Valve: a Successful Horizontal Company

Horizontal Company : Valve

Valve is a very successful company: founded in 1996 by Gabe Newell and Mike Harrington, it first started by editing video games. In 2003 it initiated an online videogames distribution system called Steam. Today, Steam is a huge business. In 2015 it reached 125 million players (FR), and more than 14 000 games in 2017. Since 2013, they have been developing their own Linux-based system: SteamOS. However the company is not organized like every other company: it is a horizontal company. How do we know? At Valve, they publish a Valve Handbook, intended for their new employees; this short book is available for anyone to read. This article is set to discuss about this organization and its distinctive working principles.

What is a horizontal company?

There are several definitions for horizontal company. The general idea is that there is little (sometimes no) hierarchy. Self-responsibility is one of the key aspect of horizontal organizations: you are accountable for your own choices.

Valve : That'd be great meme

A classical horizontal organization is adhocracy (theorized by Alvin Toffler and Henry Mintzberg in the 70s and 80s). In a nutshell, this system is built on expertise, every member of adhocracy claims (or is granted by his group for) areas of expertise. Then, projects are the core of this system: people start projects and gather people willing to cooperate and to bring their knowledge to the project. Being the one that launches a project does not give you any special right. Choices are made according to the skills of the people, not to their hierachical position. Some branches in Motorola and Nasa in its early days have experimented Adhocracy with some success.

Another kind of horizontal organization is based on clans. This organization is also focused on projects, but it gives more importance to affinity and cohesion in groups. Clans last longer than projects in adhocracy, and mentorship is very important in clan organizations.

In the book Diagnosing and Changing Organizational Culture: Based on the Competing Values Framework (Revised Edition), Kim Cameron and Robert Quinn suggest splitting organization types in four large groups. On the one hand, opposing stability and control to flexibility and self-responsibility, and on the other hand, internal focus and integration to external focus and differentiation. These ideas can be summarized in this diagram.

Horizontal Company : Valve

How is Valve organized?

Horizontal Company : Valve

In its handbook, Valve never refers to clans or to adhocracy, but there are some hints.

Of course they have a project-focused organization: every employee is encouraged to get into action, to join projects and to launch new projects. Employees are encouraged to change projects, to move, with their own desk, closer to the people they work with. But this does not make a difference, since both adhocracy and clans work as project-based teams.

However, from the book we know that:

  • they value freedom and flexibility.
  • responsibility goes primarily to customers (hence strong external focus).
  • they also express the lack of mentorship and the difficulty they feel in integrating new members.

Thus, it seems that they are an adhocracy.

How does it evolve over time?

Well, it is difficult to know what has been the organization of Valve from the beginning… However, in an article of 1999, just a few years after the success of the Half-Life videogame, Ken Birdwell explained how they were working together. In particular, he detailed the reasons that led them to choose this organization:

Ken Birdwell
Ken Birdwell

“Throughout the first 11 months of the project we searched for an official “game designer,” […] We looked at hundreds of resumes and interviewed a lot of promising applicants, but no one we looked at had enough of the qualities we wanted […] In the end, we came to the conclusion that this ideal person didn’t actually exist. Instead, we would create our own ideal by combining the strengths of a cross section of the company, putting them together in a group we called the “Cabal.”

They were looking for the providential person… and they eventually resorted to building on collective intelligence. This is the root of it: hierarchical organizations need to have people dealing almost exclusively with managing other people. And when you want to manage talented people, you also need to be very talented, both on managing skills, and also on technical skills, in order to earn respect, and to understand what’s going on. Horizontal organizations distribute the management by improving self responsibility. So no one needs extraordinary managing skills, only a good communication within the teams is necessary.

Non-persistent teams are the core of Valve organization: these teams are fit to accomplish unique projects with maximal efficiency.

What happens in the follow-up article?

We have seen that Valve is a horizontal company which encourages its employees to work in project-oriented teams called cabals. How does this system work in practice?

In the follow-up article we will get into the details of Valve’s day-to-day life. We will explain how they deal with assessment and evaluation. We will discuss some of the simple and efficient ideas they have developed in order to encourage cabal dynamics. More precisely, we will develop the following themes:

  • What is the life of a Cabal?
  • Peer evaluation
  • Hiring
  • Risks and drawbacks

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