How does the social media giant really work? PT 2

By Miguel Helft & Jessi Hempel

In a company that is driven first and foremost by its product, Zuckerberg is the ultimate arbiter of matters big and small. He is the person who came up with the original idea of building a "social utility," as he spelled out in an exclusive interview in 2005. He is the person who pushed that idea forward by turning his website into a platform for third-party applications. And he's the person who will not only weigh in on minute details but also get his hands dirty to get them just right. That's just fine with the legions of engineers because around Facebook, the cult of Zuck is downright Jobsian in its intensity. Engineers are romanced by the size and scope of his vision; for many, winning his approval is its own reward. He is less a dictator than a guru for these coders, and of course his opinion is final. Says Boz: "The reason Mark has final word is because he is fucking brilliant."

Employees' scrawl- F ings at Facebook's headquarters exhort peers to stay focused on building products.

The cornerstone of Facebook's ethos is the hackathon, an all-night workfest that happens at Facebook every few months. It's the ultimate test of mettle for Facebook's engineers, a chance to try out that otherwise crazy idea. As one engineer describes: "Your body's like, 'I'm hungry; I'm tired; I want to go home.' Your brain's like, 'No, no, no, this can become something real.' " The basic rule of a hackathon is simple: No one is allowed to work on what he normally does. The goal is to dream up potential new products and show them to Zuckerberg and other top managers who will decide which ones go forward.

This somewhat chaotic process hatched Facebook's most important recent new product: Timeline, which transforms users' profiles into a visually rich chronology. Zuckerberg had long had the idea to expand Facebook's profile pages so they would tell a more complete story of a person's life. He tapped Sam Lessin, a buddy of his from their Harvard days who had recently joined the company, to rethink them entirely. Separately, a couple of engineers came up with a product called Memories during a hackathon. It allowed people to see all the photos they had posted in a given year. Employees inside Facebook, where the company often tests out experimental features, loved it, and many turned it on and started to play with it. As the project grew, an engineer from the Newsfeed team mocked up a prototype for ticker, a feature that publishes friends' actions in real time. Zuckerberg noticed themes emerging, and helped these efforts converge into what would become Timeline, Facebook's completely redesigned homepage. "Timeline was like this wave that over a couple of months swept the entire company with it," says Serkan Piantino, an engineering manager.

Healthy dissent -- including dissent with the boss -- is encouraged at Facebook, and mock-ups are favored over conversations. Time and again engineers hacked prototypes for a service that would allow Facebook users to chat with one another. Time and again Zuckerberg and other top managers shot down the idea. Eventually, the prototype proved so compelling that the higher-ups were forced to reconsider. Facebook chat has been a runaway success. It's an example of a phrase that's often repeated inside Facebook: Code wins arguments. The company prizes people who, despite being told by Zuckerberg their idea isn't very good, "still believe in it enough to go build a prototype of it to prove him wrong," Bosworth says. Thing is, Bosworth says about Zuckerberg, "he's happy to be proven wrong."

There's a term spoken quietly around Facebook to describe a cadre of elites who have assumed powerful positions under the leadership of Zuckerberg's chief operating officer: They're FOSS, or friends of Sheryl Sandberg. Many have followed her there after studying with her at the Harvard Business School or working with her at the U.S. Treasury Department or Google. Several middle and senior executives who have left the company say that Sandberg has put friends in powerful positions, sometimes even when they were less qualified than other Facebook employees, and once there they enjoy special status. "You can't really cross a FOSS," says one former senior manager.

The point isn't that people grumble -- what corporate organization doesn't have grumblers? -- but that the business side of this company runs by somewhat different norms. It's where the chaotic and meritocratic hacker way yields to a more traditional corporate culture. It wasn't always this way. Early on, Zuckerberg presided over both sides of the business to poor effect. Sandberg arrived amid a fractured management culture that had suffered from high turnover. One president, two CFOs, one COO -- folks like Gideon Yu and Owen Van Natta -- and all three of Zuckerberg's co-founders had either chosen to leave or been pushed out. And over the years a handful of vice presidents and senior executives also left. (Contrast that with Google, which lost virtually none of its senior staff until months after its IPO.) By instituting more corporate processes and hiring a slew of new, more seasoned managers, Sandberg brought stability and the discipline needed to turn Facebook into a business with global reach. And along with clear chains of command have come the accompanying egos and politics anyone might expect.

Sandberg's management style is very professionalized; she pairs empathy with high expectations and regular direct feedback, and she values entrepreneurial problem-solving above all else. When former Dell technologist Frank Frankovsky was interviewing for his current job as director of technical operations, his most nerve-racking conversation was with Sandberg, even though he was applying for a position in a part of the company she doesn't oversee. He recalls that upon learning what he was being hired to do, she asked him point-blank, "Why should we even do that?" He was caught off guard. He had chatted amicably during his interview with Zuckerberg on the seemingly esoteric topic of thermodynamics, after all. But Frankovsky collected himself and explained how he could help Facebook think more broadly about infrastructure. The conversation then took off. "I think she was testing to see if I was open-minded," he says.

