Introduction
Have you ever heard about Valve? - The company that develops amazing video games- the global leader in video game software Industry. Games like Counter-Strike, Half Live, and Team fortress are some of the best from their archery. For management students and enthusiasts, the importance of Valve is not only about these games but also have an amazing organisational model that traditional companies inching to follow. Let's review what Valve is doing better in the level of management functions. This is my interpretation after doing the case study for my course.
Valve is an example of emergence over hierarchy model, each employee is free to choose and initiate their own projects and disputes are resolved through consensus. Teams are formed by individuals around topics of interest. Each team has leaders chosen by informal agreement and there is neither supremacy nor financial benefit associated with it.
Example someone shows an interest to do a project and everyone will say “You are struck with it now” and the project has kick started. Once the project finishes they go back and work individually on the next thing. There is very less bureaucracy and some activities (e.g. Hiring) can take long-time
Valve's Decision Making
In Valve, decisions are made through the accumulation of input from individuals in teams and output an innovative and valuable verdict, even though the founders exercise formal authority in employee recruitment and management. So Valve’s decision making can be categorised as closer to Collective wisdom than the traditional hierarchy management approach. But the level of authority is too narrow in Valve for example – “Newell (co-founder) delegate a lot of his authority to enable employees to make their own decision on how to organise themselves in team”
How employees are motivated?
As an organisation Valve has driven by both material and personal drivers of motivations. Despite the impression that they have built a motivational environment to work through many of their organisational strategies, they are still using bonuses for high performers (social drivers) and high salaries for their employees. So in management model, they are half way between the traditional and new approach of motivation or can say as a hybrid model between Extrinsic and Intrinsic rewards. Even though bonuses for top performers are through peer reviews and rank based system, are precarious and can lead to encourage bad practises or behaviours and eventually can lead to focussing on the narrowest of activities and actions for the employees.
Valve’s highlights
In Valve, coordination is achieved by emergence over bureaucracy. Individuals are motivated by self-interest. This has allowed the company to be highly responsive to market requirements and opportunities. The emergence created efficiency, responsiveness, expertise and eliminated favouritism in Valve’s teams. As there are no formal bosses in the team decisions are made by individuals with freedom and teams are self-organising and highly empowering, encourage hard work and have room for creativity and responsibility. In Valve there is no set of rules or procedures that an employee must follow other than the project they are collaborating should benefit the company. As emergence is 21st-century approach it can attract Y generation to Valve.
Valves major asset lies in the fine line of borders and has managed to incorporate assertive enhanced financial growth and management model innovation in parallel.
Valve’s spotlight
Valve has no internal department such as resource allocation or quality control which might act as bottle neck and slow moving as many people activities required aligning when it comes to decision making. The enormous stress on self-organising make the system susceptible to enormous glitches and emergence can lead to not enough clarity on where they emphasis effort. Too much freedom to experiment with fewer boundaries can lead to loss of focus after initial interest or a blockage and results in too many overlapping projects. When the company grows lack of authority the decision making can be more slow and difficult without formation proper rules. Finally, to avoid Enron’s situation in Valve, the company will have to mechanise a define structure of some level of accountability and conduct systematise meeting in order to ensure transparency and project are shut down properly or dismissing people's.
How to envisage Valve's growth?
Like all the organisation, when it grows Valve will definitely have to face some challenges in its management model. Valve’s current management model is focussing right on the alternative principles in the management models and is bit far from the traditional approach. The approach of coordination through the emergence rather than the bureaucracy, decision making through collective wisdom over hierarchical and hybrid model in motivation rather than the pure extrinsic rewards are the examples of its right shift. When Valve grows can they survive with this or requires a slight left switch towards the traditional principles by introducing some level hierarchy in its process, or bureaucracy process even when it can slow down and disempowering. There is no right answer or choice to this kind of situations. On book or in theory all this principles will work for some organisation. Consider Google as an example, when Google started they are viewed as organisation they followed the alternative approaches in management and over the years the company grown and it made some slight left switch towards the traditional approach and has great success. May be Valve can learn from Google.
So... What others can learn from Valve?
I believe there is no right or wrong answer to this question. It’s all depends on situation and can vary according to the scenarios. I truly believe that all the management models should be evolving over the years and same applicable for Valve. At this moment of time current model is working for Valve doesn’t mean we can take the same principle and apply directly to the big organisations like Microsoft. Some people have opinion managing one person or 10 persons or 100 or 1000’s persons are same, but I don’t agree with that. And it is same for Valve’s model. First, we need to understand the thoughtful steps that Valve did in order to get more management innovation and then how this can be applied to Microsoft or any big companies. Suppose Microsoft try to remove all of their bureaucracy and hierarchy. Can they become more transparent or emergent? I believe it can lead to poorly defined processes, loss of control or even embitterment of the peoples because the scale of Microsoft is bigger and some kind of rules and authority is required to create some kind of efficiency. Another example is Valve uses consensus for dispute resolution, will it work for Microsoft or not? Maybe it works or maybe not and that is because the scenario and maturity of their employees.
My point of view is big companies like Microsoft requires spending time in observing and getting the fundamental of this Valve management model and doing some researching and experimenting through small teams and widely understanding the fundamentals and principles behind these models. Then they have to identify the principles that are closely aligned with their company’s fundamental DNA’s and try to apply to the existing teams.
About the Author
Adarsh Soman is an entrepreneurial-spirited, innovative technologist with 9+ years of leadership-level experience in identifying, qualifying, building harmony for, and implementing enabling technologies and enterprise systems that facilitate business processes and strategic objectives. Powerful blend of technology vision and business acumen results in constant development of powerful business strategies supported by cost-effective development of high-performance software applications. Broad expertise in Software development, full project life cycle management, and process improvement initiatives.
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