Each month, "Management Matters" addresses management and leadership issues essential to achieving exceptional business results while growing and developing people. Please enjoy "Management Matters", and pass it on!


All Content © LeaderPoint

Working without Structure

Recently, we wrote about structural constraints to innovation and how firms might encourage creativity. One of the suggestions was to encourage non-commissioned work, allowing employees to explore things outside the structure or hierarchy. But what if you eliminated all hierarchy and worked in a place devoid of any formal structure? Let’s look inside a company that purports to do this: Valve, a game development company.

Valve, located in Kirkland, Washington, started business in 1996. The company creates and develops high-quality computer games. Their first game, Half-Life, was not released until two years later; Valve does not work under strict timelines, preferring to release products when they are ready rather than according to rigid timetables.

As the company has grown from 30 employees in 1998 to 300 today, it has maintained a work environment with no hierarchy and virtually no structure. The idea of "no bosses" is captured in the employee handbook’s credo on the title page, “A fearless adventure in knowing what to do when no one’s there telling you what to do.”1

Apparently, Valve sees its primary competitive advantage as being able to fully exploit the innate creativity of its workers by letting them ideate about projects that they are interested in and, perhaps, passionate about. Their business model is built on the ability to execute the “initial creative act” that leads to a significant first mover advantage. Valve has been successful with this model, but the idea of no hierarchy and only informal structures comes with some caveats.

While there are tremendous gains to be had from encouraging people to organize at the activity level based on exactly what needs to be done "right here, right now," an absolute lack of formal structure can have costs of its own.

One of Valve’s newer employees, Michael Abrash, asserts in his blog that the Valve way is a “lot like evolution—messy, with lots of inefficiencies that normal companies don’t have.”2 While structure allows people to focus on pieces of the work that any company must get done, Valve depends on changing, self-organizing groups to provide the structure required to take ideas for games all the way down to shipping and distribution. Admits Abrash, as a product gets closer to market, more rigid processes must set in, including deadlines. It is likely that Valve is inefficient in these types of processes because they have no formal structures in place to focus on these activities.

Another inefficiency is communication. This may be counterintuitive because we often think that hierarchy bottlenecks communication, but relying solely on organization of loosely formed groups also puts pressure on communication. The handbook directly states that “disseminating information internally” is something Valve is not good at.

One area of great focus in Valve's handbook is the challenge of hiring the right people. This is strategic for Valve. With no structure, people must come ready to contribute—no development paths, no opportunities to learn critical things like how to make decisions (things well established in companies like Proctor and Gamble and GE).

In fact, Abrash reports that when he started, the first task was to determine what to do—mostly by talking to peers (and nearly everyone is a peer). The handbook asserts that the company is not good at mentoring people or “proactively helping people to grow in areas where they need help.” They must come ready to learn immediately, so Valve has spent a lot of time developing hiring practices that can tap the right people from all kinds of disciplines (something else they admit they wish they were better at).

So eliminating structure comes with a unique set of challenges, and—while it works with the Valve business model where projects take a long time and initial creative acts are the basis for new products—companies that must seek new product/market ideas AND become more efficient to control costs can still learn some things from Valve.

First, no hierarchy requires complete transparency. Those making the decisions must have access to the information required to make them. Too often in normal structures information can be held back in part because of lack of trust. Often, structured environments become ineffective not because of the inherent structure, but because those in charge do not trust enough to make information completely available so that people closest to the work can fully engage in and determine outcomes.

Second, Valve is an great engine for daily cooperative interactions. That is, groups formed around clear common ends, one activity at a time. Abrash in his blog talks about how he vetted out his idea of wearable computing. In effect, he created small, informal groups that focused clearly on the viability of the idea and also the challenges it might face. The main finding from these "right here, right now" discussions was “that the experiment needed to be structured so there were clear tests for success and failure.”

Indeed, the cooperation is so strong that new ideas are able to germinate under disciplined processes where the focus is on common ends (no win/win compromises). Managers elsewhere would do well to emulate these cooperative contexts even when working in structured environments.

_____________________________________
1Valve Handbook for Employees. http://newcdn.flamehaus.com/Valve_Handbook_LowRes.pdf

2Kain, Eric (2012). Valve’s Michael Abrash: Hierarchical Management Bottlenecks Innovation, Forbes. http://www.forbes.com/sites/erikkain/2012/04/16/valves-michael-abrash-hierarchical-management-bottlenecks-innovation/



For more information about LeaderPoint, and to access our Reading Room of management articles, visit www.leaderpoint.biz, or call 913-384-3212.