key to making things run smoothly, Rosedale says. The company's online wiki board is filled with lively discussions. Employees meet in Second Life, allowing workers in different offices to work together as a team. People send weekly E-mails tracking what they plan to do and what they have accomplished. Because employees don't know who will be reading the progress reports, Rosedale says, the E-mails keep them accountable.

That openness also means coworkers have a good sense of who is doing what. Linden's "Love Machine," an E-mail feature, lets workers send positive notes to one another acknowledging their accomplishments. They send about 90 a day, which are archived. While the system may seem touchy-feely, Rosedale says that managers look through the notes during reviews to evaluate employee performance.

Not every experiment in democracy works out. Last year, Linden tried a system in which employees got credits that translated to time units they could distribute among projects. But because the credits were tied to real cash, the whole thing "stressed everyone out," Rosedale says.

Rosedale insists that Linden's open structure encourages employees to express their opinion, even if in the end he still gets the final say. "In a complex, rapidly changing market," Rosedale says, "our system allows everyone to take risks, not just me."