Valve, the Billion Dollar Company With No Managers

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Zero Managers

Valve Software, or more properly, Valve Corporation, is well-known to the world's gaming community. Valve gave us the ground-breaking immersive first-person shooter Half-Life, developed the Source gaming engine and Steam, the online games platform with 30 million active accounts, among many other games and products. This billion dollar private company has more than 300 employees and zero managers. Their organization chart is as flat as a dead man's EKG, with one last spike. Even the owner of Valve, Gabe Newell, the official lone spike on that EKG, does not necessarily have the first or last say. It's not Nirvana; it's not without problems; it may not scale, but Valve's brand of anarchy has enabled and continues to enable its employees to be more productive than most other large companies-- all the while producing killer products.

Valve logo
Valve logo | Source

Desks With Wheels

Some of the more progressive companies actually allow their employees to work some portion of their time on whatever they choose. At Google, employees can devote up to 20% of their work week on such projects. At Valve, that figure is 100%. And you report to no one. There are no managers. You decide which project you work on. You can start your own project if you want. The desks have wheels so that employees can easily move them where they need to be. It is a common sight to see someone pushing their desk down the hall.

New Employes Bewildered

It is disconcerting to many new employees to show up on their first day and not be handed an assignment. They are encouraged to talk to their fellow employees and find out what's being worked on and whether they want to join that group. Groups form and dissolve as necessary. It might take six months before the new employee is comfortable with this strange environment. There are the other weird perks you sometimes read about in the industry, especially Silicon Valley: fresh fruit, espresso, laundry services, massages, sometimes company-paid vacation trips for the entire family, etc, but it's the potential for total anarchy that amazes the outside world-- almost as much as the fact that Valve creates world-class games and makes more money per employee than Google, Apple or Microsoft.

Valve Envy?

Although Valve's finances are private, a Forbes report, issued in March 2012, estimated its value at $3 billion. Gabe Newell, Valve's owner, is reportedly worth more than $4 billion (2016). Other sources (including the New York Times) claim that Electronic Arts (EA) values Valve at well over $1 billion and has been trying for years to buy the company. Such discussions have been cut short as Gabe says that Valve would prefer to disintegrate than sell out.

How Can This Work?

If the projects and work are not handed down from above, how does Valve get anything done?

First is the notion of “alternative spontaneous order” which the employees form by themselves in order to get the work done. Instead of mandated from above, employees take it upon themselves to see that what must get done does get done. Valve's hiring practices are specifically geared toward ensuring, as much as is possible, that applicants will fit and thrive in their unique environment. Their handbook stresses that the hiring process, which the employees are responsible for, is the single most important process they can contribute to. Also, team leaders emerge organically and are not managers, but act more like clearinghouses of information about the project.

Second, Valve is in total control of their funding. This enables them to do things their way instead having to comply with banks' or venture capitalists' demands and concerns.

Third, Valve has commitment at the very top.

Gabe Newell, owner and Managing Director of Valve
Gabe Newell, owner and Managing Director of Valve | Source

Gabe Newell

Besides hiring the right people and controlling their finances, there is the commitment from the very top-- one step up from every other employee. Gabe Newell has become a billionaire supporting these methods and hopes they can continue without a hierarchy. Hierarchies are fine for churning out the same sort of product like sausages but in the creative arena of gaming, the Valve Way has freed up the developers to try the unknown. Although he is the owner, Gabe rarely interferes in the culture, though he has made some decisions without much discussion. For example, he brought the Portal (another game) people into Valve more or less on his own. On the other hand, he is the owner. Generally, he's just one of the hundreds of voices-- though it is assumed his thoughts carry more weight-- and he prefers Valve's flatness to remain.

