Valve Corporation

Valve Corporation

In a permanent attempt to keep the spirit of innovation, many technology companies are experimenting with different models of governance. But not one of them came along the way as far as the Valve Corporation. Against the background of Valve, Google and Facebook look disgusting bureaucratic monsters of capitalist dystopia. Established in the mid 90s by the renegades from Microsoft, Valve began its’ work as a developer of computer games. In the company’s portfolio there are such timeless hits as Half-Life, Portal, Counter Strike, and Left 4 Dead. Now Valve also owns a virtual monopoly of the market for digital distribution of video games – Shop Steam. Steam is an electronic store of games and applications for Windows, OS X and Linux, which currently has no serious rivals. According to analysts, the market share of Steam downloadable games for PC is about 70 percent, thus resulting in billions of dollars. And the company recently announced plans to finally bring home the dream of all gamers and create a full virtual reality helmet. In the company headquarters in Seattle Valve employs about four hundred people. All this has been achieved by a company with perhaps the strangest corporate culture that has ever been formed in an enterprise of this magnitude. According to some experts, it is generally one of the most innovative companies of modern day.
This paper reviews two elements of Valve company structure: organizational culture and leadership and power. Before describing the organization structure of Valve, this paper provides a short introduction of the two concepts with their classical perception and understanding. Through the two descriptions the significant difference between the traditional understanding and leadership will be very clear, as well as the peculiarities of Valve organization culture will stand out significantly.

Organizational culture

Organizational culture is a system of common for all organization members’ ideas and approaches, forms of relations, and to result achievements, which distinguish this organization from all others. In practice, organizational culture is a set of traditions, values, symbols, common approaches, and views of the organization members, which have stood the test of time. This is a kind of expression of individuality of the company and a manifestation of its differences from others (Black, 2003). The purpose of organizational culture is to help people be more productive and get satisfaction from work. If the person finds oneself in an alien organizational culture, one’s activity becomes fettered and limited (Pareek, 2006). Conversely, if the organizational culture and values ​​of the company employee are similar, the work becomes more active, thus the efficiency increases. Thus helps to obtain a synergistic effect. Organizational culture is very valuable because it serves as a motivational factor for employees.
The identity of a company leader, who forms the team and subconsciously hires those whose values and beliefs are similar, has a significant influence on company culture. This impact is felt especially when employees face a change of leadership (Pareek, 2006). Subsequently, the head of the company and has direct impact on organizational culture by adopting certain rules and regulations of the organization. Great importance in shaping the culture is also given to an informal leader, whose powers are not fixed in job descriptions (Black, 2003). Many studies show that organizational culture is also influenced by the organization’s country of origin. This is a result of national characteristics, mentality, historical factors etc. For example, there is a theory describing the differences between American and Japanese management models. If the first is based on the primacy of the individual, the second, on the contrary, is based on the primacy of the collective “we” (Black, 2003). There are also differences in the system of labor relations: the frequent change of jobs, quick promotion on the basis of personal achievement, work on narrow profile in the U.S.; virtually lifetime employment, slow career growth based on services, broad profile of activity in Japan.
Valve, despite its’ undeniable progress, is based on anarchy. This is not a figure of speech and artistic exaggeration, but strict term. This is in fact the organizational principle on which Valve has been developing from the beginning. The rejection of hierarchical organization in favor of voluntary associations is a very accurate description of the internal structure of Valve. The company consists entirely of voluntary one-level associations, and the absence of authorities is an everyday practice for Valve employees (Suddath, 2012). Even the instructions of Gabe Newell, who is one of the founders and owner of a significant proportion of the company, are not binding. The company is built on a number of principles, which in unity present Valve’s organizational culture.
Principle 1: death to chiefs. Gabe Newell, the founder and spiritual leader of Valve, was confident that in the era of the computer revolution traditional hierarchical organization makes no sense. It fits the military, which needs to send to death a thousand or two of soldiers. It fits the factories whose main purpose is the endless repetition of the same result. But in the technology industry the repetition of the same action has no value because the value here appears only when something is being done for the very first time. Newell invented Valve as a place where there is no hierarchy and no formal management, superiors and subordinates, jobs and career opportunities (Suddath, 2012). Some Valve employees are forced to invent the titles their posts to have something to write on business cards because people from other companies refuse to take them seriously.
Principle 2: do what you want. Almost every rookie in Valve initially faces a strange problem: s/he does not know what to do. Valve does not hire people for specific tasks and do not assign tasks to employees. People have a possibility to choose any sphere they would be interested in.
Principle 3: tables should have casters. Since Valve does not have fixed positions and everyone should decide for themselves where they can come in handy most, tables in the company’s headquarters are equipped with wheels. This allows employees to quickly move them around the office and organize into teams for their interesting projects (Kelion, 2013). Want to change the occupation? Move the table. Inside teams that in Valve are called Cabals employees themselves are engaged in the distribution of responsibilities. They decide who will serve as an informal leader whose mission is to coordinate efforts, while keeping in mind all the information about the project. Leaders serve the team, not vice versa. At the same time, Valve stimulates the Cabals to often change their composition and configuration. Otherwise bureaucratic structures will inevitably begin to pursue their own interests and not the interests of users.
Principle 4: search for people is more important than breathing. Obviously, not everyone is ready for the standards of freedom and personal responsibility, established in Valve. Therefore, the biggest challenge is to find new Valve employees. In this process the entire company is actually involved. Newcomers in Valve are offered to begin to participate in the interviews and to offer their own candidates as early as possible.
Principle 5: never employ a person who is worse you. Valve is always interested in people with unusual professional background. In such case they will be able to bring in the company culture something new. Therefore, the company has already employed a former puppetry actress, creator of special effects for The Lord of the Rings, and the author of satirical website about video games. The company recently hired a Greek economist because Gabe Newell liked his blog about European financial crisis. One of the digital artists was hired only after a Valve accidentally found out that in his spare time the man is painting graffiti.
Principle 6: to hell with investors and uncomfortable partners. All of the above would be fundamentally impossible if Valve failed to achieve complete independence from all external factors. When Valve started to irritate relations with their publisher, they created Steam. Thus, the company can independently produce and sell their games without intermediaries. Moreover, Valve was founded without the involvement of investors’ money on the side, and all the company’s shares are still solely distributed between active staff. It’s unlikely that one will ever see them in free float on the stock market.

