Getting Rid of the Chain of Command

In order to drive innovation, Valve has eliminated hierarchy from all aspects of its company.
Business and Workplace Author, Speaker, and Consultant, AlexandraLevit.com
August 02, 2012

Company culture is becoming more transparent.

The perfect example can be found in Valve’s employee handbook, which is posted on the Web for anyone to see.

This may be as much of a publicity stunt as it is cultural statement, because the Valve document certainly doesn’t read like any employee handbook I’ve ever seen. Instead of detailing company policy and procedures, the handbook is designed to help new hires operate creatively in a world where no one tells them what to do or how to do it.

Don’t feel too badly if you’ve never heard of Valve. I hadn’t either. It’s a 300-person gaming company based in Bellevue, Wash. and founded by ex-Microsoft employees. Mike Harrington and Gabe Newell set out to build a firm that “would be a software and entertainment company, but also a company full of passionate people who love the products we create.”

They must be doing something right. The firm started in 1996 and, thanks to money-making products Half-Life and Steam, is still going strong. Valve is self-funded, owns its intellectual property, and claims that its profitability per employee is higher than that of Amazon, Google and Microsoft.

No Parents, No Teachers

Since I wrote here recently that hierarchy is not dead in today’s business world, I was especially interested in Valve for one reason. The firm’s core philosophy is that true creative expression—vital to an innovative company’s success—can flourish only in a totally flat organization. As the young castaways from Lord of the Flies put it: “No parents, no teachers, no rules.”

In Valve’s case, it means no bosses. Employees don’t have titles or performance reviews. They decide the projects they work on based on how they can add the greatest value to the operation. “This company is yours to steer—toward opportunities and away from risks. You have the power to green-light projects. You have the power to ship products,” the handbook says. 

A Utopian Culture

When the jig is up on a project, an employee doesn’t have to ask permission to move on. He just wheels his mobile desk and computer set-up to another spot. Project leads are decided by mutual consensus, and everyone is an individual contributor—doing planning, design, coding and testing. Valve teams can easily change direction if an approach isn’t working because there is no unwieldy bureaucracy to stop them.

Valve employee Michael Abrash, also ex-Microsoft, describes why flatness is necessary
“Most value is now in the initial creative act, so there’s little benefit to a traditional hierarchical organization that’s designed to deliver the same thing over and over. What matters is being first and bootstrapping your product into a positive feedback spiral with a constant stream of creative innovation.”

To that end, Valve recruits people capable of taking the initial creative step and then stays out of their way. Not only is the approach more effective at eliciting innovation, but it also engenders a community of trust and respect. Employees are encouraged to have fun and accept that as long as they learn from your mistakes, failure is good.

Rose-Colored Glasses?

There are certainly drawbacks to this type of culture. You know that Valve descends into chaos—at least occasionally—because one hand doesn’t know what the other is doing. I’m sure that the lack of clear guidance is frustrating to developing professionals, and that not everyone at Valve fits its rose-colored picture of the creative genius. Finally, as Abrash said himself: “There are things that Gabe badly wants the company to do that aren’t happening because no one has signed up to do them.”

Could your business operate as Valve does? Does it need to?

Alexandra Levit is a former nationally-syndicated business and workplace columnist for The Wall Street Journal and the author of Blind Spots: The 10 Business Myths You Can’t Afford to Believe on Your New Path to SuccessMoney magazine’s Online Career Expert of the Year, she regularly speaks at organizations and conferences on issues facing modern employees.