On Valve’s Corporate Structure (Or Lack Thereof).

I was a big believer in the typical corporate structure for a very long time, mostly because I wanted to be the one at the top of it. There’s something attractive about being the one at the top and for quite a long time I tried to position my career in such a way that I could become an executive in some nameless company at an undetermined point in the future. I didn’t realize how bad I was at the whole management thing after I killed my university project, no it took me another 2 years to figure out that being at the top of a corporate structure wasn’t for me. I needed to be the one building things.

That’s not to say I can’t succeed in such structures myself, far from it. Being in Australia’s capital city, a town that is basically a giant shrine to bureaucracy, I’ve come to learn how to operate within traditional management structures in a such a way so that I have an incredible amount of freedom whilst also staying within the confines of my designated role. Sure I might not be able to simply up and change my job whenever I feel like it but I’ve rarely felt my creative freedom restrained when it comes to solving the various problems that get thrown my way. Still I’ve always been fascinated with non-traditional management structures and yesterday I came across an incredibly novel one.

It was that of the game development company Valve.

Yesterday one of my long time friends linked me to Valve’s new starter guide book, a typical document you’d expect from pretty much any organisation. It made for some incredibly fascinating reading mostly because it’s unlike any other that I’ve read before. Where there’s usually pictures of organisational charts, links to company policies and reams of out dated information there was instead a comprehensive guide to how Valve functions as a company and how all the employees fit into it. Astonishingly the biggest revelation in there, for me at least,  was that there is in essence no organisational structure at all.

For someone who cut his teeth in a world ruled by bureaucracy such an idea seems incredibly foreign, so much so I initially struggled to figure out how it would work. I mean how does anyone get any work done if there isn’t someone controlling the whole process from the top? As it turns out the process mimics what I envision happens when a lot of talented people get together: ideas start circulating and once they reach a critical mass of supporters they form a cohesive group in order to achieve that vision. Valve in that sense is a kind of idea incubator that enables their employees to chase their passions and should those passions resonate with others it will find its way into reality.

That to me feels like an inspired way of creating a company. The guide admits that whilst this idea works for Valve they’re not sure it would work for everyone as rogue agents operating in such an environment can do incredible amounts of damage. However when you note that Valve makes more profit per employee than Apple or Google  then you have to figure that their process has some merit to it. Being fully privately owned also helps them quite a bit as I’m sure that share holders would be uncomfortable with a company that seems to be in a constant flux.

Would I start a company with a mantra like Valves? I definitely believe in some of the core principles (like hiring people smarter than you) and I do tend to favor less management than more so I could see some form of it working for a company that I’d like to start. Maybe it’s just the residual “I need to be at the top” mentality inside me that’s having trouble letting go of the idea but Valve’s way of doing business seems a lot better than the way I’ve been thinking about it.

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  1. Thanks for sharing! It’s great to hear how other companies operate and what works and what doesn’t etc. It’s definitely a fine a balance of too much / vs. too little management in my mind – people must be allowed creative freedom to solve problems or create visions in their own way and not stifled by red tape. That said, with no red tape at all there would be very little focus on the direction the individual’s work should take (or progress thereof), and how it fits in with the rest of the company.

    Always an interesting topic! 🙂

  2. Indeed it seems that Valve’s strength lies from people being able to take on responsibility when its required and then being able to give up that responsibility once the task is completed. Without that kind of flexible mindset you’re likely headed for disaster rather than success.

    It’s truly fascinating, isn’t it? 😀

  3. Absolutely! It’s great to see companies providing their employees flexibility and giving them a voice to be heard.

    Sad side of this is that whilst the global economy struggles, most companies want to listen to their employees and glean ways to improve (read cost cut) their operations. As soon as the economy picks up and all is well, those voices are gradually ignored – the mindset being “ahh all is working well just carry on as you are! Why do we need to change, its all working ok!”

    My rant on giving employees a voice aside, I think the buzz word this year in business appears to be innovation. There was a great article in the Australian Business Solutions magazine (Issue 22) on this – did you happen upon it at all? It kind of resonates with org structure a bit in terms of providing a process for innovation to take place as bizarre as that may sound!

  4. I’ve too had the same initial interest in authority, then gradual disillusionment Dave. The more I learn about how to differentiate successful and unsuccessful governments, the more I think too much management is the problem. Australia’s best PM’s were those who could leave their ministers to drive their own portfolios, and the best ministers were those who could let their department get on with their jobs. Same goes for the US and UK experiences.

    One of the most interesting books I read last year was ‘The Leaderless Revolution’ (http://www.guardian.co.uk/books/2011/sep/08/leaderless-revolution-carne-ross-review) which is a call for anarchism as a guiding principle for the international community. I’m not sure the argument quite works, but he makes a good case for how authority reduces people’s willingness to take responsibility, to work efficiently or effectively towards their goals, to co-ordinate and communicate, and to defend the truth. While he (strangely) barely mentions it, the Arab Spring uprisings also challenged the idea of the need for clear charismatic leaders for change to occur.

    Certainly technology is helping this, but it’s also a generational attitude thing too. Gen-Y in particular is more demanding of the independence to work in their own way, and is better managed through accommodating that (changing both the worker and the managers). It’s not a hard rule, some love structure. But for those who are passionate about their projects, giving them the space and independence to seek it out (but also responsibility for their mistakes) will usually result in better outcomes.

  5. Completely agree Andrew. The best bosses I’ve ever had are the ones who recognize that setting you to task and then allowing you to achieve it as best you see fit. All too often I’ve found bosses who are far too involved in the actual work process, usually because they’re someone who’s been promoted from the ranks rather than someone who’s more of an academic type manager.

    There’s been quite a shift since a lot of Gen Y’s are now making it into more senior positions and they’re beginning to recognise the failings of traditional management structures. You’re right in saying its not a hard and fast rule, some still prefer (and thrive) in the more traditional managerial structures but there’s a definite trend away from it.

  6. Harvard Business Review recently ran a story about Morning Star, a tomato processing company that turns over $US700m a year in revenue: and not a single manager in sight. Instead, every employee signs a “Colleague Letter of Understanding” with those whom they have a business relationship. People are naturally self-selecting based on their capability, I think in part because there isn’t any “race to the top”. Seems quite effective, as Morning Star are a market leader in the US industry.

    Unfortunately the article, “First, let’s fire all the managers” is behind a paywall so I won’t link it here, but I encourage anyone with the time and means to check it out.

  7. Amazing, that shows that this style of business is transferable to other industries something which I wasn’t entirely sure would work. Software development adapts well to fluid processes but something like food processing doesn’t seem like it would fit the same mould.

    Colour me impressed.

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