Leadership and power

There is a distinction between power and leadership. Leadership is the ability to lead people, as well as the ability to influence individuals and groups, directing their efforts to achieve the goals of the organization (Glitlow, 1992). Power allows the manager to organize the actions of subordinates, to guide them into the mainstream of the organization’s interests, and to encourage employees to work more efficiently, and prevent conflicts arising in the team (Glitlow, 1992). According to traditional beliefs, without power there is no organization and no particular order in work. A company must be a balance of power. The greater dependence on another person, the greater is the power of an entity. Power depends on the person and situation. There is also power over the management of subordinates (e.g., contracts that artists and athletes can get). But the example of Valve shows that traditional understandings of leadership and value can be mitigated and replaced with new forms of interaction and inter-dependence.
The first thing one needs to realize is that in Valve managers and all employees have equal rights. This is the most difficult thing to understand. If there are no managers, who decides what to do? Who monitors the implementation of projects? Who hires and fires whom? Who creates and who closes projects? Common sense dictates that anyway someone has to make decisions and take responsibility for them. If Valve do not have people on a post called “manager”, then maybe there is someone performing manager duties part-time? Or maybe all issues are resolved collectively? For common sense it would be difficult to sustain the answer to these questions. In Valve there are really no special people who have the right to tell others what to do. Each employee decides for himself what he should do and what the whole company should do.
To create a new project employees do not need to get permission – anyone can initiate it (Kelion, 2013). It is enough to find like-minded people and persuade them to join in. After that, the newly formed team moves tables together and starts working. To move from place to place it is easier because tables have wheels.

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A project has no leader, but as a rule there is an unofficial leader. But his leadership is purely nominal. The leader has no right to dictate others what they should do (Kelion, 2013). The task of the leader is to be aware of everything that is connected with the project. If necessary, others turn to him for advice or help. Monitoring of the implementation of projects also fully decentralized. Amount of the bonuses received by Valve employees depends on how colleagues evaluated their contributions (Suddath, 2012). Those whom others consider valuable can get bonuses that exceed the amount of salary. Idlers and rowdies who receive poor grades will get only the minimal fee.
How to work without a boss? The first step is to come up with something interesting. Second step is to tell a neighbor. Third step: together to implement the idea. Fourth step: done! One would assume that Valve is an exception to the rule, but this is untrue. Valve is not the only anarchist company. Similar principles work, for example, in the U.S. Corporation WL Gore & Associates, which has nine thousand employees. And even giant General Electric not without success is experimenting with the rejection of hierarchy on some factories.

Conclusions

The structures of Valve are extremely different from traditional perceptions of company structure and operations. The theorists of traditional perspective of leadership and corporate culture would have never believed that companies could function without leaders and persons at power, and that productivity would be high with efficient work of employees. The company functions against all rules that emphasize on a form of leadership to allocate tasks and monitor work. The lack of formal or informal leadership is one of the significant elements of Valve’s organizational culture, which creates the basis for freedom and creativity at a workplace. Instead of establishing hierarchies and ensuring efficiency of work by controlling measures, the company fully relies on its’ employees in choosing tasks and producing high-quality results. Community plays a significant role in Valve’s corporate culture. And this company culture is based on natural common understanding of tasks and self-involvement of all employees. Therefore, Valve introduces a new form of leadership, which did not exist in other companies before. The theory of Valve leadership and company culture should be carefully studied and provided a solid theoretical background.

References

  1. Black, R.J. (2003) Organisational Culture: Creating the Influence Needed for Strategic Success, USA: Dissertation.com
    Glitlow, A.L. (1992) Being the Boss: The Importance of Leadership and Power, Washington D.C.: Beard Books.
  2. Kelion, L. (2013) “Valve: How going boss-free empowered the games-maker” Available: http://www.bbc.com/news/technology-24205497. Last accessed 30th Apr 2014.
  3. Pareek, U. (2006) Organisational Culture And Climate, India: The ICFAI University Press.
  4. Suddath, C. (2012) “Why There Are No Bosses at Valve” Available: http://www.businessweek.com/articles/2012-04-27/why-there-are-no-bosses-at-valve. Last accessed 29th Apr 2014.

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