COO Sandberg oversees Facebook's less quirky business side.

Sandberg and others have also worked hard to integrate the two halves of Facebook. It helps that she and Zuckerberg share a similar staffing philosophy: Both hire smart people independent of available job openings and then help them identify their top talents in what HR head Lori Goler characterizes as a "strengths-based organization." With Sandberg's enthusiastic backing, Goler began requiring that every Facebooker complete a computerized test licensed from Clifton StrengthsFinder (created by Donald Clifton, the inventor of strengths-based psychology) to identify hidden talents. Many employees worked with their managers to redefine their jobs based on the results. Now every "nube" takes the test.

To bridge the cultural gap between the makers and the sellers, Facebook has attempted to bring its hackathons to every division. Yet its efforts can feel forced. When David Ebersman, the CFO, early in his tenure conducted a hackathon to draft a multiyear budget, he described the project as a "nice tie-in with the culture" rather than a serious effort at financial planning.

Just as Facebook asks users to reveal more and more about themselves, the company aspires to full transparency and communication across its business and product sides. Every Friday afternoon Zuckerberg chats with employees during an hourlong Q&A, as Sandberg and others stand at the ready to answer questions. Beer is served, and at the end Zuckerberg asks Facebookers to share their own stories about things they've seen. And at a high level, Zuckerberg and Sandberg communicate a lot too. By design, Sandberg is embedded far from her charges, among the engineers, where her desk abuts that of her boss. They meet to review their priorities first thing on Monday morning and last thing on Friday afternoon. And it appears they have a pretty good rapport: Zuckerberg pulled a prank on his COO last fall by mounting the bulbous taxidermied head of the bison he'd hunted himself (nickname: Billy) on her orange conference room wall. (Billy is now in storage.)

As essential as Facebook's business side has become, the entire operation has had to shift direction on the whims of a founder who isn't prioritizing most of what it holds important -- be it designing to appease privacy watchdogs or creating more opportunities for revenue. Consider the launch of Facebook's ticker, the list of real-time interactions that now appears next to the Newsfeed. The ads were among the last considerations, even though the new design meant that users would see two ads instead of three on their main feeds. "Mark decides what to do with the product, and everyone has to figure out how it will affect them," says a Facebook veteran. "It's not a discussion. It has a whiplash effect on everyone -- and it's part of the genius."

And though Sandberg has been able to manage that whiplash with grace, it's increasingly clear that her long-term ambitions may extend beyond Facebook. No one believes Sandberg plans to leave Facebook anytime soon, but she is not one to occupy shadows. In recent years she has used high-profile forums to cement her role as spokeswoman for a new generation of women in the workplace. Days before the IPO filing, she was in Davos, Switzerland, as co-chair of the World Economic Forum. To be sure, a big part of her job is to be the face of Facebook with advertisers and partners, and the attention she's gotten from world leaders has been an asset. It has also helped with recruiting. But some former employees complain that her extracurricular activities are so encompassing, they distract her from the business. And those people say that she is inconsistent; internally, she encourages others to keep a low profile, but she embraces the spotlight, which "made some people unhappy and some jealous," says a former executive.

Now that Facebook has filed to go public, it is officially in the limbo between its early life as a startup and the beginning of its adulthood. It's a transition that Zuckerberg has sought to delay as long as possible, both because he worried about losing control of his baby and because he fretted that the hacker culture that has been at the root of Facebook's success until now risked being diluted in the aftermath of an IPO.

Zuckerberg has taken care of his first concern rather effectively. As he offers a piece of Facebook to the public, he will retain ownership of about 22% of the company's equity and 57% of its voting shares. It may not be a shareholder democracy, but it's an arrangement that should allow Zuckerberg to stay true to the unconventional priorities he outlined in his letter to investors: "We don't build services to make money; we make money to build better services."

Zuckerberg is mindful that, public or not, Facebook's ability to stay nimble erodes as it grows and ages: Nearly every fast-moving, innovative company in the world of tech reached a point where it struggled with bloat and bureaucracy. It happened to IBM (IBM) and Intel (INTC). It happened to Microsoft (MSFT) in the late 1990s, as hundreds of its newly minted millionaires lost their hunger. At Google, CEO Larry Page recently has had to restructure the company along a handful of product lines to streamline it and make executives more accountable. In December, Zuckerberg followed suit, restructuring Facebook along five product areas to streamline decisions and create clear lines of accountability, though Facebook is a 10th Google's size. The move suggests that the company was already seeing the first signs of innovation-slowing bureaucracy -- and that's a problem even Zuckerberg won't easily be able to hack his way out of.

Reporter associate: Caitlin Keating

SOURCE: www.cnn.com