Non-Hierarchical Worker's Self-Management

Valve is different
I’ve worked at a lot of companies and in a lot of situations over the last 30 years. I’ve been a programming consultant and magazine and book author. I’ve worked alone and with a partner and at various companies on games. I’ve worked on operating systems, drivers, firmware, natural language parsing, consoles, and processor design. I’ve consulted and worked at a series of startups and small companies, both hardware and software, I’ve worked at Microsoft, I’ve worked at Id, and I’ve worked at RAD Game Tools. They’ve all been interesting, they’ve all been great learning experiences, and some of them have been truly remarkable places. In short, I’ve seen a lot of what tech has to offer.

Valve is different.

Gabe tells it this way. When he was at Microsoft in the early 90’s, he commissioned a survey of what was actually installed on users’ PCs. The second most widely installed software was Windows.

Number one was Id’s Doom.

The idea that a 10-person company of 20-somethings in Mesquite, Texas, could get its software on more computers than the largest software company in the world told him that something fundamental had changed about the nature of productivity. When he looked into the history of the organization, he found that hierarchical management had been invented for military purposes, where it was perfectly suited to getting 1,000 men to march over a hill to get shot at. When the Industrial Revolution came along, hierarchical management was again a good fit, since the objective was to treat each person as a component, doing exactly the same thing over and over.

The success of Doom made it obvious that this was no longer the case. There was now little value in doing the same thing even twice; almost all the value was in performing a valuable creative act for the first time. Once Doom had been released, any of thousands of programmers and artists could create something similar (and many did), but none of those had anywhere near the same impact. Similarly, if you’re a programmer, you’re probably perfectly capable of writing Facebook or the Google search engine or Twitter or a browser, and you certainly could churn out Tetris or Angry Birds or Words with Friends or Farmville or any of hundreds of enormously successful programs. There’s little value in doing so, though, and that’s the point – in the Internet age, software has close to zero cost of replication and massive network effects, so there’s a positive feedback spiral that means that the first mover dominates.

If most of the value is now in the initial creative act, there’s little benefit to traditional hierarchical organization that’s designed to deliver the same thing over and over, making only incremental changes over time. What matters is being first and bootstrapping your product into a positive feedback spiral with a constant stream of creative innovation. Hierarchical management doesn’t help with that, because it bottlenecks innovation through the people at the top of the hierarchy, and there’s no reason to expect that those people would be particularly creative about coming up with new products that are dramatically different from existing ones – quite the opposite, in fact. So Valve was designed as a company that would attract the sort of people capable of taking the initial creative step, leave them free to do creative work, and make them want to stay. Consequently, Valve has no formal management or hierarchy at all.

Now, I can tell you that, deep down, you don’t really believe that last sentence. I certainly didn’t when I first heard it. How could a 300-person company not have any formal management? My observation is that it takes new hires about six months before they fully accept that no one is going to tell them what to do, that no manager is going to give them a review, that there is no such thing as a promotion or a job title or even a fixed role (although there are generous raises and bonuses based on value to the company, as assessed by peers). That it is their responsibility, and theirs alone, to allocate the most valuable resource in the company – their time – by figuring out what it is that they can do that is most valuable for the company, and then to go do it. That if they decide that they should be doing something different, there’s no manager to convince to let them go; they just move their desk to the new group (the desks are on wheels, with computers attached) and start in on the new thing. (Obviously they should choose a good point at which to do this, and coordinate with both groups, but that’s common sense, not a rule, and isn’t enforced in any way.) That everyone on a project team is an individual contributor, doing coding, artwork, level design, music, and so on, including the leads; there is no such thing as a pure management or architect or designer role. That any part of the company can change direction instantly at any time, because there are no managers to cling to their people and their territory, no reorgs to plan, no budgets to work around. That there are things that Gabe badly wants the company to do that aren’t happening, because no one has signed up to do them.

Hardest of all to believe is the level of trust. Trust is pervasive. All of Valve’s source code is available to anyone in Perforce, and anyone at Valve can sync up and modify anything. Anyone can just up and work on whatever they think is worth doing; Steam Workshop is a recent instance of someone doing exactly that. Any employee can know almost anything about how the company works and what it’s doing; the company is transparent to its employees. Unlike many organizations, Valve doesn’t build organizational barriers to its employees by default; it just trusts them and gets out of their way so they can create value.

To be clear, Valve hasn’t magically repealed the realities of developing and shipping products. We’re all human, so teams sometimes argue (and sometimes passionately) about what to do and how to do it, but people are respectful of each other, and eventually get to a consensus that works. There are stresses and more rigid processes when products are close to shipping, especially when there are hard deadlines for console certification (although shipping for the PC is much more flexible, thanks to Steam). Sometimes people or teams wander down paths that are clearly not working, and then it’s up to their peers to point that out and get them back on track.

