Is Valve the company of the future?

Have you ever heard about Valve? Yes, the company that develops video games. If you’ve ever played Counter Strike, Half Live, Team fortress, I suppose you have. But the charm of Valve is not only about these games. They also have an amazing organizational model that seems to be the new era. Let’s review this Valve’s way and figure out if we can apply it in our business…

Valve democratizes information flow in ways that go against classical, hierarchical approaches. They are explicitly trying for their employees to take responsibility for producing stuff and get things done through self-organization. This is a spontaneous coordination through self-interested behaviors of independent parties. Thus, Valve puts more emphasis in Emergence over Bureaucracy through less hierarchy and more collective wisdom. This is widely clear when for instance one of their employees says «…was designed as a company that would attract people capable of taking the initial creative step…” Another good example is the fact that they have no job titles or «bosses». [Julian Birkinshaw, Valve´s Way]

Decision-Making

Decisions are made through aggregation of inputs from the crowd to create a new and valuable output (a Commons-based Production Form), with some exceptions, because for example Gabe Newell (the C.E.O) has formal authority with his employees especially for recruitment and employees management. But the level of authority is too narrow because «…Newell delegates a lot of his authority to enable employees to make their own decision on how to organize themselves…» [Julian Birkinshaw, Valve´s Way]. Thus, they are closer to Collective Wisdom than the typical Hierarchy approach.

What about employee’s motivation?

Well, Valves combines both motivational drivers: materials and personals. Despite the idea that they build a motivational environment to work through many of their organizational policies (personals drivers), they are still using bonuses and raises in combination with high salaries (materials drivers). Therefore, the form of motivation is a Social Driver approach (like a hybrid between Extrinsic and Intrinsic Motivation). But in this hybrid model, perhaps they put more attention in an external motivation like high pay salaries (many of these practices are really hygiene factors), which is dangerous because it can lead to incentivize wrong behaviors, and eventually can lead to focusing on a narrow set of activities.

Strengths and Weaknesses

On one hand this model have many strengths. The biggest strength of this approach to coordination is that allows people to be more creative and therefore allows the company to be more flexible and more able to respond to changing demands of the system and the market. Also, this is more like a 21st century approach, because through empowerment of those involved, people of «Y generation» tend to be more attracted (and here is where we can find more talent for today’s requirements). Another strength is that the approach is sustainable in the light of the emerging globalize creative economy nowadays.

But, of course, this model has weaknesses too. The biggest weakness of this approach to coordination is that can lead to not enough clarity on where they focus effort. They have too much freedom to experiment with too few boundaries and not always this is good for the business because can lead to «dispersion of the efforts» without a clear scope. Finally, like Enron’s case, this approach can lead to a lack of supporting system, and with the lack of authority the decision-making can be more slow and difficult. Fortunately, Valve has done a good job until now.

But, what would happen as Valve grows?

When companies grow, some challenges in Management model are inevitable. Valve probably will have to deal with huge dilemmas: Should we maintain a no-hierarchy organization even when we can lose control or get a disenchantment of the crowd? Should we introduce some bureaucracy processes even when this can lead to slow moving and disempowering? Should we introduce some linear management approaches even when that means less innovation and creativity? There is not a right answer here and it is impossible to predict the best solution. Maybe Valve can learn from Google because Google Management model and way of thinking can be similar to Valve’s. And Google has grown already with some success.

So… is this model for my company?

Depends. I believe that all models are wrong but some are useful. And it is the same for Valve´s model. Many of these practices perhaps can be useful for others contexts such as biggest companies like Microsoft or Electronic Arts. Or maybe they are useful for your company too. But we need to understand first the deliberate steps that Valve did in order to get more management innovation and then how this can be applied to Microsoft or Electronic Arts. For instance, if Microsoft try to eliminate all of their hierarchy, this can lead to poorly defined processes, loss of control or even a disenchantment of the crowd, because they are a bigger company and some authority is needed in order to create efficiency. Another example can be if Electronic Arts decide to use consensus for dispute resolutions. Maybe it works or maybe not, and that is because of the context and maturity of their employees. Like Oscar Wilde said once: «The pure and simple truth is rarely pure and never simple». We need to observe and apply through small experiments but always with a widely understanding of the principles behind the models.