Valve Time

Sometimes the work doesn't get done on time. Missed delivery dates have dogged Valve since the beginning-- so much so that gamers came up with the term “Valve Time” meaning time at Valve is not necessarily Earth time. Valve will not release a product that they feel is not ready, regardless of promised dates. The community resignedly accepts this as a price for Valve's quality and Valve has embraced “Valve Time” as a badge of honor and has embraced the term themselves. They do strive to meet dates, but quality trumps dates. It must be noted that Valve have on occasion delivered product early.

Scaling and the Economist

There has been concern whether the Valve Way can scale up as the company grows. This concern started years ago when the company was smaller. At over 300 employees and billions in sales, The Valve Way still works-- to the surprise of many. Nevertheless, what is the maximum? What conditions could explode the Valve Way? Valve has a single physical location in Bellevue, Washington. What would happen if subsidiaries opened in other parts of the country? How many employees before it implodes? To this end, Valve have hired an economist, Yanis Varoufakis, to analyze Valve's model to draw useful lessons regarding the future, not only of Valve, but the rest of the hierarchical corporate world. As a Valve employee, like everyone else, he reports to no one.

2016 Update

Although this article was written in 2012, Valve's organization is still as flat as ever (no managers), Gabe Newell is still the managing director (the exception to the rule) and Valve Time is still Valve Time.

Unique

Valve is in a unique position and they know it. Partly by design and partly because of the unique demands of the gaming industry, they don't pretend to be the future, to be The Way. They have failures; they are far from Utopia; rules get broken and there has to be some non-productive anarchy. Just as telling, things like technical support are out-sourced, which is a cold dose of reality. But there may be lessons that could be used to break what has been described as America's rigid Soviet-style corporate environments. If not, that means Valve, up until now, is absolutely unique and, until the Valve Way is discarded or ceases to work, they will continue to be one of the most productive companies in the industry.

© 2012 David Hunt

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Comments 6 comments

Larry Fields profile image

Larry Fields 4 years ago from Northern California

Brilliant hub! Voted up, shared, and more. The Valve work environment sounds like TQM on steroids. I especially liked this sentence:

"But there may be lessons that could be used to break what has been described as America's rigid Soviet-style corporate environments."

The corpocrats could learn a thing or three from Valve and from Mozilla.


UnnamedHarald profile image

UnnamedHarald 4 years ago from Cedar Rapids, Iowa Author

And a great comment, Larry. I think that sentence is a fair analogy to the top-down, autocratic style many corporations use nowadays, notwithstanding their inspiring, glowing mission and vision statements.


Pavlo Badovskyy profile image

Pavlo Badovskyy 4 years ago from Kyiv, Ukraine

I liked the phrase "Valve time" . It shows that the company seems to live in the other Universe and have their own time. In fact the way they do business is so unique! I never heard of anything like that. Usual practice to contol everything seems to have an other contradictory rival. Great hub!


UnnamedHarald profile image

UnnamedHarald 4 years ago from Cedar Rapids, Iowa Author

Hi Pavlo. Yeah, isn't "Valve Time" great? I personally experienced Valve Time waiting for Half-Life 2 to come out. Lots of frustrated gamers who were awe-struck when it finally hit the shelves. I love the way Valve embraced the phrase, too-- as if to acknowledge our "pain" while promising it would be worth it. Thanks for commenting once again.


jessefutch profile image

jessefutch 4 years ago from North Carolina

As with all your hubs, I'm floored. The Valve philosophy is rough to the touch at first, then when you really think about it the idea becomes sweet and amazing. I had no idea a company could operate like this. Then once you consider the possibility, it seems so simple and logical. Hire the right people the first time, allow them space and freedom to thrive, put out a killer product. Hence the owner being a billionaire.


UnnamedHarald profile image

UnnamedHarald 4 years ago from Cedar Rapids, Iowa Author

Thanks again, jessefutch. It doesn't seem possible at first, does it? But it seems to invigorate creative works and the employees assume responsibility without the benefit of micro-management from above. And it works. But, as I noted, things like support, etc are farmed out to more conventional companies.

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