Also, don’t think that people randomly come in every day and do whatever they feel like doing. It certainly wouldn’t be okay if a programmer decided to move to an empty room and start weaving straw hats (although if they wanted to write a tool to let people weave and sell virtual straw hats, that would be fine). People commit to projects, and projects are self-organizing; there are leads, but they’re chosen by informal consensus, there’s no prestige or money attached to the label, and it’s only temporary – a lead is likely to be an individual contributor on their next project. Leads have no authority other than that everyone agrees it will help the project to have them doing coordination. Each project decides for itself about testing, check-in rules, how often to meet (not very), and what the goal is and when and how to get there. And each project is different.

It’s hard to believe it works, but it does. 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. The games speak for themselves – and then there’s Steam (and no, Steam doesn’t have formal management either). Valve’s long string of successes, many of them genuinely groundbreaking, is strong evidence that the hypothesis that creative people are the key to success is in fact correct, and that the structuring of Valve around those people has been successful.

And, almost by definition, it’s a great place for the right sort of creative people to work.

Flattening Hierarchies in Business
JEREMY FALUDI, 22 DEC 05


What can chaos theory teach us about management and governance? A lot, as it turns out. Decentralization and self-organization in business, tech, and government are trends we often laud, and have even claimed that they will help societies avoid catastrophes by "collapsing upwards". But how does it work in practice, and how does it compare to traditional hierarchy in getting things done?

In a nutshell, decentralizing is a way to be as big as a dinosaur and as nimble as a cat at the same time. Consider a swarm of bees: it can effectively be an animal twenty feet wide, a hundred feet long, with a thousand eyes and sophisticated complex behavior--bigger and smarter than most dinosaurs--but it can turn on a dime (in several directions at once, no less!) and is unburdened by the metabolic overhead of a single huge body. Also because of its distributed nature, and the multiple redundancy of its many separate bodies, it is much harder to kill. Activists with cell phones have learned this lesson; some corporations are beginning to learn it as well. Giants such as BP and Toyota have flattened the hierarchies in their management structures to become more innovative and nimble while remaining large companies, and it is proving effective.

Both academic and practical research has been done on changing management structures to be less hierarchical and more flexible. The ICoSS Project at the London School of Economics studies how complexity theory (also known as chaos theory or systems theory) can change organizational and management structure. The New England Complex Systems Institute, who have said "the inability of conventional hierarchical control and the need to understand distributed control, self-organization and networks is increasingly apparent", have a book and even teach a course on the subject. Perhaps most widely known is the Society for Organizational Learning, founded by Peter Senge; his book The Fifth Discipline is a classic explication of systems-thinking for management.
More recently, The Economist mentioned a book (more of a pamphlet, really) that has been put out by Gerard Fairtlough, former CEO of Shell Chemicals UK and founder of biotech firm Celltech. Fairtlough's book, called The Three Ways of Getting Things Done, is a great intro for those looking to dip their toes into the water, and describes traditional hierarchy plus two proven-viable alternatives: "heterarchy" and "responsible autonomy". Heterarchical systems share power--for example, a board that votes to decide issues, or different branches of government that have checks and balances through separation and overlap of power. Responsible autonomy is purer self-organization--i.e. it has no inherent structure. It distinguishes itself from anarchy by holding decision-makers responsible for the outcomes of their decisions.

Even organizations with rigidly hierarchical governance-structures can do a lot to flatten their informal channels of communication and influence (which all management theory admits are as important--sometimes even more important--than an organization's formal structures.) For instance, the Society for Organizational Learning and other groups often recommend institutionalizing After-Action Reviews in companies. After-Action Reviews were first used by the US Army in the 1970's and spread to the business world in the 1990's; they encourage feedback up and down levels of hierarchy by creating temporary hierarchy-free times when criticisms and suggestions can be aired by everyone involved in a project. They are credited as being a useful tool in transforming top-down authoritative culture into both-ways collaborative culture, even when official management structures remain the same. This is especially useful because changing a company's culture is often one of the hardest things to do, especially in giant hide-bound firms.

Another example of alternative corporate structures is the co-op. A long-time favorite of labor justice activists, the co-op structure makes all workers owners, and usually requires corporate governance to be a democratic system rather than an autocratic system. Most co-ops flounder not because it is a bad structure, but because the personalities most likely to create a co-op are generally the least likely to be business-savvy. Some co-ops have been huge successes, perhaps most notably The Co-Operative Group in the UK. It runs a bank, over a thousand grocery & convenience stores, insurance, internet service, a travel agency, and many other businesses; it has been described by The Guardian as "Britain's biggest funeral business and its largest commercial farming operation".

Do you have examples of large successful non-hierarchical businesses (or large businesses that are becoming more competitive by flattening their hierarchies)? We'd love to hear about them.