The Flat Organisation Structure
Case
Study: Valve Corporation
Anyone who has ever played video games, has at some
point in their lives played the game ‘Counter Strike’ and if that is so, then
the name ‘Valve’ is not unknown to them at all. Valve is an American video game
development and digital distribution company founded in 1996 by Gabe Newell and
Mike Harrington.
The reason why I chose Valve as my case study was not
‘only’ because I am a fan of the digital content that they create, but because
they have adopted a rather interesting and odd organizational structure called
a ‘The Flat Structure’ to manage their company.
What
is it?
A flat organization refers to an organization
structure with few or no levels of management between the management and staff
level employees. The flat organization supervises its employees less while
promoting their increased involvement in the decision-making process. The idea
is that well-trained workers will be more productive when they are more
directly involved in the decision making process, rather than closely
supervised by many layers of management.
The flat organization model promotes employee
involvement through a decentralized decision-making process. By elevating the
level of responsibility of baseline employees and eliminating layers of middle
management, comments and feedback reach all personnel involved in decisions
more quickly. Expected response to customer feedback becomes more rapid.
This form of management is also known as ‘bossless’
management. From a management perspective it might seem like complete chaos at first
glance, but the work environment at Valve shows otherwise.
How
does it work at Valve?
In an interview to ‘Bloomberg Businessweek’, Valve’s
co-founder Gabe Newell spoke about his company’s environment and how it works.
Gabe says that they don’t use the words like ‘managers’ and ‘subordinates’ in
their company. The terminology they use is ‘individual’ and ‘group’ contributors.
A group contributor’s job is to help other people be more productive, and in
doing that they sacrifice some of their own productivity. He says it’s a
higher-stress job and you get interrupted a lot more but the group contributor
has the satisfaction of shaping the project’s future. So in a sense the
position of a group contributor is much like the traditional ‘manager’.
But unlike the traditional post of a ‘manager’ which
is generally permanent, an employee acts as a ‘Group Contributor’ for only one
project and then he/she goes back to being an ‘individual’ contributor (which
is generally voluntarily). So this whole feeling of being in a ‘pseudo
bossless’ environment stems from this idea of rotating managers/bosses. Some of
the incentives to voluntarily switch from being a group contributor to an
individual contributor include a much higher pay package, a relatively stress
free work environment and the ability to hone your own skills as opposed to
helping others hone theirs.
Does
this system work at all?
Considering that Valve Corporation has been
operational for almost 20 years now and that it is one to leading names in its
industry, the short answer to this question is ‘Yes’. But this seemingly
‘perfect’ work environment comes with its own set of issues and disclaimers.
It is absolutely crucial that one hires the right kind
of people for this organisation structure to succeed. We are so tuned to an
environment of hierarchy that many people find it difficult to imagine a work
environment wherein you aren’t answerable to anyone and anyone isn’t answerable
to you. Valve, requires people who are very good at what they do, and can do it
without someone telling them to do so. In the interview, Gabe joked around
saying that instead of looking for the cheapest people to do the job, they look
for the most expensive. They hire people who want to be master craftsmen, that
is, designers who want to be great designers and not ‘managers’ of great
designers.
He gave the example of Jeremy Bennett, who was working
in the film industry on movies like the Lord of the Rings trilogy. Gabe said,
“Jeremy Bennett is someone who is insanely good at what he does”. If Valve was
to hire him, then he could do the job that would generally take a team of 4
people and do it while eliminating all the co-ordination and communication
deficiencies and delays that may exist in a team.
Where
does it falter?
As mentioned earlier, this form of organisation
structure comes with its own issues and challenges. Since the ‘Flat Structure’
is a relatively new concept and there are very few companies that actually use
it in practice, calling it ‘experimental’ wouldn’t be wrong.
One of the major drawbacks of this structure is that
there are no internal controls to monitor the progress of a project. This absence
of a formal reporting system, makes it almost impossible to identify a problem
at its origin, and if it goes overlooked then it becomes very difficult to
track it. “We assume people know what they are doing. On Half Life 2 one of the
engineers made a bunch of really bad decisions. There was no monitoring system
along the way, so it took us about six months longer than it should have for us
to catch it. It cost everyone on the team a whole bunch of extra work.” Gabe
Newell said in the interview.
Another drawback is that, while a ‘bossless’
environment gives the employees space and freedom to be creative, it also
creates a sort of power struggle within the organisation. A former Valve
employee, Jeri Ellsworth in an interview to ‘The Grey Area Podcast’ compared
Valve’s organisation structure to that of a ‘High school’. She says that while
all students in a classroom are supposed to be equals, there are always the
popular kids who have acquired power and take lead, and then there are the rest who
follow. So while on paper, the flat organisation claims to have no permanent
leadership to influence decisions, that isn’t true in practice; at least in the
case of Valve as pointed out by Jeri Ellsworth in the interview.
Conclusion
To sum up, let us quickly have a look at some of the
advantages and disadvantages of the ‘Flat Organizational Structure’.
Advantages:
- It elevates the employee's level of responsibility in the organization, hence making them more productive.
- It removes excess layers of managements which improves the coordination and speed of communication between employees.
- Fewer levels of management encourage an easier decision-making process among employees.
- Eliminating the salaries of middle management reduces an organization’s budget costs.
Disadvantages:
- Employees often lack a specific boss to report to, which creates confusion and possible power struggles among management.
- Flat structure may limit long-term growth of an organization; management may decide against new opportunities in an effort to maintain the structure.
- Larger organizations struggle to adapt the flat structure, unless the company divides into smaller, more manageable units.
- Flat organizations tend to produce a lot of generalists but no specialists. The specific job function of employees may not be clear.
Sources:
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