Case Study 17.1 Value Corporation Introduction The underlying structure is the foundation of an organization. Organizational structure is the framework of work roles and functions helping shape and su

Case Study 17.1: Valve Corporation

Gabe Newell was a founder and is the CEO of Valve Corporation, a Bellevue, Washington–based video game maker founded by former Microsoft employees Newell and Mike Harrington—or that’s what it says on paper somewhere, anyway. Not surprising, given the loose, fluid structure (or lack thereof) at Valve, Greg Coomer, a designer and artist who was one of the first employees, said of Newell, “I think he’s technically the CEO, but it’s funny that I’m not even sure of that.”

That’s because Valve Corporation is not exactly, well, the archetypal vision of a “corporate” environment. Valve doesn’t use formal titles, except in the hiring process so as to not scare away prospective applicants who might find the titleless work environment a bit peculiar. Here, desks move on wheels so that employees can relocate anywhere in the office and form work groups at a moment’s notice. Employees don’t have strict job duties; they fill in where they think they can contribute the most. Valve has no formal bosses, pay is often determined by peers, and employees create their own schedules and workdays.

Valve personifies the trend of recent years to flatten out hierarchies within companies, reducing the role of middle management where information and processes can get clogged, enabling, in theory, a freer flow of communication and increased productivity. “When you’re an entertainment company that’s spent the last decade going out of its way to recruit the most intelligent, innovative, talented people on Earth, telling them to sit at a desk and do what they’re told obliterates 99 percent of their value,” states the now-famous employee handbook, which generated buzz in 2012 when it was leaked online. “This company is yours to steer. Toward opportunities and away from risks.”

Valve developed Steam, an online service that is basically the iTunes of the video gaming world. Though some say its plans are overambitious, the 300-employee company is competing with Google to develop wearable computing—like video games played through goggles or glasses where you might see a zombie coming out of your own bathroom at home. Even competitors acknowledge that Valve is on the cutting edge of the industry. Valve is responsible for Half-Life—a game that has received numerous “Game of the Year” awards and is still widely regarded as influential among its peers; Half-Life 2, Left 4 Dead, and Counterstrike are among wildly popular and industry-shaping games.

In other flat (also called “lattice”) organizations, lines of communication flow directly from one person to the other with no intermediary; there is no fixed or assigned authority; natural leadership is identified by those who follow; and objectives are set by the same employees who have to realize them. In many flat organizations, including Valve, associates decide how much they think their peers should be paid but are never allowed to vote on their own salaries. Teams at Valve decide together whether a team member isn’t working out. “We don’t have any management, and nobody ‘reports to’ anybody else,” states Valve’s employee handbook. Valve said it was rare that anyone chose to leave the company, and when someone did, it was often for something like a sick parent needing help.

There are challenges to the flat approach—like lack of accountability. Though the environment can trigger creativity and collaboration, some still leave for more traditional companies that are more structured and organized. Retaining highly motivated individuals is critical for effectiveness within a flat organization. Discipline and motivation need to be off the chart, but unfortunately, the types of employees that a flat organization requires in order to thrive represent a small segment of the workforce. This type of structure does not work for everyone. Other challenges include talent management, appraising and motivating employees, and enforcing any policy the company might have. There is often a lack of standardization to ensure that salaries and benefits are competitive, internally and externally. Working in a flat organization may feel disorganized and chaotic, which, depending on the employee, can either be a great source of inspiration or great frustration.

“I think of it as being a lot like evolution—messy, with lots of inefficiencies that normal companies don’t have—but producing remarkable results, things that would never have seen the light of day under normal hierarchical management,” said Michael Abrash, an engineer at Valve. “Almost by definition, it’s a great place for the right sort of creative people to work.”

Case Questions

1. Would you describe Valve Corporation as a flat organization? Why? Does such a structure seem to be effective for Valve?

2. Describe the potential downsides of a flat or lattice organization. Do you think these consequences outweigh the positives at Valve?

3. Think of Valve as a future employer of your services and skills. Would your personality fit the flat structure of Valve? Why or why not?

Sources

Ramblings in Valve Time. Blog. http://blogs.valvesoftware.com/abrash/valve-how-i-got-here-what-its-like-and-what-im-doing-2/.

Silverman, Rachel Emma. “Who’s the Boss? There Isn’t One.” Wall Street Journal. June 19, 2012. http://online.wsj.com/article/SB10001424052702303379204577474953586383604.html.

Wingfield, Nick. “Game Player without a Rule Book.” New York Times. September 12, 2012. www.nytimes.com/2012/09/09/technology/valve-a-video-game-maker-with-few-rules.html?pagewanted=all&_r=0.